GOVERNMENT ORDERS

BUDGET IMPLEMENTATION ACT, 1996

Hon. Paul Martin (Minister of Finance, Lib.) moved that the bill, as amended, be concurred in.

The Deputy Speaker: Is it the pleasure of the House to adopt the motion?

Some hon. members: Agreed.

An hon. member: On division.

(Motion agreed to.)

The Deputy Speaker: When shall the bill be read a third time? By leave, now?

Some hon. members: Agreed.

Mr. Martin (LaSalle-Émard) moved that the bill be read the third time and passed.

(1205 )

Mr. Barry Campbell (Parliamentary Secretary to Minister of Finance, Lib.): Mr. Speaker, it is my pleasure to launch third reading of Bill C-31, the 1996 budget implementation act.

Of all the legislation proposed by a government, it is budgetary measures that stand at the core because they define the bottom line capabilities and concerns of government itself. This is especially true of Bill C-31. It is legislation dedicated to dramatic discipline change, change in the way government operates, change in how government spends and change in how government establishes and addresses its priorities.

[Translation]

These changes were not proposed just for the sake of it. Our initiatives reflect a reality experienced by governments in Canada as well as elsewhere in the world: they have to reassess their roles and responsibilities.

This does not mean that we have to give up the activities that are the government's reason for being: promoting job creation and economic growth as well as protecting people who are suffering great hardships because of change. Both these missions remain sacred for our government.

However, in this era of diminishing resources and intense global competition-a reality that has an influence on the operation of our economy-we must examine ways to fulfil these responsibilities more efficiently and more economically. We must also make better decisions about the priorities that are under our jurisdiction and about those that are more obviously the concern of other stakeholders in our society.

Getting the government right: that is the challenge at the very heart of this bill. I would like to point out to the House very briefly a few examples taken from the bill itself.

[English]

The bill includes measures to allow the Minister of Transport to privatize the government's fleet of grain hopper cars. Other clauses will remove the 10-year ceiling that was imposed on the repayment schedules for students who borrowed money under the Canada Student Loans Act. This will benefit students and may well save the government money by reducing the number of loan defaults. We propose to amend the Radiocommunication Act allowing the Minister of Industry to obtain greater revenues by auctioning off radio spectrum licences.

An important thrust of our government is to develop alternative ways to deliver services. That is why we will be introducing new service agencies and other mechanisms to deliver services to Canadians with the emphasis on better service and greater efficiency. To aid in this process, this bill includes legislative amendments to give the government the administrative mechanisms necessary to ensure a smooth transition to the new service delivery modes.

For instance, changes proposed to the Canada Labour Code and Public Service Staff Relations Act will permit the introduction of successor rights. That means unions will continue to represent their employees as they move from public service employment to other employers within federal jurisdiction. Collective agreements of course will continue to be in force until the terms expire.

We also want these new service agencies to have the tools they need to operate effectively and affordably. We will amend the Financial Administration Act to allow for multiyear appropriations for these organizations.

[Translation]

In the future, we will certainly not be able to improve the efficiency and the effectiveness of the federal administration without giving consideration to our employees, the people providing the services Canadians expect.

As we all know, collective bargaining in the public service was suspended when the previous government implemented the Public Sector Compensation Act. This act will expire, as provided for, in February 1997, when the collective bargaining system will come back into force.

However, when we negotiate conditions of employment with labour unions during the next three years, it will be necessary, in our opinion, to suspend binding arbitration for dispute settlement. We simply cannot afford having independent arbitrators, who are not accountable to Parliament, making decisions that do not reflect our financial situation.

Employees of the House, of the Senate, of the Library of Parliament and of the Canadian Security Intelligence Service are exempted. This is because they do not have the right to strike and are dependent on binding arbitration. In their case, arbitrators will have to take into consideration salary settlements in similar occupational groups in the public service.

(1210)

[English]

This bill will provide authority for a 2.2 per cent increase for non-commissioned members of the Canadian forces. This measure will address the disparity in wages between members of the forces and public service employees, a disparity that existed before the wage freeze.

We are amending the Public Sector Compensation Act to reinstate performance pay after a five year suspension in annual increments for those employees for whom it was suspended when

we introduced the in-range increment freeze two years ago. The bill also contains reform measures regarding public service pensions.

All public service employees, those who will be transferred out and those who stay, will benefit from changes we propose to the Public Service Superannuation Act. This includes the two year vesting of pension benefits and new lock-in provisions. Pension benefits of public servants transferring to other organizations will be fully protected.

I must underscore the fact that the government will consult on the details of these proposals before they come into effect. Amendments to the Public Service Superannuation Act will also give us the flexibility to extend coverage under the act for a limited term to employees who are transferred out of the public service.

There are two further measures we are taking so we can deliver better service while being fiscally responsible. First, we will modify the Financial Administration Act to give Treasury Board the authority to establish group insurance plans for the public service, to set terms for the management of those programs and to acquire such programs by contract. This will allow these programs to be managed in a way that is more consistent with insurance practices in the private sector.

Second, we propose to amend the Public Service Staff Relations Act so that the government can better meet its ongoing youth employment responsibilities. We plan to provide students with learning opportunities and facilitate their transition from school to work. Their employment benefits will reflect their training status.

This is legislation centred on change. It is also legislation that will provide new certainty in an important area of Canadian activity, that is, federal support to provinces to better secure this country's social programs. This bill will amend the Federal-Provincial Fiscal Arrangements Act. We propose to provide secure stable funding for the Canada health and social transfer for an additional five years through to the year 2002-03.

As I have said before, and as the minister has emphasized, there should be no mistake about our commitment to this funding. In fact, in the three years beginning in April 2000, CHST levels are projected to rise. By 2002-03 total CHST entitlements are expected to be $2.3 billion higher than the level set for the fiscal year 1997-98. To provide additional assurance to Canadians, this legislation sets a floor, an ironclad guarantee that cash transfers will be maintained at or above the $11 billion level.

This proposed legislation also provides a new formula for allocating the CHST among provinces. Under this new formula which will be phased in over five years, existing disparities and per capita funding across provinces will be cut in half. Let me point out that the gradual phase-in of the new formula not only gives provinces time to adjust, it gives them maximum certainty in their planning.

It is also worth repeating that this single consolidated block transfer represents a more flexible and mature approach to federal-provincial fiscal relations. It gives the provinces extra flexibility as they design and administer their own programs while safeguarding the social programs Canadians rely on and support.

I remind hon. members of changes that this bill proposes to the Unemployment Insurance Act. Effective January 1 of this year the maximum insurable earnings are to be reduced to $750 per week in comparison with the $845 level which would have resulted under current legislation. Similarly, the maximum weekly benefit drops from $465 per week to $413. These measures will save $200 million in the second half of this year and reduce the UI payroll tax burden on working Canadians.

This bill also amends the Old Age Security Act to lengthen the period of time before newcomers to Canada become entitled to full guaranteed income supplement or spouse's allowance. Under the current system, some immigrants obtain full benefits with as little as one year's residence in Canada. Restricting this easy access will improve the fairness of the system and lessen the burden on Canadian taxpayers.

(1215)

There is a final issue this legislation deals with which is part of an important national initiative announced just a few weeks ago, and this is adjustment support for the Atlantic provinces in harmonizing their sales taxes with the federal GST. Some voices in the country have tried to make political hay of this decision. However, I am convinced, and the government is convinced, that it is acting in a fair and responsible way and in the long term interests of Canadians.

This bill provides approximately $960 million in adjustment assistance to the provinces of Nova Scotia, New Brunswick, Newfoundland and Labrador over a four-year period. This is intended to cover a fair share of the initial revenue losses they experience under the harmonized sales tax regime.

The government firmly believes, given the benefits that will flow from harmonization, that the total cost is reasonable and responsible. It is fully in keeping with firmly established practices of providing assistance when federal initiatives entail major structural change for provinces. Let me emphasize that this adjustment assistance will not jeopardize our deficit targets. These targets are secure.

In addition to the three provinces previously mentioned, Prince Edward Island, Manitoba and Saskatchewan would also qualify for assistance should they agree to harmonize their sales taxes. Ontario, British Columbia, Alberta and Quebec would not.

[Translation]

This deserves one last comment, more particularly in view of the remarks made in the House and the media when the Quebec finance minister recently sent a bill to the federal government.

In a nutshell, this is a totally groundless request that has everything to do with a separatist project and nothing to do with facts, history and economic common sense.

We are providing this adjustment assistance only to provinces that experience, through tax harmonization, a drop of more than 5 per cent in revenues from their retail sales tax.

But Quebec did not lose any money when it harmonized. Therefore, it is not entitled to any assistance.

Quebec has decided to spread the harmonization process over six years, and has been able to increase its revenues in the process because of the wider tax base of the value-added tax, while it kept taxing many business inputs.

[English]

On the basis of the partially harmonized sales tax system in place between 1992 and 1995, Quebec would not have qualified for assistance and once fully harmonized it still will not qualify.

The three Atlantic provinces that are now harmonizing have decided to move to a single tax all at once. This means they will not have the option of boosting revenues during the phase in period. Therefore, the adjustment assistance is essential to ensure they have the opportunity to participate in a single sales tax system on the same basis as Quebec and the other larger provinces.

I have taken up more time than normal at this stage of legislation but Bill C-31 deserves the effort because it will implement wide ranging beneficial change in so many areas.

Let me conclude with the same observation I made to the House finance committee. This bill is the heart and soul of the government's fiscal agenda as laid out in the budget. The story here is quite simple: getting government right. It is one we should all agree on in principle. I trust that the House will provide its approval so we can get on with meeting that goal.

[Translation]

Mr. Yvan Loubier (Saint-Hyacinthe-Bagot, BQ): Mr. Speaker, my colleague caught me a bit by surprise. He usually takes a lot more time to explain things. With all the nonsense he said in the last part of his speech on Bill C-31, about us, separatists, acting in bad faith, I was hoping his speech was going to take much longer. However, I have to admit that he caught me by surprise.

I am pleased to take part in the third reading stage debate on Bill C-31, a piece of legislation the official opposition considers very important, especially-and here is what I want to focus on-the part dealing with the compensation paid to three maritime provinces within the partisan initiative launched by the Minister of Finance to harmonize the GST in that region of Canada.

(1220)

Before tackling head on this compensation issue, I want to go over some historical facts about the GST, although this part of our history is recent, well, maybe not so recent, since it only dates back to the time the Liberals were in the opposition, but that is still a part of our history which is, in my view, full of contradictions and cover-ups about the commitments made by the Liberals concerning the GST. When addressing such an issue, I think it is always important to remind the people of Quebec and of Canada of the many commitments made by the current government.

First of all, let me remind the House that, when the Liberal Party of Canada was in the opposition, when its representatives were sitting on this side of the House, they energetically decried the new goods and services tax introduced by the Conservative government. At the time, how many Liberal members made a big fuss and even raised quite an uproar just to condemn this Conservative policy? Even during the election campaign, at the end of which 54 members of the Bloc Quebecois were elected and now sit in the official opposition, the current Prime Minister made some pretty clear commitments concerning the GST. He said that it was out of the question for him to keep the GST if he ever was elected head of government.

I remember that, four or five months after he was elected, the Prime Minister even said, I think it was on May 2, 1994: ``We hate it and we will kill it''. There are people in Quebec as well as in Canada who voted for the Liberal Party because they hated this tax, because they believed in the commitments of Liberal members, because they believed that the Liberals, then in the opposition, were going to fight this tax with all their might and eventually, as the Prime Minister and many officials had promised-including the Deputy Prime Minister who was forced to resign lately because of this promise-because they believed that the Liberals were going to abolish the GST as promised. Instead, the government is resorting to the usual smoke screens and introducing the first phase of an in depth reform of the GST signed by the three maritime provinces, that is, New Brunswick, Nova Scotia and Newfoundland.

Not only is this in complete violation of the Liberal election promise but this agreement, this vague attempt at a reform of the commodity tax will be extremely costly for all Quebecers and all Canadians. Why? Because the agreement announced approximately one month ago but the technical details of which have not been released yet provides for the payment to the three maritime

provinces of a $961 million compensation over the next four years, that is, almost $1 billion.

This is $1 billion that all Quebecers and all Canadians outside the three maritime provinces will have to pay to compensate for a loss of revenue due to the harmonization of the GST, to this vague attempt at a reform, to this mockery of an attempt at keeping their words by the Liberal Party of Canada, when they had in fact promised to kill the GST.

The government is spending $1 billion to make us believe that it is doing something about the GST. One billion dollars to make the GST disappear, not disappear in the true meaning of the word, but to hypocritically bury it in the price of products in the three maritime provinces. Frankly, it is unacceptable.

That is not what Quebecers and Canadians had understood during the election campaign. In fact, two government members resigned recently precisely to show that the Liberal government did not fulfil its promise, its campaign commitment to abolish the GST. These two Liberal members had the courage of their convictions and decided to inform the public that they could not live with the fact that their party did not fulfil its promise when it signed that agreement with the three maritime provinces.

(1225)

What precisely are the terms of this agreement? Just like the Government of Quebec, the Government of Alberta and the Government of Ontario, we tried to know the exact terms of the agreement the federal government concluded with New Brunswick, Nova Scotia and Newfoundland. We tried to get the details, but all our efforts have been fruitless. Why is the Minister of Finance hiding the exact terms of this agreement from the people of Canada?

We know, in general terms, that the compensation principle applied by the federal government is as follows: the federal government decided, unilaterally, that the provincial sales tax and the federal GST together could not be more than 15 per cent. It has also decided unilaterally, without any consultation, that it would compensate the maritime provinces if the provincial sales tax and the GST combined exceeded 15 per cent. If you look at the three maritime provinces, you will see that the PST and GST combined are just over 19 per cent.

So the federal government has decided unilaterally that the new harmonized sales tax would not exceed 15 per cent and that it would compensate the provinces for the difference between 15 per cent and 19 per cent. The federal government has decided to compensate the governments of the three maritime provinces for this loss of four percentage points in sales tax, even though it represents tax relief for consumers in these provinces.

How did the government estimate this loss? We do not know. We do not know where it got the figures with regard to tax revenues and to the cost of this harmonization exercise, but the finance minister is asking us to trust him, to give him a free hand, just like he does every time he makes deals behind closed doors and then imposes these things upon us, begging us not to ask too many questions. He is telling us to trust him.

The government is giving close to $1 billion to three maritime provinces for a partisan policy, a policy whose sole purpose is to show that the government is doing something about the GST. Do you not think it is a bit expensive? Do you not think it is expensive for Canadian taxpayers outside these three maritime provinces and also for Quebec taxpayers? Between $200 and $250 million of that sum will come from Quebecers. And the remaining $700 million will come from taxpayers from the rest of Canada.

If, in the opinion of several government representatives according to a member of the Liberal Party, we have to pay such a price every time we need to harmonize policies, every time we need to improve the economic and commercial operation of the federation, I wonder what is the value of the federalism these people have been defending desperately since we have come to this place. I wonder what it is worth if a part of the population of Quebec and Canada have to pay such a price every time people on the other side of the House want to improve the tax system.

I will quote someone I do not quote often because our ideas rarely coincide, particularly on constitutional matters. However, I want to quote the chief editorial writer of La Presse, Mr. Dubuc, who, of course, supported our point of view last week-end when he wrote: ``The federal government and its Minister of Finance made a huge blunder when, in order to convince them to harmonize their sales tax with the federal GST, they promised the Atlantic provinces to give them $960 million''. That was written by Alain Dubuc.

(1230)

He added: ``The Chrétien government had to buy them to convince them to adopt the GST system because he absolutely needed their support to be able to claim that he replaced the GST with an harmonized tax of 15 per cent. In other words-and I am still quoting Alain Dubuc from La Presse-$1 billion in public funds were spent in a partisan way for the sole purpose of allowing the Liberal government to claim that it was fulfilling its promise''.

Seeing the official opposition in agreement with Alain Dubuc is like, in Quebec, seeing Gérald Larose in agreement with Ghislain Dufour. Suffice it to say that opposition to the Liberal government's ridiculous GST policy is pretty much unanimous.

More and more Canadians are saying no to this sort of short sighted policy, this one step at a time strategy of claiming successes at various levels. I would say the Liberal Party is a past master at this game.

Quebec harmonized its provincial sales tax with the GST in 1991 and has had one system since then. The two systems of taxation were combined, with one administrative body, the Government of Quebec, administering its own sales tax in addition to the goods and services tax for the federal government. It did not cost the federal government one red cent, except, of course, what it understandably pays for relying on the services of the Government of Quebec to administer the federal goods and services tax.

There was never any question of the sort of compensation that is part of the agreement between the three maritime provinces and the federal government. Why was that? Because in Quebec, everyone recognized-business and the public alike-that some degree of harmonization was necessary in order to facilitate commercial transactions and the operation of the economy. We understood that and we did not need a $1 billion nudge from the federal government. We understood that and we did not need to be bribed to improve the Government of Quebec's system of collecting and administering taxes.

Why must there now be compensation of close to $1 billion for three provinces that are very cosy with the federal government? Why must Canadians in other provinces and Quebecers be made to pay for this local agreement between the federal government and the three maritime provinces? There is something not right about this policy.

Quebecers and Canadians need to understand what the federal government might do for these three provinces further down the road. Not only is there compensation of close to $1 billion paid for nothing-partisan compensation from federalists who normally support this government-but, furthermore, four years from now when the federal compensation comes to an end, it is not impossible, and it is even probable, that equalization payments will take over where the federal government's subsidy leaves off.

(1235)

Why is this likely to happen? Why must Quebecers and Canadians alike see hundreds of millions of dollars more added on to this bad and partisan contract between the federal government and the three maritime provinces in the next few years? For a number of reasons.

I shall not go into the complex details of the equalization formula, but allow me to give an overview of how it works.

There is an equalization system in Canada, which affects certain provinces, including Quebec, in order to ensure that the poorest provinces, the ones which cannot raise sufficient tax revenues to ensure equivalent levels of services from east to west in Canada, can provide those services. When a complex formula is applied to calculate the taxation base for each province, the ability to collect taxes, this is where equalization payments come in for the poorest provinces.

One of the criteria for applying equalization payments is the tax base. In other words, if a province or provinces-in this case the three maritime provinces-have their tax base reduced by a federal policy related to the changes in the GST, equalization kicks in automatically to replace this reduction in the tax base.

In other words-returning to what was said at the beginning-at this time, when you take the average of the sales taxes in the three maritime provinces and add the GST, you get a taxation rate of over 19 per cent. The Minister of Finance decided it would be 15 per cent in future, so he is lowering the three maritime provinces' tax base by more than 4 points, more than 4 per cent. By doing so, however, by voluntarily reducing consumption taxes by 4 or 5 points, under a partisan agreement that hits all taxpayers in the pocket book, the equalization formula will necessarily kick in because the tax base has been lowered.

Once the $961 million are paid to New Brunswick, Newfoundland and Nova Scotia, there is a mechanism which will force all Canadians and Quebecers, with the exception of the Atlantic provinces, to continue to pay this average compensation, hundreds of millions of dollars through equalization payments, because the Finance Minister has decided, in the name of the government, to show off. By doing this he wanted to prove that his government is going ahead with the tax reform, that it has begun to hold its promises on the GST. In fact, the government is doing no such thing since it had actually promised to abolish the GST once in power.

This agreement is getting costly. First of all, it settles nothing, in terms of sales tax harmonisation. There is still going to be a sales tax and there is no single system for the consumption tax in Canada. Second, equalization will come into play in the coming years to add to the first billion dollars paid by the federal government. Third, there is this whole mess created by the finance minister and the government through this agreement.

As if the constitutional muddle he created was not enough, the Prime Minister added to it, through the finance minister, by signing secretly, behind closed doors, this agreement on the GST with three Atlantic provinces, knowing full well that Quebec had harmonized its tax in 1991, at no cost. They did not boast about it. When Quebec costs nothing and Quebec is the most efficient and even one of the most effective partners in the Canadian federation in

trade and economic terms, they try to keep it under wraps, because the nasty separatists do not make good trading partners in this federation.

We are trying to find out more about this agreement. We are trying to find out more about the subject of our remarks this morning, that is, the part of Bill C-31 on the $961 million in compensation paid to the maritime provinces. What is distressing, however, is that we have had no response from the government. We asked for the detailed agreement between the federal government and the three maritime provinces. And we, the Bloc Quebecois, the official opposition, are not the only ones to ask for it. The Government of Quebec asked for it, as did the governments of Ontario and Alberta. Instead of responding, making things clear and revealing the details of the agreement, the Minister of Finance hid behind terms that needed tidying up, saying it would have to wait until next year, perhaps.

(1240)

This is unacceptable. The Minister of Finance signs an agreement with some members of the Canadian federation that costs us $1 billion, and he refuses to tell us how he reached the figure of $1 billion. This is not normal. He will say: ``You know the details. Sales taxes are at approximately 19 per cent in the maritimes at the moment. I have decided unilaterally that the combined tax, the new GST, will be no higher than 15 per cent, and I have decided to make up the difference''.

There are a number of other questions the Minister of Finance is refusing to answer. The first one that comes to mind, which I mentioned earlier, concerns the real cost of the agreement. We are not talking simply about $961 million. There are other implications in terms of equalization payments.

The second question is: ``How were the calculations made?'' Any figure can be arrived at, it is only a matter of working from solid assumptions. But on what basis, on what assumptions was this deal with the maritimes reached, and how was the famous figure of $961 million arrived at?

For example, what is the anticipated revenue from the new goods and services tax in the three maritime provinces for the coming years? Do we at least have projected revenue for 1997-98, 1998-99, 1999-2000 and the following years? It is essential to know this. It is essential because, in addition to reducing the rate in the maritimes from 19 per cent to 15 per cent on average, the tax base has been extended, the new tax has been extended and will from now on apply to services in New Brunswick, in Nova Scotia and in Newfoundland. What more will this bring in, in terms of revenue? Is the extension to services of a 15 per cent tax-which was not applicable to services before-going to generate so much revenue that it will compensate for the reduction of the present tax on goods from 19 per cent to 15 per cent?

It is important to know this. If this extension generates extra revenue, could it be, this is the third question, that the compensation of nearly $1 billion-$250 million and $700 million of which are paid respectively by Quebecers and people in other Canadian provinces-is not necessary? The Minister of Finance said that it was necessary. This is not the way to govern a country. This is not the way to inform the public about the activities of a government, about justified actions of a government.

People need to be given explanations, they need to know this kind of detail to be able to judge the appropriateness of this deal. For the moment, the impression we have-not only us but people like Alain Dubuc, who are not necessarily and even rarely on the side of the official opposition or the Bloc Quebecois-is that it looks suspicious. Not only does it seem partisan, we have indications that it really is, according to the consensus reached outside the maritimes, in particular in Quebec, Ontario and Alberta.

Another question deserves an answer from the Minister of Finance, namely: ``What were the alternatives?'' Considering what happened in Quebec, where both taxes were harmonized without it costing the rest of the country a single cent, where Quebec succeeded in balancing its tax base and found different ways of managing its taxation system effectively, how is it that no alternative was considered to the agreement reached between the Minister of Finance and the three maritime provinces?

(1245)

Could it be that, if the Minister of Finance had done his homework, if it had not been only a partisan matter for the federal government, there could have been other ways of compensating for lost revenues in the three maritime provinces within their own taxation systems?

If the finance minister had acted properly, and had wisely and competently analyzed the evolution of the tax burden as well as the present tax burden of taxpayers in Nova Scotia, New Brunswick, and Newfoundland, he would have easily realized-it does not take a rocket scientist for that-that, by lowering the consumption tax from 19 per cent to 15 per cent with his new policy, he was doing them a favour.

However certain adjustments to the provincial income tax in these three provinces might have been necessary. Without increasing the total tax burden of people in these three maritime provinces, personal and corporate income taxes could have been slightly increased in these three provinces in order to offset the loss in revenue from the consumption tax. It would have been legitimate, efficient and normal since taxpayers in these three provinces will see their consumption tax reduced by four to five points over the next few years and, unless it is decided otherwise, forever.

Would it not have been more logical to find a local solution to a local problem of tax harmonization and efficiency? I think so, and I believe it does not take much figuring out to reach this conclusion. I believe that if the finance minister had really wanted to contribute to improved taxation and to the harmonization of a new tax across Canada, he would have gone about it differently. It would not have been difficult.

I am extremely disappointed by the government's handling of this issue. As I said before, until now we have not succeeded, just as the Quebec government and other provincial governments have not succeeded in obtaining details of this agreement.

Today, in this House, I would like to present the government with a formal request. Would it be possible to shortly obtain all the documents, not only the press releases and the media documentation, but also the technical data at the basis of the $961 million figure, the technical data which would support some sound projections on tax revenues in the maritimes and a cost projection for the harmonization?

When we spend $1 billion, it seems only reasonable that people know what they are paying for. Until now the finance minister's attitude has been outrageous. This scandalous decision comes after others like the $2 billion invested in family trusts which crossed over to the United States without a penny being paid in taxes on capital gains.

For two and a half years now, we have been asking the government to act on that issue. For two and a half years, we have been saying it is inadmissible, but the government does nothing; they sit there and say family trusts are unimportant. That is why $2 billion from two family trusts were transferred south of the border tax free. Today, the government realizes the problem and says maybe we should review the taxation system. For two and a half years, we have been saying that the taxation system makes no sense. Now the government is asking the finance committee to find a solution. It was high time.

To avoid repeating the mistakes due to its incompetence, why is the government not listening to the official opposition, the Government of Quebec, the governments of Ontario and Alberta, Canadians and Quebecers who are asking that it suspend the process leading to the payment of a billion dollars in compensation to three maritime provinces, and that the whole question of harmonization of the GST be submitted to the next meeting of finance ministers which is to be held around June 18?

(1250)

It seems to me that the process would be somewhat more open if the government were to table all the relevant data relating to the GST and make them available to all representatives of the Canadian provinces and Quebec, so they could talk about it and find ways to improve the federal tax system and the provincial tax systems.

It seems to me that, for once, it would be nice to have the Minister of Finance follow his own logic. We are talking about harmony, not just harmonization, between the federal government and the provinces, but when the time comes to make concrete decisions, goodbye harmony. As my colleague from Rimouski-Témiscouata would say: poof! harmony.

It seems to me it is high time that, for such important questions regarding taxation of consumer goods and services, the Minister of Finance be more open, that he table the technical documents we request and, moreover, that he discuss this question of harmonization of the GST and provincial sales taxes with his provincial counterparts at the next conference. In the meantime, he should stop implementing processes like this one which involves payment of $1 billion in compensation.

I think that most Quebecers and Canadians would be better off if the Minister of Finance were to listen to us, for once, and stopped acting that way. For all these reasons, on top of asking for suspension of the payment of $961 million, I urge all my colleagues in the official opposition, in the Bloc Quebecois, to vote against this bill.

[English]

Mr. Leon E. Benoit (Vegreville, Ref.): Mr. Speaker, I rise to speak at third reading of Bill C-31, the budget implementation act. In my speech I will critique the latest Liberal budget on how it responds to the wants and needs of Canadians.

I will focus on the main concern of all Canadians, namely, the creation and preservation of long term sustainable jobs. I will critique the Liberal government's performance in creating jobs, which is what it promised during the last election and since, and compare the results with the Reform Party's plan for economic prosperity.

A government budget is more than a forecast of spending practices. It is a game plan, a master plan which tells the people what are the intentions, the priorities and the goals of their government. It is a promise of performance.

The previous budgets of this government have been small steps in the right direction. The intention: deficit reduction. The priority: job creation. The goal: a better economic future for Canadians.

Even though the route taken by the Liberals has been slow, arcane and convoluted, on this side of the House we felt that they were headed in the right direction with past budgets. The 1996-97 budget is a much different story. The intention: to pull the wool over the eyes of Canadians. The priority: to maintain the status quo. The goal: to lead Canadians to believe that it has delivered on its promises in order to get re-elected. Canadians are smarter than that.

The government has promoted its political interest by subordinating the interests of hard working, tax paying Canadians. The government and, in particular, the Prime Minister and the Minister of Finance should be ashamed of themselves. We in the Reform Party feel that it is our obligation as elected representatives to get to our electorate to find out what our constituents want and to represent them in the manner in which they want to be represented. As this is not the practice of many members opposite I will take a few moments to tell them what Canadians wanted from this budget.

Canadians wanted five things. They wanted long term sustainable jobs, tax relief, long term sustainability for social programs, an increased standard of living and to know when the government will balance the budget. Many Canadians have come to realize that the first four items on their list cannot be achieved until the government stops adding to the debt and the interest payments to service the debt. This list cannot be achieved if the debt is not stabilized and then reduced.

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This list is not too much to ask from a government that campaigned on creating opportunities. Canadians were not expecting the government to create for them the opportunity to file bankruptcy or the opportunity to watch their jobs head south of the border or the opportunity to see their payroll and gas taxes skyrocket. It is probably not very comforting for Canadians to know that all of these opportunities are considered to be acts of God by our Prime Minister.

Rhetoric aside, let us take a closer look at this taxpayers' wish list to see how well this budget comes through for Canadians. First is the area of long term sustainable jobs. Canadians want work. They want to pursue employment opportunities created through a healthy and prosperous economy.

The government claims to have created hundreds of thousands of jobs. In the year ended December 31, 1995, employment had grown only a meagre 8,000 jobs. That is a fact. This number represents half a per cent of the labour force. Of course, these jobs were not created by government-nor should jobs be-but rather by companies and individuals.

The national unemployment figure is hovering just shy of the double digit range and does not take into account those who are no longer looking for work. The actual percentage of unemployed Canadians is approximately 13 per cent when including those who have given up looking for work. This figure is doubled when applied to unemployed youth.

The government has said that it is dealing with student unemployment. The budget contains a new initiative to spend $250 million on jobs for a few lucky students. These jobs will provide summer employment for a minute percentage of our youth. However, the initiative will not help to create real employment opportunities after graduation.

I would have thought that after the huge success-I say this with tongue in cheek-of the national infrastucture program, the government would have realized that throwing money into make work projects does not create meaningful jobs.

The second thing Canadians want from a budget and from a government is tax relief. The level of taxation in this country is one of the major job killers. This happens on many different fronts. Many corporations that are looking to expand operations do not consider Canada because of the outrageous level of taxation. It is a killer of potential jobs for Canadians.

Many companies in Canada cannot afford to maintain the size of their workforce due to the taxation cost per employee. This results in mass layoffs and downsizing and is the killer of present jobs.

In 1995, based on an average family income of $57,000, this family paid over $27,000 in taxes of one type or another. That is a taxation level of 46 per cent. Some estimates show the level at over 50 per cent when all types of taxation are considered. The average Canadian family's tax bill has increased by over 1,000 per cent since 1961 under successive Liberal and Conservative governments. That is not double, nor is it increased by a factor of 10. It is a shameful record. This budget does not provide tax relief.

Third, Canadians expect the budget and the government to preserve social programs. Canadians are concerned that the funding available for social programs such as health care, old age security and unemployment insurance will be swallowed up by debt servicing costs, that is, the interest payments on the debt. Currently Canada wastes close to $50 billion a year servicing the debt. That $50 billion is no longer available for social program spending on important programs such as health, education and pensions.

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This has resulted in tax grabs and clawbacks, especially from our seniors. The changes to the mandatory withdrawal of RRSPs and the clawback on federal pensions at $40,000 are robbing our retired seniors of the savings they struggled for decades to accumulate.

The government promised to maintain universality of social programs. During the last election campaign the Reform Party proposed reducing and eliminating pensions for seniors who were above the average Canadian household income of $53,000. When we came out in the open and presented very honestly our zero in three plan the Liberals condemned us to Canadians for wanting to end universality of social programs. In the finance minister's last

budget he, the same person who condemned us for our zero in three plan, ended universality of seniors pensions.

The dishonesty is astounding. I think Canadians should know about it and consider it as we get into this next election period.

By not dealing with the deficit in the budget and with the debt continuing to grow and therefore the cost of servicing the debt, the government is jeopardizing the social programs which are most important to Canadians.

The fourth thing Canadians wanted and expected from the budget was an increase in the standard of living. For the last two decades Canadians' standard of living has been dropping. That is, take home pay after taxes and other payroll deductions has been decreasing steadily for the last couple of decades. Since 1989 Canadians have suffered an 8.6 per cent drop in real disposable income. That is just since 1989. This is attributable to an ever increasing tax bill. Due to ever growing levels of taxes and payroll deductions Canadians have less money to invest, to buy a car with, to buy a home with or to take that elusive dream vacation.

The Canadian standard of living has stagnated and regressed to the point where present and future generations will be worse off than their parents. This scenario is courtesy of the tax and spend policies of the present and previous Liberal and Conservative governments. Clearly the blame is to be laid on previous Liberal and Conservative governments and on this Liberal government.

The budget does not allow for an increase in the Canadian standard of living, the fourth thing Canadians wanted and expected from the government and the budget.

The fifth thing they wanted was a definite date for balancing the budget. In a recent poll 66 per cent of Canadians surveyed expressed the belief that the government has not gone far enough with its deficit reduction plan. The Liberals are content to delay the inevitable, bleeding red ink at a rate of over $80 million a day. This means the government spends $80 million a day, still more than it brings in; this is in spite of huge increases in tax revenues over the term of the government.

Every legislative body in the country has made a commitment to get its financial house in order except for the federal government. Because of this inaction the national debt is barrelling toward $600 billion. Currently the debt load is over $40,000 for every Canadian taxpayer.

The government blames the private sector for not doing its part to create jobs. Instead of lecturing the business community on how to create jobs, the government should work hard and make the difficult decisions necessary to balance its books by the end of this mandate. In doing so it would create an environment conducive to economic growth and job creation.

I quote the finance minister from his budget speech of February 1994: ``For years governments have been promising more than they can deliver and delivering more than they can afford. This has to end and we are ending it''.

The question that comes to mind now is when. When will the government end the ever increasing debt which requires the ever increasing interest payments to service?

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The government's budgets have left Canadians with a deficit of over $30 billion. Since the Liberals took power in 1993 the national debt has grown by over $100 billion. The only thing the Liberals are putting an end to are jobs, economic growth, disposable income and certainly not the ever increasing debt.

It is not my intention to paint a dismal picture of Canada. Canadians are creative, industrious, hard working people who deserve a government which will legislate changes in their best interests.

Canada has the potential to be one of the economic powers of the global market. However, until the financial crisis is under control this potential of prosperity is in jeopardy. Do not take my work for it. This is what the experts are saying about this past budget of the finance minister, the budget which this legislation we are debating today would implement.

Diane Francis of the Financial Post stated:

The Liberals are not doing the cutting fast enough. By failing to cut deeper, faster, the Liberals ignore the real possibility that another recession will hit in a year or two and land us back in the deficit.

The government did not seize a most important opportunity to clearly reinforce its resolve to deal with our national finances. It is important that all Canadians not only understand when a balanced budget will be realized but also when surpluses will be created to facilitate tax reductions, systemic debt retirement and greater flexibility with our important social programs.

If we are going to see some enduring job creation and not just some political quick fixes like some of our youth initiatives, then we have to see a reduction in taxation on jobs, and we did not see that in this budget.

We are all left sitting on a ticking time bomb which grows by the second called the national debt.

asking us where our new budget is. When you do it right the first time, you do not have to redo it.

We did it right the first time with our taxpayers budget. The taxpayers budget is a logical, comprehensive, efficient plan to balance the federal budget. We stood behind it when it was first released in early 1995 and so did many of the experts. We still stand behind it because it works.

When asked difficult questions regarding cuts to social programs, the finance minister often refers to the so-called cold hearted Reform Party. He would have Canadians believe that I and my colleagues would sell our dear mothers down the river in the name of deficit reduction. It is the finance minister who has not only sold mothers down the river but has sent the farm with them.

The Reform Party's taxpayers budget established an old age pension clawback for those seniors whose yearly household income is $54,000 or higher. We felt these seniors were able to live comfortably without the assistance of the federal government. This was a difficult decision to make but we were forthright and had the courage to state our objections in writing.

The Liberal plan for old age security, and I have referred to it already, establishes a clawback for seniors benefits at $40,000 a year and ends universality of seniors pensions. Surely the finance minister must be apologetic to our mothers and fathers who find themselves paddleless on that infamous creek.

The finance minister is suddenly and conspicuously quiet on the subject.

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Why is he so quiet? My guess is he has finally taken time to read our taxpayers budget and is trying to steal our ideas without our noticing. I have news for the finance minister. He can have them. We presented the taxpayers budget for him to look at and to learn from. That was our intent.

He would do well to take them and put them in effect. We would see the positive results of that budget. To make it absolutely clear, the Liberal government has cut about $3.5 billion more in the areas of health care, education and welfare than the Reform Party proposed in our taxpayers budget.

The same government, Prime Minister and finance minister who call Reformers heartless have themselves reduced federal government payments for health care, welfare and education by $3.5 billion more than the Reform taxpayers budget.

What would Canadians gain through the implementation of the taxpayers budget? If I wanted to be curt, I could mention everything they have lost through the irresponsible practices of the present and past Liberal and Conservative administrations. Unfortunately it is not that simple.

The most important aspect of the taxpayers budget is that it takes place over a relatively short time period. Canadians would regain control of their financial lives quickly. Canadians would be freed from the strains of our overburdened tax system and would be able to plan for their futures in a stable economy with sustainable, universal social programs.

The taxpayers budget offers deficit elimination and tax relief which would stimulate long term private sector job creation. It offers a more secure society established through the re-examination and reform of social programs, the unemployment of individuals and families and the decentralization of social program delivery.

Reform's formula is one that will eliminate the deficit in a quick, calculated, humanitarian way. Debt reduction and increased consumer activity will lead to job creation. However, there are other essential components to creating employment opportunities.

These are spelled out in Reform's five R plan in the taxpayers budget: reduce the federal debt, relieve Canadians of their tax burden, restore labour market efficiency and reduce social program dependence, remove barriers to internal and external trade, and renew Canada's physical and intellectual infrastructure.

The combination of these components is a sure fire way to create an environment in which the private sector can thrive and in so doing create long term, sustainable employment.

I have already spoken of the importance of reducing the deficit and relieving Canadians of their tax burden. Notwithstanding the importance of the previously stated issues, I will focus the remainder of my speech on an area of job creation which I am particularly interested in.

As the Reform Party internal trade critic, I am quite concerned about the lack of action taken by the government in dismantling barriers to internal trade. We in the House recently debated Bill C-19, implementing an agreement on internal trade.

The government stated in the red book and in both throne speeches that it is committed to the dismantling of the barriers to internal trade. If this were truly the case, why did the government pass Bill C-19 two weeks ago, 10 months after the agreement on internal trade came into effect?

While the agreement on internal trade is weak and in some areas actually tends to enshrine barriers, exactly the opposite of its intention, at least it was a start. Yet the legislation to implement the agreement was not passed in the House until 10 months after the agreement came into effect, almost two years after the agreement was reached in the first place.

Interprovincial trade barriers cost Canadians jobs and money. These are the two criteria budgets traditionally address, jobs and money. A budget is supposed to outline what initiatives have been undertaken to stimulate the economy, resulting in jobs and money.

This budget is a sunshine budget. The message of don't worry, be happy does not wash with me or with Canadian taxpayers. We are supposed to believe the government is doing all it can for Canadians. To listen to the finance minister, he has not left a stone unturned in his search for job creation and debt reduction.

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Unbelievably, the Prime Minister stated last week in Calgary that high unemployment is unbeatable. The Prime Minister has thrown up his hands and has said that we will have to live with unemployment because we cannot beat it. Canadians are stuck with high unemployment under this government. If the Prime Minister is throwing up his hands and surrendering to unemployment, then he should step aside. There is plenty which can be done right here at home to deal with the high unemployment rate.

To start with, quick action should be taken to remove barriers to internal trade. These barriers between the provinces are a serious hurdle on the road to economic prosperity. Business groups, think tanks and academics across Canada all agree that it is in the economic best interests of all Canadians for trade barriers to be eliminated.

According to the Fraser Institute, if Canadian firms were able to operate freely across the country, the average Canadian household income would rise by as much as $3,500 a year. This is another means of putting dollars back in the hands of Canadians. This is a matter that this government refuses to address in a serious way.

The Canadian Manufacturers' Association, the Fraser Institute, the C.D. Howe Institute and others estimate that internal trade barriers cost Canadian businesses between $6 billion and $10 billion a year. It amazes me that this situation has not been addressed in any substantive way by the government. Stephen Van Houten, president of the Canadian Manufacturers' Association, said that trade barriers result in lost sales, lost investment and lost jobs.

Many Canadian businesses have had to resort to going through the United States, through American companies, in order to do business with businesses in other Canadian provinces. It is sad that it is easier to do business with the United States and Mexico than it is with other provinces.

Members may ask how this will affect job creation. Many companies are forced to leave Canada because they simply cannot afford to stay. When they leave they take with them Canadian jobs. Businesses leave Canada, certainly for many reasons, all of which must be eliminated.

I have already talked about the high taxes and payroll deductions driving businesses and jobs out of Canada. Excessive government regulation and interference is another factor causing businesses to leave this country. The restrictions and barriers to internal trade are another. We are not talking about a few dozen jobs. We are talking about tens of thousands and probably hundreds of thousands of jobs all lost because government in this country will not eliminate the barriers to internal trade.

I will cite one example. I will not use the company's name because I have not asked permission to do so. There is a company in northern Ontario that specializes in the high tech industrial heat treating of materials. This company is state of the art. Its workers are highly skilled at their trade. The company entered into tendering competitions for government contracts in Manitoba and Quebec. In both cases, the Ontario company could provide the best product at the lowest price. There was no doubt about that.

In both cases it was awarded conditional contracts. In Manitoba, the job would be awarded if this company would post an enormous payroll bond to cover its workers, a bond which was completely out of reach for this small company. In Quebec, the contract would be awarded only if Quebec workers were used. This is a highly specialized company which has spent a lot of time and money training staff to do a highly specialized job very efficiently. In both cases, the cost of doing business in Canada was too high.

The company is now contemplating taking its business and its high paying jobs to the United States where it can use the NAFTA agreement to gain access to Ontario and Manitoba. Does this make any sense? This kind of nonsense has to end and it must end quickly.

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I could literally go on for hours citing examples of unjust trade restrictions within Canada. They would all draw the same conclusion: we must do something to rectify the situation. Patriotism should not be the sole rationale for doing business inside Canada.

With regard to internal trade barriers many companies have stated that the only reason they are staying in this country is that they are patriotic Canadians. One after another have said that patriotism can only go so far and that if things do not change, these companies will move their businesses to the United States, Mexico or elsewhere.

I will now summarize the government's approach to budgets to date. In the 1994-95 budget the Liberals tried to grow out of debt through make work projects. In the 1995-96 budget the Liberals tried to tax their way out of debt through payroll and gasoline taxes. The 1996-97 budget is really a do nothing budget intended to

stupefy the masses into believing that all is fine and that the problem has been solved.

I will conclude by reading an excerpt from the C.D. Howe study, ``Deficit Reductions-What Pain, What Gain''. This study should be required reading for anyone who believes that we can first, grow our way out of debt; second, tax our way out of debt; third, do nothing about our fiscal crisis. The study concludes by stating that short term sacrifice for deficit elimination can yield a rich, long term return.

The long term benefits of balancing budgets in a quick and efficient manner will accomplish the following: First is income and job security. A balanced budget will put an end to the downward spiral that we have seen in take home pay over the past 20 years. Second, it will provide tax relief. By controlling spending and balancing the federal budget, taxation levels would be reduced in conjunction with deficit and debt reduction. Third is social program security. By ending the continual increase in interest payments on the debt, tax dollars could be directed to maintaining social programs such as health, education and pensions which are so important to Canadians.

The answer is quite clear. The environment for job creation can be achieved through the taxpayers budget or a similar approach. It also will require dealing with and eliminating internal trade barriers. This can and must be done.

Through my speech today I have shown that the 1996-97 Liberal budget and the Liberal government's entire approach to fiscal reform is ineffective and does not respond to the needs of Canadians which have been stated quite clearly across the country. In this budget Canadians wanted job creation, not vote creation. I believe that Canadians can see through the statements of the finance minister and others that the problem has been solved. The budget will not end up being a vote creator.

The Deputy Speaker: The Chair had an indication that another colleague wished to speak but I do not see him in the House.

Is the House ready for the question?

Some hon. members: Question.

The Deputy Speaker: Is it the pleasure of the House to adopt the motion?

Some hon. members: Agreed.

Some hon. members: No.

The Deputy Speaker: All those in favour of the motion will please say yea.

Some hon. members: Yea.

The Deputy Speaker: All those opposed will please say nay.

Some hon. members: Nay.

The Deputy Speaker: In my opinion the yeas have it.

And more than five members having risen:

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[Translation]

The Deputy Speaker: Call in the members.

And the bells having rung:

The Deputy Speaker: Dear colleagues, the recorded division on the motion stands deferred until 6.30 p.m. today.

* * *

INCOME TAX BUDGET AMENDMENT ACT

Mr. Barry Campbell (Parliamentary Secretary to Minister of Finance, Lib.): Mr. Speaker, I welcome the opportunity to begin debate in support of Bill C-36, the Income Tax Budget Amendment Act, 1995. I will begin my remarks with a few observations about the context of the tax measures we are proposing. To do that I must revisit the challenges the country faced and the expectations of the people we represent when the 1995 budget was introduced.

[Translation]

Then-as now-, Canadians wanted their governments to spend their money and to make savings in a sensible way, according to their values. And their values were undeniably reflected in the principles guiding our budgetary decisions.

These principles, underlying the bill being debated today, were set forth by my colleague, the Minister of Finance, in his budget speech.

The first principle stated that the government had to put its house in order. In other words, the budget had to focus on reducing program spending, rather than increasing taxes.

Another principle emphasized the need to be fair, fair toward the various regions of this country and its different citizens.

[English]

The record shows that we kept faith with Canadians. For the three year period that was the focus of last year's budget, from 1995-96 to 1997-98, the government has secured almost $7 in spending cuts for every dollar in new taxes. The spending reduc-

tions that were set out for the three year period total $25.3 billion and we took care to ensure that the burden was shared fairly.

Some $16.9 billion, or two-thirds of the total cuts, are to come about because of program review actions announced in the 1995 budget. This top to bottom re-evaluation of what government does and how government spends is now well under way and reflects an important reality of the 1990s.

In today's world where resources are limited, there is no question that government must change. If we are to do a better job of meeting key priorities we must reduce our presence in areas where others can do the job better.

The results of our actions in all three budgets introduced by this government speak for themselves. In 1993-94 federal program spending stood at $120 billion, or almost 17 per cent of GDP. By 1998-99 the money we spend on programs will be down to $105.5 billion, or 12 per cent of GDP.

From the start we set out tough deficit targets and we are firmly on track to meeting them. Our milestone is a deficit equal to 3 per cent of GDP for this fiscal year and 2 per cent next year.

[Translation]

As I mentioned previously, most of our decisions focused on reducing expenses. But, given the size of the challenge, we could not avoid a reform of the tax system.

In the budget speech, the minister pointed to the fundamental principle guiding our tax policy: taxes involve more than just rates, there is also the question of fairness.

With this in mind, we introduced a number of tax measures increasing the fairness of the system. We did not, however, increase personal income tax rates. In fact, we have not changed these rates in any of our three budgets, because we are well aware of the deep exasperation felt by many Canadian taxpayers.

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I would like to briefly describe a number of measures we are proposing in the bill before us today.

I am sure all members will agree that fiscal equity begins with the collection of all taxes payable. We cannot allow some Canadians to evade their duty at the expense of other taxpayers.

[English]

Measures in this budget will protect the collection of source deductions made for income tax, Canada pension plan contributions and unemployment insurance premiums. Let me explain.

There have been cases where taxpayers are encouraged or even forced by third parties in a position of influence not to remit source deductions and similar withholdings. This can happen, for instance, where a secured creditor of a taxpayer in financial trouble controls the disbursements of the taxpayer's business. In an attempt to recoup its own losses, the creditor permits the payment of wages but refuses the remittance of source deductions and similar withholdings.

To protect source deductions in these and similar circumstances the government proposes amendments that would make such secured creditors liable to pay unremitted source deductions, along with any interest and penalty charges, just as the taxpayer is liable.

It is also proposed to allow Revenue Canada to exchange business name and address information with other federal departments and the provinces when they adopt the business numbers to identify corporations, partnerships or certain associations of taxpayers. This will allow federal departments and provinces to cut duplication, simplify business registration and develop joint business services. From the business person's point of view it will reduce the cost of compliance and give access to more effective government services.

[Translation]

I would now like to talk about the measures in this bill that propose changes to the tax system itself, changes that will make the system fairer. For example, we propose to change the tax system on investment income of private holding companies by eliminating the attractive deferral opportunities that existed until now.

Also, the current film incentive measure will go from the present tax shelter, which profits high income investors, to a new refundable credit offered directly to Canadian film producers.

[English]

The government is also acting to eliminate tax advantages flowing from family trusts. This includes repealing the previous government's decision to allow deferral of the 21-year rule.

I will now turn to other tax issues. First, measures in this bill affect the tax assistance the government provides to Canadians to encourage them to save for retirement. In last year's budget it was announced that the contribution limit for RRSPs would be reduced to $13,500 for this year and next, then allowed to rise incrementally to $15,500 by 1999.

In that budget it was also announced that the contribution limit for money purchase registered pension plans would be reduced to $13,500 for this year, then rise incrementally to $15,500 by 1999. However, in this year's budget the government announced that the contribution limits would instead be frozen at $13,500 for another six years, that is until 2003 for RRSPs and 2002 for money purchase plans.

The legislation before us implements the changes to the contribution limits announced in the 1995 budget. The further freeze in the limits that was announced this March will be dealt with at a future date.

As well, under this legislation, the amount of over-contribution allowed to an RRSP without being subject to the one per cent per month tax penalty will be cut from $8,000 to $2,000. There are, however, some traditional measures to accommodate taxpayers with prebudget over-contributions below the old limit but above the new one.

The 1995 budget changes will being the limits closer to the original pension reform target of providing tax assistance on earnings up to two and one-half times the average wage. The subsequent 1996 changes will bring this target down to two times the average wage, allowing us to better target this assistance to those who need it most, modest and middle income Canadians, while limiting the cost to the government and all its taxpayers.

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As we consider the Canada of the future, in the early decades of the next century, there can be no question about the need to encourage retirement savings. In so doing we help today's wage earners prepare for their eventual exit from the workforce and thus avoid a too heavy reliance on public pension and income support programs in years to come.

Let me pause for a moment and mention one measure being introduced which affects today's higher income seniors. These individuals must repay part of the old age security benefit to the extent that their income exceeds an indexed threshold of $53,215 for this year. Through Bill C-36, instead of having them receive the full benefit and then make a repayment when they file their income tax, the government proposes to reduce the benefit before it is sent out. I want to stress that the level of the clawback is not being changed with this measure but simply how it is implemented.

Let me now turn to another issue which I wish to discuss in some detail, the action to eliminate the deferral of tax on business income. Under current law unincorporated business owners can use a fiscal year that does not correspond to the calendar year. If the year end is, for example, January 31, then all income for the remaining 11 months is added to next year's taxable income. Needless to say, taxpayers taking advantage of this feature enjoy a significant benefit over others. This approach runs counter to the general rule for taxpayers that income is taxed in the year in which it is earned.

To remedy this situation and to treat all taxpayers as equally as possible, a new rule was announced that would require all sole proprietorships, professional corporations and partnerships to have a fiscal year end of December 31. This proposal, however, came in for considerable criticism from many business people who are affected by the change and from members of this House.

The government has listened to them. It recognizes that some of the comments made to us were valid. Many businesses are of a seasonal nature and a fiscal year end of December 31 imposes hardships on them. Operators of a ski hill, for example, would prefer to focus on their business in the winter months, not on their accounting.

Second, a uniform year end would see much of the demand for accounting services concentrated in December and the few following months. In contrast, the variation of year ends allowed by the current system spreads the work more evenly throughout the year to the benefit of small businesses as well as their accountants.

The response has been to provide an alternative method of calculating income, one that addresses the goal of treating taxpayers as consistently as possible and at the same time allowing small business to retain a fiscal year end that reflects their needs.

Under this method taxpayers with a year end other than December 31 will have to adjust their income to take account of earnings between their fiscal year end and the end of the calendar year. There will be, of course, a transitional provision so taxpayers can allocate additional income from 1995 to future tax years. This alternative method will be available to individuals carrying on a business and to partnerships where all members of that partnership are individuals.

Let me also mention in passing that the decision to allow individuals to retain a fiscal year that does not end on December 31 has implications for their remittance of collected GST amounts. Individuals will continue to have the option of adopting their fiscal year for GST purposes.

The third area I wish to discuss is changes the budget made to corporate income tax rates. The government announced an increase in the large corporation tax by 12.5 per cent. As well, it proposes to raise the corporate surtax on profits from 3 per cent to 4 per cent. Taken together, these two measures will generate an extra $260 million annually.

The goal is to ensure that big companies contribute a more equitable share of the burden required to bring the deficit down. A temporary tax is being imposed on the capital of large deposit taking institutions, including banks. From February 27, 1995 to October 31, 1996 the budget anticipated this would raise $100 million over the covered intended period. Life insurance companies, which already pay an additional capital tax, would not be subject to this temporary surcharge.

Finally, let me mention one amendment that is not targeted at the fiscal environment but is targeted at the natural environment. The legislation acts to eliminate the current limit on the charitable donations credit for the donation of ecologically sensitive land. The current limit is 20 per cent of income, a level that may be a

disincentive in some cases where the value of the land is high relative to the donor's income.

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This measure reflects the fact that the government appreciates not only the vital importance of environmental action, but also the growing importance of the charitable sector in Canadian society. In this year's budget, for example, a number of additional measures were announced that will be introduced in the months ahead.

[Translation]

The tax changes we are proposing in this bill are fair and equitable. They are totally in accordance with the principles we have set for ourselves to give direction to the tax policy. These principles, as I am sure members are well aware, reflect the values and expectations of Canadians.

As elected representatives of the Canadian people, we would fail in our duty if we departed from these principles. That is why I urge my colleagues to join me in supporting this important bill.

Mr. Yvan Loubier (Saint-Hyacinthe-Bagot, BQ): Mr. Speaker, I am happy to participate in the debate at second reading of Bill C-36, an act to implement certain provisions of the budget-not the last one tabled by the Minister of Finance, but the 1995 budget.

First of all, regarding the government's behaviour, it is quite remarkable that, more than one year after tabling a budget, the government reintroduces provisions that had been announced at that time while focusing on beneficial measures from the 1995 budget, which may appear small but which are in fact magnified a thousand times. This amounts to doing the same thing twice so as to heap praise on the government and the Minister of Finance. I think the secretary of state has become an expert on this.

In the next few minutes, I will go over four of the measures in this bill which are especially important. I will talk about two positive measures on which the official opposition agrees with the government, and about two measures which, in our opinion, are highly detrimental.

I will first approach Bill C-36 in a general way. When one compares the measures in this bill with the responses given by the Minister of Finance since the 1995 budget, it is like water and fire, like night and day.

Since the 1995 budget and again recently, the Minister of Finance has often told us: ``Since the 1995 budget, and even since the 1994 budget, I have put in place tax reform measures to make the Canadian tax system more effective, to correct the inequity, the imbalance between businesses that pay no taxes and those that pay taxes every year. Since my 1995 budget in particular, I have taken steps to correct inequities between individuals who pay too much tax and some businesses that do not pay any''.

We in the official opposition say again to the Minister of Finance that he has done nothing to make the Canadian tax system more equitable. He has done nothing to make global or specific improvements to the Canadian tax system since taking office, since his first budget in 1994 even. He has done nothing to close tax loopholes, and this lack of action, this laissez-faire attitude is apparent in Bill C-36.

Since this bill contains measures relating to tax deferral and corporate income tax, why did the minister not take the opportunity, in preparing to table his budget, to truly reform our tax system, as we have been requesting ever since we were elected to this place?

If those are the measures on the basis of which he boasts day in day out to have ``plugged the tax loopholes'', it is clear-plain as day, as we would say back home-that it makes no sense whatsoever. Referring to tax deferral measures, he claimed to have fixed the problem, rectified the inequity in situations where a corporation could defer tax, perhaps indefinitely, in combination with accelerated depreciation for instance, so that it never paid a cent in taxes. He claims to have resolved the problem. He keeps referring to the 1995 budget.

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What does the 1995 budget provide for on the particular matter of tax deferral? According to this budget, any corporation that is not a business corporation must end its financial year on December 31 instead of carrying income forward 18 or 24 months.

That is not it. If that is the finance minister's basis for stating: ``Indeed, we have managed to ensure that all corporations pay the tax they owe'', it is skimpy. Very skimpy in fact, as it does not even meet one tenth of the target the Minister of Finance claims to have met.

This is so remote from the actual objective that recently, when the issue of the capital gains tax was raised, the Toronto Star showed the weaknesses of the Canadian tax system, including loopholes that were in no way eliminated by the finance minister, whether through Bill C-36 or even the February 1994 budget. The Toronto Star wrote that ``a Revenue Canada report''-not a Bloc Quebecois report, a Revenue Canada report-``released last month indicated that, in 1991, assets worth some $60 billion-that is a lot of money, a lot of wealth-left Canada without the department being able to identify the origin and destination of this money''.

The Toronto Star suspected that these $60 billion worth of Canadian assets had been secretly transferred to tax havens, thanks to the permissiveness and flexibility of the Canadian tax system. Mr. Speaker, we are talking about $60 billion worth of assets.

If this was the case in 1991, if no corrective measures were taken, if the Minister of Finance only kept telling us that we were wrong, that the Canadian tax system was good, that it was airtight and that we could rely on it to prevent capital flight and outright tax

evasion schemes such as the ones mentioned in the Toronto Star, then we have a problem.

A number of parties, including the major Canadian banks, were identified as having taken part in this massive tax evasion scheme.

We keep repeating to the Minister of Finance, the Prime Minister and the former and current revenue ministers that it is not normal that major Canadian banks have some 46 branches in Caribbean countries alone, which are considered to be tax havens. It is not normal that these banks have twice as many branches in the Caribbean as in the rest of the world.

Now, we learn that, as regards the tax evasion scheme whereby $60 billion worth of assets left Canada, a finger could be pointed at the major Canadian banks.

Everyone in Quebec and in Canada knows that the official opposition energetically accused the government of being too soft and decried the tax loopholes, by pointing out the opportunities for the businesses and the banks, as well as some of the richer families in Canada, to avoid paying their share to Revenue Canada. Even if the Minister of Finance said: ``You are exaggerating. It all amounts to a few dozens of millions of dollars'', we now know that billions of dollars, as stated in a Revenue Canada report, could leave the country and dodge income tax, that is evade the Canadian tax system.

We now have the evidence. The Minister of Finance was proud of his 1995 budget as reflected in Bill C-36. He even told us that there were no problems.

The government has made quite a few blunders, Mr. Speaker. An unkept promise about the GST; what amounts even to the most federalist of Canadians to a $1 billion partisan agreement to buy the maritime provinces; the many more blunders on constitutional issues. Now, with flights of capital of such magnitude, we realize that the Minister of Finance did not improve the tax system. This all adds up to a lot of bad points for the government.

So much for the overall approach. Let us now examine the more specific measures.

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Bill C-36 deals in part with family trusts. The Minister of Finance is not a fast worker, since it took him more than a year to implement last year's budget. In 1995, the Bloc Quebecois called the Minister of Finance a ``stand-up comic'' and said that the minister was putting up smoke screens.

The Minister of Finance pretended to address an issue that is close to the hearts of the official opposition members, because it is quite a scandal, and said: ``We have taken some measures concerning family trusts''. You can take any measure on any possible issue and still not do your work, and that is exactly what the Minister of Finance did in 1995.

He said he was going to amend the rule allowing taxes on assets held in family trusts to be deferred, a rule that had been amended by the previous government and that allowed a taxpayer to defer taxes up to 80 years. Under the provisions of this rule, it was possible to defer tax on capital gains until the death of the last exempted beneficiary.

The Minister of Finance told us this would be corrected and we would go back to the old rules. We were happy, because under the old rules you had 21 years, which, while not perfect, was better than 80. At least after 21 years, taxes were paid on billions of dollars worth of assets that were accumulating in family trusts.

But the Minister of Finance immediately followed this up with the announcement that the 21 year rule would not take effect until 1999. If you were a trustee, if you had billions, tens of millions, even hundreds of thousands of dollars in a trust, what would you do? I ask the question and I will give the answer. I think you would investigate all the fiscal options open to you with a view to minimizing the tax you had to pay to Revenue Canada.

The Minister of Finance has given very rich Canadian families and large businesses, which also use trusts, an opportunity to analyse all the financial and fiscal vehicles available, and he has given them four years to transfer their money from family trusts to other vehicles, or worse yet, outside Canada.

When we voiced our objections, the Minister of Finance said: ``Well, what do you expect, the official opposition is just a bunch of separatists''. The usual attack, and the usual rhetoric we have come to expect from this government. There always has to be a scandal somewhere, something has to happen. Even though we have been saying and shouting for two and a half years that the government is losing hundreds of millions if not billions of dollars in taxes, it always takes a bombshell for the government to finally see the light.

This bombshell came three weeks ago when the auditor general said that two family trusts had transferred $2 billion worth of assets to the United States without paying any taxes on these assets. The finance minister said that family trusts were not a problem, that he would deal with that but we had to give him four years to do it. That meant we had to give Canada's richest families, like the ones that transferred $2 billion worth of assets to the United States, four years to find ways not to lose money.

But the ordinary Canadian taxpayers will pay. They are the ones who will pay for those $2 billion that were transferred to the United

States tax free because of this government's laxness. Taxpayers will pay, consumers will pay, unemployed people who are the victims of this government's cuts in the unemployment insurance fund will pay. It is outrageous.

Considering the sacrifices that ordinary Quebecers and Canadians are being asked to make, that the real taxpayers who are supposed to be represented by the members of this government are being forced to make, we will continue to ask not only that the issue of the 21 year rule be dealt with, but also that the appropriateness of maintaining an instrument such as family trusts at the expense of Quebec's and Canada's real taxpayers be looked at.

(1355)

A second aspect of Bill C-36 which has something indecent about it. The Secretary of State was saying this morning ``As a government, we have met our responsibilities. We have taxed the major chartered banks. We have levied a special renewable $160 million tax''.

There is a special tax of $160 million on the chartered banks, banks which have amassed some $5 billion in profits. Yet those banks, if we can believe a Toronto Star article which reports on the contents of a Revenue Canada report on tax evasion and refers to the $60 billion in assets siphoned off to the U.S. and just about everywhere else, are not paying the federal government, Revenue Canada, its just dues. They are taking advantage of tax loopholes to transfer part of their untaxed funds into branch operations, particularly in the Caribbean. As I have said, there are 46 of these. It is easy for them to plan their affairs so as to pay the minimum in taxes.

Mr. Speaker, since you are indicating that I have two minutes left, I will end with this measure and continue after question period. The banks are being hit with $160 millions in taxes-a temporary measure-when, at the other end, there is $60 billion in tax evasion and $2 billion that went to the United States untaxed through family trusts.

We should compare the $160 in special tax on the banks to the billions it is costing Quebecers and Canadians with the restrictions in unemployment insurance, for example, and with the cuts to social assistance, post-secondary education and health. I think Quebec and Canadian taxpayers will realize that this government is working, but not necessarily in their best interest. It is working more for big business; for the powerful families, like those that succeeded in transferring $2 billion through family trusts without paying tax; and for certain financial institutions, including the banks. I will return to this in my analysis of Bill C-36.

The Speaker: My dear colleagues, it being nearly 2.00 p.m., we will now proceed to Statements by Members.