Mr. Paul Crête (Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, BQ):
Mr. Speaker, the Liberal party has chosen to introduce an opposition motion today that raises a good number of points for which we are far from having ideal solutions. Having said that, this motion demonstrates how the approach of the Conservatives lacks attention to detail. They have not really found a way to solve the problems. However, the motion offers solutions that I find inadequate. Therefore, the Bloc Québécois will vote against this motion, as it is presented.
The government has not properly dealt with some problems. For example, GST rebates for tourists comes to mind.
An announcement was made but it was recognized, after the fact, that there were problems in terms of organized tours, as well as outfitters and duty-free shops. They have corrected part of that, but not everything has been settled. Since there was some improvisation, the result was that major changes had to be made later.
It is the same for income trusts, except that it is even more serious.
During the election campaign, the government said that it did not want to change the rules of the game.
Some of my fellow Quebecers, who are not necessarily supporters of the Bloc Québécois, have told me that they put their savings into these entities. They thought that the rules of the game were clear, but they were changed without notice. They want to know whether a solution can be found to this problem.
We have listened to them. We have to abide by the principle that companies and trusts pay their share of income tax. On the other hand, is there no solution that would counteract the negative effects this is having, particularly for individual investors? We have to put a little more thought into finding a solution. This is another example of the government’s ad hocery.
On the question of deductibility, that remains to be seen, because the bill that will allow this part of the budget to be implemented has to be tabled first. Everyone has to know the rules of the game.
Next Monday, it seems, the Minister of Finance will make a speech to clarify the situation. However, it is obvious that the government has been very inept, and has more or less thrown the baby out with the bathwater. It sent a very ambiguous message: that the interest will no longer be deductible when investments are made for the good of our economy, even though a number of countries in the world apply that rule. On the other hand, not enough attention was drawn to the fact that this was going to eliminate tax avoidance. More work will be needed on that subject.
The Liberals have introduced a very partisan motion. When considering economic issues like these, it is a little dangerous to try to go too fast. Strangely, they seem to be reacting that way because the Conservatives went too fast themselves.
On the question of interest non-deductibility, in order to do the job, the measure must obviously target only the abuse, very precisely. We must ensure that we achieve that result. It will not be easy, because these are very complex questions. It would be wise to think about it very carefully.
The Liberal critic is talking about a working group to discuss it, and the Minister talked about the need to fine-tune things. Maybe they could get together.
It is important that a clear and moderate message be sent to the economic community and the public as a whole. I think we could agree on that.
The government says that it wants to tackle tax havens. In fact, the Standing Committee on Finance is meeting to consider the questions raised in a motion by the Bloc Québécois. The ultimate tax haven, the one the government should be taking on, is Barbados. Canadian companies that invest money there, knowing that the interest rate there is very low, can bring those profits back here without being taxed. That is not the general rule in tax treaties. Ordinarily, they provide that when money is invested in another country, it is taxed when it returns to Canada, if the two tax systems are not equivalent. But under the Liberal government, a little paragraph was added—in section 5907—exempting that money from taxation, with the result, according to the Auditor General’s 1990 estimates and the extrapolation by Statistics Canada, that this income amounts to $4 billion annually. It comes in from Barbados and it is not taxed.
I believe, at a rough estimate, that we end up losing some $800 million in income tax revenues. Obviously this money that businesses do not pay—because they take advantage of this tax haven—is money that others pay, middle class people and all taxpayers who do their part. This also means less money that could be allocated in part to social programs. On one hand there are companies that can bring home profits without being taxed, and on the other there are people who are paying too much in taxes because of this.
That is a considerable amount of money. There is a way of settling this problem, namely by quite simply getting rid of section 5907. This very concrete and practical measure could be implemented. It would immediately have a very significant effect and it would send the following message to all taxpayers: we are trying to make the situation a bit fairer; we do not tolerate this sort of situation. This is a tax loophole with the ability to disappear clearly and neatly, if the practical solution is applied. However, as far as interest deductibility is concerned, it is not easy to know what the solution is.
So there is a problem. The Liberals are dealing with it in one way in the motion, but in our opinion a lot of things are getting all mixed up at once. This issue is being associated with the fact that there are a lot of foreign takeovers of companies. This may be one element, a variable that is taken into account, but it is also the result of several years of operation in Canada, during which people were told that this is a free market and we would see, in the end, whether we were winners.
A detailed analysis of this question is needed. It is true that many Canadian companies are buying foreign companies. The net result, though, even if there are more that buy foreign companies, as far as the size of investments goes, we are clearly in the red. This matter must be examined. The solutions, however, are systemic, and a much broader policy will be needed than the one found in the motion we are discussing today.
The first aspect in the motion is the issue of non-deductibility. The second aspect is the issue of trusts.
There is a big problem with income trusts because people have to pay their taxes. It became clear that the mechanism that was created for a certain kind of capital was being used by companies in sectors that clearly did not need it. A trend was developing, especially in telecommunications. It became a way to get a tax break without producing wealth.
I think that the underlying principle was unacceptable. That being said, the way they did it was also unacceptable because they pulled the rug out from under investors without warning after having told them that the rules of the game would not change. People who had saved up $50,000 or $100,000 or $200,000—their life savings or at least a substantial portion thereof—were deprived of income that, in many cases, they had worked for their whole lives. I can well understand why people who have been affected by this issue are angry.
So how should we react to the Liberals' motion? Apparently, according to the Liberals' proposal for income trusts, people should be taxed according to the alternative solution the Liberals proposed, which was summarized in the 14th report of the Standing Committee on Finance.
Let us not forget that this report was the product of a consensus indicating that solutions had to be examined. The Bloc Québécois proposed a simple solution: extending the moratorium, the transfer period, from four to 10 years. The Liberals suggested another proposal that we consider unacceptable. As such, that part of the Liberals' motion is totally unacceptable to the Bloc Québécois because they are trying, in a roundabout way, to make it all non-taxable. I think that that aspect of the motion has no future.
The bottom line is that there is now a perception among electors and the general population that some people are more equal than others when it comes to taxation. Because of the complexity of the systems, because of what has been developed over the years, because of the expertise that some companies may have access to, there are some people who maximize their tax benefits, to the limit and to the extreme. Hence the reaction of wanting to do away with the tax advantage.
We must take the time to think and look at how these things are determined to ensure that at the end of the day, the reaction is sensible and rational. Sometimes, the possibility of tax savings should be available, because it has positive impacts on the economy. But we must find ways to stop abuse from happening.
The Liberal motion also refers to the fact that the government's two measures are the cause of foreign takeovers. I do not think that a direct causal link can be made in this way, but the fact remains that we must address the phenomenon of foreign takeovers of Canadian and Quebec companies.
In Quebec, we are obviously now carefully assessing what the impact of Alcoa's takeover of Alcan would be. All the consequences of such a takeover must be reviewed, because based on the information I have seen, this transaction would mean that 37% of all of this new giant's aluminum production would come from Quebec.
Are there not in fact benefits to be gained from this kind of transaction? We must have a closer look at this and ensure that the existing legal mechanisms concerning foreign investment review are fully utilized. In that respect, we must ensure that our legislation is consistent with the new, current economic reality of globalization. Ultimately, when a transaction is being assessed for its relevance to the Canadian economy, important social factors must also be considered, such as the impact on employment in certain regions, for instance, and the repercussions of such a transaction on older workers. Not only will this serve to correct some purely economic aspects, but it will also take into account other types of impact we can expect to see.
This motion is a bit of a hodgepodge of a number of conditions. In my opinion, its current wording is a little outdated, considering our current reality. On one hand, with respect to interest deductibility, the minister announced that he will make a statement next Monday that will make his position clear. On the other hand, yesterday, the day before the debate on this motion, the Liberal finance critic himself suggested that an expert panel should examine this issue.
Perhaps we need to head more in this direction, in order to ensure that the Standing Committee on Finance, which is currently working on these issues, can complete its work, reach some conclusions and make some recommendations, especially since we can sense the government's desire to achieve some real results and outcomes. I thank the government for its support of the Bloc Québécois motion to study the issue of tax havens. This proves that they want to have a closer look at these issues. However, we must be prepared to study all situations. Certain aspects have to do with interest deductibility. There is also the matter of the treaty with Barbados, which, in my view, is a key factor.
I hope that the Standing Committee on Finance can produce a report on which there is as much agreement as possible, with recommendations that will have an impact as soon as possible. Maybe we can set as our deadline the fall economic statement or, at the latest, next year's budget. Clearly, if the work of the Standing Committee on Finance should result in a recommendation to abolish section 5907, which enables companies to bring $4 billion in profits from Barbados back to Canada without paying taxes, that would send a message to Canadians that their elected representatives have identified a fundamental inequity that must be corrected. I think that would be a key recommendation.
In my opinion, the committee should take a thorough look at interest deductibility. This week, we met with experts from the Canada Revenue Agency, who are very cautious about these and other issues.
It is not easy to get figures. The government needs to be more transparent.
The message that should be sent to people at the finance department or the revenue agency or to other government experts is that we need information in order to make the right recommendations.
We need to stop playing hide and seek with money, or else we will encourage the current perception that there can be inequity in the tax system, but it cannot be addressed because it is protected by people behind the scenes.
We have a wonderful opportunity to move forward and correct this situation in the Standing Committee on Finance. Personally, I hope that this will be the best way of ensuring that, at the end of the day, we can make recommendations to address these issues.
Regarding income trusts, Bill C-52 is already before us. The budget has been adopted and now must be implemented. What we must do is keep listening.
We have to listen to people who have suffered serious losses, those in a position to provide arguments on this issue. Maybe we should hold a debate in the fall, and, in a future budget, determine what is feasible. Nonetheless, we must always respect the principle of tax fairness and strive to make changes that will improve the situation, allow more fairness in taxation and take into account any potential impact on the economy.
We can learn from this motion and keep the following in mind. When the government makes announcements on economic investments—primarily in the budget and on other occasions—it should make sure that it has considered every possibility and not present half-baked initiatives. Otherwise, we are sending economic stakeholders a mixed message. That is what the government has to be aware of now in the matter of deductibility of interest expenses. There needs to be a clearer message.
Consider the example I gave on the GST rebate for tourists. Again, there is still some work to complete. Often it is not just a matter of small details, but things that have a major economic impact. These days, we must always consider the big picture in the context of globalization.
Like everyone else, the representatives of the multinationals in Canada—whose head office may be in the United States or elsewhere—are well aware of the conditions on investments. We should not have to kneel down to these companies. We should make sure the representatives from Quebec or Canada within these multinationals have what they need to get authority from their head offices in order to capitalize on factors that would attract the companies and create the right conditions to move forward.
We thought the Conservative government would have been particularly sensitive about the importance of these issues, but we are seeing the opposite and it is quite surprising. The government, which says it defends business interests, has introduced a number of initiatives that lack polish, that need fine tuning, especially on aspects that could have been planned or have already been studied. These initiatives could have been introduced and implemented in a very clear manner.
I am not saying that decisions can always be made that work for everyone. Sometimes we must make decisions even if some people will be penalized. However, in the end, the criteria to be considered are transparency and respect for what has been proposed. If ever there is a need to reverse a decision or way of doing things because a party, having come into power, realizes that it was mistaken, then a way must be found to penalize the fewest possible people.
Promises made during an election campaign—such as the one pertaining to income trusts—are in some ways moral commitments, contracts entered into with the voter. In this case, the Conservatives have broken this moral contract. Therefore, we are right to bring forward our proposals. However, the way in which the Liberal Party is proposing to move forward in this motion, today, is unacceptable. With regard to the proposed solutions, the motion does not reflect comments made about interest deductibility. With regard to income trusts, it is even worse, because the proposal does not resolve the basic issue of the need for tax equity.
Ms. Judy Wasylycia-Leis (Winnipeg North, NDP):
Mr. Speaker, I am pleased to hear the member for the Bloc address this issue from the point of view of it being a grab bag of many issues on the whole front of corporate taxation. He clearly identified the failure of this motion in terms of some of the most egregious tax loopholes and corporate giveaways this country has ever seen. I appreciate the fact that the Bloc has made a difficult decision to oppose this motion for very good reason.
I stand here today to comment on the arrogance of this Liberal motion, and the audacity and bravado of Liberals to bring forward such a motion dealing with corporate tax loopholes, giveaways and tax havens that have been around through many years of Liberal government and still are not addressed by members opposite.
I have listened very carefully to the heckling from my colleague across the way, the member for Mississauga South, and I want to begin by pointing out that the arrogance of the Liberals and the corporate ties of the Liberals most clearly comes to mind given the instant line, the instant phone call, between members of the Liberal Party and the Canadian Association of Income Trust Investors.
It is interesting that the member stands in this House or heckles from his seat at about the identical moment that I received a threatening email from Brent Fullard, who is the coordinator for the Canadian Association of Income Trust Investors. I find it rather curious to see this kind of ongoing tactic of intimidation and threats that have been used by this association when it comes to anyone who opposes the Liberal position. I certainly find it reprehensible that the Liberals would immediately adopt that same kind of line and tactic.
I want to say very clear for the record that my concern generally about the Liberals has been made more clear by the fact that the statistics we have received indicate the donations that have been made by members of the Canadian Association of Income Trust Investors to the Liberal Party and to leadership contenders, including I might add the member for Kings—Hants who received a donation in his leadership bid. The member for Kings—Hants received $5,000 from James Kinnear, president of Pengrowth Energy Trust, one of the founding members of the Canadian Association of Income Trust Investors.
Now that is a pretty small amount in comparison to the amount of money that actually went to Bob Rae, which was in the neighbourhood of $40,000. Yet, it is about in the same neighbourhood as the amount of money that went to the leader of the Liberal Party. I have not even mentioned the money that went to the leadership campaign for the member for Etobicoke—Lakeshore.
I raise this today because in fact there are huge questions about why the Liberals felt so compelled to take up the cause of the Canadian Association of Income Trust Investors. They feel so compelled today to defend this organization and the member representatives of this organization, and have no compunction about standing in this House and identifying with Brent Fullard and the president of this association when he writes me that I need to publish an immediate retraction of my supposed false statements and assertions made, otherwise I will face a lawsuit.
Mr. Paul Szabo: Say it outside.
Ms. Judy Wasylycia-Leis: Is that not interesting? The member still continues to bluster from his seat because in fact the Liberals are having a hard time dealing with the fact that--
Mr. Paul Szabo: You have to say this outside.
Ms. Judy Wasylycia-Leis: Mr. Speaker, the member is suggesting I should say this outside the House. I will be glad to say outside the House what I have just said here.
The founding members of the Canadian Association of Income Trust Investors donated heavily to the Liberal Party to the tune of $282,000 over the last decade and about $53,700 to leadership contenders in the last Liberal leadership race. I specifically mentioned the amounts for the leader of the Liberal Party, the member for Kings—Hants, and others.
Hon. Scott Brison: Have you ever received union money, Judy?
Ms. Judy Wasylycia-Leis: My question today is, did this money have any influence--
Ms. Judy Wasylycia-Leis:
Mr. Speaker, I am glad you called him to order. I have found it difficult this morning to listen to what I consider to be very sexist comments of a personal nature and I find that it continues now.
It is interesting. Maybe it has something to do with the fact that today is his birthday and so, on behalf of everyone in this House, I would be happy to wish him a happy birthday and ask him to relax and consider what we are talking about today.
We are debating the question of corporate giveaways, tax havens and tax loopholes at a time when Canadians are finding it hard to make ends meet, and are finding that their share of income taxes went up and up on a personal basis, while corporate taxation is going down and down.
Perhaps the member for Kings—Hants needs to be reminded how he has made some very curious statements over the years himself, going back to a few years ago when he suggested that the Kyoto protocol was written on the back of a barf bag. That was changed to the Kyoto protocol being written on the back of a napkin.
Let us get our facts straight. Let us understand that whether we are talking about Kyoto, or we are talking about corporate loopholes, or talking about income trusts, or income interest deductibility, we have to ensure that we are talking from the basis of facts and from the point of view of trying to understand why a party that had 13 years to address this serious situation chose not to. The Liberal Party chose not to close tax loopholes such as Barbados and today is standing up in the House and defending two programs that have been identified as a way to give more and more money to corporations at a time when Canadians are struggling and paying more and more of their income tax to support government programs.
Canadians want balance. They want an understanding that the government is prepared to apply a measure of fairness. They have seen none of that from the Liberals. The Conservative proposals to date may be somewhat confusing. There may be some need for clarification, but at least the Conservatives have identified some areas of corporate taxation that are not justified and have to be dealt with.
The motion we have today is interesting because it really is a rare 12-year-old blend of Liberal corporate friendly neglect of tax havens and tax loopholes with the Liberal corporate friendly neglect of income trusts. That is the essence of this motion.
Only the Liberals, and we have seen it again this morning, have the nerve to drag out their past failures to act for ordinary Canadians rather than corporations and get self-righteous about it at the same time. Only Liberals can do that. Is there no end? Is there no end to the lengths the Liberals will go to help feather the bed of Canada's corporate elite?
It is not a hidden fact, not unknown information, that Canadian corporations will take advantage of any existing tax havens and loopholes to avoid paying their fair share of taxes. The role of government is to deal with those loopholes that are unfair and allow for income to be hidden and taxes to be avoided. It is something we pleaded with the Liberals to do for years.
I want to go back to the whole Barbados tax haven debate. We raised in 2003 the Barbados tax haven and the fact that the company owned by the present member for LaSalle—Émard, the former prime minister of this country, former leader of the Liberals, had used the Barbados tax haven as a tax avoidance measure. That was clearly, irrefutably stated in 2003 when this whole issue was dealt with by the Ethics Commissioner.
I quote again from the dialogue that went on between the representative of the member for LaSalle—Émard and a member of the committee investigating this:
|| Question: Why did you move your shell companies to Barbados in 1995?
|| Answer: We moved them to Barbados because of the change in the Canadian tax rules.
I could go on. There is no shortage of evidence to show that in fact this was a tax haven that was used by Liberals, it was a benefit to Liberals, and the Liberals stand today refusing to address that issue.
There is a real question for the Conservatives today. They have dealt with income trusts. They have dealt with interest deductibility. Will they finally deal with this outstanding issue left by the Liberals? Will they finally close the Barbados tax haven? Will they finally shut down this lucrative vehicle for Canadian companies to hide money, companies such as Merck Frosst, which is being audited for putting $2 billion in the Barbados tax haven and not paying taxes?
Is that not enough of a reason for the government to act? Is that not enough of a justification for the Conservatives to make a commitment in the House today that they are going beyond interest deductibility measures and income trust provisions to deal with tax havens and all other loopholes, havens and hidden arrangements that allow businesses to avoid paying their fair share of taxes?
What is at stake here is that hard-working, honest Canadians are left to pick up the slack. There is nothing about that in this Liberal motion. There is nothing about how the balance shifted between the corporations and individual hard-working Canadians over the last 10 years that the Liberals were in power. There is nothing in the motion that says we will actually work to ensure that corporations pay their fair share of taxes and ordinary Canadians will start to get a break. There is not a word.
Why is that? The Liberals have a chance to bring a motion to this House and what do they do? They bring something that stands up to defend corporations and the likes of these companies I have just mentioned, companies that want to see the income trust program maintained exactly as it was because they stand to benefit. They are companies like Brompton Funds, Gluskin Scheff and Associates, Borden Ladner Gervais, Lawrence Asset Management, and Pengrowth Energy Trust; the list goes on of people, organizations, businesses and trusts that are part of the Canadian Association of Income Trust Investors. Yet those Liberals stand here and get all excited because we have identified the fact that there are donations going back and forth between these organizations and the Liberal Party.
I think the question for Canadians is legitimate. What kind of influence has this had on the Liberal Party? Why has it taken such a clear stance against cracking down on corporate loopholes? What is behind this whole support of big banks and big corporations?
I suppose one could argue that the Liberal finance critic's connections to Bay Street are reason enough, but surely we leave some of the hats we have worn in previous lives at the door when we enter this place, try to do what is in the best interests of the public, and put in place good public policy. We have not seen evidence of that to date.
In fact, as a good example of this, just two days ago at our finance committee I attempted once again to convince committee members to call upon the banks to give to the committee and to Parliament information pertaining to the costs of providing ATM services, to give a breakdown of those fees and to enunciate the profits involved in that particular operation.
Those were reasonable requests, I believe. Canadians have a right to basic information. The banks have a responsibility to be somewhat transparent and accountable to Canadians. That is why we have a Bank Act. That is why this place spends a great deal of time on banking legislation.
However, would members believe that except for two Liberals, the rest, including the Liberal finance critic and the former Liberal finance critic, voted against that motion? It is not surprising that the Conservatives did as well. Surprisingly, the Bloc supported the Liberals and the Conservatives on this, so we are left with no motion and with no message from this place to ask the banks to provide basic information.
I am not talking about a motion at the finance committee to call on the government to end ATM fees, although certainly that is something that I think has to be addressed by this place. I was simply asking for this place to ask for information that the consumers of this country have a right to know.
What are the different fees that banks are charging? Under what terms and circumstances? What are the costs? What is the profit margin? How do the banks justify the huge profits and the price gouging, which is so evident when it comes to ATMs?
Here is our example of what is wrong with the Liberals in this place and their supposed concern about the public good: when push comes to shove, each and every time Liberals stand up against consumers and on the side of big banks and big corporations.
Now, to talk about the issue of foreign investments, those members are making the spurious connection between the problem of foreign takeovers of Canadian businesses and the interest deductibility and the income trust programs. There is no connection.
In fact, I would hope by now that members clearly would have read some of the expert advice. Let us go back to Jack Mintz, who actually called for the removal of this interest deductibility provision, the double-dipping, a number of years ago. Perhaps he has changed his mind now. We are not sure, given the fact that the Liberals are using his name, but it was clear back when the Auditor General made this recommendation, and on numerous occasions, that Jack Mintz made this recommendation.
Others made this recommendation because in fact it is a case of revenue being lost to Canada because of an escape hatch, because of double dipping, because of corporate interests taking advantage of a provision that was not intended for double dipping but which has become so.
I would hope that members might have listened very carefully and might have read the letter we received from the Canadian Labour Congress. I know that members on the Liberal side often like to cite the CLC and Ken Georgetti's words in many of their debates and like to create the illusion of being on the side of workers. They pretend that they are all in favour of ending anti-scab legislation and then they turn around and vote against it. Or they pretend they are in favour of cracking down on poor working conditions and lack of pay equity and they do not take any measures when they have their chance to do so.
However, I would hope that in this debate they would at least listen to the words of Ken Georgetti and the CLC, who have written very clearly to the minister and to parliamentarians expressing support for the promise in the budget to end the corporate tax deductions for interest on debt used to finance foreign affiliates, stating:
|| At a time when Canada has lost 250,000 manufacturing jobs, Canadian tax dollars should not be used to subsidize the transfer of such jobs out of the country. Ending this subsidy for foreign investment will raise revenues needed to finance vital public investment and help to promote business investment in Canada.
I see that my time is at an end. Let me say that obviously we vehemently oppose this motion. We stand up for working Canadians and ordinary families. We believe that it is time for public policy, government actions and federal budgets to reflect the growing gap between the very rich in our society and the rest of us. The fact is that we are dealing with a 30 year high in terms of that gap in income.
We are dealing with the fact that fewer and fewer people are controlling all of the wealth in this nation and more and more Canadians are working harder and harder to make ends meet, without support and without public policies that benefit them. It is time to change that. The Liberals are going in the wrong direction.