Mr. Speaker, it is obvious to anyone who is watching the various news programs today, or who has any sort of sensitivity to what is going on in the country, that there is the equivalent of a tax revolt well under way.
People have literally been driven to the wall when it comes to the existing tax system which, to give it undue consideration, would be to call it unfair, unjust, unbalanced and discriminatory. It discriminates against the small business sector relative to the corporate sector. It is biased against the average working person, as opposed to people in the upper income or the very wealthy tax brackets.
This tax revolt has occurred by the economy moving underground. There probably is not a Canadian citizen who is not participating in some way in the underground economy, with the exception of yourself, Mr. Speaker, and some of my colleagues who are presently in the House.
Who does not participate with cash transactions or in a barter system? It is increasing. It is estimated that somewhere between $40 billion and $120 billion of business transactions each year take place in the underground economy. This makes it almost impossible to pay down the debt of the country until we get some confidence back in the system.
Why is that? First of all, if we add up all of the tax exemptions, they come to about $36 billion a year. That was in the press yesterday. Thirty-six billion dollars a year is lost to the treasury because of tax exemptions. Many of these exemptions are legitimate but many must be classed as tax loopholes. I give my friend, the Minister of Finance, full credit for going public in the last few days and saying that the system is filled with tax loopholes that have to be closed. He also said that the poor do not use tax loopholes. It is clear what he means. The rich use tax loopholes.
When we go down to the harbours in some of the port cities of Canada and see the huge yachts, they are by and large tax deductions. I personally know a number of people with boats who write off half of the cost of the boat and call it a business tax deduction for entertainment purposes. The boxes in the big sports stadiums are tax write-offs. We found out from the news today that even escort services can be a tax write-off if the name is changed to a tour guide or a bodyguard.
I suspect a lot of submissions will be made by individuals who are entertaining their clients. A lot of touring will also be going on, or perhaps a lot of bodyguards will be put into place. That will be a legitimate tax write-off.
The reports say that Revenue Canada will soon send out a circular clarifying this issue. As long as the escort service is also a tour guide or a bodyguard, it will qualify for a legitimate tax write-off. I could go on, but I suspect that we are all familiar with the various forms of tax write-offs.
I would like to ask a couple of serious questions. Canada is one of the very few OECD countries that does not have an inheritance tax. Across the way, when my hon. friend inherits $2 million or $3 million, it is not taxed. We are virtually the only country in the western world where an inheritance is not taxed.
Even the United States has an inheritance tax. The United States also considers capital gains to be like any other income. In other words $1 of capital gains is taxed like $1 of regular income. But not in Canada. That $1 of capital gains is only considered to be worth 75 cents for taxation purposes.
Once again we are one of the very few OECD countries that says to people: If your income is from capital gains we are automatically going to give you a 25 per cent tax break before we even start considering it.
Again I have to ask, why the tax break for those who earn their income from capital gains as opposed to someone working in a radio station, a factory or a plant? Why do we distinguish between those two kinds of incomes? Why do we let those people who inherit vast amounts of money off, not to pay any income tax at all on it? Again, we are one of the very few countries in the world that does that.
I could also ask about the family trust provision. Here is the mother of all loopholes. I believe there is now universal agreement that if there is a tax provision that has to go in this budget, it has to be this family trust business. The tax experts told us this provision was brought in to protect only the very wealthiest families of Canada. Must we have a special tax provision that costs us many hundreds of millions of dollars to make life easier for the very wealthy in Canada? I think the reaction to that is no.
We will be watching very closely to see what the Minister of Finance does when he brings in his budget in a few days and whether or not he says: "We are going to take this loophole of loopholes, the mother or father of all loopholes out of the system". If he does that, then I think we can legitimately say that yes, there is some balance to the budget.
For example, he should tax the inheritances people receive, let us say, over $1 million or $2 million. I am not talking about people who inherit the family farm or the person who inherits a small business or the family home or whatever. I am talking about people who inherit $2 million, $3 million, $5 million or $10 million. Why should they not pay tax on that? They would if they were in virtually every other western industrialized nation, but not in Canada.
A whole set of questions must be asked about the loopholes in the system. I am very happy to see that the Minister of Finance has now acknowledged this. We will be watching carefully as he attempts to close off some of these loopholes in an effort to make the tax system a bit fairer.
