Herb Grubel

[Committees Of The House, June 22nd, 1994]

Mr. Speaker, I attended a conference on the underground economy which was held in Vancouver a couple of months ago and very soon the conference proceedings on this topic should be published by the Fraser Institute. This was a great subject for discussion. The surveys made of Canadians suggested they have become extremely cynical about these issues. The hon. member summarized the argument very well.

At the same time however the evidence presented by those people who have studied it a great deal suggests that the underground economy is not as large as is popularly believed. There are certain industries, such as home repair, shoe repair, home care services and on and on that when one looks at these industries in detail it turns out that they do not represent a very large proportion of national income.

The largest proportion of national income is produced by large industries such as automobiles, banks and so on that do not have an opportunity to evade taxes in the way it was suggested. Nevertheless it is quite clear there is a very great temptation at the moment as a result of the existence of the GST for people who wish to have their houses repaired, who have all kinds of services that are consumed in the home, are finding that producers come to them and say: "Will it be with or without the tax?" For them there is no penalty for suggesting this.

Why not save a buck, especially once the ethical standards about this have been eliminated or have been depreciated as a result of the discontent with overall levels of government spending and deficits.

It may very well be that it will be very difficult in the future to restore this. We may have used up an amount of social capital in trust and in confidence in our government and in our taxation program. There was a lot of worry expressed about that at the conference.

We hope to do that once we get our spending under control and taxes can be lowered, as is the program of some parties, but it will be a long haul.

[Committees Of The House, June 22nd, 1994]

Mr. Speaker, it gives me great pleasure to share with this House the reasons why the Reform Party opposed the majority report on the GST.

Before I go into the substance I would like to go on record as congratulating the chairman of that committee, the hon. member for Willowdale, for his excellent stewardship and the great learning experience that he allowed all of us to have. I think he treated the proceedings most fairly and really was a master at dealing with the many witnesses we saw.

I started off this hearing process fully supporting the GST. I had lectured about it in classes and thought I fully understood the principles. Well, I understood the principles but what I had failed to understand were the difficulties.

At the beginning we had many witnesses who said: "Let us keep the tax. We spent several billion dollars installing it. It would be very silly now to throw away this investment and start the learning process, the investment in cash registers and so on all over again".

We also heard the very eloquent and polished representatives of the large industry groups located here in Ottawa, all of whom suggested: "Keep the GST. There is no alternative", but they said "broaden the base, harmonize the tax with the provinces and do a few other things that will make it cheaper to run".

I thought for a long time that this was the alternative, the only sensible thing for the committee and for the country. However, I had an experience which I was very sceptical about. I travelled with the committee to as many of the capitals that I could here in our great country. There I found that the information conveyed to me by the people who one might say are on the firing line with respect to the administration and use of the tax were telling us stories that somehow were omitted in the more formal hearings that were dominated by the polished representatives of the big industrial organizations.

I changed my mind and came out with the belief that the tax cannot be rescued, that the tax is a bad tax. It is a nightmare and even with all the changes that have been proposed it will remain a nightmare.

I would like to discuss and put on record what I consider to be the unavoidable consequences of a value added tax, even under the assumption which is of course of very, very questionable validity that we will get total harmonization with the provinces. Even if we do this the administrative costs of the value added tax are extraordinarily high. Firms have to keep track of their input, the sales they have. There are all kinds of extra accounting procedures that have to be undertaken.

We know that the government is spending about $300 million to $400 million a year administering this tax. We know that there are over 1.5 million registrants, people who are entered into the computer with numbers and addresses who have to file regularly. They have to supervised. They have to be caught up with if they do not file. Businesses are going bankrupt periodically and other businesses are created. Just to keep track of all those 1.5 million registrants is a very, very high cost.

In trying to keep track of those people the government already had to make exemption by the definition of a business. The representatives selling Tupperware or Avon products are all in principle required to file GST returns. As it happens and as I learned these people have entered into a special contract where a one step higher distributor pays the GST.

There is a system that was introduced in order to reduce the regressive effect of this sales tax, in order to reduce the impact of this sales tax on those people with lower incomes.

This system is extremely expensive and awkward to administer. We have to find all of those tax filers who qualify. We have to send them cheques. As we know, many of them cannot be found. The cheques do not reach them. There are some who are receiving cheques who should not be, for example people in prison. It is a very expensive and awkward system for making this tax applicable.

The hon. member from the Bloc mentioned other disadvantages for large families and so on. In a country in which there is a very big neighbour which does not have the GST, we are finding that some Canadians, the snow birds, are taking holidays in the United States, staying there for months on end and not paying taxes yet they have the right to services that are provided while they are here.

This was a report filed by several of the witnesses who considered that to be a tax inequity. I am reporting what some representatives of the people of Canada are saying.

One of the most traumatic experiences I have had was listening to a businessman who was located in a border town whose commerce has been devastated by the existing GST. Where there once were 10 supermarkets, there now are two. Where there were 15 gas stations, three are left. There is no way in which the new value added tax will take care of this problem.

I would suggest that if we put on top of the value added tax through harmonization the provincial sales taxes equivalent, we will increase the incentives for border shopping with all the problems that this causes to a wide strip where Canadians are living along the U.S. border.

We heard many stories about tax evasion encouraged by the value added tax. This is something that will also be increased by the possible harmonization of the increase in differences. The tax was designed originally to make international trade neutral.

We know that in this country tourism is a very important export service. We heard representatives telling us that it is not possible to remove the distorting effects of the GST on that important international trade dimension. We also heard that it is impossible to ever tax the consumers of the financial sector. A

comparative international study has shown that none of the European countries have done so because technically it simply is not possible.

These problems exist because the value added tax is basically flawed in a world in which we live, next to a country that does not have a value added tax, and because we live in a country in which we like to take care of those who are at the lower income scale and who would otherwise have been hurt.

[Taxation, June 15th, 1994]

Mr. Speaker, I thank the minister for his answer. I address my supplementary question to him as well.

Recently the International Monetary Fund pointed out the connection between persistent deficits, deeper recessions and unemployment.

Does the minister agree with the IMF when it says that deficits cause unemployment and recessions and therefore the deficit must be the number one priority if Canada is to experience lower unemployment and economic growth?

[Taxation, June 15th, 1994]

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

Yesterday the Fraser Institute announced that tax freedom day, the day when Canadians stop working for the government and begin working for themselves, will not come until June 23 of this year. This is four days later than last year and represents a total tax load of 48 per cent compared with 44 per cent last year.

Instead of fiddling with the method of taxation, as the minister is preparing to do with the GST, when will the government eliminate the deficit so that the level of taxation can be reduced?

[Comments In Chamber, June 13th, 1994]

Mr. Speaker, I want to apologize to all members of the House, aboriginals and residents of the Atlantic provinces who have been offended by remarks I made or was alleged to have made in the House recently.

From the controversy over my remarks I have learned that it is not wise in the political arena and in front of the media to use the same techniques I have employed successfully during my long career as a lecturer. In the future I will be very careful in the use of strong analogies and illustrations to bring out crucial points of analysis.

The main point of my remarks was that the policies of the government toward those in need of support require a fundamental re-examination because they have not worked. These policies have created dependence and significant social problems. New approaches to these problems are needed.

I am saddened that analogies taken out of context and the misrepresentation of my basic points have distracted from an open and frank discussion of problems which are of vital importance for the well-being of all Canadians.

Judging from the messages I have received, very many Canadians want to see such a discussion.

[Yukon First Nations Self-Government Act, June 9th, 1994]

Mr. Speaker, it is quite clear we are facing a very complex problem.

I do not pretend to have the answer but I can tell the member that I have read studies. One of them had a wonderful title. In fact the author and I were colleagues at the Australian National University for a long time. It was called The Affluent Subsistence Economy .

The south sea islands are so far away from all markets that the south sea islands will never be able to be industrialized and have the kind of living standards we have in our industrial country. It is simply a physical impossibility. I wish it were different. I wish we could fly. It is not in the cards.

Why am I using this example of the south sea islands? It is because that is something we can relate to. I certainly come from a temperate climate. This has always been my dream.

The areas in the north are very much like the south sea islands that have been studied. There was no great interference in many of them from the outside. They all have a reasonably good living. They are healthy. They have their traditions. They are from all descriptions of sociologists a happy, well-balanced society.

However they now all want radios, televisions and other things. One of the tragedies of our lives, of the reality of this world is that there is no way that by staying on these islands they can have these things. I did not invent it. The analysts did not invent it. It is simply a fact of life. There are distances and they cannot have this.

They have a choice. Either they continue to have their affluent subsistence with all the satisfaction, all the dreams and romantic attributes that are associated with that kind of a life or, dare I say it, they leave. They go to the big island and they join the big cities with all the problems that go along with it.

Time is too limited to draw the parallel of what that analysis implies for the native people of our country. I can tell you there will never be in the centre of Yukon an industry sufficient to maintain the people there by their own work at a living standard corresponding to that which we have in Toronto or in Vancouver. I believe that it is a contradiction, that we are not serving them by giving in to their demands. I do not deny that the hon. minister has been listening to them.

They say they want enough resources in the centre of Yukon so that they can live as well as the people in Vancouver. It is not possible. I believe the sooner we come to that realization and tell them they have a choice but they cannot have it both ways, the better off they will be and we will be.

That is an outline of the solution I have. I know it is not popular, but I have not been elected to keep on talking about what is popular. I was elected to speak out and to say things the way I see them after 30 years of spending my life reading, writing and thinking about these matters.

[Yukon First Nations Self-Government Act, June 9th, 1994]

Mr. Speaker, could you indicate to me how much time I have.

[Yukon First Nations Self-Government Act, June 9th, 1994]

Mr. Speaker, it is not my intention to suggest that the native people are in any way inferior to us or any other people in the world. It is my considered judgment from reading history and evidence on the sociology and the problems of these communities that the state and well meaning people like the minister who just spoke have created conditions and institutions with the best intentions, filling the short run demands of the individual just like we were likely to do when we were teenagers or in our twenties.

I am suggesting the evidence I have seen is that these institutions have produced not what the teenager wanted, not what the natives wanted but something that is now creating the difficulties all of us feel so terrible about. From what I hear life is awful on these reservations.

We all want to help. I am not here to denigrate or in any way insinuate that the aboriginal peoples of this country are in any way inferior. They need our help. The question is, are we giving them the right help?

I believe we must look at how we got where we are. How did we get there? How does the proposal to give even more resources to these people differ from what our predecessors in the last 100 years said: "Here is a problem. Let us throw more money at it". Let us make sure that this is a cure, that the responsibility we have for them is even more permanent and fixed.

I did not invent the words lazy house. It was discovered by the natives themselves. When they get the things they have they do not quite turn out the way they expected.

You remember when you had your first bicycle, your first motorcycle, your first car. As you were fighting for it, you thought: "If only I could have that, I would be happy forever and ever". We now remember. Sometimes the things we want, when we have them, are not really good for us.

Let me sum up. I am not in any way insinuating that the people themselves are lazy, that they are in any way inferior. Any problems that society has I believe should be looked at realistically by asking: "How did we get there?" If we decide that all we need are more resources, I urge members to go back and see why proposing all those resources in the past, increasing all those resources available to them, has not solved the problem. From what I hear and read, it has made it worse.

[Yukon First Nations Self-Government Act, June 9th, 1994]

Mr. Speaker, I rise to discuss the problems of Bill C-34 and its attempt to help the Indian communities in Yukon to achieve the kind of economic and social aspirations which I think is their legitimate right and which I would like to support.

Unfortunately I believe this bill will not achieve this objective. In fact, it is my judgment this bill will do a great deal of harm, much like policies of the past have done an unfortunately large amount of harm.

In my saying that the basic principles underlying this bill are false, I do not wish to suggest that I have an answer to the complex problem on how to help the native population of our country. Nevertheless, I am in the kind of situation where I do know there is an illness and that the medicine which is being proposed will not help alleviate the problems but in fact will make them worse.

Let me say what I mean. All of us-it is a human condition-dream about having a rich uncle who pays us a guaranteed, generous income so we can retire somewhere on some south sea island and be happy ever after. It is part of the human condition that we all have these kinds of dreams. However, in our experience, as we have matured, we have known that this is a dream which cannot be fulfilled. The rich uncle, even if he gave money to us, even if we could go to the south sea island, would not help us be any happier than we are. Often in fact we would be forced to leave.

Studies have shown that people who have the means to engage in this kind of fulfilment of their dreams come back unhappy and resume their old lives.

This is why we as parents typically, even if we could afford to, tell our children: "No, your education is finished, you cannot count on more support from me, from my family, from your parents. You will from now on be on your own". The rich families of this world establish trust funds to say: "At age 35 or 40 you will be able to draw on this money".

We understand it is in the human condition that we need an obligation, that we need a job, that we need to work. We have refused to give in to our children, yet we have been misguided when in the past we have given in to the demands of the native community to give them more physical goods, to allow them to live on their south sea island equivalent. This is my judgment of what is going on.

I have read a sociological economic study of conditions on these reservations. Let me tell you the story of what is known on these reservations as the lazy house. In the olden days, when families lived in their traditional ways the man in the house had a task. The man had to cut wood, make sure that his family was comfortable. He went out to hunt and fish to supplement the food supply. The housewife, the mother, was fully occupied doing the kinds of chores we have all seen our wives doing and we in fact have participated in helping in the family.

Of course with modern houses you do not have to go and cut wood. Electricity or gas supplies the heat. You do not have to stir the wood in the stove in order to cook meals. Instead of having to tend a garden in the summer you just buy the food from the supermarket.

I can understand it. When I was in my twenties I was saying to my parents: "Hey, listen, you know you can afford it. Give me some more". These people have come to the Government of Canada and said: "It is our right". It has been supported by people like those heckling me saying: "Yes, of course you poor people, we will give it to you". Well, we give it to them.

This is what I read has been the consequence of this policy. They would not do it to their children but they do it to the natives. The lazy house now means the mother has so much time on her hands she does not know what to do with it. The father, his very existence, the meaning in life has gone away, just like the meaning of life has gone away from people who go to the south sea islands and have the option to come back.

This is the interpretation that I read of what is wrong with the native communities. I do not have to repeat what is wrong with the native communities. The books are full of it. My wife, the doctor, treats the wounds, treats the cigarette burns on the arms of the people, of the wives who have been mistreated by men whose meaning of life has gone because we were like the rich uncle who says: "Oh my poor teenage nephew. He needs a steady flow of income".

I know I am going against the conventional wisdom by suggesting that it is short-sighted for the government to do what many of us have decided is short-sightedness of supplying our children with ways which lead to complications of the sort I have described.

I do not know the answer to the native communities and the problems which persist. If we go back 50 or 100 years, every year the answer is to give them more resources and they will be happy and will get rid of the problems. We give them more and more and more.

I have the budget here. We already are increasing expenditures at a time when all the other spending programs are being cut, for example, to old people. The future is being burdened by increasing debt. We are increasing spending on natives by $300 million a year. That has been going on over the last 100 years.

I hear people saying: "You do not know what you are talking about. You mean to spend even more". The problem has not got any better. From what I know, it has been getting worse all the time. That is why we are now going for other institutional innovations. Now we have to make this absolutely permanent so they never, ever have to do certain things that I believe are the essence of human dignity, of a life worth living on this planet.

It is the natives who have called those houses lazy houses. We have seen what happens if we do this.

Sometimes the best thing we can do for our children is to say no. I believe that even though we do not have the answers, saying no would mean that we are not giving more medicine for the cure of this problem which I think history over the last 100 years suggests is the wrong medicine.

[Supply, June 8th, 1994]

Mr. Speaker, I appreciate the time constraint. I am sorry if I went on a little long. I did not keep track of time.

With a reformed Senate, one which is modelled after successful upper chambers around the world, I wonder whether there is not a chance that the member who spoke so articulately against the present system might be willing to consider that a reformed Senate might be in the interest of all Canadians, in particular the people of Quebec.