Roy Cullen

[Supply, September 21st, 2000]

Mr. Speaker, the Right hon. Leader of the Progressive Conservative Party talked about the need for the government to take action and that it should not wait. When the Progressive Conservatives were in power they did not wait. They invented the tax on diesel fuel and increased it twice to its current rate of 4 cents a litre. In addition, with regard to the tax on gasoline, it increased the tax on gasoline six times.

I would like to ask the Leader of the Progressive Conservative Party if he supports the comments of the premier of Ontario who said that if the government lowered its 14.7% flat tax on fuel the oil companies would just raise their prices in kind. Mr. Palladini, the development minister of Ontario, said that whenever the government has cut fuel taxes it has not been reflected at the pumps and that international supply and demand and huge profits in the oil industry were definitely at the root of this problem.

Does he support those statements by Tories in Ontario?

[Income Tax Act, September 20th, 2000]

This has to do with forestry workers.

[Income Tax Act, September 20th, 2000]

Mr. Speaker, the number of private members' bills that are coming forward are very creative, imaginative and are keeping the Department of Finance, the Minister of Finance and his parliamentary secretary very busy.

I hope I am not the bad cop today.

I have some sympathy for the member's bill. Before I was elected in 1996, I worked for 20 years in the forestry sector. The workers in this sector are very professional. They are people with whom I have done a lot of work.

As I understand it, the intention of this private member's bill is to amend the Income Tax Act to permit, in certain circumstances, forestry workers to deduct for tax purposes motor vehicle expenses related to travel between their residences and places of work. Deductible costs would include not only the day to day out of pocket expenses required to operate the vehicle, such as gasoline, repairs and maintenance costs, insurance and licence fees, but also capital cost allowances. That is the depreciation on the original cost of the vehicle and interest costs associated with any loan taken out to acquire the vehicle.

This bill raises a number of issues that need to be examined carefully. In examining these issues, a number of policy principles must be considered.

One of the most important tax policy considerations is that of fairness. That is that the tax change be fair, not only to the taxpayers directly affected by the change, but also to all other Canadians.

A second important tax policy consideration is that of simplicity. Can taxpayers understand and comply with the tax change and can the proposed tax change be readily administered and enforced by the Canada Customs and Revenue Agency? Another consideration is how the proposed tax change impacts on the fiscal resources of the government.

This bill proposes to permit forestry workers to deduct employment income motor vehicle expenses related to travel between their residence and their place of work. Permitting such a deduction would represent a major departure from a well-established tax policy which has been in place for many years. The cost of driving to and from one's place of employment is considered to be personal driving. As such, costs associated with personal driving are considered to be personal and therefore not deductible.

Before I was first elected in 1996, I spent a number of years in the forestry sector. Even with that predisposition I cannot think of any rationale that would justify providing this benefit to forestry workers but not to workers in other sectors. I agree that forestry workers often have to work far from their home in relatively remote locations whether it is doing silviculture work, tree planting, thinning or spacing or whatever the case may be. However, forestry workers are not unique in this regard. Most employees have to commute to work and incur costs in doing so. Some employees may have to travel relatively long distances, like forestry workers, to remote work locations. However, it would be difficult to justify providing a tax deduction solely for forestry workers, as this private member's bill proposes, at the exclusion of other individuals.

In fact, the issue that this bill raises relates to the much broader issue of the deductibility of employment related expenditures more generally.

Most workers incur costs connected, in one way or another, to their employment. In addition to the cost of commuting to and from their work location, in the past, taxpayers and their representatives have sought tax relief for work related expenditures such as personal computers; professional journals; skills upgrading; business and construction safety clothing; and home office expenses.

Providing tax relief to employees in all of these situations would be a major shift in policy and would result in a significant fiscal cost.

As I mentioned, a second issue that must be carefully considered in examining this bill is that of simplicity. Can taxpayers understand and comply with the tax change and can the proposed tax change be readily administered and enforced by the Canada Customs and Revenue Agency?

We already have extensive provisions that permit the deduction of automobile expenses from business and employment income in certain circumstances and within certain limits. These rather extensive provisions are intended to ensure that all taxpayers are treated in a fair and consistent manner. However, taxpayers often express concern about the complexity of these provisions. This bill would only increase the number and length of the provisions devoted to automobiles by providing a unique tax benefit to forestry workers that other employees are not entitled to. By confining this benefit to forestry workers, the bill requires the crafting of a definition of forestry workers eligible for this tax benefit. However, developing an appropriate definition broad enough to include a variety of work situations yet narrow enough to focus the benefit to those taxpayers for which it is intended would be extremely difficult and could lead to increased uncertainty for taxpayers and increased administrative and enforcement concerns for the Canada Customs and Revenue Agency.

I agree that there is a need to reduce the tax burden of Canadians. However, providing focused tax relief to employees in specific sectors is not the way to go. Rather, as outlined by the government in its last three budgets, it is better to provide broad-based tax relief to all Canadians.

In the 2000 budget alone, the government proposed that federal personal income taxes be reduced by an average of at least 15% over the next five years. The proposed budget measures will ultimately benefit each and every Canadian taxpayer by retroactively restoring full indexation of the personal income tax system effective January 1, 2000.

In addition, the budget proposes to: first, reduce the middle income tax rate to 23% from 26%; second, increase the amount of income that Canadians can earn tax free to $8,000; three, raise the income amounts where middle and upper tax rates begin to apply to at least $35,000 and $70,000 respectively; and finally, eliminate the 5% deficit reduction surtax for people with incomes up to $85,000 effective July 2000 and completely phase it out over the following five years.

The budget also provided further support to Canadian families by the expansion of the Canada child tax benefit by $2.5 billion a year to more than $9 billion annually.

The personal income tax cuts proposed are even larger when combined with actions taken in the budgets of 1997, 1998 and 1999. The combined effect is that federal personal income taxes will be cut by an average of 22% over all, 26% for low and middle income Canadians and 30% for families with children by the year 2004-05.

It is important to note that the personal tax cuts outlined in the 2000 budget reflect the least, not the most, that the government will do and we will accelerate those tax measures, I am quite confident, in budget 2001.

I could not agree more that the forestry sector plays an important role in the Canadian economy. I have met and worked with many of these professionals. This sector contributes significantly to our gross domestic product and the large volume of exports contribute significantly to our balance of trade.

This industry provides work to many hard working Canadians. However, for the reasons I mentioned, I hope the members here would support the position I outlined. To create this provision for forestry workers alone, to restrict it and not allow it for other workers in other sectors and to create a precedent with respect to the deductibility of travel expenses from home to the workplace would create an unnecessary and costly precedent. I urge members to vote against the bill.

[Income Tax Act, September 19th, 2000]

Mr. Speaker, this private member's bill proposed by the hon. member for Calgary Centre would allow taxpayers to deduct expenses related to the adoption of a child to a maximum of $7,000. While I am sure that the member opposite from Calgary Centre has been motivated to present this bill to the House of Commons for all the right reasons, a basic principle of our income tax system is that tax relief is not generally provided for personal expenses, such as adoption costs.

Although the government is aware that parents adopting a child incur relatively high costs, these and other personal expenses do not qualify for tax assistance because they are incurred at an individual's discretion in widely varying amounts and types depending on the individual's tastes, lifestyle and economic status. The higher the socioeconomic status of the taxpayer, the more likely he or she is to incur larger and more varied personal expenses. If these expenses were made deductible, a portion of the personal expenses incurred by some taxpayers would be financed by taxpayers at large.

When tax assistance is provided with regard to expenses, it applies to expenses incurred to earn an income, for example child care expenses, union dues or job related moving expenses, or to largely non-discretionary expenses, such as higher than normal medical expenses.

Let us take the example of child care expenses. As hon. members know, eligible child care expenses are deductible in computing income. The purpose of the child care expense deduction is to recognize that taxpayers who need to incur child care expenses to earn employment or business income, to attend a recognized educational institution or to take an eligible vocational training course have a lower ability to pay taxes than taxpayers with the same income who do not need to incur such expenses.

The child care expense deduction provides a tax deduction of up to $7,000 annually for expenses related to the care of a child under the age of seven and of up to $4,000 for a child between the ages of seven and 15.

Since it would be difficult to separate the personal and non-discretionary components of child related expenses, tax assistance is provided to families with children in the form of a benefit, the amount of which is predetermined, rather than in the form of tax credits or deductions for specific expenses.

As the House may know, the government provides considerable financial support to families with children through the Canada child tax benefit, the CCTB. More specifically, the CCTB has two components: the base benefit and the national child benefit. Under the base benefit families currently receive up to $1,020 per child. In addition, supplements of $213 for each child under the age of seven where no child care expenses are claimed and $75 for the third and each subsequent child are added to the base benefit.

Additional assistance is provided to low income families with children under the national child benefit, the NCB.

As of July 1999 NCB benefits are $785 for the first child, $585 for the second and $510 for the third and each subsequent child. Therefore, the maximum CCTB benefit is $1,805 for the first child and $1,605 for each subsequent child.

Over the last few years our government has proven that it is committed to investing the future of our children. In fact, even before the budget was balanced, the government committed $850 million to the Canada child tax benefit to start building the national child benefit in 1997. In the 1998 budget the federal government enriched the NCB by an additional $850 million. The design of this enrichment was set out in the 1999 budget which also proposed an additional investment of $300 million to extend benefit enhancements to modest and middle income families.

Moreover the budget tabled in the House on February 28 contained a five year plan to increase benefits under the Canada child tax benefit by $2.5 billion annually by 2004. That means that the maximum Canada child tax benefit has increased to $2,056 in July 2000 and will reach $2,400 by 2004.

In the three budgets preceding the 2000 budget, the government invested a total of $2 billion a year in the Canada child tax benefit. With the additional investment of $2.5 billion a year proposed in the 2000 budget, by 2004 over $9 billion will be devoted each year to helping families with the cost of raising children.

Before concluding, I also want to emphasize that the significant tax reduction measures proposed in the last four budgets were especially beneficial to families with children. By 2004-05, the measures in these budgets will translate into a 30% reduction in the tax burden for families with children, compared to 22% on average for all Canadians. The measures presented in the 2000 budget alone will mean a 21% reduction in the tax burden for families with children, compared to 15% for all taxpayers.

The five year tax reduction plan announced in budget 2000 proposes to restore full indexation of the personal income tax system. This will protect families against automatic tax increases and erosion in benefits caused by inflation.

In addition, the plan proposes broad based personal income tax reductions. For the first time in 12 years, a reduction in a tax rate is being proposed. The middle tax rate will be reduced from 26% to 23% by 2004. As well, it is proposed that by 2004 the amount Canadians can earn tax free will increase to at least $8,000, while the income levels at which the middle and top tax rates begin to apply will increased to at least $35,000 and $70,000 respectively. It is also proposed that the 5% surtax be eliminated.

In total, the 2000 budget proposes a minimum of $39.5 billion in personal income tax relief for Canadians.

It was announced at that time that the government hoped to accelerate the five year tax reduction plan. Well, the government is now able to guarantee that it will do so.

In conclusion, the government believes that parents should receive financial assistance to help them meet the needs of their children, and we are giving it to them.

However, it would not be appropriate to ask taxpayers at large to subsidize adoption expenses through the tax system because of the largely discretionary nature of these personal expenses. Therefore, I ask that all hon. members not support this bill.

[Supply, June 15th, 2000]

Mr. Speaker, the member is picking up on the point made by my colleague for Trinity—Spadina.

In fact, the member for Saanich—Gulf Islands I think for a very short period of time was supporting some Ontario cabinet minister but that only lasted a couple of weeks. I am not quite sure about his overall sense of judgment.

I am flabbergasted that the member would stand here and have the nerve to talk about respect and honesty. He draws the example of the grants and contributions being upped in the budget to, I think he said, $1.3 billion, drawing the conclusion or the inference that the money is for HRDC, when he knows full well or he should know that $900 million of that $1.3 billion is for the Canada Foundation for Innovation and the Genome project where we are investing in new technologies and innovation.

I could go on but I will give the member a chance to respond.

[Main Estimates, 2000-01, June 15th, 2000]

Mr. Speaker, I listened to the member opposite go on and on and I was surprised by some of his comments.

For example, he made a comment that the government just blithely accepted bill 11 in Alberta. I am not here to defend the Minister of Health, but the member opposite knows that our government has intervened in the strongest way with respect to bill 11 and we will be responding over the next few months and years to ensure that what Alberta is doing meets the principles of the Canada Health Act.

The member also talked about the federal contribution to health care. He said that the federal government used to contribute 50% to health care costs in Canada. He must know that while we did contribute 50% to certain prescribed health care costs, in no way was it 50% of the total health care expenditures in Canada. In fact, it related to hospital expenditures and certain medical services covered under medical services plans but it was well below 50%.

He also conveniently neglected to talk about the tax point room in 1977 of 13 points of personal income taxes, which the provinces asked for, and about 1 point of corporate income taxes so that the provinces could move in. The provinces moved into that tax room immediately. It was totally transparent to the Canadian taxpayer. The federal government stopped taxing by these percentage points and the provinces moved in immediately to take that tax room.

At that time in 1977 the agreement with the provinces and the territories was that was in contemplation of the provinces and territories spending that money on health care, post-secondary education and social programs. There was no ambiguity about it. The tax points were there for health care, social programs and post-secondary education. There was not a lot of questioning and debate at the time. It was very clear.

People who leave out the tax points that the federal government vacated conveniently forget the huge contribution the federal government is making still to health care and social programs within Canada.

I would like to ask the hon. member opposite if he would like to check his notes again. I am sure he would find that what I have said is true and that the 50% was only certain prescribed services and not the total health care expenditures within Canada.

[Sales Tax And Excise Tax Amendments Act, 1999, June 12th, 2000]

Mr. Speaker, I welcome the opportunity to speak to the House today at third reading of Bill C-24, the Sales Tax and Excise Tax Amendments Act, 1999.

By way of introduction, the measures contained in this bill, while wide ranging, all fall within the broad sphere of the government's ongoing commitment to an effective, efficient and fiscally responsible government. The intent of the legislation before us is to make our tax system more simple and more fair not only for individual Canadians but for Canadian businesses as well.

It is also in line with our government's commitment to sustain and improve our federal taxation system so as to encourage harmonization and federal-provincial co-operation.

Bill C-24 is aimed primarily at improving application of the goods and services tax, the GST, and the harmonized sales tax, the HST. It also contains some important proposals relating to specific taxes on certain products.

As hon. members are familiar with this legislation, I will briefly reiterate some of the key measures contained in the bill.

The government is committed to reducing smoking in Canada particularly among young Canadians. Bill C-24 contains measures with respect to the taxation of tobacco products that reaffirm the government's commitment to work in concert with the provinces and territories in order to reduce tobacco consumption in Canada, while at the same time maintaining vigilance in combating the level of contraband.

An important component of Bill C-24 reflects the government's responsiveness to the health and social needs of Canadians. For example, Bill C-24 proposes to provide a sales tax exemption for respite care for Canadians who are providing care for family members, very often an elderly parent or a disabled child. In past budgets the government has introduced numerous measures to assist individuals with disabilities. The bill builds on such actions by extending sales tax relief to the purchase of specially equipped motor vehicles for transporting individuals with disabilities.

In this same area, other measures contained in this bill relate to GST and HST exemptions on speech therapy, osteopathy and psychotherapy.

Bill C-24 reflects the government's commitment to making the taxation system fairer for Canadians. That commitment is translated into a number of different provisions.

The bill provides charities whose main purposes include the provision of care, employment, employment training or employment placement services for individuals with disabilities the capacity to compete on an equal footing when selling goods or services to GST registered businesses. Bill C-24 also refines the rules for the streamlined accounting method for charities.

A number of amendments contained in Bill C-24 are aimed at clarifying and refining the application of our sales tax system. In response to representations from the tax and business communities, these amendments will ensure consistency and fairness in the application of the GST and HST in a number of key areas.

For instance, further to the process of co-operation between the federal government and businesses in the energy sector, this bill proposes certain amendments simplifying the application of the GST and the HST in this sector.

These amendments will help Canadian businesses to remain competitive internationally.

With respect to other international commercial transactions, the bill also proposes to make air navigation services provided to carriers tax free in relation to international flights, and to refine the rules for exports of goods by common carriers.

Bill C-24 proposes a number of enhancements to the design and delivery of the visitors rebate program to further promote Canada as a destination for tourists and a place to hold conventions, for example by reducing the GST and HST costs associated with providing conventions to non-residents. These proposals will help to promote Canada as a tourist destination and to support the tourism industry in the creation of employment.

The federal government will continue to consult with the business community to improve the operation of our sales tax system. In that regard Bill C-24 contains a number of proposals to improve the rules relating to certain business arrangements and ensures that the legislation accords with the policy intent.

Our government is also continuing its efforts to improve the application and enforcement of our sales tax system. Bill C-24 amends a number of provisions in these areas, in some cases in order to bring them into line with existing administrative practices and, in others, in order to increase the effectiveness of assessment, appeals and collection provisions in general.

As I mentioned earlier, Bill C-24 also contains measures relating to taxes and tariffs on specific products. In accordance with the 1997 decision of the World Trade Organization, the bill contains the amendments that repeal the provisions relating to the excise tax on split-run editions of periodicals.

With respect to tariffs, Bill C-24 implements proposals to increase certain duty and tax exemptions for persons returning to Canada after a minimum period abroad. These proposals will make it more convenient for travellers to clear Canadian customs.

Our government remains committed to increasing aboriginal self-government and has frequently reiterated its desire to conclude tax agreements with first nations interested in exercising fiscal authority.

This bill proposes technical amendments to improve harmonization of first nations sales taxes with the GST, and to ensure that the definitions in implementation legislation are consistent with those used in other federal statutes.

In conclusion, the measures contained in Bill C-24 which I have outlined here today propose to improve the operation of our tax system while at the same time responding to the social issues that are important to Canadians.

I therefore urge hon. members to give their full support to this bill.

[Income Tax Conventions Implementation Act, 1999, June 8th, 2000]

Madam Speaker, I appreciate the opportunity to speak today at third reading of Bill S-3.

This legislation implements nine tax treaties. All of them are important to Canada's trade and investment with the countries involved and to the elimination of double taxation for businesses and individuals with operations and investments in those countries. Among these treaties are seven new ones that have been concluded with Kyrgyzstan, Lebanon, Algeria, Bulgaria, Portugal, Uzbekistan and Jordan. Bill S-3 also amends Canada's tax treaty with Japan and replaces our existing convention with Luxembourg.

These treaties were designed with two primary objectives in mind—the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. The potential for double taxation arises when a taxpayer resides in one country and earns income in another. Without a tax treaty, both countries can tax this income.

Tax treaties are therefore essential in helping to ensure that income is not taxed twice. This can be achieved in several ways. The most important method requires the country of residence to either exempt the income from tax or give credit for the tax paid to the source country under a tax treaty. Another is to allocate taxation rights between a taxpayer's country of residence and the source country of the income. One of the ways of achieving this is for tax treaties to provide for reciprocal rate reductions.

The treaties contained in Bill S-3 meet this objective through reduced withholding taxes for individuals and businesses. Withholding taxes, as hon. members know, are the taxes that countries usually impose on income paid to non-residents. Let me provide some examples.

The treaty with Kyrgyzstan limits the maximum withholding tax on dividends and interest to 15% and to 10% on royalties. Some exemptions exist for interest and royalties on copyrights, computer software, patents and know-how.

The convention with Lebanon provides for a maximum 5% withholding tax on dividends paid to a company controlling at least 10% of the voting power in the company paying the dividends, and 15% in all other cases.

Copyright, computer software, patent and know-how royalties will be taxed at 5%; other royalties as well as interest at 10%.

I could cite the other treaties with Algeria, Bulgaria, Portugal, Uzbekistan, Jordan, Luxembourg and Japan, but the bill lays out the measures very clearly. They are in a similar fashion to the one I cited earlier so I will not belabour the House with that information.

I would be remiss in my remarks if I did not mention the second main objective of tax treaties, the prevention of fiscal evasion. The treaties contained in this bill encourage the exchange of information between revenue authorities to prevent tax evasion or tax avoidance. Sharing information helps revenue authorities in both countries identify and act on cases of tax evasion or avoidance.

There is one remaining issue I want to highlight before closing, and that is the taxpayer migration rules as proposed by the Minister of Finance.

Amendments to the Income Tax Act will be introduced under separate legislation with respect to Canada's right to tax emigrants on gains that accrue while they are in Canada.

With this in mind, Canada has been negotiating its tax treaties to ensure that double taxation will not happen when emigrants' pre-departure gains are taxed. However, this provision is included in only four of the treaties covered in the bill, the ones with Luxembourg, Portugal, Lebanon and Jordan. I will explain why.

The treaties with Uzbekistan, Bulgaria, Algeria and Kyrgyzstan were all negotiated before the new rules were announced. Because of this, there is a provision in the proposed taxpayer migration rules for Canada to give a unilateral foreign tax credit to emigrants until the year 2007. This time frame guarantees that there will be no double taxation of pre-departure gains before these treaties have been negotiated to take the new rules into account. Japan has asked to review taxpayer migration in future negotiations.

In summary, I want to assure hon. members that the tax treaties contained in this bill only hold positive benefits for Canadian businesses and individuals with operations and investments in these countries.

The fact that our exports now account for over 40% of Canada's annual GDP is testament to the importance of tax treaties to both international trade and to Canada's domestic economic performance.

Once these treaties come into force, the number of tax treaties Canada has in place with other countries will increase to 75.

I therefore urge all hon. members to pass this legislation without delay.

[Income Tax Act Amendments, 1999, June 7th, 2000]

Mr. Speaker, I am pleased to speak to the House today at third reading of Bill C-25, the 1999 income tax amendments act.

Hon. members are familiar with this legislation so I will not take up valuable House time discussing the bill in any detail. Instead, I will briefly review the highlights of the bill.

This bill brings into force many of the tax measures that were announced in the 1999 budget, together with some non-budget tax measures. For those hon. members wondering about the tax measures in the 2000 budget, they will be contained in separate legislation.

Every one of the government's budgets to date have provided targeted tax relief designed to achieve key social and economic goals. With the deficit eliminated in 1997-98, the door was subsequently opened to the introduction of some broad based tax relief measures.

The tax measures in the 1999 budget build on those that were introduced in previous budgets. Most important, as members of the House know, for the first time since 1965 the 1999 budget provides tax relief for every taxpayer without the government having to borrow money to pay for it and, as with the previous relief measures, low and middle income Canadians benefit the most.

Hon. members will be aware of the government's commitment to provide ongoing tax relief to Canadians as we can afford it. Hon. members will also know that the Minister of Finance followed through on the promise he made in the fall fiscal and economic update and announced a five year tax reduction plan in budget 2000.

This plan will provide real and lasting tax reductions for Canadians and ensure that all taxpayers will see their taxes reduced in a manner consistent with the government's tax-cutting principles. These measures, however, will be introduced under separate legislation.

As we did in eliminating the deficit, the tax reduction plan will be achieved as quickly as possible—and further expanded as resources permit.

It is important that we pass this bill without delay. Let me continue my remarks by outlining the measures in this bill that stem from the 1999 budget.

Bill C-25 includes three general tax relief measures which, subject to this legislation being enacted, all took effect on July 1, 1999. The amount of income Canadians can receive tax free is increased. This amount is increased further in the 2000 budget, a provision that will be contained in separate legislation. The supplement to personal amounts provided for low income taxpayers in the 1998 budget is extended to all taxpayers and increased by a further $175. Bill C-25 eliminates the general 3% surtax for all taxpayers.

Standing to benefit the most from these measures are low income earners. A single filer with an income of $15,000 for example will pay 15% less federal tax, while a similar person earning $30,000 will pay 6% less tax.

Income splitting with minor children is also covered in this bill. Income splitting occurs when high income individuals divert income to low income earners, generally family members, to avoid tax. In most cases only high income individuals with dependants reap any tax benefits from income splitting. Bill C-25 rectifies this situation by introducing a special tax that is specifically directed at structures designed to split income with minors.

Individuals age 17 and under will have to pay this special tax on any taxable dividends or any benefits on unlisted shares of Canadian and foreign companies that they receive from a trust or partnership. In addition, income they receive from a partnership or trust that comes from a business carried on by a relative will also be subject to this special tax.

Bill C-25 also deals with the taxation of retroactive lump-sum payments. These payments are taxed in the year they are received, even though a significant portion may relate to prior years. Because of the progressivity of the tax system, an individual's tax liability on these payments may be higher than if they had been made, and taxed, year by year as the income arose.

There will now be a special relieving mechanism in place to compute the tax on qualifying retroactive lump sum payments where those payments are $3,000 or more in a given year.

Bill C-25 also effects a change on the tax treatment of Hutterite colonies. For tax purposes, Hutterite colonies are viewed as communal organizations and subject to section 143 of the Income Tax Act. The intent is that their income be taxed at roughly the same level as farming income earned outside these organizations by allocating colony income among adult members.

Until now, income in a communal organization was allocated to only one designated spouse in a family. To allow for the tax burden on communal organizations to be reduced and more fairly distributed, Bill C-25 provides for income to be allocated to each spouse in the family. This change will help maintain roughly equivalent taxation on income earned by Hutterite colonies and other groups.

Bill C-25 also contains a number of other tax provisions that were included in the 1999 budget.

Third parties making false statements that could be used for tax purposes will now be subject to two new civil penalties. One deals with tax shelter and other tax-planning arrangements; the second concerns advising or participating in a false tax filing.

There will now be a culpable conduct test—consistent with what the courts have used in the past when applying civil penalties to taxpayers—along with a “reliance in good faith” exception to the test.

There has been some discussion about the culpable conduct test. I would like to briefly describe for the House and for Canadians what it is and what it is not.

Culpable conduct as defined in the act means conduct, whether an act or a failure to act, that (a) is tantamount to intentional conduct, (b) shows an indifference as to whether this act is complied with, or (c) shows a wilful, reckless or wanton disregard of law. I am sure members of the House will agree that conduct such as this is truly not acceptable. Honest errors of omission or commission will not be applicable under the culpable conduct test.

Bill C-25 also addresses the tax situation that arises when an individual dies and the value of their RRSP or RRIF is included in their income for the year of their death. When there is a surviving spouse but RRSPs and RRIFs have been left to dependent children, it is the children, not the deceased's estate, who will now be responsible for any resulting income inclusions. With income tax rates for dependent children usually lower, this provision will help them when a parent dies.

Through the bill the care of people with severe disabilities living in a group home, therapy for those with severe disabilities, and tutoring for the learning disabled will now be covered under the medical expense tax credit. In addition, talking text books for people with perceptual disabilities who are enrolled at educational institutions will be included on the eligible equipment list for persons with disabilities.

Corporations producing electrical energy for sale or steam for use in such production will now be eligible for the manufacturing and processing profits tax credit. This measure will help the electricity generating sector to become more competitive.

The next measure will also help corporations. Faced with multiple taxation years being reassessed at the same time, corporations are often caught in situations where refund interest is taxable while arrears interest is non-deductible. There will now be a relieving mechanism in place so corporations can ask for such amounts to be offset for interest calculation purposes.

Another component in Bill C-25 is designed to help the Canadian investment services industry compete more effectively internationally. A new rule will ensure that, subject to conditions, if a non-resident hires a Canadian firm to provide certain investment services, the non-resident is not, for that reason alone, considered to be carrying on business in Canada.

Canadian firms serving offshore clients will continue to pay tax in Canada on their profits. Non-residents who receive income from Canadian sources will continue to be subject to Canadian tax.

Other measures in the bill will encourage labour sponsored venture capital corporations to focus more on small business investments under the 12% part VI surcharge on large deposit making institutions. The 12% part VI surcharge on large deposit making institutions is being extended further to October 31, 2000.

As I indicated at the beginning of my remarks, this bill also contains some non-budget tax measures. One exempts the income of the trust that has been established by the federal, provincial and territorial governments to provide compensation to hepatitis C victims from income taxation.

Finally, the bill ensures that for tax purposes cash demutualization benefits are treated as dividends and therefore are subject to the low dividend rate. While there is no immediate tax benefit associated with a policyholder receiving a share as a demutualization benefit, a capital gain would be recognized once the share is sold.

In conclusion, I encourage my hon. colleagues to support the bill. Each of these measures improves the operation of the tax system and each adheres to the principle of tax fairness. Together the measures introduced in the 1997, 1998 and 1999 budgets reduce the income tax burden of Canadians by some 10%.

But, as the Minister of Finance said last fall, these are only the first steps. Combined with the actions in those budgets, the measures in the 2000 budget will see personal income taxes reduced by 22% in 2004-05.

Let us pass this bill quickly, colleagues, so we can move on to implementing the five year tax reduction plan.

[Budget Implementation Act, 2000, June 5th, 2000]

Mr. Speaker, thank you for the opportunity to address the House at third reading of Bill C-32, the budget 2000 implementation bill. The measures in the bill were all announced in the 2000 budget.

In this budget, the Minister of Finance reaffirmed that the government would observe its plan of sound financial management, that it would reduce taxes, and invest in abilities, knowledge and innovation. This plan will make it possible for the quality of life of Canadians and their children to be improved.

Several measures in Bill C-32 contribute to improving the quality of life for Canadians. Amendments to the Federal-Provincial Fiscal Arrangements Act, the Income Tax Act and the Canada Student Financial Assistance Act, for example, will strengthen access to post-secondary education, provide support for health care and provide more financial assistance to families with children and students. It is important that these particular measures be in place before the summer recess in order to benefit those Canadians who want and who need them.

Let me take a moment to provide the House with a brief overview of the bill. The first announcement the Minister of Finance made in the 2000 budget concerned increased funding for post-secondary education and health care, thus reaffirming the importance the government attaches to these two areas.

Bill C-32 calls for a $2.5 billion increase in Canada health and social transfer payment for health, social programs and post-secondary education. This is the fourth increase the government has made to the CHST.

The additional funds will be distributed to the provinces and territories on a per capita basis and will go into a trust fund from which they can draw funds for four years once the bill has been passed.

Combined with a value of tax transfers and this new supplement, total CHST will reach almost $31 billion in 2000-01, up from $29.4 billion in 1999-2000. Put a different way, together with the $11.5 billion investment in the 1999 budget, the cash component of the CHST will reach $15.5 billion in each of the next four years. That is a 25% increase in the CHST from the 1998-99 level.

One reason to pass the bill without delay is to ensure that this much needed money gets into the health care system quickly to help Canadians.

A second measure in the bill concerns financial assistance to students.

As hon. members are aware, the Canada student loan program has been making post-secondary education more accessible since 1964. The current agreement under which financial institutions make loans to students on behalf of the federal government will, however, come to an end on July 31, 2000.

The bill we are debating today ensures that the Canada student loans program will continue to serve students after that date. There will be money available for student borrowers after July 31 and there will be no interruption in service.

As I indicated before, it is essential that this measure be in place soon so that there is money available for students who will need loans in September.

A third measure provides increased child tax benefits and indexed GST benefits effective July 1, 2000. To assist families with the added expense of raising children, benefits under the Canada child tax benefit are being increased by $2.5 billion annually by 2004. The government's five year goal is to bring the maximum Canada child tax benefit for the first child to $2,400 and to $2,200 for the second child by 2004.

To achieve these goals, the Canada child tax benefit will be fully indexed. The base benefit and the national child benefit supplement will be increased beyond indexation. The income thresholds for the base benefit and the national child benefit supplement will be raised and the reduction rate for the base benefit will be lowered.

Middle income families will benefit substantially from these changes. For example, the CCTB benefit for a family with two children and an annual income of $60,000 will more than double, from $733 before the 2000 budget to $1,541 by the year 2004. This measure is one more reason Bill C-32 must be passed without delay. Low and middle income Canadian families are depending on the CCTB increases and indexed GST benefits in July.

Another measure in this bill also assists families.

Budget 2000 is extremely generous toward parents of newly born or newly adopted children, increasing the duration of parental leave allowed under the employment insurance program as well as the flexibility and accessibility of benefits.

The duration of parental leave, which may be used by one parent or split between the two, will be raised to 35 weeks. With 15 weeks of maternity leave and the standard two week waiting period, this brings the leave related to the arrival of a child up to one full year.

In addition, the number of insurable hours that must be worked to qualify for special benefits will be lowered to 600 hours from 700 hours. Parents will have increased flexibility to decide whether one or both parents will spend time at home with a new child, as only one waiting period per birth or adoption will be required instead of two.

Income earned while receiving parental benefits will be treated the same as for regular EI benefits and the Canada Labour Code will be amended to protect the jobs of employees in federally regulated workplaces during the extended parental leave period.

Another measure will allow Canadians to further diversify their personal retirement savings plans. The limit on foreign property that can be held in registered retirement savings plans and other deferred income plans will be increased to 25% for 2000 and to 30% for 2001.

Several bodies, including the House of Commons Standing Committee on Finance, the Senate Standing Committee on Banking, Trade and Commerce, and the Investment Funds Institute of Canada have asked that this ceiling be raised.

These increases will also apply to the Canada Pension Plan Investment Board. There is a change in Bill C-32 which directly affects the Canada pension plan. The provinces are permitted to borrow money from the CPP under terms set out in the CPP legislation. Bill C-32 responds to a request from the provinces that was agreed to by the federal-provincial ministers of finance last December as part of the CPP triennial review for a prepayment option for provincial CPP borrowings. The provinces will now be allowed to prepay their CPP obligations in advance of maturity and at no cost to the CPP plan. This will provide provinces which have fiscal surpluses with some flexibility to look for ways to reduce their debt. It also means that more funds will be transferred to the CPPIB and invested in the market at higher expected returns.

On the international front, Bill C-32 amends the Special Import Measures Act, or SIMA, to bring Canadian countervailing duty laws into line with recent changes to the WTO subsidies agreement. Certain provisions in that agreement which rendered certain foreign subsidies immune from countervailing duty action lapsed last December 31.

Bill C-32 allows for the suspension of provisions in the Special Import Measures Act that implement these non-actionable subsidy provisions into Canadian law.

These amendments will ensure that we are not treating our trading partners more favourably than they are treating us in countervailing duty investigations.

The two remaining measures in the bill concern first nations taxation and an amendment to the Excise Tax Act. Thirteen first nations will be allowed to levy a direct 7% GST-style sales tax on fuel, alcohol and tobacco products sold on reserve. The Canada Customs and Revenue Agency will collect the sales taxes and the federal government will vacate the GST room where the first nation tax applies. First nations which wish to follow suit in the future can be granted authorization through an order in council instead of a legislative amendment.

Finally, this bill addresses the issue of tax evasion. The Minister of National Revenue will be able to apply ex parte, in other words, without notice, for judicial authorization to proceed with assessment and collection action in instances where revenues may be at risk if GST and harmonized sales tax registrants are allowed their usual remittance period. Until now the Minister of National Revenue has been powerless to proceed with assessment and collection action before the tax came due.

In short, the measures included in this bill are non contentious and, because of three initiatives in particular, this bill should be passed quickly.

It is essential that the CHST supplement be invested in the health network as quickly as possible. It is essential that the student loans program be in place by September. Finally, it is essential that the child tax benefits be increased and that the indexed GST benefits be available by the end of June.

If these three measures are not enacted before the summer recess Canadians will suffer. While the remaining measures are not facing a similar timeframe, they are nonetheless important for millions of Canadians and for the efficient operation of government.

I strongly recommend that all hon. members give their support to this bill.