Mr. Speaker, this is yet another bill to add to the great pile my friend was talking about. I happen to be six foot five inches tall and indeed the documents go over my head. The Income Tax Act and all the reports and documents to interpret it are totally convoluted. Bill C-72 just adds to that convolution.
I believe it was the parliamentary secretary to the finance minister who was trying to say earlier that we should look at what they have done in terms of clarifying things and reducing taxes. Why does he and his department not take a look at how convoluted the Income Tax Act is? The officials who enforce the Income Tax Act have the ability to make virtually any interpretation they want of many sections. It creates all sorts of confusion.
Before I speak specifically about Bill C-72, I offer by way of example something that occurred not once but twice in my own constituency which relates to what I am speaking about. I have previously addressed this situation in the House. I hope the parliamentary secretary will listen with great concern and interest and take notes. We are not getting anywhere in this situation. I know he will be able to help me break through on behalf of my constituents.
A few years ago, as a result of some rather lopsided logic by the NDP government in Victoria, there was a lack of wood fibre or feedstock to the local lumber mills in my constituency. As a consequence, a number of ranchers who were not normally in the business of tree farming or logging on their property were approached by lumber mills and asked if they would be interested in selling logs on a selective harvest to the mills. Many of them did. As a matter of fact, I think the caseload in my office right now is approaching 25 or 30 of these ranchers who took advantage of the situation.
All these people, as my colleague who spoke previously mentioned, had to go to tax accountants to get the issue straightened out. What was interesting was that in most cases the accountants had prior experience with this kind of situation. In some instances some of the CGAs and CAs approached Revenue Canada in Penticton and asked what was the best way to account for that income.
None of my constituents, whose cases are in my office right now, had any intention of walking away from their responsibility of paying taxes. They are good, responsible Canadian citizens who recognize that they have that responsibility and are prepared to pay their taxes.
Their accountants advised them that the way it was handled as far as Revenue Canada was concerned was to declare the income as a capital gain. This was to get around the problem that obviously there were some expenses incurred, but because they were not in the business of normally growing the trees to be harvested for lumber production there were not any easily identifiable expenses that could be written off against that income.
If this had just been one public accountancy firm, if this had just been one CGA firm, we would have a situation where someone obviously was mistaken in his or her interpretation. However, it was 100% consistent on the part of all 10 firms that were involved. As I indicated earlier, some of them actually took advice from Revenue Canada about the issue.
What happened? Now I am getting into some interpretation, but we had a situation where in my judgment some officials in Revenue Canada were sitting around one day and realized that a tremendous amount of income had been declared but if they had declared the income as income and not as income from capital gain which gave them a 25% advantage, they would have collected an extra $1 million in taxes.
All of a sudden these constituents were reassessed. I would counsel my NDP colleague from Kamloops that he will have people in his constituency who will be hit the same way. I would counsel anyone in British Columbia and, once this has spread, anyone involved in this kind of situation. This has been turned back already by one appeal to one level of the tax system. Now the government is taking it forward to a higher court of appeal.
I can think of a situation of some people who are now into their 70s. They have a very large piece of property and a residence on the property. They received this income. They went through the procedure as specified as good Canadian citizens. They paid their taxes as required by Revenue Canada under the interpretation at that time. They then paid off all their encumbrances and disbursed funds to their families who in turn will have used that income to pay off perhaps their mortgages or some other debts.
In other words, what I am saying is that the money is gone. All of a sudden, with a reassessment out of the clear blue sky this older couple is now faced with a $72,000 tax bill. It is absolutely bizarre that because the Income Tax Act is so convoluted the officials in Revenue Canada were able to go after this couple, times 25 or 30 more in my constituency.
I said that there were two cases. The second case deals with debate that has happened in the House today. The member for Kamloops asked whether my Reform colleague thought there is the issue here that it is the responsibility that the direction comes from the political side. The answer to that question is partly yes and partly no.
The yes part is that a couple of years ago the finance minister finally woke up to what the Reform Party had been saying all through the 1993 election, that the deficit was killing us and that we had to cut back. The finance minister all of a sudden woke up in 1996 and said that the government would be going after all these so-called tax loopholes. He said there were going to be ways to take the so-called tax loopholes, tax credits and things of that nature away from people in middle and higher income brackets. That was in 1996.
I have received advice that fundamentally the income tax department has three years to go back and reassess. The income tax department knew on the basis of what the finance minister said that it would be rolling this back. Why did it not reassess immediately for the 1996 year? If it was too busy, why did it not get around to it in the 1997 year? If it was still too busy, which I find difficult to believe due to the amount of tax that was outstanding because it was closing this loophole, why did it not get around to it?
The department is now getting around to it. It is filing this at the very last minute, at the end of the approaching third year when the statute would prevent it from going after this money.
The situation is that the finance minister says “We are closing loopholes” and Revenue Canada says “We are going to wait”. Why would it wait? Because of the penalties and the interest that will be charged on the money that the department is now reassessing as a result of the direction from the finance minister.
I say to my friend from Kamloops, that is why he is partially correct. Revenue Canada and the Income Tax Act are creations of the incumbent Liberal government. On the other side of the coin, the department itself in many cases can be legitimately accused of being unfair and unbalanced when dealing with with law-abiding Canadian citizens.
Unfortunately, the result is that we end up with decent law-abiding Canadian citizens who want to pay their taxes, who want to comply with the law and end up feeling as though they have been shafted. What do they do with their income tax the next year? They do everything they possibly can and sometimes they slip into very grey areas of trying to avoid tax. They say “I am going to hide whatever I can from those people”.
As a responsible member of parliament, I would never, ever countenance or counsel that and I mean that in all seriousness. But I must say as a human being I understand that kind of reaction and emotion when people feel that it is simply unfair and say “I am being treated unfairly so I will treat the tax department unfairly”. It is an ever growing and an ever encroaching problem.
Let us deal specifically with Bill C-72. I would like to read something on page 34 of this 155 page document. It is a bit long, but it indicates how the act is so completely twisted, convoluted, mixed up and creates so many pockets which the tax people in Revenue Canada have the ability to work in so many different areas of interpretation.
Clause 18(3) states:
Paragraph 63(2)(b) of the Act is replaced by the following:
(b) the amount determined by the formula
(A + B) X C
where
A is the product obtained when $175 is multiplied by the number of eligible children of the taxpayer for the year each of whom
(i) is under 7 years of age at the end of the year, or
(ii) is a person in respect of whom an amount may be deducted under section 118.3 in computing a taxpayer's tax payable under this Part for the year,
B is the product obtained when $100 is multiplied by the number of the taxpayer's eligible children for the year (other than children referred to in the description of A), and
C is the total of
(i) the number of weeks in the year during which the child care expenses were incurred and throughout which the supporting person was
(A) a student in attendance at a designated educational institution or a secondary school and enrolled in a program of the institution or school of not less than 3 consecutive weeks duration that provides that each student in the program spend not less than 10 hours per week on courses or work in the program,
(B) a person certified by a medical doctor to be a person who
(I) was incapable of caring for children because of the person's mental or physical infirmity and confinement throughout a period of not less than 2 weeks in the year to bed, to a wheelchair or as a patient in a hospital, an asylum or other similar institution, or
(II) was in the year, and is likely to be for a long, continuous and indefinite period, incapable of caring for children, because of the person's mental or physical infirmity,
(C) a person confined to a prison or similar institution throughout a period of not less than 2 weeks in the year, or
(D) a person who, because of a breakdown of the person's marriage, was living separate and apart from the taxpayer at the end of the year and for a period of at least 90 days that began in the year, and—
This is just one very infinitesimal part of what we are dealing with. It has to do with what I know the parliamentary secretary is going to wax eloquent about, how the Liberals have been cutting back on increasing allowances and taking, how many was it, 400,000 people off the income tax rolls and all the rest of it.
He and the Minister of Finance, instead of all these layers of convolution on convolution, should simply do that which needs to be done. Index the basic exemptions going back to the time when the Progressive Conservative government in its wisdom decided to deindex. Give people proper basic exemptions. They would be able to take more than 400,000 people off the tax rolls and those people would be the people who would be needing it the most.
The kind of gobbledegook contained in this act is the reason people even in low income brackets make the people at H&R Block rich. People have to go to some kind of a tax accountant even to fill in the most basic form and it is because of this.
Why not simply do what is right? Allow people to keep income in their pockets, particularly people at the low end of the scale. It has always been and will always be the position of the Reform Party that money in the hands of the taxpayers is far more productive than it will ever be in the hands of the Minister of Finance or the bureaucracy this government represents.
The Liberals often accuse us of coming up with simple answers. In this case this is precisely what we are coming up with. Leave money in the hands of Canadians. It is they who buy the running shoes for their kids. It is they who make the decisions about what kind of food the children will eat. It is they who make all sorts of purchasing decisions. Leave the money in the hands of the people, particularly the people at the low end of the income scale. Those people of necessity circulate the money back into the economy. Instead, the government continues to grab and grab. It basically rips off money from the pockets of the poor.
This act is simply a layering on of convolution. This bill makes the onion that much bigger. Even if we were to peel this bill off the income tax onion, we would come into what was passed in the House just last month. And if we peeled that layer off we would be back a little farther. We would have to take a big carving knife to this onion to get to a point where ordinary citizens could feel confident that when they pay their taxes it is in a fair, just and equitable way.
It is the plea of the Reform Party and of myself on behalf of my constituents to simplify the Income Tax Act, to make it workable and above all to make it fair.
