Mr. Speaker, I would like to begin by picking up on some of the comments that other members have made in this debate so far, that we are dealing with a very complex issue.
I refer to a paper that was delivered at the University of Toronto last August 8 and 9 at the Institute for Policy Analysis. It was delivered by Professor Pierre Fortin from the University of Quebec. The title of this paper was "A Diversified Strategy for Deficit Control: Combining Faster Growth with Fiscal Discipline".
I would like to read a few comments from the abstract of this paper, which I recommend to all members because it deals with the complexity of the challenge before us:
"Under current projections of economic growth and fiscal policy for the next two years, the probability that the federal government will achieve its stated goal of bringing down the fiscal deficit to 3 per cent of GDP by 1996 is almost zero. Four types of changes could improve the odds that the target be achieved: one, faster economic growth; two, a decline in interest rates; three, additional cuts in program spending; four, increases in tax rates.
"It is possible to develop a diversified strategy that would: one, allow the deficit target to be met by 1996; two, achieve continued reduction of debt and deficit beyond that day; three, permit the economy to return to full employment by 1999; four, preserve the gains already made against inflation. That strategy would have lower interest rates, raise the average growth rate of real GDP to 5 per cent per year over the next five years. A nominal freeze on program spending would be imposed in 1995 and 1996 and would be followed by moderate real growth in 1997 to 1999. There would be no increase in the global effective tax rate".
For the largest part the paper exposes the analytical and empirical foundations of this proposed combination of accelerated growth and fiscal discipline. I quote specifically from that paper because I realize that Professor Fortin is a respected economist in this country. I have heard he is someone who from time to time would even give our members in the Bloc Quebecois some advice. It was for that specific reason, aside from his reputation, that I tried to get into his paper.
I believe that all members in the House have really put the right emphasis on the cuts. I do not think anybody watching the debates that are going on around here would question the commitment, the focus or the debate on cuts. We cannot turn on a light around here these days without somebody saying do not do that because we have to save money. The message of working on achieving cuts has been well impregnated into the thought process of this Chamber and of this city.
The other area of tax reform in my mind has not really been put on the front burner to the level it should be, but the real issue for me has to do with faster growth. I believe that is where we as members of Parliament are falling short.
If we are going to meet the challenge of getting our deficit and debt house in order we are going to need growth in the country. We are going to need jobs. We are going to need investment. We are going to need the entrepreneurial spirit recharged.
I believe passionately that we will not achieve the growth that we must achieve if we are going to meet these targeted numbers unless we reform the tax system. The current tax system is no longer trusted by business or by the average person in terms of the personal side. Look on the business side right now. There are 37,000 tax cases before the courts with a burden on the justice system because of the tax act challenges coming from business. Most Canadian recognize that.
There is something else that we as a government have to face. Members have touched on it this morning. We are now competing more than ever for capital around the world. We are in a globally competitive regime for capital. In order to have capital move to our community, move to our country, we have to have a globally competitive tax regime.
We should not look at these other countries that are attracting capital for investment in their communities in a condescending way. We should realize that they are ahead of the game. They are ahead of us. They have realized that point. Today capital can move with the push of a button.
If people who have wealth, capital and are entrepreneurial achievers see that by getting a better tax break by pushing or parking some of their wealth in either the islands, Switzerland or some other part of the world, why would we not expect them to try to do that? We would not want them to just leave their money here after they had worked hard to achieve this wealth when we did not make any effort at reforming our tax system or recognizing that those wealth generators are an important factor in generating jobs and growth in this economy.
The challenge of reducing the deficit and debt is inextricably intertwined with having a tax system that will reverse capital flows. I will try to explain this.
If we have a tax environment that attracts capital from all over the world all of a sudden in our community, in our financial institutions we will have a glut of capital. When we have a glut of capital that means costs will go down. When costs go down the interest rate on serving our debt is going to put a lot less strain on the fiscal framework of our country.
More important, if we have capital in our community that is not expensive, that is readily available, the entrepreneurial spirit which needs access to that capital can go out and do what it does best, take risk and create jobs.
When those jobs are created, once again on that side of the ledger we are going to be putting less pressure on the fiscal framework of this nation.
I believe that we have a challenge here. We have achieved the notion. I would give the Reform Party some credit for pushing this whole subject of cuts almost through the wall, but I really believe that we as a government and as a Chamber now have to put an equal amount of thinking and creativity on how to get some growth going.
One cannot get growth with the current tax system. The current tax system is a disincentive to achievers. It is a disincentive to risk takers. It is a disincentive to the entrepreneurial spirit in our country. That entrepreneurial spirit which is required for taking chances and throwing out ideas that can create jobs needs to be nurtured. We are not doing that with the system that we have today.
The problem when one tries to reform a tax system that has looked after every little interest group in this country is that the political will becomes very fragile. As members know I have been trying, I believe in a constructive way, to reform the tax system of the country over the last five years.
I realize that this may be the last chance in the government's term to reform the tax system. If we do not take on the challenge of comprehensive tax reform in this budget, we will have committed ourselves to a pathway or a direction that will carry us for the term of this government. For me, the next 30 to 45 days is crucial if we are going to address the whole issue of comprehensive tax reform on the personal and corporate side.
As I started to say, the difficulty we are going to have in trying to achieve tax reform is that every interest group in the country has a built-in measure of support in the current tax system.
As many members know, I have been advancing this notion of the single tax system for the last few years, continuing to refine it. Many times Canadians will say: "Why is it that you are having problems in moving this debate forward?" I always say: "First of all, there is a basic tax lethargy in the country. The second thing is that when you go to eliminate the preferences in the tax system, people become very queasy. Their political will does not tend to remain strong".
In the latest proposal that our team has put forward, some of the income deductions that would be eliminated are the following: attendant care expenses; moving expenses; workers' compensation payments; employee home relocation loan deduction; the stock option and shares deduction; the capital gains deduction; the northern residents deduction; forward averaging; employer paid health preplanned premiums; child care expenses; receipt of intercorporate dividends on the major tax credits eliminated.
There is everything related to tuition, education, certain medical, labour sponsored funds, political contributions, investment tax credits, et cetera. There are a lot of preferences that have to be eliminated if we are going to have tax reform in the country.
I believe the tax system is the one instrument that the Government of Canada has that can move the whole spirit of the country. It is the one act of Parliament that touches every single Canadian. If we redesign the tax act in a simplified, fair, efficient way so that all Canadians can feel that they are part of the tax renewal movement, that will be the spark that is necessary to first of all get capital flowing into this country. By having a globally competitive tax system, capital will move here. That in turn will ignite that entrepreneurial spirit again, to take chances and invest in our communities, which is how jobs are created. At the same time it is going to give us the ability, because of that uptake and faster growth, to make those cuts in program spending a whole lot easier because the growth will have picked up some of the pain that will be there because of these deep program cuts we are going to have to make.
I welcome this debate today. It is a very important debate on the eve of preparing the budget. However, I caution members to consider, as Professor Fortin has stated in his paper, that we cannot just look at a system where we only have fiscal discipline. At the same time we have to create an environment where we can have faster growth. We need faster growth. You cannot spark, induce and motivate people into taking chances and getting this economy going unless you hit them with a fair and constructive tax system.
