Mr. Speaker, I appreciate the opportunity to address the House at third reading of Bill C-22, the income tax amendments act, 2000.
The bill would implement key elements of the government's five year tax reduction plan, the largest tax relief package in Canada's history, and would legislate the technical amendments in Bill C-43 which died on the order paper last fall. Each measure in the bill is based on the principles of fairness and equity in the federal tax system to which we have been committed since 1993.
The most important component of the bill delivers measures announced in the 2000 budget and last October's economic statement to set out a multiyear plan for further tax reductions.
This plan, which provides $100 billion in tax relief by 2004-05, will reduce by an average of 21% the federal personal income tax paid by Canadians.
Families with children will receive an even larger tax cut of about 27% on average.
As of January 2001, tax rates on all income levels were reduced and the 5% deficit reduction surtax was eliminated. The low and middle income tax rates fell to 16% and 22% respectively. The top 29% rate was reduced to 26% on incomes between $61,000 and $100,000, which means the 29% rate applies only to income over $100,000. As all the economists and analysts have noted, the timing could not have been more perfect to bring in these tax cuts.
Increased support for families with children would be provided through the Canada child tax benefit. The maximum Canada child tax benefit for the first child would rise to $2,372 in July, well on the way to the five year goal of $2,500 by the year 2004.
For the second child the maximum Canada child tax benefit would increase to $2,308 in July 2004.
These amendments must be in effect by July 1, so that families can get this benefit within the set timeframe.
Other amendments to personal income tax are specifically designed to help those who need them most.
The bill would increase the amount on which the disability tax credit is based. It would expand the list of relatives to whom the disability tax credit can be transferred to make it consistent with medical expense tax credit rules and it would allow speech language pathologists to determine eligibility for the disability tax credit with respect to speech impairments.
In addition, the bill would increase the maximum child care expense deduction for children for whom the disability tax credit can be claimed and the amounts on which the caregiver and infirm dependant credits are based.
It would also include certain incremental costs under the medical expenses tax credit when a principal residence is built for people with mobility impairments.
Moreover, an amount of up to $3,000 in scholarships, fellowships and bursaries will be tax exempt, provided the student is eligible for the education tax credit. Self-employed workers can deduct from their income the share of the contributions to the Canada pension plan or to the Quebec pension plan paid by the employer for their own benefit.
Other personal income tax changes clarify the rules under which clergy can claim a deduction for their residence, allow Revenue Canada to release information about former registered charities under certain conditions and exempt municipalities from filing T4s for volunteers to whom they paid not more than $1,000.
Another element of the tax reduction plan would help make Canada's business income tax more internationally competitive. Corporate tax rates would drop to 21% from 28% for businesses in the highest tax sectors to make them more internationally competitive, beginning with a one point tax cut effective January 1, 2001.
By the year 2005 the combined federal-provincial tax rate would drop from the current average of 47% to 35%, five percentage points lower than the U.S. This would put our businesses on a more competitive level with other G-7 countries and serve to attract investment and create jobs.
The plan also provides a tax deferred capital gains rollover for investments in shares of certain small and medium size businesses, and a 50% reduction of the capital gains inclusion rate. Thus, the highest federal-provincial tax rate on capital gains will be lower than the same combined rate in the United States.
Increasing the employee stock option deduction from one-third to one-half means employees in Canada would be taxed more favourably on stock option benefits than employees in the United States. In addition, the bill would allow the deferral of tax on certain stock option benefits and an additional deduction for certain stock option shares donated to charity.
Bill C-22 would ensure a comparable tax system for Canadian banks and foreign bank branches operating here. It would strengthen the thin capitalization rules, phase out the special tax regime for non-resident owned investment corporations and introduce a temporary 15% investment tax credit for grassroots mineral exploration.
Technical amendments include extending the additional capital tax on life insurance corporations until the end of 2000 and clarifying the tax treatment of resource expenditures and the rules governing gifts of ecologically sensitive land.
There are three remaining measures I will touch on briefly before closing.
The first would introduce changes to the taxation of trusts and their beneficiaries, in particular property distributed from a Canadian trust to a non-resident beneficiary, mutual fund trusts, health and welfare trusts and those governed by RRSPs and RRIFs.
New antiavoidance measures will ensure that transfers to trusts cannot be used to unfairly reduce taxes.
The next measure would ensure that Canada retains the right to tax immigrants on gains that accrue during their stay in Canada. It would also clarify the effects of new taxpayer migration rules on rights to future income and allow returning former residents to unwind the tax effects of their departure regardless of how long they were non-resident.
To avoid international double taxation, former residents would be able to reduce Canadian tax payable on their pre-departure gains by certain foreign taxes paid on the same gains.
Another measure would make advertising expenses in periodicals with at least 80% original editorial content fully deductible and those in other periodicals 50% deductible regardless of ownership.
After July 1996 Canadian pension funds and other entities that own Canadian newspapers qualify as Canadian citizens under the ownership requirements of the Income Tax Act.
Before closing, I wish to mention that a number of amendments were made to this bill in committee. On behalf of the government, I wish to thank members of the Standing Committee on Finance for their detailed examination of this bill.
Improvements have been made to several provisions, including those affecting back to back loans, weak currency debts, foreign accrual property income, partnerships, mortgage investment corporations and segregated fund trusts, just to name a few.
Each of these amendments contributes to fairness in the tax system.
I remind the House that fiscal responsibility for government is fundamental and tax cuts are essential. At the same time we are committed to maintaining an effective, fair and technically valid tax system. Without a doubt this is the thrust of Bill C-22.
This bill will implement the key features of the five year tax reduction plan, which will lighten the tax burden on all taxpayers, strengthen support for families with children, and increase the competitiveness of the Canadian corporate tax system internationally.
I urge all my hon. colleagues to keep in mind that Canadian children need the Canada child tax benefit increases on July 1, a fact that makes speedy passage of the bill essential.
