Ray Speaker

[The Economy, May 12th, 1994]

My question is for the Minister of Finance. Now that we have classed ourselves among the third world nations of indebtedness, will the finance minister admit that the debt problem of Canada is the number one economic problem we face.

[The Economy, May 12th, 1994]

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

Since the federal budget in February things have changed. Real and nominal short and long term interest rates have risen. This and next year's growth projections are down. Unemployment has remained dismally high and, in short, every economic indicator has turned rather sour.

Yesterday we learned the true reason for this. According to a recently released study, Canada places below Poland, Ethiopia, Brazil, New Zealand, and even war-torn Rwanda-

[The Deficit, May 6th, 1994]

Mr. Speaker, in the government's plan for deficit reduction one of the objects is to reduce the transfer payments to provinces. The minister knows the consequences of doing that.

First of all, we offload part of the federal deficit problem on the provinces. Second, by removing funding from the provinces in terms of transfers without easing the obligation in terms of funding services, we create a problem for the provinces.

Will the minister deal with that question in full co-operation and full discussion with the provinces so that the provinces know what the actions of the federal government will be? They could therefore plan on a longer term basis their deficit reduction programs in co-operation with the federal government.

[The Deficit, May 6th, 1994]

Mr. Speaker, in light of the hon. minister's answer, I ask the minister the following:

First of all, what are the targets and objectives that the minister is establishing for the federal government along with the provinces in terms of a deficit reduction strategy?

Second, in co-ordination with that question, is the minister prepared to make this the number one item on the agenda of the finance ministers meeting in June? Out of that meeting will there come specific targets and objectives not only for the federal government but the provinces as well?

[The Deficit, May 6th, 1994]

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

The budget presented yesterday in the province of Ontario is evidence that the provinces and the federal government can no longer operate in budget isolation of each other.

This government is initiating through the Minister of Human Resources Development a national strategy on social reform. The Prime Minister is chairing a national forum on health care. Is it not time for the federal government in consultation with the provinces to initiate a national strategy on deficit reduction?

[Petitions, May 5th, 1994]

Mr. Speaker, I wish to present a petition on behalf of 187 constituents from Lethbridge.

They present the petition requesting that Parliament not amend the Canadian Human Rights Act or the Charter of Rights and Freedoms to include the undefined phrase sexual orientation.

I so present the petition to Parliament.

[Supply, May 3rd, 1994]

Madam Speaker, with regard to the first point in terms of what is fair and what does not act as a deterrent to persons investing, taking risks, being successful and encouraging success, in a sense that is what creates our economy, when a tax system does that and does not act as a detriment to investment.

To stand and say that I could judge what the rates should be and whether the three rates we have in place today are fair or not would be difficult. The point I wanted to make in my presentation was that the cost of government today is too high. People, no matter where they are, whether they are in business, private individuals, in labour or whatever, are paying a rate of taxation up front in many cases of 25 per cent as wage earners. They are paying 25 per cent. They are sending it to Ottawa through their income tax forms. That is too much. We are taking away too much from people that they could use for their own personal reasons. That is a deterrent.

The only way we are going to deal with that is to bring the cost of government down. That is the whole thrust of the objectives of the Reform Party. We must bring the cost of government down so that there is more money in the hands of the people. That is the point I make there.

The next point is with regard to using the Income Tax Act or other tax policy for social purposes. I have found in my travels and in the hearings of the finance committee on the GST that every time we tried to use the tax system for social policy it created inequities. For example, when we were in Quebec City a professional group made a presentation to us and said: "We are not exempt from GST". Another professional group that appeared before the committee prior to that one had said it was exempt. Which professional organization should have had the exemption and which should not have? We could go down the line and find other social organizations. Some are exempt from GST and some are not. The tax is applied unfairly.

Social policy initiatives should go through the budget process. In this assembly we should determine what types of benefits we will pay to which group, make it an expenditure program as such and deal with it directly rather than indirectly through the tax system.

[Supply, May 3rd, 1994]

Madam Speaker, thank you very much for the opportunity to second the motion of my hon. colleague from Calgary Centre. The motion before us is very straightforward. It asks for a major tax review under the current circumstances that we face as Canadians.

As has been mentioned by the hon. member for Durham, all of us have just faced the rigorous task of doing and redoing our income tax for 1993 so we know the problems that are there. They are very fresh in our minds as well as in the minds of all Canadians. It is very appropriate that we have this motion before us today in which we are looking at better ways of utilizing the income tax system, better ways to apply excise tax, a better way to apply consumption taxes. The review today is very appropriate.

There is no way that all of us in the House are going to agree on the fact that there may be only one way to do it. There are a variety of ways of approaching tax review and tax revisions.

What I want to do today in my few moments is look at it under the criteria of whether taxation is fair, whether there is simplicity, efficiency and effectiveness. In his earlier remarks the Parliamentary Secretary to the Minister of Finance mentioned that the government accepts those principles in evaluating the tax system. I would have to accept him and the government at their word that they have a criteria and that if there are to be revisions, the revisions or the changes in the tax policy would be based on those very basic principles.

When we look at the taxation system we have to recognize that there is no real consensus as to what the problem is. I do not believe we have a consensus in Canada nor will we have in this assembly here today as to what the solution is. I think we must look first of all at what the problem may be.

I believe that the problem stems from the overspending of governments. That is the first major problem that we must deal with. No matter how we collect the taxes, it is very frustrating when Canadians say that we as legislators and leaders waste the money that they give to us. We have to deal first with the problem of overspending. The major question before this assembly is how it should be done.

Canadians are certainly overtaxed. They believe they are no longer receiving value for their tax dollars, and Canadians are certainly correct on that premise. It is very obvious when we look at the current circumstances and the finances of this country. For every dollar that Canadians send to Ottawa, and this is on the downscale rather than the upscale, 65 cents is applied to government program spending, programs for Canadians.

Why is that happening? We have a $500 billion plus debt facing us.

Second, in the current budget $41 billion is being applied to interest payments which do nothing in terms of productivity or helping people in Canada with regard to health programs, social programs, transportation programs or whatever they may be. The interest payment takes away access to the positive use of a tax dollar.

In terms of the government's plan we also face another $100 billion of debt in the next two to three fiscal years being added to the current $500 billion debt. This means that of the tax dollar, the $1 that comes to Ottawa, the amount available for programs

will certainly be less than 65 cents. It will most likely approach a 60-cent dollar to run our country. That is not good enough.

The point I want to make is that there cannot be effective tax reform without effective expenditure reform and dealing with the debt and the deficit of the country. This is not to say that GST and tax reform are not necessary. I only wish to point out the futility in trying to fix the tax system without reigning in the spending of governments.

Let me deal with defining a fair tax system. That will be the thrust of my remarks today. How do we put together a fair tax system? I will list six points which I feel are relevant.

The first is equity. A fair tax system implies equity. Equity implies that Canadians feel that all taxpayers are sharing equally in the tax burden. Any redesign of a tax system must distribute the burden of tax equality among Canadians.

The second is punishing success. A fair tax system does not punish success. Equity demands that Canadians be allowed to keep the rewards for working harder, for working smarter and for being successful. This component of tax reform is often overlooked. It is often an area wherein those putting together tax policy say that a person is earning a lot and let us take it away from him or her. It is not fair. By overtaxing the monetary rewards of success the incentive for Canadians to invest in a future for Canada is removed. We rob ourselves by punishing success through the taxation system in this land of ours.

The third is dealing with the less fortunate. What should a tax policy do there? A fair tax system does not punish the unfortunate in our society. A tax system that overtaxes those who cannot defend themselves is a double hit on the less fortunate in our society.

The fourth is a point that is often made. I know it has been made many times in this assembly. There is only one taxpayer. On that basis I make two points. First, we must recognize that taxation of businesses eventually falls on individuals. It does so through lower wages, higher prices, reduced dividends and an internationally uncompetitive industrial base. While I am not advocating the elimination of taxes on all businesses, we should recognize that a corporation of any size does not bear the burden of these taxes as is often assumed. These taxes are borne by one taxpayer or individual Canadians.

The second way our tax system must recognize that there is only one taxpayer is with respect to provincial and federal powers of taxation. The current overlap of consumption taxation means that Canadians face 10 different sales taxes. This increases the cost of doing business and overly complicates the tax system.

Last I want to deal with what I call economic choices. A fair tax system does not bias the economic choices of taxpayers. Through special cases and exceptions the current tax system discriminates against certain activities and promotes others. Canadians more than ever before are recognizing their activities to avoid tax. This is what we mean when we talk about a tax revolt.

The tax system should not be a mechanism for a large range of public policy initiatives. My hon. colleague from Calgary Centre covered this point earlier.

These public policies are often designed with all the best intentions. They often result in the reorganization of economic activity in a way in which they were not intended in the first place. When this is done, the true cost of policy is difficult to determine and the reorganization of economic activity creates negative and unintended consequences.

In the last few moments I have I want to raise the following question. How does our current system stack up? Let us look at equity first of all. Canadians do not feel that everybody is paying their share. Second, in punishing success, our current system punishes success. Third, we now have a tax system with a marginal tax rate that at many points exceeds 50 per cent, the percentage believed to have a disincentive effect to earn more. The economic effect of this damaging policy is nearly impossible to measure as it must measure what Canadians are not doing but could be doing under a better and fairer tax system. The fourth point is punishing the less fortunate. Today many people are paying taxes with incomes of $7,000. Last I would make the point with regard to complication. It is clear that a current tax system is complicated with the many forms of tax that are before Canadians. What is the solution?

[Health Care, April 28th, 1994]

If I may quote one of the great Speakers of the House of Commons, would the hon. member please put his question?

[Income Tax Act, April 19th, 1994]

Right. That is what should happen here, to see if we need consultation or not.

That is an impression. It is certainly a comment on the complications of the Income Tax Act. I want to speak about that in my remarks today and where we feel the process should go in reviewing the tax collection system of Canada.

I would like to make clear there are some good aspects to the bill. We would like to see the government continue with some of these programs and certainly improve on them as we proceed in the legislative session.

We know young people today cannot afford to buy homes because they are paying too much tax. We should look at some of the details. While total incomes per capita have increased 170 per cent in the last 10 years total direct personal taxes have risen

some 235 per cent. How are we doing with respect to other countries?

Canadian government revenues as a percentage of gross domestic product have increased from 24 per cent in 1950 to almost 43 per cent in 1990. Also six years ago the tax burden in Canada was approximately 20 per cent higher than that of the United States. By 1992 it had risen to 25 per cent and was projected to increase to 30 per cent by 1997. My recent reading of statistics indicates that we are at that point today. It is not just young people who are feeling the tax burden; it is all Canadians.

The homebuyers plan that allows those saving for homes to withdraw from their RRSPs to make down payments is and was a good idea. It not only puts the dream of home ownership within the grasp of more people. It provides economic spinoffs all the way down the line.

A poll released in September 1993 by the Canadian Real Estate Association confirmed that the homebuyers plan was a big success. The Angus Reid poll was conducted in five major Canadian cities. First of all it found that four out of five buyers who used the plan said it was an important factor in their decision. It was especially important for 86 per cent of first time buyers.

Second, nearly half or 49 per cent said it would have been unlikely they would have been able to buy their homes without the plan.

Third, the plan helped a significant number of home buyers surveyed: 22 per cent of all first time home buyers and 17 per cent of buyers generally.

Fourth, repaying their RRSPs is a high priority. Eighty-one per cent of respondents said it was important to repay. Fully 88 per cent said they would repay at least at the rate required by the plan. Only 4 per cent said they would not repay and would declare their withdrawals as income.

Fifth, home ownership was seen by 84 per cent of those surveyed as being at least somewhat important to retirement planning. Fifty-four per cent said it was very important. Owning a home was rated by far the most important source of income for retirement.

Sixth, the Department of Finance has already reported that the numbers have been very impressive with nearly 200,000 participants to the end of July 1993. These are indeed impressive numbers. As we well know the number of housing starts is a reliable indicator of the overall health of the economy.

The housing industry directly employs, to name a few, general contractors, carpenters, electricians, plumbers, drywallers, painters, landscapers, building product suppliers, real estate agents and lawyers. We are encouraged by such measures as the homebuyers plan and the results it has had. I am sure the limited extension of that program will be of benefit to many other Canadians.

In more general terms it is our hope the new government makes meaningful, effective reforms of the Income Tax Act, as I have already mentioned, with an aim to simplifying the process and certainly making it less complicated and fairer.

We in the Reform Party support a taxation policy that has as its principle the objective of raising funds to pay directly for government programs. We support a balanced budget concept. If we look at the history of the act it was originally intended to collect taxes to ideally pay for the services provided by government. Somewhere along the line we have lost the original intent of the tax system and have allowed it to become a tool to influence the behaviour of people. As well we have used it as a social reform instrument rather than a means by which to collect funds to pay for services. That is inappropriate and has moved us away from a rational responsible budget process.

I say in a general sense now, and certainly some of my colleagues will talk about it in detail as the weeks proceed. We should be working toward a more simple, visible, proportional system of taxation: the flat tax that many people talk about or the single tax. We believe it could be fair, more applicable, more easily administered and more easily understood by the people who have to take responsibility for sending revenue to government each year.

As we sit here today to assent to the amendments before us that were proposed by the last government, I cannot help but be a little cautious in my optimism. All of us in the House should not need reminding of the resounding message sent to the last government on October 25. We must be responsible in our deliberations and make sure we are responding to the needs of Canadians, not to our needs as either a government, an opposition party or individual MPs. We cannot allow ourselves to slip into those ways even in the slightest.

I call upon government members to assure us they will give reform of the Income Tax Act the priority it deserves. In the hearings of the finance committee on a variety of proposals to change the GST, to fix the GST or on other options, one point made by a major number of presenters was that we needed to look at all taxing instruments of government and come up with a plan that is fair, more co-ordinated and more responsive to the needs of Canadians. At the present time they feel they are not co-ordinated. Often because of that some people in our economic system are taxed to a greater extent than others.

If the government makes a commitment to make the reforming of the Income Tax Act a high priority, it shows us as the opposition party that it is making good on its promise of a new way of doing business. It also sends a strong message to the provinces that they should follow the lead of the federal government. Most important, it shows Canadians that there is hope for a new way of government. We cannot let fear of media or any

other kind of pressure inhibit our effort at reform. We have to try.

In closing I take a moment to remind my colleagues in the House that there is a big, fast moving and exciting world beyond these walls. In my brief experience in this House I am often amazed at how this simple fact gets lost in the daily shuffle of papers this institution is confronted with. We often get distracted from some of our major causes or our major concerns. However we have to recognize there is another world out there where they are throwing around words and we are doing it in this House as well. They are words like information superhighway. We as legislators must strive to keep up and be ready for change.

I leave this portion of the debate with this final thought. Failure is not fatal, but in these times failure to change might be.