Mr. Speaker, I am pleased to rise on debate at second reading of Bill C-72, an act to amend the Income Tax Act. This bill follows on several policy and technical changes made by the government in last year's budget, the 1998 budget, and which are now being fully implemented in this bill.
The bill covers many different areas, including registered education savings plans, provisions with respect to RRSPs, the personal tax credit, the child care expense deduction, as well as the caregiver tax credit.
The official opposition will be opposing this bill on several grounds. Whenever the government brings before us a tax bill of this nature, which adds greater complexity to the tax code, we must ask why. Why is it that this parliament and this government cannot understand the fundamental need for root and branch tax reform and tax simplification?
Today we have a tax code that is over 1,300 pages long. It has thousands of associated pages of regulations, rulings and interpretation bulletins issued by the Department of Finance and the Department of National Revenue. This tax code which we are proposing to amend constitutes an enormous, destructive and wasteful burden on the productive capacity potential of our economy.
The Department of National Revenue employs over 43,000 full time personnel just to interpret, apply and enforce this Byzantine, out of control, costly and burdensome tax code. Untold tens of thousands of other Canadians are occupied full time in the interpretation and compliance with the Income Tax Act. That is to say that an enormous proportion of our national wealth is misdirected into complying with a tax code which no single individual can understand and which has grown beyond any reasonable level for a tax code in a free and democratic country.
The power to tax is the power to destroy. It is an enormous power with which we are entrusted in this parliament, the power to confiscate legally the fruits of the labour of people who work hard day in and day out to do better by themselves and their families. We use this enormous power, this Income Tax Act, to tell those families that they must give 10%, 20% or 30% of their family or individual incomes to this government to spend on its priorities rather than their own priorities.
Fundamentally, I want to make it clear that the official opposition opposes the continuing growth in complexity and cost of this destructive tax system.
This bill does precisely nothing to alleviate the enormous complexity and burden of the Income Tax Act but rather adds to it. I will refer to each of the provisions here that simply add additional regulations and legislative language which will make the code even more burdensome and more difficult to interpret and even more difficult to comply with.
I refer in particular to the proposed increase in the personal tax credit of $500 announced in the 1998 budget. The first half of that $500 increase in the basic personal amount for some low income taxpayers was implemented in legislation last year. The bill before us today would complete that increase to $500.
Let me point to an example of how ridiculously complicated this bill and the tax code are. This bill does not increase the basic exemption for all Canadians, treating them equally across the income spectrum; rather it will only be increased for incomes under a certain amount based on a certain complicated formula, all of which unnecessarily complicates what should be the simplest part of the tax system, the basic personal exemption. Based on any rational principle of taxation, the basic personal exemption should be clear, straightforward, and ought not to become a complex exemption, as has been done in this bill.
Let me also say with respect to the provisions for RRSPs, this bill permits Canadian residents to make tax free withdrawals to pay for full time training, as they can for instance under the status quo ante to pay for their mortgage on a principal residence.
With respect to RRSPs, this bill does not address the fundamental problem. This parliament has decided to allow Canadians to direct a relatively small portion of their annual income into a registered retirement savings plan, if they do not qualify for a registered pension plan. That is a sensible policy. We recognize that millions of Canadians do not and cannot rely on government or their private sector employers to provide them with retirement security.
The problem is that with the provision for RRSPs, we impose unreasonable regulations, restrictions and limitations on how much Canadians can save for the future in a tax sheltered vehicle such as an RRSP. How do we do that?
First, we limit the amount of Canadian taxpayers' taxable income which can be deferred through the RRSPs to 18% or $13,500, whichever is less. This is to say that a self-employed young Canadian, with no company pension plan and no real prospect of a Canada pension plan benefit because of the actuarial instability of the CPP, has to almost exclusively rely on the RRSP as his or her source of future retirement income. Yet the government says that it will limit quite severely the portion of the person's income which he or she can direct into that RRSP. That is a disincentive for self-employed Canadians to take full responsibility for their financial future and for their retirement.
This cap of $13,500 or 18%, whichever is less, has not increased over the past several years. This is a reflection of the government's pernicious policy of taxing people on inflation.
We have seen this government continue the Mulroney Conservative government policy of partial deindexation of the tax code. We have seen taxpayers having to pay about $12 billion in additional taxes than they otherwise would have paid were it not for partial deindexation and the consequent bracket creep.
So too we see the limit of $13,500 for maximum allowable RRSP contributions not keeping pace with inflation. In other words, had the RRSP maximum amount been held constant with inflation, and if the maximum amount for RRSP contributions were equivalent to the maximum amount that people can contribute to a registered pension plan, then it would be about $15,000 that they could put into their RRSP and not $13,500.
We should have seen an increase in the amount that people could save and defer taxes on through the RRSP for each of the last three or four years. However the government, through its nickel and diming of people and its tax policies, decided to freeze the maximum allowable contributions several years ago. Therefore, many hundreds of thousands of Canadians have not been able to defer taxation on their one and only source of future retirement income, namely their private retirement savings plans. For that reason we oppose the bill because it does not include the kind of increase in the RRSP allowable contribution amount which all people who are serious about their financial future would like to see.
I can say that I have not in my time as a member of parliament received a single letter, phone call, fax, e-mail, comment at a town hall or on an open line show suggesting that Canadians would like to see their taxes increased, but I have received dozens upon dozens asking that the maximum amount for RRSPs be increased, which the bill does not do.
I have also received dozens of messages from constituents asking that we allow Canadians to invest a larger portion of their RRSPs into foreign held equities and investments. Under the current law, which the bill fails to change, Canadian investors can only contribute 20% of their tax deferred RRSP savings in foreign investments. That means that at least 80% of their investments are stuck in domestic Canadian equities and bonds. We are again forcing Canadians to be irresponsible when it comes to their own financial future. One of the basic fundamental principles of sound investment is to diversify, which we do not allow Canadians to do because of the restrictive 20% foreign content limit on RRSPs.
Yet another one of the inadequacies in the Bill C-72 is its failure to respond to the outcry among Canadians to allow them to protect the value of their retirement savings and to generate better returns, which would consequently benefit the Canadian economy by raising the maximum allowable foreign content limit in the RRSP.
Let me address an aspect of the bill which I really find the most objectionable, that is the increase which it proposes in the child care expense deduction. The bill completes a change begun in legislation from last year's budget which increased the child care expense deduction from $5,000 for children under seven to $7,000, an increase of $2,000.
Let me explain what the child care tax deduction—