Pierre Brien

[The Budget, February 23rd, 1994]

Mr. Speaker, my question is directed to the Minister of Finance. Instead of dealing with the real problem, the high level of government spending, and eliminating costly duplication, the government says it intends to cut $7.5 million from social programs, mainly by reducing unemployment insurance. Like its predecessor, this government is trying to get the deficit down at the expense of the unemployed and senior citizens.

Why is the minister putting the bite on the unemployed, although he criticized the previous government every time it reduced benefits under the unemployment insurance program? What has become of those high-sounding principles, Mr. Speaker?

[Liquor Smuggling, February 18th, 1994]

Mr. Speaker, considering the scope of the problem, will the minister consider a concerted effort with the provinces to curb the spread of this illegal activity?

[Liquor Smuggling, February 18th, 1994]

Mr. Speaker, I want to talk about another contraband product.

It appears that losses related to smuggling of liquor might be more important than first thought. According to the Association of Canadian Distillers, this illegal activity results in a loss of $1.2 billion in uncollected taxes. In Quebec, liquor smuggling has increased 35 per cent and now affects 1.7 million cases of liquor, and 2.2 million cases are smuggled into Ontario each year.

Will the Minister of National Revenue order an internal inquiry, following allegations to the effect that some senior customs officials are involved in liquor smuggling?

[Canada Customs, February 17th, 1994]

As a supplementary, I would ask the minister to say if he will report to the House on his investigation. I would also like to ask him whether he recognizes that the lack of follow-up on goods in transit in Canada is a weakness of Canadian customs and that this weakness is a boon to all kinds of smugglers.

[Canada Customs, February 17th, 1994]

Mr. Speaker, CBC Prime Time News reported yesterday that liquor smugglers had bribed Canadian customs officers to make their illegal activities easier. This morning, the minister asked for an investigation and announced the hiring of 350 additional officers.

Can the Minister of National Revenue tell us whether he has arranged for tight controls during the selection process to avoid hiring people with links to organized crime and whether he will report back to the House after the investigation is completed?

[Taxation, February 10th, 1994]

Mr. Speaker, does the Minister of Finance not believe that the middle class deserves a break and that he should prove to our citizens that high income earners will be paying their fair share, by eliminating tax shelters like family trusts?

[Taxation, February 10th, 1994]

Mr. Speaker, my question is for the Minister of Finance.

There are increasingly clear signs that the government will increase the tax burden of the middle class in its forthcoming budget. Experts already set the value of the underground economy at about 15 per cent of gross domestic product.

Does the Minister of Finance not agree that any further increase in the tax burden of the middle class will only lead more people to the underground economy?

[Income Tax Act, February 9th, 1994]

Madam Speaker, I would like to thank the hon. member for St. Boniface for his questions and especially his last point, which I will comment, but only after I have answered his questions in sequence.

First of all, the hon. member asked whether we agree with this bill. As a matter of fact, it will pass at second reading whether we agree or not. We will support the principle of this legislation, but we will examine the bill clause by clause in committee and ask very specific questions. Third reading will come afterwards. That is the way it goes. This bill will be referred to the Finance Committee, a committee which always has a busy schedule, but it will only be one more piece of legislation on a heavy agenda.

Now he wants to know what our position is compared to the Reform Party's. I think I see what he is getting at. Do we consider that reducing tax shelters is different from raising taxes? I think that was the thrust of his question.

There could be a difference, except that, on the whole, we are collecting more revenues. One day, we will have to agree on a definition of tax increase. Traditionally it means increasing the consumption and income taxes. Can we say, however, that reducing tax shelters and fiscal incentives is in effect a tax increase? This is debatable, but the results are the same: more revenues for the government.

In some instances, we will agree with a given tax shelter; in others, we will not. We will study them one by one.

If we compare the tax returns for Quebec and for Ottawa, we see that they are both complex, because there are two governments involved. That is very important.

In Quebec, Mr. Yves Séguin tried very hard to simplify the tax returns, but there is still a lot to be done. We often talk about administrative overlap, but there is one thing that drives people crazy. Let me assure you that Quebec's sovereignty will have a great benefit in people's daily life, if only for the fact that they will only have one tax return to fill.

Overall, the figures may not change much, but it would be a lot simpler. The individuals will feel better, as will the businesses, and that will be a great step forward, one we have never been able to take so far.

We will not have to hear a lot of rhetoric about harmonization all year long, without ever achieving it.

In closing, I want to speak about access to capital. I tell the hon. member that we will have to see what the government will do. The federal and the provincial governments tend to offer more and more assistance programs to businesses, including the business development centres. There are even regional investment funds. We hear people talking about putting more pressure on financial institutions, but what will happen?

[Income Tax Act, February 9th, 1994]

Thank you, Madam Speaker. I am happy that you have trouble hearing me as it shows there is at least one person listening besides my colleagues, or two persons I should say.

The technical reason for this measure abolishing something retroactively to 1985-not the technical reason but the actual principle-is that it could not be implemented in real life. It was too complex to manage. It took eight, almost nine years to put in place this measure and the revenue department could not make it work. It is very hard to understand. Why did we wait so long and what happened to the money given to debtor businesses that could not be recovered? All this remains to be seen and we will ask questions when this bill is reviewed by the finance committee.

Another measure that we wish to see extended further in the future is the home buyers plan. This is a valuable measure with a stimulating effect on the construction industry. It allows individuals to buy a home, which is desirable. The bill provides for tax incentives and ways of doing things in terms of taxation which are very positive. When we talk about reform, we are not suggesting that everything about the present tax system is wrong. Some aspects of it are more positive than others, and this is one of them.

Two measures regarding flow-through shares and exploration expenses were included in an attempt to repair the mistakes made by the Conservatives when they axed the flow-through shares program. The Quebec government had jumped on the band-wagon and I can tell you that it had disastrous consequences in my region.

In 1987, the unemployment level was about 7 per cent in Abitibi-Témiscamingue. Today, we would call that full employment. In the beginning of the 1980s, full employment was fixed at about 4 per cent, but we must adjust this figure. After two recessions, one in the beginning of the 1980s and the second one ten years later, the unemployment level is now higher. Our economy was thriving. There was indeed abuse. As with everything else, there are some who take advantage of good policies. That is what happened and that is why we had to make drastic cuts.

A popular expression applies here: we threw out the baby with the bathwater. It could have been possible to correct the situation with a few technical amendments. We tried to make up a little for this. These measures are interesting, but a lot less, and it is not the main concern of the Association des producteurs et des exportateurs. I can tell you that the former incentives and flow-through shares plan were much more interesting than these measures.

There is another measure that must not be considered only in this light because one has to dig a little to put it in perspective. It is important since it is closely related to a suggestion made by the Bloc Quebecois, and which, hopefully, the government will study one day.

It provides for a maximum annual investment tax credit. This credit will be eliminated. Before, businesses could use this credit up to a maximum of 75 per cent. They could reduce their benefits by 75 per cent, so why not totally eliminate them and not to have to pay any tax?

It will now be possible. This has to be considered along with another measure from the previous year, namely a capital tax to ensure that most businesses pay a minimum of taxes. Where there may a problem, although we have to be careful and examine this issue in a much more technical and thorough fashion, it is with this capital tax of .02 per cent which applies only to a capital amount of $10 million or more. Do businesses with a capital of $5 to $10 million deserve this break? This is a good question which we must ask ourselves. It must at least be raised, but it should be examined and I hope it will be when the Finance Committee will look at this piece of legislation.

The other two measures were aimed at promoting research and development, and at ensuring the payment of tax instalments. The amount has been raised to help more people.

This bill is exactly identical to the one tabled by the Conservatives following their budget, except for the change to the GST refund. I do not object to the fact that it is so similar to the previous piece of legislation. What I am saying is that there is only one change. There will still be four quarterly payments, which is a good thing, and which also enabled the previous government to change somewhat the record keeping and underestimate the deficit. Now, it has the opposite effect with the new government, which uses it to slightly overestimate the deficit.

This is certainly not a major change. Some like the idea of four payments, others would prefer two, but in terms of public finances as a whole, this is of no consequence. It is essentially a cosmetic change.

Finally, there are two things about taxation and fiscal policy that bother me. These measures often target small businesses. Earlier, I heard an hon. member talk about the importance of the people and of the rural communities. I urge him to carefully consider the situation of the small and medium sized businesses, because there must be some in his riding too.

These businesses have a lot of trouble dealing with a very complex tax system. If the system is complicated for the individuals, it is even more so for small and medium sized businesses, who completely rely on an accountant or an analyst of their acquaintance for advice, even though it is not always in their best interests. They are told about temporary one-year

measures, but they are unable to assess quickly enough the benefits they can derive from these measures.

They do not take full advantage of the measures. The government should put in place a simpler mechanism, easier to understand, particularly in the area of research and development. There is not enough R and D done in the private sector in Quebec and in Canada. With all the economic changes that are occurring, the level of R and D in the private sector will have to increase. The government will have to encourage these people to get into R and D. However, they need about eighteen months before there are any significant results. I can tell you, Madam Speaker, that we have excellent tax incentives, the best in the world in some areas, but they are not well understood by businesses and they are very difficult to use.

Obviously, pharmaceutical companies understand them well and use them well. They are doing very well in Quebec. But in other areas, companies are not even aware of the tax incentives that exist. The Department of Industry, Trade and Commerce has a program, the Department of Finance has another program, there are just too many programs. Businesses have trouble finding their way through the maze of programs. They have to look at all the possibilities and it takes time. It is not only the GST that costs businesses a lot of money. There is also the cost of trying to understand all the government support programs. It can be very difficult, particularly for small and medium sized businesses.

I am about to conclude. Fiscal measures should always be evaluated as to their fallouts and costs before being announced. In economic jargon, it is simply called a cost-benefit projection. Then, results can be made public. This is rarely done and it is easy to understand why. When facts are published, the people can evaluate how good their government is. Thus, I hope that for the sake of openness this government will do more than its predecessor on this. The Minister of Finance has often promised to do it and his colleagues should press him to deliver.

To conclude, we will carefully monitor these measures and the upcoming budget. That is when it will truly start. And if this government does not want to end like the previous one, it should take a completely different approach.

[Income Tax Act, February 9th, 1994]

Indeed, and I am even expecting some questions.

Let us continue. Another measure, one of a series of very technical measures, is the extension of the small business financing program under which a small business in financial difficulty may refinance its debt. This measure, which provides for a different tax treatment, is very interesting for businesses as well as for financial institutions.

Another measure provides for the abolition of the penalty tax. How ineffective can this be. The penalty tax on excess small business properties held by RRSPs and registered retirement income funds is repealed from October 31, 1985. It is not important to understand the technical aspects of this measure-