Yvan Loubier

[Employment Insurance, October 19th, 1998]

Mr. Speaker, the Minister of Finance announced that the government has decided to use the federal budget surplus to reduce Canada's debt. However, a significant part of the surplus comes from the employment insurance fund.

In making this decision, is the Minister of Finance not saying that he has decided to have Canada's debt paid off primarily by those who earn $39,000 or less a year, that is the workers who are the main contributors to the employment insurance fund?

[The Economy, October 5th, 1998]

Mr. Speaker, if the Prime Minister wants to protect the economy of Quebec and of Canada against the risks of recession, why does he not immediately lower EI premiums, which would be an effective, fair, morally acceptable and, above all, legal way of creating jobs?

[The Economy, October 5th, 1998]

Mr. Speaker, the government says it would like to use several billions of dollars from the EI fund to make general tax cuts and stimulate the economy.

My question is for the Acting Prime Minister. Does he not realize that using the EI fund to lower the taxes paid by the rich, a cut which would be funded primarily by workers earning $39,000 and less annually, is the most unfair, most illegal and most immoral course he could choose?

[Supply, October 5th, 1998]

Madam Speaker, the debate on the social union initiated this morning by the Bloc Quebecois is taking place against the backdrop of an economic downturn, which makes it all the more urgent to adopt a series of measures to reinvest in the economy the money accumulated at the expense of everyone but the Minister of Finance to stimulate economic growth.

We have suggested, and we are doing it again in this debate, that an increase in the social transfer could, in part, serve that purpose, particularly to finance social security, post-secondary education and, of course, health.

Since mid-August, the Bloc Quebecois has been warning the federal government that a major economic downturn and even a recession could be expected in the next few months. In August, we could already see some signs of this, since the growth in the GDP had been slowing down for three consecutive months, that is in April, May and June.

Last Thursday, Statistics Canada announced a decrease in the growth of the GDP for the fourth month in a row, which means that, according to the figures registered or estimated by Statistics Canada, the Canadian economy lost over $5 billion in the last four months, which means about $200 per person in Canada. In four months, due to negative growth, $200 from our pockets were completely squandered.

Two more months of economic downturn will usher in a full recession. Six months in a row of reduced growth of the GDP is the very definition of a recession.

Two major factors explain the downturn in the economy we have been seeing in the past four months. First, there is the Asian crisis which is exacerbated by the crisis in the former countries of the Soviet Union, mainly Russia. Those two crisis combined have resulted in an increase in uncertainty all over the world, in a decrease in the value of our exports of raw materials, especially to Southeast Asia, which in turn resulted in a decrease in the demand for the Canadian dollar and therefore a fall in the value of our currency.

In the face of this world uncertainty, speculators have turned to what are called safe havens, in particular the U.S. dollar which they have bought in large quantities. They shied away from the Canadian dollar, thus accentuating the downward pressure on our currency.

Everywhere, the consequences of this crisis have been enormous. The fall of the Canadian dollar may be profitable in the short term for the tourism industry, for example, but it is not profitable in the long run in the high tech sector, in particular in those sectors where inputs have to be bought in the United States, in those sectors where high tech electronic equipment must be bought at higher prices. Since Canadian business must pay more for this equipment, we become less competitive at a time where we are already facing an economic downturn not only nationally, not only in Quebec and in Canada, but also internationally.

The second factor responsible for the decrease in Canada's GDP is the federal government. For several years we have been telling the government that it cannot make deep cuts in social programs, such as health care, post-secondary education and welfare, and in transfers to the provinces in general, help itself to the employment insurance fund surplus and maintain artificially high taxes without causing an economic slowdown.

In four years of Liberal government, taxes going into the federal treasury increased by $37 billion. Individual taxpayers had to pay $20 billion more in federal taxes, and businesses had to pay $17 billion more. These $37 billion taken out of the economy inevitably contributed to the economic downturn.

The artificially high employment insurance premium rates are just another tax in disguise, adding to the tax burden of businesses. In a situation where the economy is slowing down and where the cost of buying foreign goods has increased because of our falling Canadian dollar, now is not the time to maintain premium rates at the current high level.

The government is responsible for the economic downturn because it has failed to substantially reduce EI premiums and because it has chosen to maintain high taxes. It is also responsible because of the billions of dollars it took away from the unemployed two years ago with its employment insurance reform.

The government cannot continue taking more money from taxpayers. It cannot maintain all kinds of taxes in disguise, such as EI premiums for employers, and think the economy will keep on going.

Moreover, the debt reduction policy is also partly responsible for the low Canadian dollar and for the harmful effects of its fall.

Taking a lot of money, billions and billions of dollars, to pay back part of the debt, can look good. That is what the Prime Minister bragged about last summer. In 15 months, the federal government used $20 billion, which amounts to the surplus found in the employment insurance fund, because the premium rates are too high, or to one and a half times the health budget. They used $20 billion to pay back part of the debt.

What impact did this $20 billion payment have on the Canadian and world markets? It flooded the money market with new Canadian dollars, which reduced the value of the loonie. That is what this federal policy did.

To understand the situation, one has to know who the Canadian debtholders are. In Canada, 25% of debt securities, bonds, etc. issued by the federal government are held by foreigners, almost half of whom are American. What did these people do when we bought back our securities, as the Minister of Finance did? What did they do? They exchanged their new Canadian dollars for US dollars, because they are Americans, and by doing so they flooded the Canadian money market with new Canadian dollars, which, in turn, decreased the value of the loonie.

The other debtholders are chartered banks, pension funds, insurance funds. These people were looking, especially last summer, for the best return possible and for less uncertainty. What did they do when the federal government bought back their securities in Canadian dollars? They took the money and either exchanged it for US dollars, which is a sure bet in these times of uncertainty and crisis in Asia, or bought shares in American companies or US bonds, which is a better investment in these turbulent times throughout the world.

The Minister of Finance, who asked the Bank of Canada to step in, especially in August, to support the Canadian dollar, was himself responsible for the precipitous drop of the Canadian dollar and for all its impacts on the competitiveness and on consumer confidence.

The monetary policy and the interest rate policy of the Bank of Canada are the third reason that makes the federal government responsible in part for the economic downturn and, indeed, for the recession that could happen next year if the data continue to show the same sluggishness observed during the first four months.

While we learned, last August, that the GDP had fallen for three months in a row and that other indicators hinted to a major economic slowdown, the Bank of Canada decided to raise its interest rates by 100 basis points or 1%. This 1% raise may seem insignificant, but when there is already an economic downturn, one can deal a death blow to the economy simply with a 1% shock on the monetary market, through an increase in the interest rates.

When the Bank of Canada did that, which was very stupid, the Minister of Finance said that he still trusted the governor of the Bank of Canada, even though the latter is stopping—and I would even say throttling—economic growth in Canada. Gordon Thiessen, the governor of the Bank of Canada, not only made a mistake when he raised the interest rates by 1%, but recently he also sent contradictory signals.

Last Thursday, when the US Federal Reserve Bank lowered its interest rates by 20 base points—it could do so because large economies like those of Germany and the United States must lower their interest rates—the Bank of Canada followed suit in exactly the same proportions. That was nonsense. The Bank of Canada should have done nothing.

That is precisely what is being asked of the governor of the Bank of Canada: to stay put and do nothing. He should lock himself in his office, and think up more intelligent measures than the ones he is taking to stimulate Canadian economic growth.

Why be stubborn, like the Minister of Finance and the Prime Minister who, all summer long, made light of the fall of the Canadian dollar, and even of the economic downturn?

On the contrary, he should admit there is a downturn, that all the experts now agree with the Bloc Quebecois who raised the alarm the very first week of the financial crisis. All the experts are now saying there is no sign that next month or the following one—I am still talking about economic statistics—things will pick up. As I mentioned before, we are talking about the first four months of the current fiscal year, or April, May, June, and July. In August and September, unless one is as short-sighted as the Minister of Finance, the economy did not do better.

In August, the Canadian dollar dived to an all-time low. Businesses were beginning to complain about the increasing costs of American equipment and high technology as a result of the decline in the value of the Canadian dollar. If there was an economic slowdown in April, May, June and July, we should expect the same in August and September. We will then have, according to the technical definition, a recession.

For the last month and a half, we have been asking the finance minister to use if not all, at least most of the actual surplus to promote economic growth instead of using the entire amount to repay part of the debt—we are not against repayment of the debt but it makes no sense in the current climate of economic uncertainty. We are not asking him to spend money recklessly as the Liberal government used to do in the old days.

I remind you that the current Prime Minister was once the Minister of Finance and that he was responsible for one of the largest deficits in Canada, back in the days when the federal government used to run deficits. We are not asking him to fall back into the same bad habits. Neither are we asking the Minister of Finance to repeat his Prime Minister's old mistakes. Since the budget surplus will reach between $12 billion and $15 billion by March 1999, we are simply asking him to take these funds and announce imminent tax reductions and measures that will boost the economy and restore the confidence of consumers, which is now badly eroded.

What is the greatest threat? It is that in a few months consumers, whose savings are unusually low right now, facing uncertainty, a falling dollar, and the do-nothing attitude of the Minister of Finance and the Prime Minister, will decide not to spend, to postpone all their purchases. As I said, with their unusually low savings, they are quite likely to postpone their purchases, and that will be the end. As early as 1999, we will be in a recession, and it will be because of the Prime Minister and the Minister of Finance, who did not take seriously the early signs of a major slowdown in the economy in the last four months. They did not listen to the Bloc Quebecois which, for a month and a half, has been mapping a plan for government action.

What could the government do to stimulate the economy? We are asking for three things. First, implement a series of fiscal measures within a special budget. These measures would include, among other things, a substantial tax break for middle income earners.

We are also advocating a reduction of EI premiums to help employers go through the economic slowdown and help middle income earners who are likely to spend the extra money made available through income tax cuts and premium reductions, thereby stimulating the economy.

And on the heels of the debate on the Canadian social union, we also ask for an immediate increase in social transfers to the provinces. Spending on social programs can also result in economic growth.

Then we are asking the government—this is our second demand—to ask the Bank of Canada to stop making erratic decisions and creating shock waves in the economy. Nobody knows where the Bank of Canada is going anymore. Gordon Thiessen told us “We are independent from the U.S. Federal Reserve Bank”. This does not hold true anymore. Last Thursday, when the Federal Reserve Bank lowered its basic rate by 25 basis points, Gordon Thiessen blindly followed suit, something he should not have done.

A better way to manage the monetary policy would have been to wait and see. His 1% rate increase at the end of August has hurt the economy, but what is hurting the economy even more is that we do not know where he is heading. He has put us in an uncertain situation. He is putting the financial markets in a situation where we expect the worst. Things may not be at their worst, but they could certainly be better. We in Canada are just keeping our heads above water.

Gordon Thiessen should keep quiet and lock himself up as I was saying earlier. Perhaps the Minister of Finance could reconsider Mr. Thiessen's future, for he is the one responsible for our greatly reduced options in terms of monetary policy and interest rate management policy.

Our third request to the government in this economic slowdown scenario is to hold a full public debate on the best way to spend the budget surpluses derived from employer and employee contributions to the employment insurance fund, from the substantial tax increases imposed on middle income Canadians in the last four years, and from cutbacks in transfers to the provinces.

There should be a public debate on these issues as well as on debt management. Why is it important to talk about debt management? Because the government is lying through its teeth. In the latest budget, at page 58, in table 1.13, we read:

We established a debt reduction plan for the next three years. We will use the contingency reserve.

This is a reserve to provide for the unforeseen. It amounts to $3 billion a year. What the Minister of Finance said in his budget is that if this reserve were not used in the three years, it would simply go to repay the debt.

If we calculate—and we are able to do calculations—$3 billion this year, $3 billion next year and $3 billion in two years add up to $9 billion in three years that the Minister of Finance had promised to apply to the debt.

He applied $20 billion in 15 months totally contrary to the promises in his budget and the electoral promises made, whereby 50% of the surplus would go to repay the debt and 50% to reducing taxes and increasing social transfers, especially to support health.

The government has yet again reneged on its promises, as it did with its shamefaced lies over the GST. This is why we have to have a public debate. There is nothing but a wad of lies between what they write, what they do and what they say.

[Economic Situation, October 1st, 1998]

Mr. Speaker, a GDP on the decline for four consecutive months is not the result of an international problem, but a domestic one.

For the past two months, the Bloc Quebecois has been warning the Prime Minister that we are slowly sinking into a recession.

So, I put the question to him: Will he continue to watch the train go by until next spring's budget, or will he have the courage to immediately take the actions he can and must take to get the economy back on track, without running a deficit?

[Economic Situation, October 1st, 1998]

Mr. Speaker, while the government pocketed a $7 billion surplus over a four-month period, experts are increasingly talking about a recession: the GDP is declining, the dollar is plunging and consumer confidence is being eroded.

My question is for the Prime Minister. Does the Prime Minister—who is stubbornly refusing to take any initiative to get the economy back on track—not realize that the outrageous cuts he continues to make in the economy could bring about a recession within a year?

[Employment Insurance, September 28th, 1998]

Is the Minister of Finance telling us that he will do everything in his power to change the Employment Insurance Act so that it is legal to take the money of unemployed workers and low-income earners and use it to lower the taxes of the richest members of Canadian society?

[Employment Insurance, September 28th, 1998]

Mr. Speaker, I take the side of the most disadvantaged and the middle-income earners of this country, because of the $37 billion in taxes the minister has wrung out of them.

[Employment Insurance, September 28th, 1998]

Mr. Speaker, the government seems to be having trouble deciding whether to use EI surpluses to lower premiums and help contributors, or to lower taxes generally. It appears to be leaning toward the second course of action.

My question is for the Minister of Finance. Does he realize that, by opting for a general tax reduction, he would have decided to slough off the cost of the tax break for everyone, including the rich, on those earning $39,000 and less, which is complete nonsense?

[Income Tax Conventions Implementation Act, 1998, September 24th, 1998]

Mr. Speaker, it is my pleasure to speak to the bill on tax conventions. But first, I would like to make a digression similar to that of my Reform colleague earlier. I do not want to take away from this bill, which I consider very important. Tax conventions are always important, as are their provisions.

However, the precipitous drop in the value of the Canadian dollar, its effects on the economy, the three consecutive months of slower economic growth, the declining orders with businesses, all the composite indexes, including those released yesterday by Statistics Canada for the month of August, indicate that we are in a period of economic slowdown. However, the Minister of Finance keeps producing fantastic surpluses every month off the backs of the unemployed, the sick, the provinces, everywhere except his own back.

Instead of using these surpluses to stimulate economic growth, he most unwisely prefers to pay off part of the debt, whereas he should be setting up reserves and using them right now to stabilize the economy. I would like this to have been debated in this House.

It seems to me important that we do not find ourselves in ten months facing the delayed effects of a recession, in a full recession with the loss of thousands of jobs, because the Minister of Finance failed to carry out his responsibilities and failed to use tax revenues wisely to stimulate economic growth, create jobs and reverse the trend we have seen in recent months.

That said, I would have liked such a debate, but I would like to devote the next few minutes to Bill S-16, which I consider very important. It is aimed at implementing three tax conventions, which I will explain later and which were signed between Canada and three countries: Croatia, Chile and Vietnam.

What are these tax conventions? They are agreements Canada has signed with the countries I just mentioned to prevent Canadian companies, for instance, that have branches in Croatia, Chile or Vietnam from having the revenues, capital or profits from their branches abroad taxed twice when these revenues are brought back into Canada.

The opposite is also true. Chilean companies also have branches in Canada. These tax conventions ensure that the same revenues are not taxed twice. This would not make any sense and would be both unfair and devastating at the economic level and in terms of job creation in Canada as well as in Croatia, Vietnam and Chile.

Tax conventions are based on a very good principle. This practice has been in effect in Canada and throughout the world for many years now. Canada has signed dozens of tax treaties with various countries, and that is all very fine.

The problem with the tax treaties or tax conventions we sign with other countries arises when the tax rates in these countries are very different than our own. The difference may be so great that, if revenues are taxed in the other country and not in Canada, there is a terrible fiscal distortion. Also, Revenue Canada stands to lose a lot of money in tax revenue.

Let us take as an example a country like Barbados. Barbados is considered a tax haven, just like Bermuda, Liberia, and other countries. In these countries, the rate of taxation is so low that it is almost non-existent. In Barbados, the maximum corporate income tax rate is 2.5%. For your information, the maximum tax rate in Canada for businesses is about 40%. The tax rate ranges from 25% to 40% depending on the nature of the industry and the tax expenditures applicable to each business.

Therefore, when Canada signs a tax treaty with Barbados, it means that a Canadian company with a branch in that country will pay only 2.5% tax on its profits there and can bring the rest into Canada without having to pay a cent to Revenue Canada. This makes no sense at all. The gap is too wide between the taxation rates in these two countries.

For the Bahamas, it is even worse: the taxation rate is zero. If Canada signs a tax treaty with the Bahamas, Canadian companies that have a branch in that country will pay almost zero tax on their profits there. They will then bring that money into Canada. Since the profits will have already been taxed in the Bahamas, no tax will have to be paid in Canada by the parent company. This creates a substantial imbalance.

That is why, when Canada signs a tax treaty with another country, we have to make sure that the tax rates are comparable, that Revenue Canada will not lose tax revenues and that this tax treaty will not encourage companies to open bogus or even legitimate branches in countries considered to be tax havens simply because tax rates there are very low and because there is a tax treaty. The Canadian company pays tax in that foreign country and does not have to pay tax in Canada, which means a loss of tax revenues for Revenue Canada.

Those who are watching us today should know that it is the people of Quebec and Canada who have to foot the bill for this loss of tax revenues, for those taxes that are not paid in Canada by Canadian companies because of these kinds of tax treaties with countries that are considered to be tax havens. It is the people of Quebec and Canada who have to pay the taxes that these businesses avoid paying through the existence of reciprocal taxation agreements also known as tax treaties.

That is why we have to avoid signing such agreements with countries that have taxation rates that are very different from ours.

Ever since the Bloc Quebecois was elected to this place five years ago, every time a bill to implement a tax convention has been introduced in the House, we have taken these conventions very seriously, as they could ultimately result in tax losses for Canada, which would have to be covered by individual and corporate taxpayers in Quebec and Canada.

Every time, we have carefully considered the conventions on a case-by-case basis to determine whether the countries entering into a tax agreement with Canada had comparable tax rates.

In this particular case, when we checked in the International Tax Summaries, 1998, at first glance, based on the analysis contained in this document and our own analysis of the situation, comparing tax rates with tax expenditures, supply, etc., tax rates in Croatia, Chile and Vietnam seemed to be relatively the same as in Canada.

Personal income tax rates varied between 20% and 35%. As such, a maximum tax rate of 35% is fairly similar to what we find in this country. The maximum corporate tax rate was also 35%. Canada and Croatia basically have comparable rates.

Turning to Chile, again, the maximum tax rate was 35%. So, it is really comparable to Canadian rates. There is no big difference.

In Vietnam, tax rates vary between 0% and 60%. Compared to our 35% to 40%, a maximum rate of 60% may be making this convention slightly unfavourable to Vietnam, as far as individual taxpayers are concerned at least. It all depends on the type of relationship and the subsidiaries that will be established in Vietnam by Canadian interests and vice versa. All in all, as a basis for assessing comparative tax rates, let us say we do not see any problem with this tax convention and we will support the bill.

Since April 1994, when the Bloc Quebecois first intervened with respect to a tax convention bill, we have been asking the Minister of Finance and the government to tidy up some long-standing tax conventions with countries whose tax rates differ radically from Canadian tax rates and, if need be, to set them aside because they create imbalances in fiscal exchanges between Canada and the parties to these conventions, which are considered tax havens.

We have asked the Minister of Finance on countless occasions to update these conventions. As I mentioned earlier, the tax rates in conventions signed with Liberia, Barbados and Bermuda are so low that there is a real shortfall for Revenue Canada. When Canadian companies with branches in these countries realize profits that are taxed at anywhere from 0% to 2.5%, instead of the 25% to 40% they would be taxed at here, depending on the nature of the tax, there is a substantial imbalance.

Distortions are created and there is also a shortfall that can be substantial for individuals and for Quebec and Canadian companies. They must make up this shortfall.

Every time we asked the Minister of Finance to do something about this, we received a completely detached and unconcerned reply, just as each time we asked him to really reform taxation he told us that we had done a good job, that our analysis was correct, but completely side-stepped the fundamental changes that should have been introduced in 1993 after the election. Behind a veneer of equity and fiscal fairness, the Liberal Party talked about overhauling taxation. Once this government was elected, what happened to its concern for tax fairness, for tax equity, and what happened to the promised reform of the Canadian tax system, which is still full of loopholes? Our tax system still includes tax conventions with countries with which we should not have such treaties, because it is very costly for Canada.

Whenever we ask the Minister of Finance to review these conventions with countries considered to be tax havens, he tells us that it is not an urgent matter. He also tells us that, over time, the government will make a few minor reforms here and there.

Yet, it would have been so simple—as we suggested to the finance minister back then and have kept suggesting every year, whenever we have had the opportunity to do so when dealing with other bills involving tax conventions—to correct the situation. A few years ago, the United States and the European countries were quick to react and make adjustments, in light of these imbalances.

Let us say, for example, that Canada has signed a tax convention with a country that has a 2.5% tax rate, as is the case for Barbados, or where taxes are practically non-existent, as in the Bahamas. But let us assume a 2.5% tax rate.

The United States solved the issue by providing a tax credit to companies that have already paid some taxes on profits made by subsidiaries in countries such as Barbados. So, a tax credit is given to American businesses that have already paid a 2.5% tax on their profits. These companies are given a credit equivalent to what they have already paid in taxes to Barbados, but they have to pay regular taxes to the American government.

In other words, if you paid $10 in taxes to Barbados and would normally have to pay $40 in the United States, you now owe $30 in taxes on your corporate profits. The amount already paid in the foreign country is taken into account. This makes it possible to continue to have tax conventions with countries whose tax rates are much lower than ours. A tax credit is granted to companies that have subsidiaries in countries considered to be tax havens, for the portion—however small—of taxes already paid abroad. These companies then pay to the American government the full amount of taxes that they would normally have to pay.

This is not hard to understand. It is logical and it is fair. That is called tax fairness, tax equity, which involves the payment of the money owed, no more, no less, to the government by individuals and businesses.

If a business owes the government money, but through a subsidiary in a country considered to be a tax haven it does not pay its fair share, it is the responsibility of the Minister of Finance and of the Liberal government to recover this money. It does not mean threatening the survival of a business, it means ensuring that all businesses receive the same treatment.

A Canadian business operating on Canadian soil without a subsidiary in a tax haven pays its share of taxation at a rate varying between 25% and 40%. Why then would a business with a subsidiary in a tax haven be required to pay only 2.5% or even 0%? It makes no sense.

There are distortions. There are major injustices. Representatives of business ask us why the Minister of Finance has failed to act in this matter up to now.

The Department of Finance provides little information. It keeps no record of financial losses that occur as a result of these tax conventions. Nor does it keep a record of the number of businesses set up each year so very carefully in countries considered to be tax havens. However, the information we have indicates that nothing has changed. Quite the contrary, the situation has worsened.

Let us look just at the six major Canadian banks. A number of criticisms may be levelled at them, but this one is well founded. The six major Canadian banks have 119 branches abroad, including 57 in the Caribbean, where tax havens abound. There are not a lot of people, and there is not a lot of wealth. What are the 57 branches of the six major Canadian banks doing there? Banking, no doubt, but enough to justify maintaining 57 branches in the West Indies? We need some hard answers.

Earlier I explained how tax havens worked. The tax rate is very low. Revenues and tax losses are allowed to circulate between head office and the subsidiaries abroad. There are tricks to saving taxes and perhaps the banks use them in the West Indies. Of the 119 branches abroad, 57 are in the West Indies. Now that is really something.

On the Cayman Islands, a typical example, the situation has not changed, it has worsened. Around the mid 1990s, in 1994-95, there were 28,000 companies on the Cayman Islands, a tax haven par excellence, for a population of 30,000. That is just about one company per inhabitant. We can see it makes no sense. However, these are the countries we have relations, this sort of tax convention, with. It makes no sense at all.

This is why we keep asking to have things cleared up and a simple rule applied, as the Americans did recently. There should be a tax to be paid in Canada, the usual business tax, and a credit given for the tax already paid abroad—whether it is 15%, 20% or 25%—and the tax payable less the credit comes to something close to zero. That is the way it should be. This way we could say there was no problem for countries we have tax conventions with, if their tax rate is the same.

The credit amounts to the tax they paid there, and the tax payable here comes to zero on calculation. However, when really ridiculously low tax rates are involved, there should be an amount payable covering the difference in tax rates with Canada's higher rate so these businesses do not rob us. I repeat. What they do not pay, the taxpayers pay for them. This is indirect robbery by means of a tax convention that is legal and has the approval of the Minister of Finance.

I have often asked myself why we have a Minister of Finance if he does nothing, if he does not review taxes, if he does not plug tax loopholes and review tax conventions as we ask and if he allows hundreds of millions out of the country as the auditor general pointed out in 1992. Why do we pay him? Why is he there?

My second question was this: Why is he doing nothing? I had my answer less than one year ago. We already knew this, but since it came from sources other than the Bloc Quebecois, we were not going to let it slip by. Why does the Minister of Finance do nothing about tax havens, given the discrepancies I have just mentioned? The simple answer is that, since 1981 when he acquired Canada Steamship Lines, he has opened ten subsidiaries of that company in other countries. These ten subsidiaries are located in Bermuda, Liberia and Barbados, three so-called tax havens.

Prior to 1981, before the Minister of Finance took possession of Canada Steamship Lines, these subsidiaries did not exist. He organized his international shipping activities—because everyone knows he is involved in shipping, it is public knowledge—by opening subsidiaries in tax havens, with preferential tax rates, with great flexibility regarding environmental policies, for instance. In some of these countries, very little is respected. There was also quite a bit of give in the labour policies. These are not necessarily countries with stringent labour laws.

The Minister of Finance himself, who is involved in shipping, is at the helm, has subsidiaries of Canada Steamship Lines in so-called tax havens. Is he both judge and jury here? One might well wonder. The public also has a right to wonder why hundreds of millions of dollars are allowed to float away to so-called tax havens, why this is allowed to hang fire—for that is what is happening—, why tax conventions are maintained with countries with tax rates ridiculously close to zero. We are the ones who foot the bill for taxes not paid by Canadian subsidiaries in other countries. We are probably footing the bill for Canada Steamship Lines as well.

This is unfair. It is inequitable. There is something about it that bothers me and that greatly bothers the public. On December 10, 1997, a bill was introduced: Bill C-28. I can tell you that we will not drop this matter. We asked that special committee be struck to look into Bill C-28.

Perhaps I should remind those who have forgotten what Bill C-28 was about that its provisions supplemented somewhat tax treaties between Canada and countries considered as tax havens.

Bill C-28 is a big, massive bill. When it was introduced at first reading on December 10, it went almost unnoticed. At second reading, however, when it was first debated in the House, on February 2, 1998, the Bloc Quebecois went over this bill several hundred pages long with a fine-tooth comb. We dissected the bill and, toward the end, we found this rather short passage—three little paragraphs, 12 lines altogether over more than 400 pages of legislation—which proposed a tax change with respect to taxes paid by steamship holding companies. The Minister of Finance owns such a company.

What was the purpose of this change? It provided for holdings involved in international shipping operations in countries like Liberia, Bermuda and the Bahamas, where the finance minister's ships and companies operate, to be exempt from paying taxes to Revenue Canada. And no action would be taken against any of the international shipping companies involved. There are only five such companies in Canada, and the Minister of Finance owns one of them. Revenue Canada cannot retroactively prosecute these companies for unpaid taxes.

When we pointed that out at second reading, we were told we were wrong, that it was not the case, that it was not true. The Minister of Finance tore up his shirt. For example, when he left the House, he had a hard time providing an explanation for five minutes. He was stuttering, which is unusual for him. You have seen him during oral question period. He is so confident, he is so sure of himself that he gives us the short shrift. Even though every economic indicator points to a downturn in the economy, even though all the experts are talking about a major slowdown, and even though an increasing number of them talk about a recession in a year from now, as far as the minister is concerned, there is no problem. Things are just fine.

In the last two days, he has been using old quotes from the experts, and from the Quebec premier, Mr. Bouchard, during oral question period. These quotes are old ones dating back to the Saskatoon meeting, a month ago. The minister uses old quotes from experts that date back to last month, when the Bloc Quebecois raised the alarm by saying “be careful about the dollar free falling . The Prime Minister and the Minister of Finance are wrong to take this lightly, to play golf and to continue to say there is no problem, that there is no adverse effect on the economy”.

There is a risk of a slowdown in the economy. The number of jobs could decrease. We pointed that out in early August, and they made fun of us. Now, all the indicators point to a downward trend. For the past three months the economy has been slowing down, the growth rate and the GDP have been decreasing, and the Minister of Finance is still quoting what the experts said when we raised the alarm.

The situation has changed since then. The experts now agree with the Bloc Quebecois. They have asked the minister to use the surpluses generated at everyone's expense to, first, reduce taxes, second, increase social transfers and, third, lower employment insurance contributions, so as to give businesses and workers a break. But no, everything is just fine, said the minister with assurance, no problem.

On February 2, when this apparent conflict of interest was brought out—one that still exists—the Minister of Finance left the House, and his assurance left him as well. He did not have much in the way of explanations to offer, since he was the sponsor of a bill which offered tax advantages and protection against any recourse by Revenue Canada for payment of income and other taxes by his shipping subsidiaries located in countries considered to be tax havens. He was stuttering.

He referred us to Len Farber—and I recall it as if it were yesterday—his main man for tax policy, but also what I would call his main man for shady dealings. That same Len Farber who told us there was no problem with the family trusts condemned by the Bloc Quebecois as well as by the auditor general two and a half years ago.

Members will recall the two family trusts that moved from Canada to the United States. Two family trusts with total capital evaluated at $2 billion, transferred over to the U.S. without a cent of tax deducted. That same Len Farber, the great tax expert and organizer of shady dealings for the Minister of Finance, told us there was no problem, that everything had been done in accordance with the taxation rules, even if the decision at midnight to let these two trusts go without any problem had been made on December 23, 1990. At the end of the debate, Mr. Farber was taken down a peg because the Minister of Finance had been obliged to table a bill to block the loopholes that had allowed this near-illegal transfer of two two-billion dollar trusts to the United States.

That same Len Farber is given us as a reference by the Minister of Finance for an explanation of why there is no problem with Bill C-28. I met with him personally, along with one other person, in my office on the fifth floor, and it was explained to us that there might be a problem one day.

A minister introduces a bill which has an impact on a business in an area in which he works on the international level. Then a person referred by him tells us there could be a problem, a potential conflict of interest, that we need to be careful. We therefore began to wonder, and the fact is that the appearance of conflict of interest remains.

The minister then referred us to his ethics counsellor, who testified before the Standing Committee on Finance. Not only did he say there might be an appearance of conflict of interest, but he put it in writing. It was repeated time after time that a public inquiry was necessary for the sake of the Minister of Finance, that all appearance of conflict of interest needed to be taken away, because it made no sense to maintain the situation as it was. The minister always maintained that there was no problem, despite all the arguments to the contrary that were put forward.

Not often have we seen all four opposition parties present a united front. However, on this issue, members of the Bloc Quebecois, the Reform Party, the New Democratic Party and the Progressive Conservative Party held a joint press conference to demand an inquiry because of the appearance of a conflict of interest.

Not only was their request turned down, but when motions were tabled at the Standing Committee on Finance to call witnesses to shed light on the impact of Bill C-28 on the Minister of Finance's shipping companies, all Liberal members on the committee voted against these motions.

The minister and the government keep arguing that there is no conflict of interest or even the appearance of a conflict of interest. Yet, the Minister of Finance, who is sponsoring a bill dealing with international shipping, is the sole owner of an international shipping company that operates in tax havens.

How can you expect changes to the tax system? How can you expect the people opposite to be willing to review those tax conventions signed with countries whose tax rates are much lower than ours, and where tax evasion is possible?

I think we know the answer to that question. There is no willingness on the part of the government. The people opposite may be acting as judge and jury. We will not know for sure—and there is still some doubt in my mind—until we shed some light on Bill C-28, its impact and the appearance of a conflict of interest involving the Minister of Finance.

Is it any wonder the minister is unwilling to review the tax system? For five years now, we have been asking him to review the whole tax system in order to make it fairer. But he knew that the tax rates of shipping companies and our relationship with tax havens would fall under the scope of such an extensive reform, which is why he did not seem too eager to carry it out.

When we realized what was happening, we, in the Bloc Quebecois, decided to release starting in November 1996 two series of studies, some 350 pages, including very serious analyses and recommendations. In our studies, we suggested several changes to the personal income tax system to make it fairer and to give a tax break to middle-income Canadians who, need I remind you, have paid most of the $20 billion in new taxes the Minister of Finance has imposed since he was appointed in 1994. A large part of this $20 billion was paid by middle-income Canadians. Businesses in Quebec and Canada absorbed the other $17 billion in tax increases.

We presented a document on personal taxes which included critical analyses as well as recommendations. When we presented this document, the Minister of Finance praised us in the House. He said: “I praise the opposition for the serious work it has done on personal taxes and for its approach to this issue. I recognize there are problems and I recognize this document contains some good solutions”. He then took the document and put it at the bottom of his desk. When his desk was cleaned at the end of the summer, the document was put away in the circular file. We got no tax reform proposal from him.

Then we presented another document on corporate tax expenditures in Canada. It was an analysis of the main tax loopholes used by large businesses in Canada. Our analysis showed that some of these were outdated but cost billions of dollars a year to the Canadian treasury, and they still do, with the people of Quebec and Canada having to pay the difference in personal income tax.

We proposed abolishing certain tax expenditures and transferring these savings to small businesses to encourage job creation: for example, reduced payroll taxes and tax breaks for businesses that create jobs year after year.

The Minister of Finance said: “Another serious exercise”. Right. We can do without his praise. What we want is tax reform, and we never got it.

The Minister of Finance was so embarrassed about not doing anything that he decided to establish the Mintz group, a working group presided by Mr. Mintz, a highly competent tax expert. This group produced a large document. It took them a year as the deadline kept being postponed.

Some recommendations are worthwhile. Others are absolutely worthless. But to ease his conscience, the Minister of Finance asked the Mintz group to produce an analysis of tax reform. The group submitted its report last year. The Minister of Finance probably put that report on a shelf or in his desk. It did the same with it as it did with our two analytical studies on personal and corporate taxes.

There is no political will on the other side of the House to reform our tax system for the reasons I stated earlier. I see what the minister has done over the last five years. If there is anyone who follows him closely, it is me.

I see that the minister was coasting. Business was good, so he surfed, he rode the crest of economic growth. Money was coming in—corporations and individuals have paid $37 billion in taxes into the federal coffers over the past four and a half years—and he collected it. He also took in surplus after surplus in the employment insurance fund, to the tune of $6 billion a year, during three and a half years.

He is still collecting and wants it to be legal. He will ask his fellow ministers to be his accomplices in robbing the EI fund. He has cut assistance to the poor and the sick. He has cut billions from transfer payments to the provinces; by 2003, he will have cut $42 billion from transfers for social assistance, higher education and health.

He pocketed the money. Everyone—the sick, the disadvantages, seniors, students—tightened their belts while he collected. A real money machine. Favourable economic conditions, combined with cuts imposed on the poorest of the poor and cuts to health transfers, that is what he calls sound management of our public finances.

He could have taken positive steps instead of achieving the exact same result through decline management. He could have reviewed the whole tax system five years ago, when we asked him to; it was in fact part of our platform. He could have plugged the loopholes in the tax system with respect to tax havens. He could have reviewed the reciprocal treaties, that is, the tax conventions with countries considered tax havens. He could have avoided voting in favour of bills promoting international shipping, where he has some involvement. He could have done a whole lot of positive things for employment, equity and tax fairness.

But no, the Minister of Finance took advantage of the economic situation. Money was coming in and everything was fine. He looked like a good manager, but he is one of the worst we have ever had. In the past, the economy was not so kind to finance ministers. We have had Ministers of Finance who were less draconian than this one. They would not have dared take money from the sick, the unemployed, those on welfare, students and the less fortunate. There was respect at that point, which the Minister of Finance no longer has for anyone.

Bill S-16 is a good bill, because the countries involved have comparable tax rates. But it has given us an opportunity—and we will seize it whenever we can—to criticize the inertia and the lies of this government along with the measures it has not taken but ought to have to improve the lives of people in Quebec and Canada. These measures could still be taken, because the surpluses generated could be used properly instead of to repay part of the debt in a context that is very uncertain at the moment.

I remind you that we do not oppose repayment of the debt. When things are more sure, we will be the first to advocate using a large part of the surplus to repay the debt. At the moment, however, we have had three consecutive months of economic slowdown. The Statistics Canada composite index tells us there was no growth in August, something we have not seen for two years. Businesses' orders are down and jobs are beginning to stagnate in the area of trade.

It seems to me that all this together with the fact that the Bank of Canada stupidly raised interest rates by one whole percentage point on August 27 sent considerable shock waves through the economy, which was already weakened after three consecutive months of reductions in the rate of GDP growth. We thus have all the ingredients for a major economic slowdown in the months to come. Let us not forget that such a downturn means fewer jobs created, a loss of wealth and less tax revenues for the government. In short, it means hardship.

The Minister of Finance now has surpluses he should use to stimulate economic growth. He should at least do that good deed, given that he has not done any in the past five years. Let us give him the honour and ask him to take our request for a special budget seriously. He should consider using the surpluses to stimulate domestic economic growth by reducing taxes for middle-income people—who have been paying a lot in the past four years—and by reducing EI premiums, so as to give a break to businesses and workers, who have contributed more than their fair share in the past few years.

The minister should listen to the unanimous plea made by the premiers. They are asking him to reinvest what he shamelessly took from federal transfers to the provinces, and to use that money to fund social assistance, higher education and health. That is all we are asking him to do.

Having said that, we will support Bill S-16.