December 16, 1971

LIB

Eric William Kierans

Liberal

Mr. Kierans:

Mr. Speaker, a nation's natural resources are not past-production; they are the wealth of its soil and waterways. As such, they cannot be viewed in the same light as current production, as goods and services that we produce each year. Those goods can legitimately be disposed of at will by the people who produce them currently in any given year. Resources are a trust. They have been received from the past. They are to be husbanded by the present generation and they are to be passed on to future generations. A generation that deliberately squanders a nation's natural wealth-I emphasize "deliberately squanders"-to enhance its own standard of living will have much to answer for.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
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Some hon. Members:

Hear, hear!

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LIB

Eric William Kierans

Liberal

Mr. Kierans:

A government that deliberately pursues a policy of selling off the natural wealth of its people to achieve short-run gains breaks faith with its own future. It reveals, by the forced sale of its assets, its inability to devise the set of objectives and economic policies that will increase output and distribute it more equitably on an annual basis. It admits that the standard of living we enjoy today depends on the selling of our capital in natural wealth as well as on our own efforts.

Unfortunately, Canada decided in the late forties and early fifties to ensure a rapid rate of growth by selling off its non-renewable resources. This policy was permanently enshrined in our tax legislation in 1955 and still survives, despite the bill before us today. The current attempts of the resource industries-we have all received letters and been under pressure from these people, particularly from the Mining Association of Canada-to prove their unboubted value to the Canadian economy are based on considerable exaggeration and sometimes border on hysteria. Their use of the multiplier, which one sees so much of in their advertising would, if accepted and applied to all sectors of the economy, force on to conclude that there are between 12 million and 14 million people presently employed in this country instead of 8 million plus the half million unemployed.

I have been constantly amazed, Mr. Speaker, by the violent and vehement representations of the captains of our resource industries as they fight to maintain their existing exemptions. I realize that a privilege once enjoyed is hard to forgo. One can accept their self-interest; but they must also admit the rights to measure their private and immediate gains against the longrun social advantage.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
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Some hon. Members:

Hear, hear!

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Subtopic:   INCOME TAX ACT
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LIB

Eric William Kierans

Liberal

Mr. Kierans:

They exist, not by some divine right but by the will of the people as represented by the members of this House, and I think their current intransigence and threats could easily lead to nationalization. If we were to eliminate all the concessions, depletion, accelerated depreciation, capital cost allowances exceeding actual funds invested by between 15 per cent and 33-1/3 per cent, and so on, the federal government could reduce the corporate tax rate to 35 per cent on all firms in all sectors of the economy without any loss of revenue. At the present time, 24725-39.'

Income Tax Act

the outrageously low effective tax rates in the resource sector directs investment into those low employment sectors and discriminates against investment in the heavier employment manufacturing and service industries. A corporate tax rate that would affect equally all branches of economic activity would not distort the investment decision-making process to the extent that is achieved by our present system.

If the government should agree that a 35 per cent corporate tax rate without concessions, without exemptions and without special immunities would yield the same revenues, I see no reason why this rate cannot be confined to wholly-owned or controlled Canadian companies. Every nation favours its own citizens in one form or another. We have only to cite the most recent example, the United States with its investment allowance, its 10 per cent import surcharge and its DISC program. Those programs do not favour Canada by any means. So far as I know, they favour American firms. If we were intelligent and sovereign, we could devise tax rates that would favour our own Canadian firms in the very difficult situation in which they find themselves. Let the corporate tax rate on foreign subsidiaries be whatever that rate is in the home country of that subsidiary. If the rate is 52 per cent, as in the United States-and it is that high because of all their tremendous objectives, their military efforts and their flights to the moon-let the rate for American subsidiaries in Canada be 52 per cent.

If the rate is 40 per cent, as in the U.K., the rate for U.K. subsidiaries in Canada ought to be 40 per cent. In no instance, however, should we allow that rate to be less than the Canadian rate of 35 per cent. On the basis of their existing initiatives the Americans could only say that we are in accord with their policies because we would be avoiding encouraging new American subsidiaries to locate in this country and we would really be acting within the spirit of their DISC program.

Similarly, we could enlist the entire Canadian entrepreneurial community in trying to reverse and turn around the trend toward increasing foreign ownership. This cannot be done alone by a Canada Development Corporation, or by half a dozen such corporations. This would require the united effort of all elements in the Canadian business and financial community.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
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NDP

Leslie Gordon Benjamin

New Democratic Party

Mr. Benjamin:

How would you get them to do that?

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LIB

Eric William Kierans

Liberal

Mr. Kierans:

It has not been my experience that the company with the 50 per cent tax rate drives out the Canadian company with the 35 per cent rate. Rather, the trend of the last few years would be turned the other way around. I should simply like to say-

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LIB

Russell Clayton Honey (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

Mr. Deputy Speaker:

Order, please. I regret to interrupt the hon. member-

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
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Some hon. Members:

Continue.

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LIB

Eric William Kierans

Liberal

Mr. Kierans:

I would be only a few more minutes, Mr. Speaker.

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Subtopic:   INCOME TAX ACT
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NDP

Leslie Gordon Benjamin

New Democratic Party

Mr. Benjamin:

Let us not see the clock.

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LIB

Patrick Morgan Mahoney (Parliamentary Secretary to the Minister of Finance)

Liberal

Mr. Mahoney:

On a point of order, Mr. Speaker, since as I understand the hon. member is about to conclude his

December 16, 1971

Income Tax Act

remarks, I wonder whether there might be unanimous consent to allow him to do that.

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Subtopic:   INCOME TAX ACT
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Some hon. Members:

Agreed.

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LIB

Paul St. Pierre (Parliamentary Secretary to the Secretary of State for External Affairs)

Liberal

Mr. St. Pierre:

On the same point of order, Mr. Speaker, may I point out that no less than six of the 130-odd members of the national press gallery are listening to the hon. member's speech. That is almost a record number.

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LIB

Russell Clayton Honey (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

Mr. Deputy Speaker:

Order, please. I was about to ask if there was unanimous consent for the hon. member to continue. Is there such consent?

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
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Some hon. Members:

Agreed.

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LIB

Eric William Kierans

Liberal

Mr. Kierans:

Let me quote what Professor Gordon, professor of finance at the University of Toronto, has said:

-on its own, Canadian industry cannot provide an adequate response to the challenge of foreign competition. Strong and efficient competition is required in the area of taxation and beyond it as well. The alternative is a drift down the road toward a Venezuelan type economy-a large modern resource extraction industry that provides very little employment, a large unproductive government bureaucracy,-

Those are his words, not mine.

-an inefficient weak manufacturing sector, increased imports of manufactured products, and rising government expenditures to provide for the unemployed.

Tax policy, Mr. Speaker, should be restructured. It should be neutral, but it should nevertheless favour those sectors of the economy that will give us the most employment and the most growth.

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Subtopic:   INCOME TAX ACT
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NDP

Leslie Gordon Benjamin

New Democratic Party

Mr. Benjamin:

Then it cannot be neutral.

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Subtopic:   INCOME TAX ACT
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LIB

Eric William Kierans

Liberal

Mr. Kierans:

The relative productivities of the Canadian and American economies are not equal. When one finds that the Canadian dollar is equal to the American dollar, one says at the same time that our productive capacity and our climate is the same as theirs, our financial resources are the same as theirs and the size of our markets is the same as theirs. Yet when one gets into business he knows it costs more to build a plant here, with our heavy construction and heavy heating costs. All of this would argue that our productivity, while as good as theirs in the abstract, cannot measure theirs in the concrete. When policies suddenly result in two equivalent dollars, when neither the resources nor the productivities of two nations are the same, one must argue that such monetary policy is itself at fault.

One only has to look at the tightness of our monetary policy in the last decade to find that we have caused a great deal of our own problems. The higher interest rates have forced provinces to go to New York, borrow there, bring the money back here and increase our exchange rate. Also, our resource policy emphasizes the exports of those industries.

I thank Your Honour for your patience, and I thank my colleagues in the House. I am aware that some of my colleagues will disapprove and will be disappointed in what I have said. But let me look at it on the positive side. Ten years ago a group of men were named to draft for

Canada a fair and just taxation policy that would emphasize growth, employment and stability in the economy. I do not think that task is over. All I want to do is remind the Canadian people and the Canadian government tonight that after ten years that task is not over. This task has to be begun again. I sincerely believe this government can put together all of the elements of an economic policy that will give us growth and employment. In any event, I certainly hope so.

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Subtopic:   INCOME TAX ACT
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Some hon. Members:

Hear, hear!

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Subtopic:   INCOME TAX ACT
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December 16, 1971