Mr. Speaker, let me say how much I welcome the opportunity to discuss this motion as it has been presented to the House and to shed light on the real and substantive issues that the case before us demands.
The members of the opposition have really gone out of their way to distort the issues, to confuse the Canadian public. What they forget to say time and again is that this decision was a decision made by the former government, the Tory government in 1991. It was brought to our attention by the auditor general and now we have to deal with it and ensure that the integrity of the tax system is maintained and improved. That is what the opposition forgets to talk about.
The other thing it forgets to talk about is that we did take action. When the auditor general brought this to our attention we responded immediately to the issues and presented them to the finance committee for review. It is a very public body with members from all the elected parties in this House that represent this country from coast to coast to coast.
The opposition members forget to talk about the fact that we have actually acted on the results of that committee report, that we are making changes, that we are committed to having a fair and equitable tax system.
The thing they continue to talk about, the myths they continue to perpetuate are these. They think that if they keep repeating the words family trust and scandal over and over again they can make something out of nothing. But in fact this topic has nothing to do with family trusts, nothing at all.
I sat on the finance committee with the member who proposed this motion, the member for Saint-Hyacinthe-Bagot. When we focused specifically on the issue of family trusts, we heard witnesses, we talked to experts, we listened to testimony, reviewed the implications and made recommendations to the Minister of Finance how we should change family trusts in this country. The Minister of Finance read that report, as he reads all the reports of the finance committee, and in fact went further than our recommendations to deal with that particular tax strategy.
In fact, the government, in response to the issue of family trusts, has eliminated the election to defer the 21 year deemed disposition rule which was introduced by the Tory government. It is gone. It is not part of the legislation any more. We did that. It is gone.
In addition, the government eliminated the preferred beneficiary election for trusts. This ensures that trust income cannot be arbitrarily allocated to a beneficiary instead of being taxed at the trust level just because the beneficiary is at a low marginal income tax bracket. That has all been changed. Family trusts have been dealt with.
I was part of the committee. The Bloc member who has proposed the motion to the House and who keeps talking about family trusts was there as well. He knows that these changes have been made. I want to assure Canadians that they can have confidence in the system and that that tax loophole does not exist for the advantage of the wealthy any more.
In addition to making the changes to family trusts, the government has gone even further in terms of increasing the fairness of the tax regime. In fact, we have tightened the rules on tax shelters. We have improved our large business audits. We have eliminated the $100,000 capital gains exemption. We have introduced draft legislation to strengthen the reporting of world income in order to prevent the use of offshore tax havens and the evasion of taxes.
The Minister of Finance mentioned last week that he has implemented to date 30 different improvements to the Income Tax Act to make it more fair and equitable. That is the kind of government we are. We are improving fairness to ensure that all Canadians have appropriate opportunities to make their contributions and to benefit from the taxes which they pay.
This is not about family trusts. I cannot say that more emphatically. What this issue is about is how we tax the property of Canadians who emigrate and how we tax the property of people
who are not Canadians but who hold Canadian property. It is about the thing we call taxable Canadian property, that is, and let us be clear, property that remains taxable in Canada even though the owner may not live here and may not reside in the country. Taxable Canadian property is an extremely complicated notion. It is an extremely complicated aspect of the Income Tax Act.
As the Minister of National Revenue, I received the report from the auditor general on this topic. As I read the chapter I took it very seriously. I met with the auditor general for three hours to go through, line by line, his concerns as written in the report. We began by talking about his concern of how the department ruled on the issue of taxable Canadian property. He talked to me about the fact that he understood the complexity of the legislation. He understood that, in fact, it is very unlikely that any law had been broken. He was asking whether or not the ruling was reflective of the intent of Parliament when it drafted the legislation.
He was not suggesting anything inappropriate. He was not suggesting anything illegal. He was suggesting that in the ruling we may have highlighted something which needed to be drawn to the attention of the House for its consideration.
That is particularly an issue for the Minister of Finance. It is an issue of policy, not of administration. I met with the Minister of Finance and suggested that an appropriate response to the auditor general in this regard would be to send this part of the Income Tax Act to the finance committee for a full and open review. That is what we did.
I would like hon. members to understand that this was the first time in 25 years that this part of the act had been reviewed. It was timely. It was appropriate. The finance committee reviewed it in its fullest context. They had expert witnesses who are credible internationally look at the circumstances, to review the decisions. Six out of the eight said there was nothing inappropriate in the decision, that the ruling was correct as the law is written.
The finance committee looked at it and asked: "Is this really the way we want things to work in Canada or should we make changes? Is it time to make changes? Should we clarify our intentions?" Members of the committee made some very clear suggestions to the Minister of Finance that he is now reviewing and considering and will act on in due course.
There was a second concern which was raised in the auditor general's report relating to this topic. The concern spoke directly to my responsibility as the minister of revenue. He talked about the way in which the ruling proceeded. He gave the dates, the timeline. He indicated that he was confused about where and when and by whom the decisions were made. As I read the report I was extremely concerned.
In the course of the three hour discussion I had with the auditor general I asked him if he was suggesting that there was political interference in this case and was he asking me to investigate political interference. He responded: "I have no reason to doubt the integrity of your department".
We went on and discussed the issues he was concerned about. He was concerned that there was no documentation which directed my attention to how the decision was made. It was not clear, not full in its nature. We must have that kind of documentation if we are going to have a fair, open and transparent system. I immediately agreed with the auditor general and I immediately directed my officials to ensure and build a new plan of action to be implemented immediately to ensure that documentation of all our decisions was clear, full and made available when requested. That was an area of real concern.
The auditor general expressed his concern about consistency, highlighting the particular example of the matter where an opinion, not a ruling, was given in another part of the country on a similar topic at a different time which was different than the ruling in 1991. He indicated some concern about the consistency of decisions within my department. Again I agreed and said that we must have consistency. Canadians must be able to rely on the rulings. No matter where they are they must get the same answer from the department when a similar question is asked.
As a result and subsequent to 1991 the department has made very credible changes to the way we operate, primarily using technology so that all the rulings and opinions are listed in a data base which can be accessed. Now any department officials who are making rulings can refer to the data base, see what decisions had been made in the past and ensure that there is consistency and integrity in the responses given to Canadians.
Third, he was concerned about the transparency of our decisions. He was concerned that we made decisions and then did not publicize them for the broad benefit of all Canadians. We changed that some time ago. Our concern originally was with the integrity of confidentiality which we must maintain for all Canadian taxpayers. We must ensure that every individual's details and circumstances remain with us and are not exposed to broad public review. When we get these rulings we have to sever them and present them publicly in a way so that there is no connection between the individual tax filer and the decision. We have found ways of doing that and we have implemented that strategy in our day to day process.
When we look at the issue there are really two sides to it, one of policy which was dealt with very effectively by the Finance committee. It has made recommendations to the minister and he is considering them.
The second area was administration. The finance committee decided on its own to look at those issues, to hear from witnesses, to talk to the auditor general, his assistant, the deputy in my department and the deputy of finance to talk to them about that system of decision making. Their conclusions were the same as those of the auditor general. In fact, the auditor general when questioned in the public accounts committee said: "I have never had the occasion or the need to ever question the integrity of senior officials at Revenue Canada", a reiteration of what he told me. In the finance committee the assistant auditor general said: "We have seen no evidence of bad faith and we have seen no evidence of wrong doing".
Committee members heard that testimony and reported to me as the minister that they saw no evidence of scandal. The only people talking about scandal reside in the opposition. All they talk about are these two things, family trust and scandal. They are not part at all of the discussions presented to me by the auditor general.
I would like to take the opportunity as we are discussing the integrity of the tax system to tell members a little more about what we are doing in Revenue Canada to respond to the needs and the wants of Canadians. Most recently, my department is undertaking the largest re-engineering project in Canadian history. There are 40,000 employees in 800 offices across this country engaged in a structural change that will bring together two very separate organizations.
Traditionally in my department the tax side was distinct, the customs side was distinct. They had their own deputy ministers, their own policies and procedures, their own penalties and interest, their own publications, all quite separate. As a result of changes made by my colleague, the former minister of revenue and now the Minister of Transport, we have redesigned our whole department. We have brought the sections together under one administration and that is contributing to a savings of $300 million to the Government of Canada and the taxpayers. Together we are providing a system that is going to give the Canadian public a real competitive advantage.
I was in the United States in March and met with 500 exporters and importers. I said to them that they had to understand that in Revenue Canada I have responsibility for what is effectively their IRS, their customs administration and their trade administration. They sucked in their breath. They could not believe it. I said yes, and you could not do that in the United States but because of the way we have organized ourselves, because of our size we could bring and house these separate entities together so that our citizens can contact the government more effectively and efficiently.
This whole issue of horizontal management becomes real and alive. Canadians no longer have to call and someone says "I am sorry, that is someone else's business". In my department everybody can respond to those issues: a single window. That is what
Canadians want. They want effective government, a government to respond to them as citizens, to provide that service, and that is what we are doing. It is a tremendous challenge but the employees of Revenue Canada are rising to that challenge.
Today the auditor general in his report completed a whole chapter talking about our administrative consolidation. He praised us for the approach we have taken. He praised us for the contribution that change is going to make to the fairness and effectiveness of the system, for the return to the taxpayer. He indicated that our activities should be a model for other departments and agencies.
It is a pleasure for me to receive that report and to say to the employees who are in the service of the Canadian public in my department, thank you. You are making a difference to the way this government responds to Canadians, to the way we are serving the Canadian public. It is real and it is tangible.
More specifically, there are other things that we are doing on the revenue administration side.
Members will know that different tax regimes were developed individually in their own silos, the personal tax structure, the corporate tax structure, the consumption tax structure; all separate, all with their own penalties and interests, all with their own management teams.
We are breaking that down as well so that we can now look at a Canadian citizen, a Canadian business as an entity. They do not have to deal with Revenue Canada with four business numbers. We can look at them in total. Their tax positions can be understood completely by us.
That is a real competitive advantage. It is a responsive, positive change in the way of doing business. On the customs side, the same thing is happening. Very effectively, we are now moving to understand that we have to facilitate effective trade to let the good things pass through our border quickly and efficiently. But by golly, to keep the bad things out, firearms, drugs, people we do not want in our country, we have to have a smart border.
Our strategy is to maximize the potential of our employees, to use new technologies, to build partnerships with the private sector and yes, with other levels of government and other governments to provide Canadians with the most competitive revenue and customs administration they can possibly have.
I am very proud of the work of my department. I am very proud of the response that my department took to these issues directed to us by the auditor general. I want to make clear to the Canadian public that the opposition is full of political huffery and puffery on this item.
Again, it is not about family trust. We have dealt with that effectively. It is not about scandal. There is no indication of scandal. What this is about is our government's taking efficient, effective, immediate action when concerns are drawn to our attention. It is about a government that believes in the fairness and equity in the tax system.
It is a government that believes it can make a difference and will make a difference. It will provide Canadians with the tax regimes they deserve.
