Jim Silye

[Supply, May 3rd, 1994]

Madam Speaker, do we not get to ask some questions of the hon. member for Saint-Léonard?

[Supply, May 3rd, 1994]

Madam Speaker, I will be very brief. I compliment the hon. member for Broadview-Greenwood on all the work he has done for the last four or five years. We would like that to snowball and not have to wait another three or four years before something happens.

In defence of his simple, fair and efficient tax system, whether we call it a flat tax, a single tax or proportional tax, how many more years is he willing to wait before his government supports or rejects the proposal?

[Supply, May 3rd, 1994]

Madam Speaker, I would like to compliment the hon. member for Témiscamingue for a very good presentation. I feel he has made some very good points, especially his suggestion-the most important of all and I implore the government to listen to it-which is to look at all the options.

On his point of progressivity, he was worried and concerned, as previous members have expressed, that a flat tax might enter into that territory and make it regressive. As an economist I would think he has read about Albert Laffer, an American economist, and the Laffer curve-not like a joke. The answer to progressivity is that currently within our system we have all these loopholes. We have different segments of taxation at the high end, different incentives, various rates and the graduated taxes. Therefore our tax rates have to be high to get the same amount of money.

Where lower in the curve, by having no tax loopholes and no exemptions, the kind that you need down here-I am not talking about personal deductions-you generate the same amount of money. As the hon. member for Témiscamingue would like to have fairness and equity, that is where the equity would come back in. It eliminates a lot of the rules, addressing his specific point on flow-through shares and how the lack of deductibility or the lack of incentive to invest would impact negatively in his riding.

An individual currently at the high end who makes these investments, who is obviously in the upper middle or upper income, is taxed at the 50 per cent rate. If their taxes were reduced to 15 per cent of income and they had 85 per cent of disposable income they could still make that investment in their ridings. The corporation, after it made its profit, could give a return on investment to that individual through dividends taxable to the individual. With the change you would have to make, the corporation would be able to deduct that dividend. The key to it all is with the corporation. The high marginal tax rate for corporations after they use up the first $200,000 of taxable

income which is tax free or taxed at a lower rate is 50 per cent. You could lower that tax rate for a corporation from 50 per cent down to 15 per cent as well.

The principle of our taxation system is that if you give a deduction that somebody has to pay the tax on it is eliminated. It takes it out of the Laffer curve and brings you back down and now you are treating dollars with more respect. You are treating real dollars and governments can then focus on just generating the revenue they need to pay for the social and economic programs that they have, subsidies, whatever it may be because you do need those. You are dealing with true dollars, after tax dollars, instead of this complicated, confusing abomination.

Basically my intervention here is to make a comment on what the hon. member had questioned about this system of a single or flat tax.

[Translation]

[Supply, May 3rd, 1994]

Madam Speaker, I would like to make a comment and ask a question of the hon. member for Winnipeg North Centre.

I am disappointed to hear that he is against the exploration of an integrated flat tax system or single tax. I am also challenged to see here that he says it is seductive. It is unfortunate that when suggestions are made that seem to have a lot of encouraging inducements to looking at them they are labelled as too simple.

Why do people in politics feel that the problems are so complex and that tax reform is a difficult process? I believe the parliamentary secretary has already listened to the Department of Finance too long. That is an incorrect and false premise. He should think for himself. He should look at the problems and try to use some common sense and he will see that this is where that will lead him. Not that I am that intelligent but that is where my nose led me and Lord knows it is long enough.

The other comment I have is that we in the Standing Committee on Finance are looking at a replacement for the GST, but that is a band-aid approach to the real problem. Why not cure the entire illness with a surgical overhaul of the entire tax system?

We have a year and a half to do it; a year and a half to just come up with a band-aid and the illness will have grown worse, and then our problem will become even greater.

The hon. member also took credit for the wonderful consultative process that this great Liberal government has now introduced to the principles of democracy. Taking credit for consultations is nothing new. If that is all the credit it wants to take, it can have all of it.

What would be new is after we consult with provinces and individuals the government actually listens and implements their suggestions. I hope this is something that will happen.

He also criticizes flat tax. This is where I am leading to my question. He states that as the current system is progressive, it would eliminate progressivity. It would introduce regressivity because it is a flat tax and we are taxing the poor.

Lower income earners would be tax exempt. Upper income earners would lose their tax loopholes. They would not get these wonderful deductions that they are getting now and they would pay tax on every dollar earned. For instance, higher income people can lower their tax rates from a 50 per cent rate down to a 30 per cent rate and this I know from personal experience. That would be eliminated and they would be paying tax on everything.

Therefore, collectively from individuals and more significantly in terms of corporations this is where we get more tax out of corporations. After my comments here and specifically to his questions, would the parliamentary secretary apply some common sense and would he be willing to request the Department of Finance and the department of revenue and taxation to crunch some numbers to illustrate or highlight the difficulties to this House of a system like this with no exemptions?

Why not put the Departments of Finance and National Revenue to work instead of listening to them saying that it is too complex and it will not work? Put them to work and make them

prove to this House that a system like this does not deserve more consideration.

[Supply, May 3rd, 1994]

Madam Speaker, I would like to respond to the hon. member for Broadview-Greenwood on the GST replacement and the work in the finance committee.

Although the intentions are honourable, we will really end up at the end of the day with a new tax that replaces an old tax. They will still try to collect $15 billion out of the pockets of taxpayers. They say that is a solution. We can simplify it and make it less expensive to collect but nevertheless it is still a tax. It is a band-aid approach to the problem. The real solution to the problem is an entire review of the tax system so that we do not have to worry about the GST replacement and we only have to tax the one time.

With respect to corporate profits, the whole concept is that currently the Income Tax Act and the income tax system are being used to drive social and economic policy. We have to design an income tax system solely for the collection of revenues to pay for the government programs people want. The responsibility of politicians is to find out what the people want and raise the money to do it.

If they come up with a program to support the oil and gas industry, to support the coal industry or to support manufacturing, fishing, forestry or whatever, then they should treat them all the same and not be selective with specific subsidies at a particular time that distorts the marketplace, that confuses the marketplace and that creates unfair competition within the industry. At that time they might be favouring a certain type of industry. Within that industry those who know how to make a profit will be making a profit and those who do not will be getting the subsidy. In a way that is rewarding failure.

The system of a flat tax, a proportional tax or a single tax-I do not care about the name-is an important concept. The principles are important. If we can get members of the House to accept certain principles and concepts, we will go a long way toward solving the problem. No company or industry, even if it is in the city of Calgary where I have worked for 23 years, would object to the fact of eliminating all complications, pretax and after tax. If we just deal with after tax dollars and we all had more disposable income, it would really purify and clean up the system.

[Supply, May 3rd, 1994]

moved:

That this House implore the government to initiate immediate consultations with Canadian taxpayers and provincial governments on the creation of a fair and integrated reform of the entire tax system which incorporates the principles of equity, efficiency and effectiveness, thereby reducing the tax burden on Canadians.

Madam Speaker, on behalf of the whip of the Reform Party I would like to advise the House that pursuant to Standing Order 43(2) our speakers on this motion will be dividing their time today.

Someone once said that you cannot get there from here. Nowhere is this saying more applicable than to the Canadian government's reliance on a confusing, complicated and convoluted system of tax and revenue collection. I rise on this opposition day as the first of many Reform speakers to call on the government for a complete overhaul of Canada's taxation system.

The Chair read the motion so I will not do the same.

Every year Canadians spend countless millions of dollars on accountants and lawyers to have their income tax prepared. The 2,091 page Income Tax Act is an unmitigated mess of rules and regulations and is screaming for reform, as are millions of Canadians.

This red book, which is not to be confused with the Liberal red ink book, has in the rules and regulations and various forms that make it so confusing that all the people who tried to do their own tax returns this year had a hard time coming up with the right answers, myself included.

The Liberal government with its red ink book promised to find ways to achieve tax fairness, simplicity and harmonization, implying some sort of reform to our tax system itself. Are Canadians truly getting the changes that they demanded and were promised? The answer is no.

After six months all we hear in answer to our questions is "jobs, jobs, jobs". All the Liberal government has done is pass old Tory bills, introduce no new bills of their own and we have not been able to question the government whatsoever on the direction that it wants to take this country.

What has happened is that the Liberals have dangled reform in front of the noses of Canadian taxpayers but they have not delivered.

In question period yesterday-I hear an hon. member talking who was not here, so he might listen to this-the Prime Minister stated that the only way to reduce taxes is to get Canadians back to work. This is a noble gesture, but has the Prime Minister not considered that it is the high tax burden that Canadians face which is stifling our economy and economic growth?

The fact is that revenue collected from personal income tax has more than doubled since the 1984-85 fiscal year. Tax collected from corporations has remained stagnant at approximately $10 billion because profits have been sluggish due to our recession.

Canada's overall tax burden has become the second highest of the G-7 countries in recent years and the taxpayers, as we all know, have moved to the underground economy that is valued anywhere from a low of $20 billion to a high of $120 billion.

The government has failed to address the problem. In its last budget it increased spending by $3.3 billion instead of holding the line or reducing the spending. This makes the private sector less productive which leads to greater unemployment. Will governments acknowledge that they are in fact part of the problem and not the solution?

The current high taxation rates serve as a temptation for government to keep spending at its current levels which will not solve our problems of high debt and high unemployment expeditiously. We must learn to live within our means like all Canadians and cannot look to the Canadian taxpayer before accomplishing this goal.

It is our belief that to stimulate the economy and to increase revenues for government, lenders, investors and consumers must possess a larger pool of disposable income. In this light, the Liberals should start by throwing this Income Tax Act out the window and replacing it with a completely new, entire tax system.

Why not reform the tax system? I would submit to the finance minister that less is more. Lower taxes will mean more revenue to the government. In this vein I would recommend the implementation of a flat tax on individual and corporate income. This model may work. We would suggest to start with a premise that would require input and consultation with Canadians, the provinces and individuals in the House, that the first $12,000 be tax free. One per cent of charitable donations would be deductible, but RRSPs would be limited to $5,000 to $6,000 for deductions so that the wealthy would not get the higher amount of deductions. There would be a spousal deduction and a child care deduction, and that would be it. We would draw a line, multiply it by 15 per cent or 20 per cent and send in our tax return.

Corporations would pay the same rate. The difference with corporations would be that their dividends would be deductible. We would not be taxing that and giving it out as after tax dollars. Dividends to individuals who invest would be deductible and taxable in the hands of the recipients. All investments in the future, all loopholes, exemptions and deductions defined here with rules, exceptions and counterexceptions would be gone. We would be investing as individuals with after tax dollars, and the corporations would be paying us based on their profits.

The objective of this tax would be threefold. It would simplify the current complicated tax forms so that all Canadians could understand them. It would restore equity in the tax system, eliminating the perception that one group of taxpayers is favoured over another and people with the same level of income would pay relatively the same amount of tax. The inequity right now is that there are people making $100,000 a year and one person pays $40,000 in taxes and the other person pays $20,000 because they might have better advice or they might have better borrowing power. That is not fair. Third, this tax would eliminate the triple hits that Canadians are taking in their pocketbooks with PSTs, GSTs and income taxes.

Under this system there would be no loopholes for anyone and we would be rid of the expensive bureaucracies now required to co-ordinate tax collection.

In National Revenue and Taxation, Customs and Excise, there are 44,000 employees at a cost of $2.2 billion. Savings to the Department of National Revenue in tax collection and the monitoring of all personal and corporate tax exemptions would be in the billions, not just the $36 million the government has proposed to save by the wonderful amalgamation of two deputy ministers, one of taxation revenue and the other of customs and

excise. We need more savings than just $36 million out of a $2.2 billion budget. That is ludicrous and the government should be embarrassed.

Introducing a simple, fair and integrated system of taxation would lower these costs substantially while checking the powers of the bureaucracy. If the bureaucracy in Canada is left unchecked it will continue to increase costs and taxes, continuing the country on its present downward spiral. Canadians will never have an opportunity to pay less taxes in a current year than they did the year before.

An example of the high cost of the bureaucratic action was brought to my attention by a CA firm in Calgary, Bogle, Duska, Robinson and Perry. Mr. George Duska did an analysis in a six-month period. The number of forms and taxation slips whether or not they were required that changed for him to do his job on a file, to make copies and do the necessary changes, was about an inch and a half thick over a period of a month and a half.

Witnessing the cost in changes in tax forms that had taken place over the past 10 years, Mr. Duska did an analysis of the revised tax forms over the six months to see if these changes were truly necessary. In his opinion 16 per cent of the revisions were required by the tax system, while 84 per cent "were useless and a waste of taxpayers' money". This indicates that as usual bureaucracy is out of control.

I challenge the government and cabinet to give existing standing committees more authority to look at the expenditures and the budget estimates. They should let them come back to cabinet and recommend cuts, prioritize them and cut off the bottom two, to start the government toward a balanced budget. It is a small area relative to government expenditures, but it illustrates the fact that our present system is becoming a bureaucratic nightmare.

I would like to conclude by educating the Liberal government, which might be nearly impossible, on the reality of the private sector, not the perceived reality of the Liberal government. Government overspending results in the raising of tax dollars. Higher taxation means less capital available in the marketplace which leads to a drop in demand. When demand drops, consumption drops, businesses close their doors and the cycle continues.

This vicious circle is the main reason why over one million Canadians are unemployed. It takes money to create wealth. The government takes too much of it and then wonders why unemployment goes up. Business people in the House know this but politicians in the House do not understand this. They do not understand the difference between the spending of debt capital, borrowed money and equity capital, especially when the government has not paid back $1 of the money it has borrowed since 1968, the first years of Trudeau.

Is that not embarrassing? Who in the House borrows money from the bank and has never had to repay $1 of it over 23 years? I would venture to guess nobody. Why is the government being treated differently or why is it treating itself differently? The private sector understands the difference. It is time that politicians did as well.

It should not be beyond our means to create a more equitable system of taxation, one that inspires prosperity for Canadians and economic growth for the country. Let us work toward the restoration of public trust in taxation and create a tax system that reflects the principles of equity, efficiency and effectiveness, thereby reducing the tax burden on Canadians.

We must listen to the comments of all members in the House today and see if we come up with some solutions. The real problem is a balanced budget. It is important. No tax system in the world is good if it does not address the real problem. If we continue to spend $160 billion and do not raise $160 billion, we are contributing to the problem, not solving it.

[Income Tax, May 2nd, 1994]

Mr. Speaker, the income tax system is so complicated that the revenue department is the largest employer in the public service with over 35,000 employees at a cost of $1.8 billion. That is a workforce larger than the town of Shawinigan.

I ask the Prime Minister, has the government calculated how many billions of dollars it could save in government administration costs and how much individual taxpayers could save in tax preparation charges by introducing a fair and integrated system of taxation?

[Income Tax, May 2nd, 1994]

Mr. Speaker, tomorrow's supply motion will be on this very subject. I hope the Prime Minister takes the time to listen to some of the comments by members of this House.

Currently tax freedom day is July 7. That is how long Canadians have to work to pay their share of the costs of this government's red book plan.

I ask the Prime Minister, when can Canadians expect to pay less in taxes in a current year than they did the year before?

[Income Tax, May 2nd, 1994]

No, it was not to watch the hockey game. Canadians were sorting through their T1s, T1CTBs, their T778s, their T4s and T5s. Frankly, today there are lot of teed-off Canadians out there.

Every year Canadians spend countless millions of dollars on accountants and lawyers to have their income tax returns prepared. The 2,091 page Income Tax Act is an unmitigated mess of rules and regulations and is screaming for reform, as are many Canadians.

When will the Prime Minister instruct his ministers and mandarins to simplify the income tax system to reflect equity, efficiency and effectiveness and thereby reduce the tax burden on Canadians?

[Income Tax, May 2nd, 1994]

Mr. Speaker, my question is for the Prime Minister.

Last night many Canadians stayed awake to do their income tax returns.