Yvan Loubier

[Borrowing Authority Act, 1995-96, February 27th, 1995]

Mr. Speaker, the only thing the finance minister is decentralizing to the provinces in this budget is the deficit, and nothing else.

[Tax Loopholes, February 21st, 1995]

Mr. Speaker, I would like to thank the Minister of Finance for his only truthful answer in some time, I thank him for stating the date of the budget.

I would like to ask him whether, when his upcoming budget is brought down on February 27 at 4.30 p.m., he will tackle the real tax loopholes benefiting wealthy Canadians, including tax treaties signed with countries which provide endless loopholes and are regarded as veritable tax havens?

[Tax Loopholes, February 21st, 1995]

Mr. Speaker, the finance minister himself stated yesterday on the CBC that he is well aware of the tax loopholes which he must close to ensure that the wealthiest Canadians do their fair share to correct the fiscal situation. Unfortunately, the minister once again targeted social programs in his strategy to combat the deficit.

Can the finance minister tell us when he will bring down the upcoming budget, and can he tell us whether he will have the courage this time to tackle the real tax loopholes of wealthy Canadians which he claims he knows so well, while leaving unscathed the unemployed, persons receiving social assistance and senior citizens?

[Supply, February 15th, 1995]

Madam Speaker, I do not know where to start with this question. It is huge, and it is more of a commentary than a question as such. My statement contained neither speculation nor rumour, it was based on fact. The facts are as follows: since it came to power, the Liberal government has done exactly the opposite, or just about, of what it said it was going to do in the red book, except for infrastructure projects.

It said it would protect society's most disadvantaged; it said it would not tax middle income Canadians. The first thing it did in its first budget, on February 22, was cut unemployment insurance by $7.5 billion. If these are not the most disadvantaged-I think these are people who are somewhat desperate. They are looking for work and have little to do as well, because, with the tightening up of unemployment insurance measures, whole families have been thrown on welfare. This is what happened in my riding and in the ridings of my colleagues as well. I hope my Liberal colleagues are still checking on the people in their ridings.

Secondly, as for the taxation measures, in 1993 the Prime Minister said: "No problem, we will not tax, we will not increase taxes or income tax". Since we have been here, since we started questioning the government, led off by the Prime Minister, has not ruled out the possibility of an increase in taxes and income taxes. So, they are looking at increasing taxes and income tax for taxpayers, but they are not prepared to clean up the tax system. Where is the logic? There is no way the tax return can be simplified with the present tax legislation.

This is not what I was saying earlier. I was not talking about simplifying tax returns. In any case, we have decided not even to raise this issue any more. Each time we called for a simplified tax return, senior government officials would complicate tax returns even more. So we have stopped raising the issue. People are beginning to get used to the present forms. What I am talking about is an in depth reform of the tax system. I do not know whether you have read the tax legislation for the past 40 years-it is awful.

I have tried to do my best. I have often taken those books out of the library and have gone to consult them there as well. It is a monumental mess. Only the experts can find their way around. Secondly, you will admit that without this reform, we have a serious taxation problem. Forty-five years ago, corporate taxes accounted for 50 per cent of federal revenues, while the remaining 50 per cent was drawn from individual taxpayers.

Now nearly 83 per cent of federal tax dollars are collected from individual taxpayers. The remaining 17 per cent is collected from businesses. This is an imbalance, an unhealthy one, I would say, and people are increasingly aware of that. It is no wonder that, just about everywhere, and I am not referring to the revolt stirred up by Reformers, people are outraged to see this, they see what is happening and see us walking away from our responsibilities, they see that the government will not even go so far as to review the tax system.

Even if it takes two or three years, it has to be done, such a review must be done. This should have been the first step, the first measure taken by the Liberal government. They talked about it before the election campaign, during the campaign, and even before bringing down the first budget and the Minister of Finance has turned a deaf ear to it all. So has the Prime Minister. Reformers are doing the same because it is a direct attack on their friends, and even on a number of the people they represent who have considerable personal assets.

This review must be carried out, I feel, and so must tax expenditures be reviewed. There was talk earlier of tax treaties; they really must be reviewed individually because, in this area too, people are becoming aware that some large, very profitable companies benefit by establishing phoney companies abroad, in countries considered as tax havens, and thereby avoid paying taxes. Ordinary people cannot do that. They cannot set up such companies and, when they owe a dollar in taxes, be assured that they are hunted down for it.

[Supply, February 15th, 1995]

moved:

That this House call upon the government in its next budget to avoid any tax increases targeting low and middle-income taxpayers and to consider instead trimming the fat from the government, eliminating tax expenditures which primarily benefit large corporations and wealthy Canadians and collecting on unpaid tax debts owed to the federal government.

Madam Speaker, I am pleased to debate this motion in the House because it is consistent with what the official opposition has been defending, since the last election, as a means of putting our finances in order, as short term or medium term corrective measures, since most experts agree, as we do, that, without fundamentally changing the system, it will be difficult to get control over public finances again.

The Bloc Quebecois is of the opinion that the government must, in its upcoming budget, substantially reduce its expenditures and refrain from increasing income taxes for the middle class or low income taxpayers. The Bloc Quebecois asks that the federal government undertake a complete review of the tax system in order to eliminate unfair tax expenditures and ensure that companies currently not paying taxes pay their fair share.

The federal government should, in particular, eliminate tax shelters benefiting high income taxpayers and big business. Not the measures which favour middle or low income individuals, but the real tax loopholes benefiting very wealthy Canadians and big business who have not been paying their fair share in the federal system for at least 12 years.

The government has tried to justify a possible tax increase, stating that the rise in interest rates is forcing them to do so, forcing the Liberals, when in fact this rise is in large measure attributable to their inaction in fighting the deficit in the last year. I would like to remind you that just days after the Minister of Finance tabled his first budget last February 22, Canada's credit rating was lowered significantly for the first time in five years and the interest rates demanded by domestic and foreign investors on Canadian securities increased considerably, which in turn caused mortgage rates in particular to rise.

Middle class taxpayers are past their tolerance level. Any increase in their tax burden is unacceptable, and the Prime Minister should be reminded that he made promises and commitments regarding the issue on the Téléjournal newscast, on October 1, 1993. He said then that he would not raise taxes during his first two years in office. This is year two.

Last December, the Liberal representatives on the finance committee paid no heed to the Prime Minister's commitment and recommended an across the board surtax on income. This proposal, in the official opposition's opinion, is utterly unacceptable, and I would like to remind you, Madam Speaker, that according to the OECD, individual Canadian taxpayers pay 33 per cent more taxes than the average taxpayer in the United States. We are neighbours, we have a free trade agreement in common and it is inadmissible to have such a disparity between levels of taxation.

The official opposition also warns the government not to make any attempt to use devious means to increase the tax burden of the middle class and others by hitting RRSPs. The Bloc Quebecois is also firmly opposed to the option considered by the federal government to impose a one per cent capital tax on RRSPs. I would say to you that this hidden tax, which could net up to 5 billion dollars annually, would be an insidious blow to taxpayers who are trying to plan for a comfortable retirement, at a time when public funds are inadequate and Canadians' savings are at their lowest in thirty years. This would be an ill-considered and irresponsible measure.

Neither should the federal government abdicate its responsibilities by shifting its deficit onto the backs of the provinces. This approach is irresponsible and has been resorted to time and again in the past, by this government. As an example, since 1982, in the health and education sectors alone, the federal government has deprived the provinces of 48 billion dollars-no small amount-by cutting transfers to the provinces, a loss of 12 billion dollars just for Quebec. Members will recall that, in his February 1994 budget, the present finance minister again made additional cuts of over 2 billion dollars in transfers to the provinces.

Since meeting with his provincial counterparts, the Minister of Finance has left open the possibility that the federal government might make new cuts in transfer payments to provinces. This dumping of the deficit and this scheme to force the provinces to shoulder the burden of the cuts to social programs are unacceptable and irresponsible.

The official opposition feels that the federal government must withdraw from provincial fields of jurisdiction and provide full financial compensation. After all, and in spite of what we are often led to believe, transfer payments to provinces are not gifts from the federal government. The money being transferred comes from taxpayers, including Quebec taxpayers.

Between 1982 and 1992, taxes paid to the federal government by Quebecers increased by 121 per cent. Over that same ten year period, financial transfers from the federal government to Quebec only rose by 50 per cent.

If the federal government makes cuts in transfer payments to the provinces, it should also transfer to provinces tax revenues or tax points equivalent to those cuts, so that the provinces can assume their new responsibility.

The issue of duplication and overlap must be a priority in the government's upcoming budget. Any attempt to eliminate these problems will fail if it is not supported by a withdrawal of the federal government from provincial fields of jurisdiction, as well as full financial compensation. Our friends opposite know that it would be irresponsible for the federal government, after creating duplication by meddling in areas of provincial jurisdiction, to cause a sudden and serious imbalance by withdrawing from social programs while keeping Quebecers' savings and taxes in Ottawa.

I wish to raise a last point. The Liberals have forgotten that the fight against the deficit involves creating jobs. We will create jobs not by cutting post-secondary education funds, as proposed by the Axworthy reform, or by raising taxes, but above all by assuming our responsibilities.

A consensus was reached long ago, in particular in Quebec, on the generalized decentralization of everything having to do with manpower training, job training, the re-entry of unemployed workers into the labour force and even income security. The time has come for the federal government to open its ears and eyes and do what is needed to stimulate employment. It is not by quoting the red book to us every day and telling us that their infrastructure project has created thousands of jobs, when they only created 45,000 casual jobs, that they will convince us that they are concerned about employment. This government must learn the difference between wasteful spending and investing in human capital. That is something it has forgotten in the last year and that is unfortunate.

Finally, last October and last December, when the Liberal majority on the finance committee tabled its report concerning the prebudget consultations, the official opposition made some suggestions to put our finances back in order in the short or medium run, but mostly on the short term. We made these suggestions to allow the Minister of Finance to boast and to reduce the deficit to $25 billion, or 3 per cent of the GDP, by 1996-1997.

We came up with measures to find the money where it is. Cutting social programs will not help us to straighten out our finances. Let me briefly recall the recommendations we put forward.

The first thing the official opposition suggested was for the federal government to withdraw from the provincial areas of jurisdiction upon which it has encroached since the second world war and from all the areas it has invaded, oftentimes by ignoring the provincial governments' prerogatives. We suggest that it withdraw completely from areas that belong to the provinces, with financial compensation.

This withdrawal must not be drastic, it must not steal away like a thief, but in areas of provincial jurisdiction, it should give

the provinces all the tools they need, especially fiscal, with full tax points so that they can meet their new obligations. The provinces are not asking for a handout. They just want the federal government to have the honesty to say: We are pulling out of certain areas, we are eliminating the costs of duplication and overlap, and we are going to let the provinces, who are in the best position to do so anyway, manage their own affairs, as provided in the Canadian constitution, in the fields of health, post-secondary education and social assistance, to name a few.

This proposal has a dual objective. First, it sets out to eliminate contradictory policies and to allow the provinces to adopt an integrated policy on job training, education, job creation and health, in short truly comprehensive social policies. Second, this proposal allows the provincial and federal governments to reduce their operating expenses by eliminating costly overlap and duplication in programs and services. In Quebec alone, the cost of duplication and overlap is in excess of $3 billion. I think it would be worthwhile for the minister to consider this proposal.

The second recommendation from the official opposition contained in the minority report submitted to the finance committee in December, as part of the finance minister's pre-budget consultations, is to stop providing subsidies to business immediately, as these subsidies total more than $3.3 billion and are more a source of patronage than a source of assistance for businesses facing modern day challenges, mostly in terms of productivity and international competitiveness.

The president of the Conseil du patronat du Québec himself made the same suggestion in his testimony. He said something like this: these subsidies only foster competition between those businesses which are subsidized and those which are not, and this is unhealthy in terms of management and business growth. I think that it is fair to say that, however much wisdom Mr. Dufour may have displayed in the past, on several occasions, he really outdid himself this time.

We are suggesting that the Minister of Finance immediately cut business subsidies, in other words to forget about his corporate chums for once and make sure that expenditure restraint targets are met, this year as well as next year.

Third recommendation: these are times of reduced international tensions. Experts we consulted before the last election when the Bloc Quebecois became the official opposition say that it is possible, practical and, in fact, desirable that the defence budget be cut by 25 per cent. That is what they said a year ago. National Defence's budget has since been reduced by some 13 per cent, which leaves 12 per cent more cuts to be made, for savings of $1.6 billion. It is definitely worth it in times of constraint, when the Minister of Finance is actively seeking to save. I think there is a good potential for savings there.

We also recommended and continue to recommend that the federal government withdraw from a huge money pit project in which the government has already sunk over $3 billion in direct transfers or loan guarantees. I am referring to Hibernia. According to all the studies conducted, except government studies justifying its continued involvement in this harebrained project, oil prices are unlikely to rise in the next 20 years and may even fall in relation to today's prices. If Hibernia is not profitable with today's prices, how can it be profitable in 20 years with lower prices?

If the government really believes in sound financial management, it should start there. I think it is an interesting idea.

Our fifth recommendation was that the government, the Minister of Finance, undertake a full review of the taxation system in preparing his next budget. We are no longer the only ones asking, although we were the first in the last two years to push for the establishment of a special committee, made up of elected parliamentarians, to review the whole tax system, item by item.

The Canadian tax system is very complex and has not undergone a thorough review in 25 years. Some tax experts mired in administration will, of course, tell us that changes have been made, but these changes are nothing more than patchwork and cannot be compared to a thorough review.

They added some provisions and removed others, and made more additions and deletions. For example, they allowed big businesses to hire renowned tax experts familiar with Canadian tax loopholes. And there are many of them. We have discovered new tax loopholes every day since becoming the official opposition.

The time has come to undertake a thorough review of the tax system. I do not understand why finance department officials, the finance minister himself, the revenue minister and the members of our third party are all opposed to this idea. I do not understand why they are against reviewing the Canadian tax system when many experts, if not the vast majority of them, see this as a necessity at this time.

Our tax system-and particularly our corporate tax system-is the most complicated one in the world. And I am not just expressing my own opinion.

There are people in the United States, including tax experts and economists, who simply cannot figure out our system. I should point out that, towards the end of the Reagan administration, the United States undertook such a process. The Americans reviewed their whole tax system. They did not only look at the corporate tax system, but also at the personal income tax program. They streamlined their whole system to the greatest possible extent. The Americans did not do that just to simplify matters, but also to facilitate detection of tax evaders, including those who take advantage of their financial means or corporate income to hire experts who help them avoid the tax man. It is

now more difficult in the United States to avoid paying one's due to the government.

Why not do the same here? Why is the government so reluctant to follow up on our suggestions to target two sectors on a priority basis? The first one is the tax conventions signed with 16 countries considered to be tax havens. Investment management companies will tell you that they can easily find loopholes. It is easy to establish subsidiaries in some of those 16 countries and take advantage of tax loopholes which will allow you to save hundreds of thousands of dollars, if not millions, or even billions, in federal taxes.

Why does the government refuse to review these 16 tax conventions? Is it because of possible conflicts of interest? Is it because some friends of the party might be taking advantage of these tax havens by creating bogus companies in these countries? They also declare phoney operating losses in these tax havens, so they can deduct them from their profits in Canada and avoid paying taxes.

It is time something was done about this. When the government talks about cutting back, when Quebecers and Canadians are asked to tighten their belts and make incredible sacrifices, maybe it is time the Minister of Finance acted responsibly and stopped protecting his friends and the friends of the Liberal Party of Canada, whose incomes are not necessarily those of the average Canadian.

Tax treaties should be a priority in the next budget. The minister should overhaul some of these treaties which are riddled with tax loopholes.

Family trusts are another case in point. In November, and even in his last budget, the minister tried to make a good impression when he said he would create a sub-committee of the finance committee to analyse the impact of family trusts on federal tax revenues.

The subcommittee was set up, but despite assurances that the process would be completely open, first of all we never got the co-operation of senior officials from the Department of Finance who just laughed at us in committee; second, whenever we asked for additional information and studies, the real stuff, we were turned down; and third, before Christmas, when the official opposition presented a motion in the finance committee to review the policy on family trusts for wealthy taxpayers who never have to pay a cent of capital gains tax, the committee's Liberal majority and the Reform Party voted the motion down. They even voted against a study of family trusts. I think that is unconscionable.

In concluding, I have another recommendation. In his report, the auditor general referred to federal accounts receivable still outstanding. He mentioned the $6.6 billion, owed by taxpayers, especially wealthy taxpayers, to the federal government. They did not deny the fact that they owed the money, but because of this government's spineless attitude, no attempt is being made to recover the $6.6 billion. According to the auditor general, we could recover 80 per cent of this amount.

If the minister needs a few more billion, we suggest that he can get around $14 billion without even touching social programs. It is high time government members woke up to this fact, because people have had enough.

[Transfer Payments, February 15th, 1995]

Mr. Speaker, how can the Minister of Finance plan, on the one hand, to reduce the provinces' transfer payments, which will cause a shortfall in social program funding, and on the other, to shrink their tax bases by putting in place a Canada-wide sales tax which would replace provincial sales taxes? Can he explain this to us?

[Transfer Payments, February 15th, 1995]

Mr. Speaker, during his meeting with his provincial counterparts, the federal Minister of Finance carefully avoided discussing the issue of the GST replacement which, according to the commitment made in the red book, should normally be implemented next year. I would ask him to reread the red book, since the commitment was made in it.

My question is for the Minister of Finance. Will the minister concede that he refused to discuss the issue of reforming the GST because Alberta, and especially Quebec, want nothing to do with a national sales tax that would limit their freedom to tax when Ottawa is also preparing to reduce transfer payments to the provinces?

[Transfer Payments, February 14th, 1995]

Mr. Speaker, I certainly did not expect an answer like that to a serious question, but I will control myself for your sake.

Can the Prime Minister promise, and this is a serious matter, that the measures in the upcoming budget will not constitute an outright offloading of the government's responsibilities on the backs of the provinces? This is walking away from responsibility. It is not decentralization.

[Transfer Payments, February 14th, 1995]

Mr. Speaker, today, two weeks before budget day, the Minister of Finance is meeting his provincial counterparts. They will probably discuss further reductions in transfer payments to the provinces for social programs financing.

If I understood correctly what the Prime Minister said to the leader of the Reform Party just now, the government is really determined to offload its debt problems on the backs of the provinces, since he just told the leader of the Reform Party that a transfer of responsibility for post-secondary education, health and social assistance would not entail a concomitant transfer of tax points to the provinces. That is what we understood from the Prime Minister's reply.

[Supply, February 14th, 1995]

Mr. Speaker, in response to the first question on taxes, we do not want the Minister of Finance to raise taxes when he tables his next budget, or the one after that.

However-and I have the feeling my colleague is having trouble reading our recommendations, does not understand them or does not want to understand them-, there are inequities in Canada's current tax system. There are so many inequities, as I demonstrated a little before the House adjourned last December, business taxation in Canada has become so ludicrous that some businesses even sell their unused tax deductions to other businesses. There was a classified advertisement in the newspaper offering a tax loss for sale to businesses that could use it. If you do not find this ludicrous, there is a problem.

What we are saying is that there are loopholes to be closed, inequities to be corrected in our tax system. As a result, we have been recommending for a year and a half that the government undertake a comprehensive review of the tax system.

We already know about the loopholes. The auditor general has already pointed out some of them. He mentioned the 16 tax treaties, saying that there were problems with them because they were often concluded with countries considered to be tax havens, where Canadian businesses open fictitious subsidiaries, report fictitious losses, and manage not to pay what they owe Revenue Canada.

If you want to maintain these inequities, these loopholes, these inconsistencies, while asking Canadian men and women to tighten their belts another notch, there is a problem within the Reform Party although it is not the only problem.

As for family trusts, let me reiterate that the Minister of Finance held out his hand to us by saying that he would let a finance subcommittee look into the matter of family trusts, that it would be given carte blanche, that his officials would visit the committee and do whatever it would ask them to do. It was a monumental farce.

It was even, I would say-no, I will not say it because it would be unparliamentary-but it is a monumental farce. We had four months of regular hearings. We met with officials and experts. Imagine, the Liberal chair told the officials that they did not have to answer the questions. Enough is enough. There is a problem with respect to the relations between the government and senior officials. Senior officials can answer if they feel like it. They never responded to that.

How can we propose specific measures when you and I along with my Liberal colleagues do not know what is happening with family trusts nor how much money we are losing as a result of the tax treaties.

There is a lack of transparency, of understanding, and I think that it has become ridiculous.