Roy Cullen

[The Budget, March 10th, 1998]

Madam Speaker, I am pleased to share my time with the member for Ahuntsic.

I guess the member opposite has had a mortgage and is still alive and well and unfortunately she missed the point of my question.

I am very pleased and honoured to be part of a very historic moment because our federal government budget will be balanced for the first time in almost 30 years. We have achieved this with balance and with determination. We have not been slashing and burning. We have been listening to Canadians. This balanced budget could not have been achieved without the support and with sacrifices from many Canadians. The effort has been worth it.

A balanced budget means no new borrowing by the Government of Canada. We can now begin to pay down our public debts. We can reduce the tax burden of Canadians and we can make important and strategic investments in our health care system and in providing Canadians with access to the knowledge and skills that will be necessary for the jobs of the 21st century.

Our federal budget will be balanced for 1998, 1999 and 2000. This is the first time in almost 50 years that the federal government will have balanced its books for three years in a row. That is why I am pleased to be part of this historic moment.

Some, including members of the official opposition, call for more departmental and program budget cuts. Certainly there will always be room to increase efficiencies and make sure that programs are still relevant. I would like to highlight that by the end of the year 2000 federal program spending in relation to GDP or the size of our Canadian economy will be at the lowest level in 50 years. That is quite an achievement. Over the next two years the percentage of our federal debt in relation to the GDP, the size of our Canadian economy, will drop from 72% to 63%. It will decline very quickly in the years following.

We have started the very important process of paying down the public debt and we will continue to do so. As my colleague pointed out, so far this year $13 billion of market debt has already been paid down.

In this budget the Minister of Finance is providing $7 billion in tax relief to Canadians. When members opposite say there is no tax relief, please, there is $7 billion in tax relief. In terms of new spending initiatives, 80% of our new spending initiatives reflect two of the highest priorities of Canadians, access to knowledge and skills and increased funding for health and education through increased transfers to the provinces.

The key to jobs and growth in the years ahead is knowledge and skills. The Canadian opportunities strategy will help prepare Canadians for this rapidly changing world. The Canadian opportunities strategy acts on seven fronts: one, to help students in financial need to cope with rising costs; two, to increase assistance for advanced research and graduate students; three, it helps individuals repaying student loans, particularly those in need; four, it helps Canadians upgrade their skills throughout their working lives; five, it helps families save for their children's education; six, it encourages employers to hire young Canadians and help young people make the transition to work; and seven, it helps bring the benefits of information technology into more classrooms and communities across Canada.

A very important component of the Canadian opportunities strategy is a Canada millennium scholarship foundation. Canada millennium scholarships will be awarded to more than 100,000 full and part time students each year over the next 10 years. This initiative will level the playing field or begin to level the playing field for low and middle income individuals who demonstrate academic merit.

I was very pleased also to see more support for research in Canada. The increased funding to three granting councils will complement very well the $800 million Canada foundation for innovation which our government launched last year. As a nation, we must invest increasingly in both the public and the private sectors in research, development and in our people. Our federal government, as the fiscal capacity permits, is demonstrating this commitment.

Many conscientious students in my riding come to my office with problems paying off their students loans, so I am very pleased to see the improvements in the Canada student loans program that were announced in this budget. These measures include income tax relief for interest charges on student loans and the extension of loan repayment periods.

Changes to RRSP provisions, the new Canada education savings grant and an increase in the limits of contributions to the registered education savings plans will provide greater opportunities for adults to participate in lifelong learning and for them to save for their children's future education.

This budget allocates a further $850 million to enrich the Canada child tax benefit, a further investment in the future of our children. When children are deprived of the opportunity to reach their full potential, we as a country are deprived of our full potential.

Canadians are concerned about the state of our national health care system. This budget confirms an increase in the cash floor of the Canada health and social transfer from $11 billion annually to $12.5 billion annually. This amount responds directly to the recommendations of the national forum on health.

In addition to this annual cash contribution, our federal government will pour over $13.5 billion in 1998-99 into provincial coffers in tax points for health and social programs. This is totally different from the equalization transfers.

There has been much misinformation about the impact of federal transfer payment reductions to the province of Ontario over the last few years. I would like to clarify that.

When fully implemented, Mike Harris' 30% tax cut scheme will reduce provincial revenues by $4.8 billion per year, money that could have been used to balance the budget or fund health care. It is more than five times as much as the $850 million that federal transfer restraint will have cost the province by the year 1998-99. Let us put things in the proper perspective.

The province of Ontario has made some choices as we have and we have not sacrificed important social programs for tax cuts. General tax cuts will come when we can afford them as Canadians.

This budget begins the process of tax reductions as I said, and I am confident that more tax reductions will follow. We have heard much recently about the so-called brain drain. Some would call it the brain trade, but I think it is clear that we need to pay attention to differential tax policies in the United States and Canada as it affects individuals.

In the United States, for example, tax policies encourage employees to own shares in their own company. Tax policies also encourage employers to set up employee share ownership plans. The results are significant. Increased productivity, more employment, greater job satisfaction and many other benefits. I believe we should be moving aggressively in these areas as well.

In the overall equation, we need to understand and accept the fact that individuals moving to the United States are often making a lifestyle choice. I quote from the Toronto Globe and Mail recently from a professional who moved to the United States and then moved back to Canada after some years in the United States. The article is entitled Back from the Brain Drain. He said: “I doubt that there are substantial tax gains to be made for the average young professional if he had to pay the real cost of health care and relocation.”

This is not from a right wing think tank. This is not theory. This is from a Canadian who went to the United States and has come back.

There are many other positive provisions in this budget which we cannot really outline here in any detail. We have heard about many of them from my colleagues. Not too many of the other members opposite have mentioned them but there is health care, child care expenses, people with infirmities, with disabilities, self-employed individuals, the voluntary sector and a host of other very positive provisions.

To sum up, this budget has balance. It is the Liberal way but I would ask all in this House to celebrate this historic moment and agree among parliamentarians that we will work together to build a stronger future for all Canadians.

[The Budget, March 10th, 1998]

Madam Speaker, I would like to put a question to the member for Calgary—Nose Hill which she may or may not want to answer. I do not mean to pry but I was wondering whether she has ever had a mortgage on a home, her own home.

I had the good fortune of owning a home in Canada. When I bought my first home in the late 1970s I had a mortgage of $50,000. Frankly, I thought I would have to declare personal bankruptcy within the first or second month. However, in another six months to a year I looked at my mortgage and it was suddenly fairly manageable. I had not become obsessed with the mortgage and life went on.

I do not want to treat the member's remarks about dealing with the debt facetiously. I am all for dealing with the debt, but I think there is a danger of becoming obsessed with it.

I wonder if the member would answer my question, although I would understand if she declined.

[Canada Labour Code, February 19th, 1998]

Mr. Speaker, I agree with the member for Winnipeg Centre that Bill C-19 is good legislation. I am not sure about the amendments, but the bill is good. I disagree with him on the remark he made about asbestos.

There are countries in Europe that are currently proposing banning asbestos. That would be devastating for asbestos workers across Canada. It is based on the same misinformation that the member for Winnipeg Centre cited.

In fact the International Labour Organization in Geneva, with which the Canadian labour union movement operates very, very closely, has developed a convention that has been approved by the ILO. It talks about the safe use of asbestos and ways of applying and installing asbestos safely. I would ask the member to please check his facts on that.

I would like to comment briefly if I could on the comments earlier by the Reform labour critic. We have had this debate before in this House very briefly. It has to do with final offer selection arbitration. Again I come back and ask the member, if there is a system where they either accept one position or the other, it seems to me that what there is is one happy party and one unhappy party. I am not sure that is the way we should solve labour disputes in Canada.

I am reminded again of some of the ironies of Reform policy positions. On the one hand, they will say we should let the market decide, but there are big exceptions when it comes to labour negotiations when it affects prairie farmers. I would have to say at the outset I have a lot of empathy with the plight of the prairie farmers when it comes to getting their product to market, and all Canadians do. On the one hand they say to let the market decide and on the other hand they say when it comes to labour-management negotiations as it affects wheat shipments to the ports that we should put in this final offer selection arbitration where neither party will be happy with the results.

I think we should pause and reflect on these proposals by the members opposite.

[Small Business Loans Act, February 16th, 1998]

Mr. Speaker, I truly hope the constituents of the member for Saanich—Gulf Islands are listening to this debate. There are many small businesses in the creative field such as artists and other small businesses. If they could hear what he just said in this House. If someone goes to a bank with a good business case, they can get a loan. I do not know where he has been. He is just not listening or he has not been out there talking to people.

Talk about the rhetoric of Reformers. It looks like they get their speeches by cutting and pasting. They talk about subsidies to business. What we did as a government is to say that big business and medium size businesses do not need us as much. Frankly, we cannot afford it any more.

We took a major effort to reduce or almost eliminate grants or loans to big and medium size businesses. In fact, Industry Canada was reduced by 40% or 50%. All the granting and loan programs when it came to medium and big business were essentially cut out.

What we are talking about here is small business, the people who need us, those who need our help. We should be supporting financing for small business.

The member opposite also talks about payroll taxes as he calls them. Our government has reduced employment insurance premiums while the previous government increased them significantly. I think this is an incredible program that helps small business with access to capital. I think everybody in this House should support it.

[Small Business Loans Act, February 16th, 1998]

Mr. Speaker, I am pleased to participate in the debate on Bill C-21, an act that will extend the lending period of the Small Business Loans Act for another year, until March 1999. It will also increase the aggregate funding ceiling under the program by $1 billion, from $14 billion to $15 billion. I can say with some conviction that any program that helps small business raise capital is something this House should support.

Again I am amazed by the rhetoric of members of the Reform Party. I do not know where they have been. In my riding I have talked to small business people and they have told me about the difficulty they have in attracting capital. This program would give needed capital to small business.

Reform members say that small business will look at the balance sheet of Canada and say that the Government of Canada owes all this money, has all this debt, and therefore they will not invest in Canada. Where have they been? We are talking about small businesses with one to twenty employees. Do they really believe those people will sit down to look at the balance sheet of the Government of Canada and say there is all this debt and therefore I am not going to start a business in Canada? Where are they?

Maybe that is what big business would do. Maybe medium size business would do that. But it is certainly not the drivers of economic growth in Canada, the businesses with one to twenty employees, the businesses which are creating all the jobs in Canada which would do that. Do those members really think that small businesses sit down to analyse the balance sheet of the Government of Canada? I am not saying that we do not have to deal with the national debt, but they are getting caught up in their own rhetoric.

Recently we have seen data which indicate that small businesses are driving the jobs in this country.

A couple of years ago members of the Reform Party said that we had to deal with the deficit. Our government dealt with the deficit. They were saying that we must decrease taxes. Now they are saying forget about decreasing taxes, eliminate government debt. If we ask them how they can argue both sides, they say we want it all.

We have to make choices and our government is making choices. We are dealing with the debt. I would like to see income tax reduction in Canada. We are dealing with that in a targeted way. We will be in a position in the not too distant future to give Canadians some general tax relief.

I have talked to business people in my riding as well as the banks. The finance critic for the Reform Party said that the auditor general has criticized this program because 40% of the loans would have been made anyway. The whole idea behind the small business loans program is to provide incremental funding.

I am a chartered accountant and I have the greatest respect for the work the auditor general is trying to do. He criticized other programs such as TAGS. I am wondering, with the greatest respect, what methodology the auditor general used to establish that so many of these loans would have been made anyway. Does he have a crystal ball? Can he look into the future and say that these loans would have been made anyway?

I would like to know his methodology. It is unfortunate that the finance critic for the Reform Party is not here. I am sure he has studied that methodology in some depth and understands clearly how the auditor general can make that assertion.

How can he make the assertion that these loans would have been made anyway? I challenge that. I have talked to small business people who very much like this program. It is a way for them to get capital which otherwise they would not be able to obtain.

I have talked to bankers. The member opposite intimated that the banks like the program because it means more profits. The day Reformers start attacking profits is another day. I wish they would make up their minds.

The bankers say this is an incredibly good program. It helps them to package financing. It helps them to help small businesses when often they would not be able to do that.

I have been critical of the banks. I was at the Bank of Montreal last week and I met with small business loans officers. I said how are you rewarded? Are you rewarded based on how many new loans you give to small business or are you penalized for how many bad loans you make? I would have to say, in fairness, they do have some criteria for new business. They are rewarded or judged on the volume of new business they are able to generate. But they are also judged on how many bad loans they make. I submit that we still have in our Canadian banking system the culture that we do not want to make too many bad loans. That culture is changing.

We have seen the banks get into the high technology sector. They know they are not as qualified or as experienced with the high technology sector as they could be so they are trying to gear programs to the high technology sector where they do not have the fixed assets or the collateralizing of loans that was possible in years past. They are talking more about loaning on a good solid business plan and managerial abilities. They are making progress but we have a long way to go.

Last year in the finance committee I supported a new entrant, the Wells Fargo bank. It works on a very simple model called risk and return. When there is a higher risk it will charge more interest. It makes sense. Why have the Canadian banks here not embraced it? I do not know. A certain threshold is met at a Canadian bank it says sorry, if you do not meet that hurdle rate we are not dealing with you. We are letting Wells Fargo in because it says that if it is a riskier loan it is going to charge more interest. What can be more realistic or more reasonable?

It also says that it is going to loan on a good business plan. It realizes that the world is changing. We have more technology. We have businesses that need capital but they do not have the equipment, the land or the buildings to offer as collateral. They have a very good idea and a sound business plan and it loans on that. Therefore we are letting it in.

I believe we need more of this kind of competition in the Canadian banking system because some of these banks that have come in from the United States are very aggressive with small business. When I talk to constituents in my riding sometimes they say they have been to a Canadian charter bank, the Bank of Montreal, TD bank, the Bank of Nova Scotia, CIBC or whatever, and they will not look at them.

I ask them if they have been to the Business Development Bank of Canada, a federal bank which is meant to be a lender of last resort. It will take a slightly bigger risk. My constituents say they have been there and it will not look at them either. I then ask them if they have been to the venture capitalist. They might be in that situation because our Canadian banks are struggling. We are sending some signals that they should be more supportive of small business. They are doing things but they have to do a lot more. They have to stretch a lot harder.

They say “yes, we have been there but it wanted 35% of my business. It is my idea. I put all the work into it. I developed the business plan. I want to make it work and it is saying it can loan me some money but it wants 35% of the action”.

My constituents are telling me they are not prepared to do that. I tell them frankly that with the way things are now, until we have more competition such as U.S. and foreign banks, they are going to be stuck. We are working on it but they had better think about giving up 35% equity maybe with a buyback later on. They are telling me that they are just at their wit's end.

I went back to a number of those small business people and told them there is a bank coming into Canada called the Wells Fargo bank, by way of example, and there are going to be more. I tell them this bank will sit down with them. It will be slightly riskier and it will not be prime plus 3% or 4%. It is going to be prime plus 7% or 8%. I ask them if they think that is a good idea and they tell me it is an incredible idea. I ask them if their business can carry it and they tell me that they will rejig the numbers but they think it will work. They know they will then still own their business.

That is when I came back here to Ottawa to get in on the finance committee discussions. I told them we were going to let banks in like the Wells Fargo bank. I think we can do more with the Wells Fargo bank because it has to support start-up businesses as well right from scratch. It cannot cherry pick. It has to be with start-up businesses right from day one. With the more competitive environment in Canada, which we are creating through some of the moves that we are making, and with more aggressive lending to small business we will all be better off, including small business which will be creating more jobs.

I therefore urge members of the House to support this bill which will provide an important source of capital to small business.

[Olympic Games, February 16th, 1998]

Mr. Speaker, over the weekend Canada's athletes made Olympic history.

Our women's curling rink, skipped by Sandra Schmirler, made history by winning the sport's first ever Olympic gold medal. The men's team, skipped by Mike Harris, won a silver medal.

For the first time ever, Pierre Lueders and Dave MacEachern won Olympic gold for Canada in two man bobsledding. In another first, this Canadian team shared the gold with a team from Italy.

Catriona Le May Doan and Susan Auch won gold and silver, respectively, after setting an Olympic record in the women's 500 meter speed skating event.

Canada's Elvis Stojko, who finished with a silver medal in men's figure skating, walked away with a world class medal for the courage he displayed.

The important thing is not that Canada win more medals than in the last Olympics. What is important is our pride in our athletes, because they represent the best of what we are and because they have the courage to give their all in the pursuit of excellence.

[Income Tax Act, February 4th, 1998]

Mr. Speaker, I congratulate the member for Portage—Lisgar for his initiative in proposing this bill. I am sure he is well intentioned. He would like to give Canadians a tax break, he would like to stimulate housing construction in Canada and he would like to re-emphasize the importance of the home, the family, et cetera.

I am sure that none of us in this House would disagree with those objectives, but the bill proposes that interest paid by a taxpayer on the first $100,000 of a mortgage loan secured by that first qualifying home acquired by a taxpayer would be allowed as a deduction for tax purposes. I am afraid the bill falls short of meeting the objectives proposed by the member when he introduced this bill.

The bill raises a number of important questions but fails to answer them. I am sure they are begging for answers but I am not sure the bill really answers them. For example, is it appropriate to give a tax break to a citizen who does not own a home but who rents or who does not pay rent or own a home at all? Why give a tax break to someone who owns a home versus someone who does not own a home?

Why should first time buyers of a home receive a tax break versus people who already a home? Does that make any sense? I submit that it does not make any sense at all. Should our tax system reward borrowing and penalize saving? I am not sure that is the kind of incentive we want to build into our tax system.

If the mortgage interest were deductible clearly taxpayers would be motivated to have the highest mortgage possible. They would have more interest and more interest to deduct. Clearly we would be encouraging Canadians to borrow more and save less. I am not sure that is something we want our tax system to encourage. These are some serious questions that really beg answers. Maybe the member opposite will have a chance to address them but the answers are not contained in his private member's bill.

It is unfortunate that there are more questions that beg answers. Currently in Canada the capital gain on a sale of a principal residence is not taxable. If we allowed the interest to be deductible then surely the capital gain on the sale of a principal residence should be taxable. The reason a capital gain on a principal residence is not taxable in Canada now is that we do not consider an investment in a principal residence as an investment. It is the ownership of a private home. You cannot have your cake and eat it too. You cannot be tax free in terms of capital gains and have interest that is tax deductible.

There is the serious question of the cost of implementing this proposal. If this proposal were implemented the annual cost to the treasury would eventually be approximately $3 billion a year. If the tax rolls were broadened to be at least within the context of the member's proposal to be more equitable in terms of not just first time home buyers but all homeowners, the annual cost to the treasury could rise to $6 billion at a time when we are looking at fiscal priorities. I could think of a myriad of other good ways to give Canadians a tax break or to repay the debt or to invest in some much needed social and economic programs. First time home buyers already get some tax assistance under the home buyers plan.

What the bill fundamentally proposes comes from a misunderstanding of what Canadians want in their tax system. They want a progressive tax system. That is the whole essence of our tax system in Canada. Under this proposal individuals with higher incomes would get a bigger tax break. That is really contrary to the whole philosophy and the principles behind the tax system in Canada, and I think quite rightly.

I am sure the member opposite gets a lot of his ideas from what goes on in the United States. Yes, it is true that mortgage interest is deductible for tax purposes in the United States, but again capital gains in excess of $500,000 on a principal residence are typically taxed. In addition, most Americans do not really take advantage of the deductibility of mortgage interest because they prefer to take the standard deduction without any questions. Our personal income tax system in Canada is far more progressive than the U.S. income tax system.

While I and a lot of my colleagues I am sure would like to reduce the general burden of personal income taxes in Canada, and we are working very hard toward that end, I am quite convinced that this proposal is really not a very equitable or a very efficient way to give tax relief to Canadians.

If we look at the United States and just to sort of emphasize the lack of progressiveness in its income tax system, Americans hit the highest marginal income tax rate when they get to incomes of $300,000 plus. By way of contrast, in Canada when we hit incomes of $150,000 or thereabouts we start to hit the top marginal tax rate. That is by design. That is the way our tax system works. We say that those people earning the bigger incomes are able to share their wealth to some extent to help those who are in less advantageous positions. That is the whole philosophy behind the income tax system.

This measure is really not a very progressive step at all. I am sure it is really counter to what Canadians expect from their income tax system. For that reason I urge members of this House to vote against this bill.

[Money Laundering, February 4th, 1998]

Mr. Speaker, the G-7 financial action task force has been critical of Canada for our failure to eliminate money laundering activities in this country. International criminals are the beneficiaries of inaction on our part.

Will the solicitor general please advise this House what Canada is doing to address this serious problem of international money laundering.

[Income Tax Amendments Act, 1997, February 3rd, 1998]

Mr. Speaker, I am pleased to speak on Bill C-28, an act which will allow our government to implement the tax policies and provisions introduced in the 1997 budget.

I cannot help but be continually amazed by the Reform Party's flavour of the month. It was some time ago that it argued that what the government should be doing was tackling the deficit. When we tackled the deficit and started to win the fight and have won the fight against the deficit, it switched to tax reductions. Very recently it moved from tax reductions to eliminating the federal debt. We will have to stay tuned to see what the next flavour of the month will be.

As I said, Bill C-28 allows the government to implement the tax changes that we brought in, in the 1997 budget. There are a number of important provisions in the bill which facilitate a number of detailed changes to the Income Tax Act. I will not go into them today but I would like to address a few key areas. The first area is the Canada health and social transfer, a critical part of the bill.

We as a government have said that we will limit or put a floor on the cash transfers to the provinces at $12.5 billion. This responds directly to the recommendations of the National Forum on Health which stated that we should increase the cash floor from $11 billion to $12.5 billion. It would have triggered in, in 1997-98. It responds to the concerns expressed by Canadians about the delicate nature of our health care system.

It is important for Canadians to understand the amount of funding we are providing through the CHST. In addition to cash payments there are tax points. In total in 1997-98 it will amount to some $25 billion that we will be transferring to the provinces to deal with health care, education and welfare.

Under the old system the funds and the tax points were transferred under established programs financing or EPF and through CAP which was the Canada assistance plan. Established programs financing was meant to cover health care and education and CAP was a cost shared program with the provinces to cover welfare.

CAP was not a very efficient program at either the provincial or federal level. For the provinces it was really using 50 cent dollars. For every dollar the provinces spent they recovered 50 cents from the federal government. As a federal government we did not have the kinds of controls that we desired in a program where we were spending Canadian taxpayers' money. At the provincial level CAP was sometimes not managed in a fiscally prudent way, so moving away from CAP is a wise decision.

As far as established programs financing is concerned, it has always been a challenge in Canada to ascertain where the funding is going directly, whether it is going to health or education. Essentially it goes into the consolidated revenues of the provinces and it is very difficult to establish that trail.

What we as a government are doing and will be doing more of is ensuring that we set standards and guidelines in terms of the delivery of health care, education and welfare. Some of those are already enshrined in the Canada Health Act in terms of accessibility of programs, the affordability of programs and implicitly the quality of programs.

We need to do a better job of establishing those criteria notwithstanding how difficult the task is. To measure outputs in a health care system, an education system or a welfare system is a challenge at the best of times because these systems are changing constantly.

First we have health care, from acute care to community based care. How is wellness measured? How do we measure whether people are getting quality care? How do we measure whether people have access to an affordable system?

It is these areas we need to focus on because the block funding is transferring en bloc to the provinces not much differently what than we did under EPF. We need to do a better job as provinces begin to grapple with their fiscal positions.

Many of my colleagues and I are concerned that we do not erode these very important programs within Canada. That is a very important part of the bill. I am sure that most members will support it.

I would like to touch on another key area of the bill, that is the registered education savings plan where we increased the limits from $2,000 to $4,000. This begins to make education more affordable, more approachable for middle income or low income Canadians. Money can be put away for the future education of their children and they will be able to afford quality education when they get to either school age, university age, or both. That is a very progressive part of this undertaking. I am sure it will be supported by members of the House.

There is another area I would like to touch on briefly. I will come back to comments made yesterday in the House by the Bloc finance critic, the member for Saint-Hyacinthe—Bagot. He made some assertions to which I am sure the finance minister will be responding in much more detail as the days and hours ensue.

I would like to comment on them briefly because I think the member has his facts in error. Before doing that I would like to talk about another provision in the bill that is very important, the provision to deal with transfer pricing.

As organizations become multinational and have companies and subsidiaries around the world, they start to move products and services within their own subsidiaries across national boundaries. Corporations have the ability to transfer the profits from high tax jurisdictions to low tax jurisdictions. This happens all the time.

If a company, for example, is incorporated in the United Kingdom and is selling products worldwide, it might set up a wholly owned subsidiary and tax haven and move product through that tax haven to companies around the world. It will essentially change and adjust its pricing to ensure that most of the profit margin is transferred to the low tax jurisdiction.

We have always had rules. Canada has had rules about transfer pricing and fair market value pricing so that if a Canadian company sets up a similar subsidiary in a place like Bermuda it has to sell that product to the Bermudian subsidiary at a price that approximates fair market value. We do not want the profit margin sitting in a tax free jurisdiction based on some transfer pricing decisions that are made at head office.

The difficulty has been that quite a range determines fair market value. Tax authorities worldwide have been struggling with this. It needs co-ordinated effort so that if companies in the United Kingdom, Germany or in South America are selling products through intermediaries in low tax jurisdictions they are selling them at fair market value. This is a very positive aspect of Bill C-28.

I turn very briefly to comments made yesterday in the House by the Bloc member for Saint-Hyacinthe—Bagot about international shipping because I think he misrepresented the facts.

The changes reflected in Bill C-28 are not creating any new situation. They are basically reinforcing the fact that if a company is shipping 90% internationally and 10% in Canada the same rules would apply that have been agreed to countries around the world.

Shipping really knows no boundaries. It is not like a mine in Chile or an oil and gas pipeline in Russia. There is really no national boundary for airlines and shipping. The rules have always been that if a company is conducting 90% of it business outside the country it is not considered to be a resident of the country in which the head office might be. That facilitates the fair taxation of shipping companies around the world.

Over the past few years companies have set up individual corporations for individual ships not driven necessarily by tax but by liability issues. The holding company would fail to qualify for these agreed to international rules if it held 100% of these subsidiary corporations. It would be perceived as an investment company and would not qualify under the rules as being an international shipping company in the primary business of international shipping.

These rules had to be changed to maintain that level playing field. Otherwise we could create a competitive disadvantage for shipping companies that happen to be located in Canada.

[The Environment, November 26th, 1997]

Mr. Speaker, I am very pleased to have the opportunity to contribute to this important debate on greenhouse gases and climate change.

I am one who believes that greenhouse gases are a threat to our planet. The balance of probabilities indicates that we should be taking action. The risk of inaction is just too great. We really cannot put this problem off into the future. We have to deal with it now.

The questions for me are how we improve our environmental performance with respect to greenhouse gases, at what pace we proceed, and how we implement these policies without negatively impacting our industries and our competitive position.

Reducing greenhouse gases is a very complex global issue. It involves matters of public policy. It involves matters of scientific and technical research. It is a very politically charged issue as well.

As with most issues of public policy we would generally ask the following questions. If we make a public policy change who loses and who wins? Are there winners and losers? Is it a win-win or is it a lose-lose situation?

If we look at the question of climate change and greenhouse gases we clearly cannot measure all the benefits. Nor should we try. We cannot really deal adequately with the benefits of a climate that is more stable, that minimizes the frequency and the severity of natural disasters, and that avoids the severe impacts on agriculture and other negative consequences of dislocation which climate change can cause.

These are some of the benefits of addressing climate change but there are other benefits as well. One that has been brought to the attention of our natural resource committee relates to insurance costs. Insurance premiums that cover natural disasters are getting to be totally out of hand and quite unaffordable. If we do not deal with greenhouse gases insurance premiums will become astronomically high and force our businesses and taxpayers generally to deal with a very difficult problem.

There are benefits such as that but some have argued there are other benefits. If we deal with climate change we will create a large movement in technology development.

The argument which has been repeated in the House goes something like this. If we set aggressive targets for greenhouse gases new technologies will help us reach our goals. The argument continues with the thought that as these technologies develop in Canada new industries and new export possibilities will be created. We will be able to sell and license these environmental technologies abroad.

I have oversimplified the argument but basically that is the essence of it. I hope it comes true. I am sure a lot of this will happen.

We should also ask ourselves what happens if these technologies do not materialize What happens if they do not meet the test of being commercially viable? We need to contemplate these possibilities as we negotiate greenhouse gas emissions. We need to have a fallback position. We should only bet on those technologies that are proven today and have been demonstrated to have commercial viability.

At the same time we can do a better job of removing obstacles and creating the right policy and tax environment, favouring the development and commercialization of environmental technologies. The agreements we reach in Kyoto must be achievable. We know from the Rio experience that targets must be realistic and achievable. To do this in Canada we need to do a few things.

First, we need to agree on realistic targets. Second, we need to obtain the commitment of all stakeholders, and that includes all Canadians, to achieve these goals. Third, we need to provide and refine economic instruments to create the right incentives and the right market signals to industry to improve our greenhouse gas reduction performance.

The economic instruments referred to are generally classified in two broad areas, non-tax instruments and tax instruments. In the area of non-tax instruments we have heard a lot about tradable permits for emissions trading.

Although it is a complex issue it boils down to a very simple scenario if we assume we have a certain jurisdiction, oversimplify it and make it hypothetical. There are two plants, two factories, and to reach certain greenhouse gas targets those plants together are allowed, say, 1,000 units of emissions. One plant is allocated 500 units and the other plant another 500 units of emissions. One plant is able to achieve the target, in fact exceed it and perhaps reduce it to 300 units of emissions. The other plant is having difficulty with achieving the 500 units and will be over by 200 units.

What happens is that the plant that will be over buys the surplus capacity the other plant will not utilize to meet the reduction targets. There is a consideration. One plant pays the other to buy its unused emissions target. This places a market value or opportunity cost on the cost of not being able to comply with the emissions targets.

It has some interesting possibilities. Although it is not a long term solution it provides some phasing of the problem. It allows companies and other creators of greenhouse gases some opportunities to step up to the issue.

We do not have much experience with tradable permits. The United States has some. We really do not have a lot of experience to draw on. It is something we should be looking at and seriously considering. Whether we could apply emissions trading on a global context is more of a challenge.

I am not sure it is workable in the short run, but it is something that perhaps is a target to look at. I mention that as one non-tax instrument. There are others. There are voluntary measures.

I am not sure over the last number of years that voluntary measures, unfortunately, have really done the job. I say unfortunately because I know there are many companies that have worked very hard at improving their environmental performance with greenhouse gases.

I can think, for example, of the industry that I came from, the forest industry, the pulp and paper industry. If we look at the greenhouse gas emissions in 1995 for the Canadian pulp and paper industry, they have been reduced by 20% from 1990. That is at a time when the production increased by a similar amount, 20%. Those were through voluntary measures.

I can look at my own riding of Etobicoke North where I have Bayer, the pharmaceutical company, BASF Canada and Parker Amchem, large chemical and pharmaceutical manufacturers which have really put a great effort into voluntary measures and have achieved some significant reductions in their emissions.

I would hope that voluntary measures will be part of the solution because there are some sectors and some companies that are working very hard to reduce their emissions.

If we look at other non-tax instruments, there are concepts like user charges for water supply, disposal charges or deposit refund schemes. There is a myriad of non-tax instruments that could be embellished and expanded.

If we look at tax instruments, we could look at accelerating depreciation allowances for environmental investments, for example, waste heat recovery. We waste a lot of heat.

There are a number of other tax instruments, but to reduce greenhouse gas emissions in Canada, we must recognize some important facts. Twenty-seven per cent of greenhouse gases originate in the transportation sector.

Secondly, if we adopt a policy of business as usual with respect to greenhouse gases, greenhouse gases will increase by 36.1% over 1990 levels by the year 2020.

We have seen this debate pitched as an Alberta oil patch issue versus the rest of Canada. In fact, that is not the case. The greenhouse gas producers in the next number of years will be British Columbia, Ontario and other provinces like Quebec, the Atlantic region and Saskatchewan.

To reach our goal, all Canadians will have to contribute. The end result will be worth it but it will involve a huge commitment by all Canadians. I think the goal will be worth it. I look forward to continuing discussion on this important topic.