John McCallum

[National Defence, March 1st, 2013]

Mr. Speaker, this government cannot do basic math. Fortunately, Kevin Page was there to point out the government's financial incompetence in the shipbuilding budget.

How can Canadians trust the government to deliver its projects on time and on budget and to provide our forces with the equipment needed to protect our country?

[National Defence, February 26th, 2013]

Mr. Speaker, two weeks ago I asked the same question, twice, about shipbuilding costs, and each time I got the same non-answer from the minister, so I will give it another try.

Does she accept the 7% to 11% industry estimate of military shipbuilding inflation? If so, what is it going to be? Will she increase her shipbuilding budget by $14 billion, or will she build 10 large combat ships instead of 15? It is a very simple question, and it deserves a serious answer.

[Technical Tax Amendments Act, 2012, February 15th, 2013]

Mr. Speaker, I certainly agree with the hon. member's first statement that it has been some years since the Liberals were in government. I think his second statement that it will be many years before that happens again reflects a certain arrogance in the assumption made by some members of the NDP that they have God's will to become the next government. On that point, I disagree.

It is my understanding, and I might be wrong, that this proposal for annual housecleaning bills began after we ceased to be the government, which was from 2006 onwards. I know that the quotes I read were from 2009, 2010 and 2012. It is possible that such recommendations were made before 2006. I do not deny it, if that is true. I am simply not aware that this was the case.

[Technical Tax Amendments Act, 2012, February 15th, 2013]

Mr. Speaker, I do not think that the idea of annual bills even existed before 2009, and we were not in power at that time. Accountants had the idea.

As far as I know, no one made that suggestion when we were in office. It is a much more recent thing. Given the problems that this 12-year delay is causing for us today, this would be a feasible and practical reform, even though no one did things this way in the past. This is a relatively new idea that we can examine in the future.

[Technical Tax Amendments Act, 2012, February 15th, 2013]

Mr. Speaker, as I said before, we passed a tax housecleaning bill in 2001, and we drafted a second bill in 2005.

We tried, but then the Conservatives took power. The Conservatives have now been in office for seven or eight years, and it took them that long to introduce a bill in the House. That is far too long.

[Technical Tax Amendments Act, 2012, February 15th, 2013]

Mr. Speaker, I am not saying that the Liberal governments of the past were in every respect 100% perfect. However, I think we were certainly much better on this issue than the current government, because we introduced changes that took effect in 2001 and other changes that would have taken effect under a Liberal government in 2005. When we were defeated, the Conservatives took over those changes, and they dropped the ball until today.

I think there is scope for improvement on the part of all Canadian governments. I do not think any of them have brought in changes as frequently as once per year. In the intervening time, since the Auditor General's report of 2009 and the accountants' reports I quoted earlier, it has become clearer to all that once per year would be the ideal frequency of these housekeeping bills.

[Technical Tax Amendments Act, 2012, February 15th, 2013]

Mr. Speaker, I guess the hon. member would have to consult the member for Kings—Hants to get clarification on that point.

My own view is that these measures are far too late, perhaps 11 years too late. My view is that if they can be passed, they should be passed as quickly as possible. As I also said, I hope we have another much smaller set of technical amendments, perhaps a year from now.

[Technical Tax Amendments Act, 2012, February 15th, 2013]

Mr. Speaker, I am pleased to rise on the subject of Bill C-48, which is now before the House. The bill could be termed a housecleaning bill, which does not mean that it is unimportant because it is important to keep one's house clean and in this case we are talking about the cleanliness of our tax system. The bill enacts into law previous comfort letters and other statements by the Department of Finance, which have already been enacted by CRA but which are not yet enshrined in the law.

As I will indicate, the Liberal Party will support the bill. Our only complaint is that it is far too long in coming. There have been massive delays to the point where the bill is almost 1,000 pages long with, I believe, 40-something amendments. This has caused great cost and great uncertainty to the tax system. We believe that it is simply bad public administration that the government should have delayed so long in bringing the legislation forward.

The last housecleaning tax bill passed by Parliament was in 2001, almost 12 years ago. We believe as a matter of course such bills should come before the House every year, so that the complexity of the tax system would be alleviated and taxpayers would have a clearer idea of what their rights and obligations are.

Let me begin by going through a little bit of the sad, lengthy history, which has led us from 12 years ago when the last bill was passed to where we are today. As I said, in 2001, a tax housecleaning bill was passed, 12 years ago. The Liberal government prepared another one but then was defeated. The Conservatives made two attempts but both failed. Because of an election or because of prorogation, those bills simply did not get through the House and were dropped.

The next event that is of some importance is the Auditor General's report of 2009. The Auditor General made it crystal clear that there were major costs imposed by not acting more expeditiously in this area. I would like to read a few of the key recommendations that were made by the Auditor General in 2009.

She said:

For taxpayers, the negative effects of uncertainty may include

• higher costs of obtaining professional advice to comply with tax law;

• less efficiency in doing business transactions;

• inability of publicly traded corporations to use proposed tax changes in their financial reporting, because they have not been “substantively enacted”;

• greater cynicism about the fairness of the tax system; and

• increased willingness to use aggressive tax plans.

She continued:

For the tax administrator, the negative effects may include

• higher costs for providing additional guidance and interpretations to taxpayers and tax auditors; and

• higher administrative costs for reprocessing the tax returns after an outstanding legislative amendment is enacted and for obtaining waivers to extend the limitation period for reassessment.

These points are extremely clear. The Auditor General makes it very clear that the absence of housecleaning legislation presented promptly imposes major costs on taxpayers in terms of their ability to understand the law, their need for professional advice and also imposes greater delays on rulings by CRA, which further reduce the efficiency of the system.

Following the Auditor General's report, the parliamentary committee on public accounts met and I would like to read its recommendations, which were published in the year 2010:

RECOMMENDATION 1

That the Department of Finance Canada facilitate the elimination of the backlog by ensuring that bills making technical amendments to the Income Tax Act only relate to technical tax matters.

RECOMMENDATION 2

That the Department of Finance Canada not wait until technical amendments bills are passed by Parliament before releasing further proposed amendments to the Income Tax Act for comment.

RECOMMENDATION 3

That once the current backlog of technical amendments is passed, the Department of Finance Canada should prepare annual technical amendments bills for consideration by Parliament.

RECOMMENDATION 4

That the Canada Revenue Agency provide by 31 March 2011 a progress report to the Public Accounts Committee on actions taken to address the recommendations contained in Chapter 3 of the Auditor General’s November 2009 Report.

It is clear as we stand now, in 2013, that these recommendations of the public accounts committee were not followed. It called for this housekeeping legislation to be presented on an annual basis. It called for a reduction in the time that CRA took to give its tax opinions or directions. This has not happened. The time has gotten longer, not shorter. Again, I would argue that this is a case of really bad public administration in an area that is not particularly exciting to the public but is, nevertheless, critical to the good functioning of our economy.

Now, one would think that accountants, of all people, would love tax complexity because they are paid for helping people to complete their taxes. If the system is more complex, they are needed even more and they would make more money. However, quite to the contrary, both the chartered accountants and the certified general accountants have recently been arguing very strongly in favour of expeditious passing of the legislation as well as a more general reform of the tax system.

I would like to read from both the recommendations of the chartered accountants and the certified general accountants on these issues. In 2010, the Canadian Institute of Chartered Accountants said:

Reducing complexity in Canada’s domestic tax regime is crucial to easing the regulatory burden placed on Canadian businesses and attracting investment. Simplifying our tax system would make the country more competitive and allow both individuals and business to prosper. According to The Global Competitiveness Report 2010 – 2011 issued by the World Economic Forum, tax regulations are among the top four most problematic factors cited by business executives for doing business in Canada. Many aspects of Canada’s tax system have become much too complex. We recommend that the government establish a national consultation process to examine tax simplification measures.

This is a government that talks all the time about caring only about the economy, about being competitive, about attracting foreign investment, and yet tax complexity is number four on the list of negative factors, according to companies, investors. The government has done nothing since these recommendations of 2009-10 until three years later, today, notwithstanding the pleas from the accountants, the Auditor General and the public accounts committee, to act expeditiously.

Let me now read what the certified general accountants said:

Modernize Canada’s tax system – make it simple, transparent and more efficient

Introduce and pass a technical tax bill to deal with unlegislated tax proposals

Implement a “sunset provision” to prevent future legislative backlogs

Appoint an independent panel of experts to recommend steps to reform Canada’s tax system

That statement about a sunset provision is interesting because it would say that when Finance issues a declaration or a comfort letter that effectively changes the system, unless it is placed in law within a certain time, such as a year or two years, it sunsets. It disappears. This would be a good change to the system because it would be an incentive for the Department of Finance or the government to implement these housecleaning bills annually or expeditiously so as to reduce this growing complication of Canada's tax system.

However, as members will have heard from these quotes, the issue goes further than simply these housecleaning bills. It has been 12 years since our last housecleaning bill and close to 50 years since our last full-scale examination of Canada's tax system. The last time that was done, I believe, the report was issued in 1966 and it was done by the Carter commission. The accountants and I say that it is high time we have another overall study of Canada's tax system with a view to simplifying it and making it more competitive, less complex and more fair. This would be a major undertaking, and since it has not been done in almost 50 years, it is high time that we do it.

One obvious unfairness, which would become apparent if such a study were done, is the operation of our tax credits. The government offers tax credits for young soccer players or young violinists. Some economists would prefer that such measures be put into overall cuts in income tax, but that is another issue. My point is that these tax credits are grossly unfair because they deliberately exclude those people whose income is not high enough to pay significant tax. Therefore, low-income Canadians' sons and daughters might want to play soccer or the violin just as much as a child of a higher-income Canadian, but because their income is low and they do not pay tax or much tax, they are excluded from the benefit. That is a gross unfairness. Item number one in reforming our tax system would be to make those tax credits refundable so that they are available for all Canadians and not just for well-heeled Canadians.

That is just one tiny item in the overall scheme of things. We need an overall review of our tax system, which has not happened for nearly 50 years, and it is high time that this was done. We do support the bill. Our complaint is that it is far too late in coming.

I will go over a few of the provisions of the bill. I obviously cannot cover in detail the nearly 1,000 pages of changed legislation. One of the problems with it is that it is just too much to absorb correctly all in one bite and to analyze appropriately. However, I will mention some of the things that would be changed.

There would be changes to the foreign affiliate rules, which would probably be the most important changes for business. These changes would generally be considered to be relieving for business, although they also would increase the complexity of meeting those tax obligations.

On income trusts, the bill would affect how debt would be treated when an income tax trust is taken over by a corporation after the infamous 2006 income trust tax announcement.

There would be a change for employment insurance. Now that self-employed individuals can contribute to EI, Bill C-48 would ensure those contributions would be deducted from annual income for taxation purposes in the same manner that an employee's contributions are deducted.

On GST, first nations would be able to choose to levy a sales tax on reserve by allowing the Canada Revenue Agency to collect and administer the tax. All money collected would be returned to the band council. Bill C-48 would allow Revenu Québec to fulfill that same function.

On labour-sponsored venture funds, in 2010 the Province of Ontario announced it was phasing out its tax credit for labour-sponsored venture funds by 2014. Many of those funds are no longer attracting the capital they need to continue as labour-sponsored funds, and the fund administrators have asked that they become mutual funds. However, the Income Tax Act imposes some severe federal penalties for making that switch. Bill C-48 would waive those penalties in recognition of the Ontario government's change. It would also allow shareholders to sell their shares to other investors instead of back to the fund.

Finally, on airlines, provinces and taxes, this clarifies the allocation of miles flown over certain territorial waters for the purpose of provincial taxation.

As we will see from that list, none of those items is likely to make a headline, but cumulatively, when added together, the absence of such provisions in our income tax law adds complexity and costs and reduces the competitiveness of the Canadian economy. That is why the Liberal Party, while supporting this bill, would also make a plea to the government that the next such housecleaning bill be introduced in the House approximately one year from today.

[National Defence, February 14th, 2013]

Mr. Speaker, the minister appears not to understand the enormity of her $14 billion cost overrun on ships because of inflation compared with the phoney $16 billion total cost estimate for the F-35s.

With a 56% cost overrun, does the minister understand that she can now build only 10 destroyers and frigates rather than the original 15? Will she come back to Canadians with a new and financially credible plan on the number of ships and their cost?

[National Defence, February 13th, 2013]

Mr. Speaker, recently officials were evasive when I asked how they were accounting for inflation in the shipbuilding contract. Now we learn that their assumed inflation rate is 2.7% versus an industry rate between 7% and 11%. This huge inflation gap shows gross financial incompetence by the government and would add at least $14 billion, or 56%, to the total cost of the ships.

Does this mean that we will get way fewer ships, a massive budget overrun, or both?