House of Commons photo

Crucial Fact

  • His favourite word was billion.

Last in Parliament April 1997, as Reform MP for Capilano—Howe Sound (B.C.)

Won his last election, in 1993, with 42% of the vote.

Statements in the House

Criminal Justice June 1st, 1994

Mr. Speaker, on May 16, 1994 someone said: "An effective criminal justice system, one that holds people accountable for harmful conduct, simply cannot be sustained under conditions where there are boundless excuses for violent behaviour and no moral authority for the state to punish. If people know that they are not going to be held accountable because of myriad excuses, how will our society be able to influence behaviour and provide incentives to follow the law? How can we teach future generations right from wrong if the idea of criminal responsibility is riddled with exceptions and our governing institutions and courts lack the moral self-confidence? A society that does not hold someone accountable for harmful behaviour can be viewed as condoning-or even worse, endorsing-such conduct".

These words were not spoken by a Reformer but by U.S. Supreme Court Justice Clarence Thomas.

Would the Minister of Justice please take note.

The Economy May 10th, 1994

Mr. Speaker, a leading bank just published a report saying that if the interest rate remains one and a half percentage points above that predicted it will in fact wipe out the contingency reserve. Furthermore the contingency reserve is in the budget as spending and the deficit will be increased by this continuation.

What criteria will the minister use in deciding that interest rates have risen such that he has to act, that he has to make new spending cuts?

The Economy May 10th, 1994

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

Today the bank increased its lending rate by 34 basis points to what is now 6.61 per cent. When the present Minister of Finance was in opposition he often insisted on the lowering of interest rates because high rates retard economic growth, reduce employment and tax revenue. We know that they also raise the cost of servicing the debt. The two effects combined will result in a larger deficit.

Will the minister now consider further spending cuts that he knows are the only way to prevent increasing the deficit and the

possible disastrous dumping of Canadian bonds by investors, which in turn will lead to even higher interest rates?

Supply May 3rd, 1994

Mr. Speaker, I appreciate this opportunity after this almost ranting and raving question to respond to challenges about my motives and the motives of my colleagues.

I know my friends here now very closely. They are as compassionate and concerned about the future of Canada and the welfare of individuals at least I would argue as some of the members on the other side. Obviously there is no merit in us having a dispute, an argument, over who is more compassionate. What a rational debate in government and in society should be about is how do we carry it out, how do we do it?

The reason why I have left a comfortable life as a professor, short of retirement, is because I am so worried that the future of our social programs is in jeopardy. We are very, very close to losing it all. This would not be the first industrial country of the world where this has happened.

I am more compassionate, I assert strongly to the member opposite. Let us have an argument on who is more compassionate. I am more compassionate. On top of that, I have a brain, a brain which says to me that it is not just a heart or a stomach with which I have to make policy. I have to look at the world around me. As I look around at the world I see this government predicting an extra $100 billion deficit in the next three years.

At a 6 per cent average that means $6 billion more spending just to serve the interest on the part of the debt they have created in six years. Do you know how much we can spend on social welfare with $6 billion? That does not count all the higher interest we owe on the already existing $500 billion. We are on a treadmill with the spending cuts we are making. The increases in revenue-

Supply May 3rd, 1994

Mr. Speaker, it is a pleasure to switch gears a bit and talk in a non-partisan way about some matters which I think are extremely important for the country.

The debate I just witnessed, the shouting, the unpleasantness that took place here and the emptiness of the political rhetoric are the kinds of things that have turned so many people against politics. It is a sad thing to observe, sitting in the Chamber.

I would like to talk about the fact that the underground economy is widely discussed in Canada these days. In these discussions the need for lower taxes and the reform of the taxation system are regularly linked. In my remarks I will expand on these subjects drawing heavily on information which I have obtained as a member of the Standing Committee on Finance on possible changes to the GST and during a recent Fraser Institute conference on the growth of the underground economy in Vancouver.

During the recent hearings of the finance committee many witnesses noted their concern that the GST had been a major cause of the growth of the underground economy, the loss of government revenue, and the precarious state of the government's fiscal condition. These witnesses reflected their own experiences as well as those shared by researchers and the general public. There is widespread agreement that the underground economy was encouraged by the introduction of the GST. This tax induced evasion because it is visible and imposed on every consumer purchase.

Evasion is encouraged additionally by the fact that consumers do not face any penalties for non-payment of the tax. Evasion is particularly high among small firms that supply services with a high labour content. In these industries honest owners are forced by competition from just a few bad apples into operating outside the law.

The GST is not the only determinant of the underground economy. High marginal tax rates on personal income provide incentives that often reinforce the reward of evading the GST. If you are hanged you might as well be hanged for a sheep as for a lamb. Onerous regulations of business and large surcharges on labour costs mandated by the government also encourage firms and workers to operate outside the regular economy.

There are strong incentives for persons receiving unemployment insurance or welfare benefits to work in their own households as well as in the underground economy without reporting their incomes. These social security systems penalize beneficiaries with 100 per cent tax rate on reported income above only a very small amount.

Many people are particularly concerned about the growth of the underground economy because it appears to be accompanied by a change in public attitude about the morality of tax evasion. In a recent survey 71 per cent of Canadians indicated that "most people would cheat on their taxes if they knew they could get away with it". Seventy-nine per cent agreed that people who pay all the taxes they should are fools. Can we believe that? Thirty-two per cent considered acceptable the evasion of the GST by other people.

Some analysts believe that social capital in the form of honesty, which in the past has made Canadians among the most compliant in the world in the voluntary filing of their income taxes, may have been lost irretrievably.

However it is important that the government at least try to get Canadians to return to their traditional honesty by tax reforms that simplify compliance and reduce incentives to cheat by the lowering of both marginal and average tax rates. Unfortunately the lowering of tax rates under any taxation system cannot take place until spending is cut and increased revenue due to economic growth has eliminated the deficit.

Government success in this challenging task is likely to increase further the public's incentive to evade taxes because the level of real government services per dollar of taxes collected will be falling and ultimately reach a rather low level. This phenomenon is due to the fact that in the absence of debt payment a balanced budget provides the people of Canada with a dollar's worth of government services. However in a few years the debt payments of the federal government are likely to be about $50 billion annually.

If by that time program spending remains at its present level of $125 billion and economic growth under the present tax structure yields $175 billion the budget will be balanced. At that time each dollar of taxes will provide for less than 70 cents of traditional government services. Taxpayers will have little trouble rationalizing evasion on the grounds that taxes are not providing value for their money.

During the finance committee hearings and in the public media it is often suggested that the government's financial crisis could be eliminated if only somehow it were possible to tax the underground economy. The validity of this proposition depends decisively on the size of the underground economy and the possibility of forcing it into the open.

The Fraser Institute conference saw some academics present estimates of the underground economy as high as 15 per cent of national income. On the other hand government statisticians and economists suggested that it represent 5 per cent of national income at the most and that it is probably more like 3 per cent. The difference between these two estimates is due to the use of different methods for the estimation of a phenomenon that by its very nature is not known and attempts to remain hidden.

The academics use strong assumptions about the demand for money by the public to finance regular and underground economic business. Some have found the demand for cash is higher, the higher our tax rate. In fact the amount of cash used by the public is much larger than can legitimately be used in the regular economy. The excess amount is believed to be used to finance underground activities.

Analysts in the employ of the government use sophisticated accounting data to check for the growth of discrepancies in balances which if measured completely and accurately should be zero. They also engage in sensitivity analyses of data which show the academic estimates imply phenomena that simply are not observed in the real world by any standard of measurement.

Some part of the observed differences in the estimates are due to definitions of the underground economy. Government estimates focus on the amount of income that goes unreported to the tax collectors on the one hand and is unrecorded by Statistics Canada on the other. The academic estimates include illegal activities which may be as much as 1 per cent to 2 per cent of the national income.

Some academics know of the professional bias of government analysts who prefer not to be reporting that they have done their job poorly and that they tend to make continuous adjustments to their data to avoid the development of the kind of large errors the academics claim to have discovered.

While this criticism is probably unfair, there was the astounding revelation that the U.S. Internal Revenue Service has doubled its official estimate of the amount of tax evasion after a new head had been appointed. He is alleged to have decided that the estimate of 5 per cent evasion, twice that given by his predecessor, would strengthen with congress his case for more tax collectors. The IRS is now investigating its own internal auditors. Some academics noted that official positions on the issue now imply that Canadians are 10 times as honest as Americans in filing their income tax returns.

Dr. Don Drummond, deputy minister of finance for fiscal affairs, put much credence in the maximum of 5 per cent figure for the underground economy. Importantly, he noted that this figure represents a serious problem. It equals about $35 billion and, at $17 of federal revenue per $100 of national income, it amounts to about $6 billion of foregone taxes. This is not

enough to eliminate last year's regular deficit of $42 billion but enough to help significantly the fight for a balanced budget.

However, it is unlikely that the full 5 per cent of the more or less officially admitted maximum underground economy can ever be brought into the open and made taxable. Yet I would argue that the lowering of taxes might make for more tax revenue than the $6 billion suggested by the government representatives.

For one, returns from after tax legal income would rise relative to the returns from illegal activities. More important, there would be reduced incentives to produce in the informal unmeasured household sector. This effect will be enlarged considerably when the economy recovers and the number of persons on welfare and UIC is reduced.

It is believed that persons on social assistance use much of their free time to work in this unmeasured sector which is not included in the official estimates of the underground economy. They would do less of this kind of work, hire others to do it and pay with income from their own formal work. Many economists believe that this tendency would be strengthened even more if the pending redesign of social programs makes it more difficult and less rewarding to remain on social and UIC assistance.

Let me conclude by summarizing my argument. The underground economy in Canada is large and policies that result in shrinking it would result in significant increases in tax revenue. The federal government has the opportunity to achieve this outcome by the lowering of average and marginal tax rates, the elimination and simplification of regulations and the reform of the social programs.

The issues and opportunities are clear. It is time to act on them.

Supply May 3rd, 1994

Regardless of cost.

Questions On The Order Paper April 15th, 1994

What is the incidence of social spending by deciles of family income, in particular with respect to old age security, unemployment insurance, family and youth allowance, and other federal transfers to persons?

Interest Rates March 24th, 1994

Mr. Speaker, why was the Canadian dollar under such heavy pressure that the Bank of Canada on Tuesday had to increase its lending rate 18 per cent, or 78 basis points, to a level of 5 per cent and the exchange rate today has dropped another four-tenths of 1 per cent?

Interest Rates March 24th, 1994

Mr. Speaker, my question is for the Minister of Finance. Yesterday the minister acknowledged that Tuesday's rise in the Bank of Canada lending rate is likely to result in higher than budgeted costs for servicing the government debt. He insisted the estimate for other budget items were conservative and that the overall deficit estimate would be achieved.

It looks like business as usual. Does the minister admit that the high interest rates also will have a negative impact on economic growth and tax revenues and that therefore the overall deficit forecast is also too low?

Electoral Boundaries Readjustment Suspension Act March 21st, 1994

Mr. Speaker, this is a question for the Minister of Citizenship and Immigration.

Since the minister announced that next year's level of immigration will be 250,000 I have received only critical comments from my constituents concerning this decision. Other Reform members of Parliament have had the same experience. We are getting clear signals from the people of Canada that they want less immigration.

Last week I asked the minister about the contacts his office has had concerning the same matter. I received no answer and instead received a lecture about the merit of the government's determination to stick to policies regardless of public opinion polls and comments received from the general public.

I find this attitude of the government policymakers arrogant, elitist and undemocratic. When this government was in opposition its MPs were constantly arguing against government policies on the grounds that the people did not want such things as free trade and the GST. Power corrupts. Now the people's wishes no longer matter.

I ask the minister again a simple and straightforward question which should be answerable in simple terms. How many contacts from the public has he received critical and supportive of the immigration levels since he has announced them?