Paul Crête

[Income Trusts, May 16th, 2007]

Mr. Speaker, our debate on this motion must take two different angles into account. This is an example of a terrible decision made by the federal government, which, systematically, year after year, sends conflicting messages to the business community and investors.

For example, in September 2005, the Liberal finance minister declared a moratorium on the creation of income trusts, under the pretext that the government wanted to limit the loss of tax revenues stemming from the conversion of corporations. In his economic and fiscal update in November 2005, the minister flip-flopped and lifted the moratorium that he had just declared in September 2005.

When the Conservatives said during the election campaign that they would not touch the financial vehicles known as income trusts, many investors found them to be a worthwhile investment. Big businesses and small investors all went ahead with them. The Conservatives must accept their considerable responsibility. Their actions caused the stock market activity that we saw in relation to income trusts.

But this tax avoidance had to be eliminated. When he was running for office, the current Minister of Finance should have been careful and said that he would look at the figures and announce appropriate measures once he was in power. Instead, he said that he would not make any change, but he reversed his position in the fall of 2006. Using a ways and means motion, he announced the introduction of a tax on the income distributed by trusts to companies, thereby going back on what he had said during the election campaign. This caused serious problems. However, if we take a close look at this issue, we see that the Conservative government practically had no choice. The finance department estimated that year in and year out, the different levels of government lost $400 million in revenue because of income trusts.

For example, Bell and Telus announced that they would convert to income trusts which, in and of itself, would have inflated tax losses to about $1 billion annually. This measure, which was allowing corporations to avoid paying significant amounts of tax, had to be eliminated.

The measure offered tax benefits, but no constructive benefit to the economy. The income trust structure practically forces a company to pay 100% of its profits to its shareholders at the end of the year, which is highly counter-productive in terms of economic investments. If the company keeps part of its profits for an investment project, for instance, it must pay the maximum amount of taxes on that non-distributed revenue. This structure did not promote investment. This is why, in addition to the tax leakage associated with the conversion of a growing number of income trusts for reasons that are strictly tax motivated, the potential loss of productivity in our businesses is a real danger when the manufacturing sector in Quebec and Canada is going through a serious productivity crisis.

For example, according to the World Competitiveness Yearbook, 2007, Canada was ranked seventh in 2005, but fell to 18th in 2006. Had the government not stepped in, a company such as Bell, for example, would have been forced to distribute all profits to its shareholders or be subject to substantial financial penalties. It makes no sense for this structure to be applied to a company such as Bell. Thus, Bell would have been forced to cancel its investments in order to ensure its growth and would have been condemned to die a slow death. Entire industrial sectors could have been forced, by shareholders wishing to maximize their short-term profits, to convert to income trusts merely for tax reasons. At the same time, they would have had to sacrifice long-term growth in our industrial sector. Action had to be taken to correct this situation. That is what the government did.

It was the way in which they did it that had a significant negative impact on the stock exchange and on the portfolios of small and large investors. First, it backtracked on its election promise made to citizens and investors that it would not change the tax treatment. After it came into power, it suddenly changed its mind.

The Bloc would have liked the Minister of Finance to have taken more care in making his decision. He could have arrived at a conclusion that would have avoided using this solution. The Bloc Québécois did make constructive suggestions in this regard.

Nevertheless, in the end, we have to come to terms with the government's position as expressed in the budget and the bill to implement the budget, which is currently before the Standing Committee on Finance. The Bloc Québécois does not believe that this budget corrects the fiscal imbalance. It merely corrects the financial imbalance without dealing with the underlying fiscal imbalance. All the same, we think that the budget deserves our support, and the people of Quebec agree with us on that. As part of its budget, the government will be transferring adequate funds to Quebec. In light of our current financial situation and the fact that often, the needs are provincial while the money is federal, that will give the province a chance to breathe.

They are correcting the situation for this year and the next few years, but they are not making any structural improvements. The federal government has yet to take that step. The Bloc Québécois has been fighting this battle for the past four years in the House of Commons and in every other forum imaginable. It has based its arguments on the Séguin report and the consensus in Quebec. Four years ago, nobody in this House was talking about fiscal imbalance. Now we have at least one budget that will allocate major funds to Quebec. As such, the budget deserves our support.

The income trust situation should have been fixed with a similar measure despite the fact that it clearly had a negative impact on a lot of investors. In terms of the underlying issue, the decision the government made was necessary, yet the government should have found other ways to ensure that the measure had as few negative effects as possible. Proposals to address this were submitted to the committee. The Bloc Québécois has been recognized for its efforts in that regard. The government did not agree to the Bloc's proposals. Instead, it implemented its own crude solution, which is fine, but our solution would have been better.

If the government had kept its original position and not made any changes, we would be faced today with huge flights of capital, which would add significantly to the challenges and problems facing the manufacturing industry in Quebec and Canada. We know how important it is in today's competitive global economy for capital to be available and used to improve productivity and not just make tax gains.

I believe that, on the face of it, the proposal my colleague is making today is not acceptable. This House must reject this motion. Moreover, if it were adopted, it would run counter to the budget that has been adopted and the implementation bill that is currently under study.

I invite my colleague and anyone who has questions about this issue that should be studied to continue making representations during the pre-budget consultations to come. This will not resolve the issue for this year, but if any additional information and solutions are out there, it would be interesting to know what they are. The Bloc Québécois began looking at income trusts in 2005, after the Liberal finance minister announced that the moratorium had been lifted. We did not want to abolish income trusts at that time. Instead of preventing corporations from becoming income trusts, we were in favour of introducing a minimum tax on profits from income trusts. We felt that this was worth considering, as it would rebalance the tax treatment of income trusts and corporations.

Following the minister's decision, in October 2006, the member for Joliette, who was then our party's finance critic, brought forward a motion before the Standing Committee on Finance that read as follows:

That, as soon as the report on prebudget consultations has been completed, the Standing Committee on Finance study the economic and fiscal consequences of the transformation of a growing number of taxable corporations into income trusts.

A few days later, we learned where the finance minister stood on this issue. Today, we have to choose between voting for this motion—which would recreate a very difficult situation that is not good for the economy and especially the manufacturing industry—and rejecting this motion. The Bloc Québécois chooses to reject the motion. We believe that that is better overall for Quebec's economy. We must move in that direction.

[Income Trusts, May 16th, 2007]

Mr. Speaker, I will speak quickly, since we do not have much time. Does the hon. member admit that, on the essence of the issue, that was the right decision to make? Unfortunately, the Conservatives changed their mind after they had promised they would not modify the rules. Many small investors were swindled by that decision. However, on the essence of the issue, the situation could no longer continue.

[Sales Tax Amendments Act, 2006, May 14th, 2007]

Mr. Speaker, I thank my colleague for his question. It gives me an opportunity to add something I did not mention before.

This bill will defer the payment of duty by small vintners selling wine on consignment in retail stores operated by an association of vintners until the wine is sold. For very small businesses, any additional cost can really eat into profits, which are often quite slim.

This measure came about because members went to see small vintners and listened to what they had to say. This measure is good for these companies' bottom line. On the one hand, we have a measure that lets them have a still to develop new products, and on the other, we have a measure like this one that relates directly to the GST.

Let us hope that all these measures will help this sector develop better in the coming months and years.

[Sales Tax Amendments Act, 2006, May 14th, 2007]

Mr. Speaker, my hon. colleague raises a very good point. He is an experienced parliamentarian and has dedicated a great deal of time to parliamentary work.

Indeed, we are talking about enacting legislation flowing from other legislation that has existed for years. I think a good parliamentary exercise with one piece of legislation would be to entrust it to the organizations responsible for reviewing the regulations so that a comprehensive study can be done and a recommendation made.

The observation that always has to be carefully considered is the following. When governments resort to regulations, the legislators are excluded from a part of the process. I have already seen this in other bills. It was a means of avoiding debate in the House to some extent, avoiding debate between legislators by saying that it would be included in the regulations. As they say, the devil is in the details. That is said in negotiations, for instance. Thus, I feel it is important that clear choices can be made between what can be addressed by legislation and what must be addressed by regulations.

This is a discussion that can take place when the Standing Orders of the House are reviewed and in the course of our various activities here. Perhaps we could also find a specific field in which to conduct such a study on a bill that will allow us to see if, indeed, there is not a specific field in which a consensus could be reached and in which studies of this nature could be conducted, and thereby avoid a partisan debate on the matter. It would have to be in a subject matter that is the result of a consensus among the parties of this House.

[Sales Tax Amendments Act, 2006, May 14th, 2007]

Mr. Speaker, I thank the hon. member for his question and for the details that he provided.

When we pass laws, it is particularly satisfying when such measures can be implemented. Charities are often organizations that provide services to specific clienteles, that have specific needs in terms of equipment, and that may also have specific building needs to be able to do their work.

What we hope to do with this measure is to streamline as much as possible the administrative rules governing charities, so that they will spend as little money as possible on administrative procedures.

This provision ensures that the exemption of supplies by charities of real property under short-term leases and licences extends to any goods supplied together with such real property.

For example, a building may be bought in my riding by a charity, through a foundation. At some point, the charity may find out that it needs this equipment. They have their day to day operations, and this measure will help reduce costs, particularly the administrative costs that often results from such operations.

When it comes to the GST, things can quickly get complicated. Additional administrative staff is required. It is very important that charities can fulfill their social mandate under less financial pressure. One of our responsibilities as elected people is to ensure that this is done, so as to promote the spreading of wealth. At times, this can be achieved in a spectacular fashion at specific events, but it can also be done in a concrete way, through measures such as those included in this bill.

[Sales Tax Amendments Act, 2006, May 14th, 2007]

Mr. Speaker, the intent of Bill C-40, which we are studying today at third reading, is to correct various weaknesses with the GST and the excise tax. First, I would like to talk about some aspects of the excise tax, more precisely the measures on tobacco and alcohol, and some other enforcement aspects.

The measures to make some provisions on tobacco in the Excise Tax Act more precise should help the fight against tobacco smuggling while simplifying the collection of the tobacco tax. The bill will extend the requirement to identify the origin of tobacco products to all products, including those for sale at duty-free shops or for export, consistent with the international Framework Convention on Tobacco Control.

We can see that the whole tobacco smuggling issue is something that comes up on a regular basis. It seems that smugglers, from one generation to the next, are more and more original and innovative in their smuggling methods. We have heard a great deal from those concerned, from grocers among others. A kind of secondary, parallel market has sprouted up across Quebec and Canada.

Now the solution lies in part in the measure contained in this bill. We will probably need to ask for other measures to add to the punishment aspect. In any event, we will have to make sure that we really know where the tobacco comes from and that we also know, when a pack of cigarettes is sold outside a reserve for example, where it comes from and where it was produced. There would be no more ambiguity then and the customer would automatically know where it comes from and could not pretend that he or she did not know anything about the situation. This has a major economic impact on the regular network, the legal sales network, including groceries and all the other businesses that sell cigarettes.

Of course we will keep on with the campaigns to reduce tobacco use and hope that tobacco use will diminish. As far as the legal aspect is concerned, we have to make sure that the current law is properly enforced. There is at least one measure that seems to go in the right direction and this is one of the reasons why we will support this bill.

As far as alcohol is concerned, part of the bill deals with some level of modernization. Provincial liquor boards and vintners would be allowed to possess a still, or similar equipment, to produce spirits for the purpose of analyzing substances containing ethyl alcohol without holding a spirits licence.

As we know, our legislation still includes old provisions dating back to the days when some very strict restrictions were in effect regarding alcohol consumption. Some of these principles are still found in various acts, and even in the basic structure of the Quebec liquor corporation act. We are finding out that, in everyday life, with the changes occurring in consumption habits, it is important to provide local producers with as many tools as possible to allow them to develop good products, because this will often help them secure new markets. Indeed, sometimes they are not able to do so at the international level, because those products that are imported in large volumes are often sold at a much lower cost. This is why it is important to move forward with such measures.

A lot of changes are occurring. In my riding, a few years ago, a wine producer created the Vignoble du Faubourg. This producer was awarded the Grand prix du tourisme in Quebec, and it has achieved promising results. Authorizing the use of this type of tools will definitely allow us to move forward in this area.

There are other things in this bill, including measures pertaining to the air travellers security charge, and some tax relief. Other measures that deal with various areas include: a tax exemption for certain medical services; a lower tax burden for charities; helping small vintners—as I mentioned earlier—and measures relating to tobacco.

So, for all of these reasons, the Bloc Québécois will support this bill. This is a piece of legislation that includes many small provisions. A large number of measures are proposed, such as those in the health sector.

For example, the government is amending the act so that, in the future, speech-language pathology services will be tax exempt. This amendment to the act will confirm the tax exempt status of those services.

The change will facilitate access to services for seniors who suffer strokes. There are many interesting measures. There is one that ensures that the exemption of supplies by charities of real property under short-term leases and licences extends to any goods supplied together with such real property. That will allow charities to fulfill their social mission with fewer financial pressures.

There are also measures concerning business arrangements. The Goods and Services Tax Act will be amended to provide transitional relief on the initial asset transfer by a foreign bank that restructures its Canadian subsidiary into a Canadian branch.

This last measure will give a foreign bank which owns a Canadian subsidiary the tools it needs to restructure it to the benefit of the Canadian economy. That will help foreign banks doing business in Canada to transform their subsidiaries into Canadian branches and will stimulate an increase in competition in the Canadian banking industry. We know that that industry will see more change in the future.

The debate on bank mergers is not over yet. Right now, measures are being introduced to allow Canadian banks access to foreign markets but when foreign banks have subsidiaries here we want to facilitate matters for them, depending on the context and according to the law.

The bill removes technical impediments that hinder the use of existing group relief provisions under the GST. This amendment simply clarifies the rules of application of the legislation already in effect. It is very technical in nature. In addition, the bill simplifies compliance by excluding beverage container deposits that are refundable to the consumer from the GST base. This will make it easier for businesses to manage collection and will lighten the regulatory burden associated with deposits, with a view to promoting more recycling and environmental protection.

The measure also clarifies the treatment of the right to use certain types of amusement or entertainment devices, such as gaming devices, when provided through the operation of a mechanical coin-operated device that can accept only a single coin of twenty-five cents or less as the total consideration for the supply.

This obviously is an omnibus bill that addresses a wide range of specific issues.

During speeches by my colleagues in this House I have often raised the issue of GST for tourists. I wanted to see in this bill or in any decision made by the government, assurances that all the negative effects of the measure announced in the budget would be eliminated.

The government probably realized in good faith that the GST rebate program was costing too much. It decided to eliminate the program, when it could have tried to find another way to manage it. Some countries that have this type of program simply outsource the management of the program. Thus, it is businesses—for example, duty free shops or other types of businesses—that ensure the administration of the tax and simply reimburse the government what it is owed. This eliminates a very costly bureaucratic process.

We should look into these avenues in order to find a way to maintain this program, which provides a significant competitive edge for the tourism industry in Canada and Quebec. Similar programs exist in other countries and some original ideas have been proposed.

What is more, a number of months ago, the Conservative government made systematic cuts in several areas. It was like these cuts were made blindly, without any consideration to their impact. We now have a concrete example that applies to the purpose of this bill before us and that calls for us to move forward to correct the situation.

I think that it is fair to say that this bill, which was introduced quite a while ago, puts forward measures worth recognizing. I would like to come back on those in relation to health, an area where speech therapy is under consideration for becoming zero rated. I do believe this is a very positive step, which would confirm the zero-rated status of speech therapy services and facilitate access to these services for youth with language disorders.

Also, this amendment will facilitate access for seniors who suffered a stroke. This is why I think it is important that these measures be implemented as soon as possible.

The sales and importations of a blood substitute known as plasma expander could also be zero rated. It is a little complicated to explain, but basically a blood substitute can be used in the treatment of people who have suffered massive blood loss, severe burns or an open fracture.

The intention was to ensure that these products would be zero rated. People's health is important, and these kinds of measures have to be put in place.

The government will restore the zero-rated status of a group of drugs collectively known as Benzodiazepines. These include medications such as Valium, Ativan and other similar products used primarily to treat anxiety, for alcohol withdrawal or as a preanesthetic medication. These help and improve people's health.

With respect to charities, the bill will allow the exemption of supplies by charities of real property. I think that is a worthwhile measure.

As a whole, this bill deserves to be passed by this House. It is currently at third reading. It has been considered and amended where necessary. It also announces work that will have to continue in these areas.

Concerning the GST and the excise tax, a thorough examination and technical improvements are often needed. Some have been suggested during this debate. It is now time to pass this bill and to ensure that it will really fulfil its role, that it will make some situations more human and that the very concrete work done to allow small wine businesses, for example, to make a name for themselves and to develop, will be made more effective.

This bill is non partisan in nature and does not require an extensive debate. Legislators have to intervene in very contentious areas, but, at times, they must support bills that are the result of in-depth discussions among participants and of recommendations coming from different areas.

Time spent on drafting a bill often impedes a lot with action. It is important to act quickly. In this case, we have already waited too long to implement some of these measures. That is why I want this bill to pass as quickly as possible.

[Sales Tax Amendments Act, 2006, May 14th, 2007]

Mr. Speaker, I found the speech by the hon. member particularly interesting. Of course, the Bloc will support the bill. However, I would like to draw the member's attention to an addition he certainly noticed.

I refer to the problem the government created when it abolished the GST rebate for tourists. We succeeded in getting some changes to the program to protect, for example, outfitters and big meetings and conventions. However, the duty free shop owners and operators are still making representations.

Since the member is an active member of the border caucus, he must undoubtedly be concerned by the issue, all the more so because there is a big duty free shop in his riding, close to the American border.

I would like to know if he thinks that the government should change the unfair situation in its future bills. If it could be done through bill C-40 it must be possible to do it in the future.

[Sales Tax Amendments Act, 2006, May 14th, 2007]

Mr. Speaker, while it is not directly relevant to this bill, I think it would be appropriate to know what the member thinks of the program that was abolished by the Conservative government, the GST rebate for tourists. This has a major impact.

Corrective measures were taken already for outfitters and conventions. Would it not have been appropriate for similar measures to be adopted for duty-free shops, to avoid the problem being experienced now, which creates a major disadvantage for those shops, even if it might have meant adopting a private system as other countries have done?

Would it not be appropriate for the government to act quickly? Why has it not done so in the case of Bill C-40?

[Income Tax Amendments Act, 2006, May 14th, 2007]

Mr. Speaker, I would like to expand on the comments of my colleague from Joliette, who is very familiar with financial matters. He gave examples of situations where the current minister, with the best intentions, proposed a policy that was in need of some fine-tuning. The picture I am getting could be added to the one he was talking about. I am thinking about the program for GST rebates for tourists.

In this case, the Bloc Québécois, the industry and other political parties had to make strong and repeated arguments to achieve a few partial corrections to an unacceptable situation, in which organizers of conventions for outfitters or other similar events were losing a considerable international competitive advantage. It is the same type of situation with interest deductibility.

As for GST rebates for tourists, an extra effort should be made to come up with a reasonable solution for duty-free shops.

But my question is more general. I would like my colleague from Joliette to tell me, since pre-budget consultations on next year's budget will be starting soon—it is already the time to be working on these things—should tax avoidance not be an important issue? Should it not be important to make increasing transparency in Canada's tax situation a priority, or to ensure that there is a significant improvement beyond Bill C-33, which we are studying right now?

[Income Tax Amendments Act, 2006, May 14th, 2007]

Mr. Speaker, this is a complex issue which deserves much attention and probably more than 45 seconds. Obviously, at each step, it must be determined if a given tax measure is adequate. Its fairness, its efficiency in generating revenues and its relevance must be taken into account.

I hope that the government will display the same maturity we are finding today in Bill C-33, which we support, but many aspects of this issue have not been addressed.