November 1, 1979

LIB

Louis R. Desmarais

Liberal

Mr. Desmarais:

1 have a supplementary, Mr. Chairman.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

Gérald Laniel (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

The Chairman:

The time allotted to the hon. member for Broadview-Greenwood has expired. I can therefore not allow this dialogue, but I shall add the name of the hon. member for Dollard to my list and recognize him in due time, perhaps to allow him to express his opinion instead of simply asking a question.

Income Tax Act

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Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

Peter A. Stollery

Liberal

Mr. Stollery:

Mr. Chairman, 1 was surprised by the comments a moment ago of the hon. member for Broadview-Greenwood to the effect that no one in my party was becoming involved in this debate. That is an unusual comment on the part of the hon. member in view of the fact that I indicated to him last night before we adjourned at six o'clock that I intended to speak on this same point. The hon. member knew full well how I felt about the special tax rate that is being maintained, as 1 told the hon. member last night that I would be speaking on this point. In view of that I think it is a little bit ungentlemanly of him to make the kind of comment he made earlier about no member of my party being involved in this debate. 1 also think, as he leaves the room, having just a moment ago commented on the fact that the Liberal finance critic is doing a television interview-

Topic:   GOVERNMENT ORDERS
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Sub-subtopic:   MEASURE TO AMEND
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NDP

Bob Rae

New Democratic Party

Mr. Rae:

I am here.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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?

An hon. Member:

Where were you last night?

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
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LIB

Peter A. Stollery

Liberal

Mr. Stollery:

I was sitting right here.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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?

An hon. Member:

You did not say a word yesterday.

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LIB

Peter A. Stollery

Liberal

Mr. Stollery:

I do not think that those kinds of tactics will be very successful, nor are they the sorts of tactics one would expect from a major spokesman of the NDP.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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?

An hon. Member:

They got you up.

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LIB

Peter A. Stollery

Liberal

Mr. Stollery:

I can assure the hon. member that the spokesman on this bill for my party will return to the House very shortly. He is presently giving a television interview, so I do not think that the hon. member should make such comments.

1, too, would like to question the Parliamentary Secretary to Minister of Finance on this very strange business of creating a special kind of taxpayer, as the hon. member for Broadview-Greenwood describes it. People who have the tax withdrawn at the source, and this includes most people, are the people who pay most of the taxes and who pay them at the very least arguable rates. These people do not get a chance to argue or make claims on expenses. They simply get the pay cheque with the money removed. I am sure that most of these people will resent bitterly a society which gives the guy down the street a special rate because he happens to be a professional or in a tax category which gives him a special tax rate.

It is not the small businessman who is being considered in this clause. The whole purpose of the changes was to give a tax benefit to what all of us understand to be small business, because it is small businesses in Canada which employ the largest number of Canadians. The small business is involved in everything from manufacturing to the retail level. They have felt for a long time that they have been discriminated against in the tax system. They work longer hours, but they always seem to get the short end of the stick when it comes to the tax system.

November 1, 1979

Income Tax Act

There is the belief that it would be advantageous to the country because small businesses employ more people if they expand. I realize that the parliamentary secretary has a background in big business with regard to the oil field. He may not be aware of the plight of the small businessman, and 1 am not saying that in an unpleasant way. Small businesses traditionally have not wanted to get very large. They have enjoyed the kind of activity in which they were involved, but they have always felt that they were being beaten in the tax system.

Over the years the small business tax advantage has been put into the system to create employment. We have found that it is being used by people who are really not small businessmen according to the original concept, but who were, for example, in legal partnerships. As I understand it, and I am not a lawyer, in some provinces the law society will not allow a lawyer to set himself up as an incorporated business. Perhaps the best example is the hockey player who sets himself up as a company and pays his salary into a limited company, thereby paying a smaller amount of income tax. Many people think that this is unfair.

1 recognize that there is a certain amount of tightening up taking place in this clause. I recognize that the hockey player will no longer be able simply to pay his salary into a limited company, but would probably have to claim that he was doing personal appearances or something else besides just putting his salary into a limited company. That represents some small improvement.

I believe that the original changes proposed by the minister of finance in the last government show the direction in which this government should be heading. It should be trying to make income tax payable on a more equal basis and getting away from these special categories. I recognize, and I suppose it will continue to be the situation, that one could have a large income from stocks and other investments which one could pay into a limited company. As 1 understand the proposal, such a company would now be required to employ at least five people. That proposition was proposed by the last minister of finance, and I believe that it is being maintained.

What I do not understand is the way in which the government has caved in to this lobby of people with basically high incomes, in so far as 1 can make out, and who do not want to pay the normal income tax. There are enough schemes already available to these people to divert their incomes. There are special tax rates in this country for the film industry, and for the oil industry particularly with regard to exploration, to mention but two examples. There are a vast number of ways in which a person can get away from paying tax so long as they are interested in creating employment and investing in some sector of the Canadian economy.

1 wonder, Mr. Chairman, whether this proposal has been thought through. As I understand it, if a person puts his money into a company and pays tax at the rate of 33 per cent, that company can accumulate over a period of years a reserve of up to $750,000. I should like to know if it is true that the person who then retires and collects the income from $750,-

000, which could be up to $35,000 a year, would not have to pay any tax on it. As I understand the proposal of the government, it would lead to a situation where people in this country who earn $35,000 per year through income or from dividends or from their company could end up not paying any income tax. That is a pretty serious state of affairs, and I am fairly certain that it is so. I strongly urge the Minister of Finance and his parliamentary secretary to consider that they are creating a potentially new brand of taxpayer.

Every taxpayer in Canada who is paying income tax at the source, and that is most of us-members of the House of Commons have it taken out of their pay cheques like everyone else-anybody who receives a pay cheque, should strongly resent a system which creates a special kind of taxpayer, that is, one who is not paying his taxes.

I then ask why I should pay taxes at pretty high rates. 1 am a single person with no dependants who pays a high rate of tax. Why should 1 pay up to 50 per cent in Ontario? I have the Clarkson Gordon 1979 tax rates here. I have never resented paying income tax, but on behalf of anyone paying their taxes in the normal fashion 1 register the strongest protest against a system which will create a group which does not have to pay or who can avoid paying. 1 would suspect that in the marginal rates there will be many who will not be paying 17 per cent of taxes. That is a disgraceful situation.

It is no wonder that at a time when Canada is getting poorer every year and when the brunt of this economic hardship is being carried by people who do not have any special tax advantages, the individual who has a lot of tax advantages absorbs a lot of the decline in real income in this country, and 1 suspect this is so in most of the world. He absorbs it because he charges it up to the government. The country pays; the other taxpayers pay for him. There could be some person earning $50,000 or $100,000 per year, yet he is being subsidized by someone earning $15,000 per year. That is what is being proposed here. It leads to a situation which I checked today with the Department of Finance. I am not an accountant and my taxes are simple enough that I have never had to understand these various dividends and credits and things that exist for those who can take advantage of the tax system. I never understand them because I can never take advantage of them.

I should like the parliamentary secretary to tell us whether it is true or not true that this can result in an individual having an income up to a maximum of $35,000 per year, so long as it comes in the form of dividends from a dummy company that the person has set up for $200, and not pay any income tax on that amount.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

William Gordon Ritchie

Progressive Conservative

Mr. Ritchie (Dauphin):

Mr. Chairman, I should like to speak for a few moments on this clause. As a member of a profession for whom this legislation was primarily designed, I might say that putting the rate back at 3316 makes it about as neutral as it can be.

November 1, 1979

The hon. member who just sat down pointed out that dummy corporations have people who get money out of them through wages that they basically do not earn. Many small businesses have people on their payroll who, strictly speaking, might not be considered productive. This seems to be one of the disadvantages of tax systems.

One of the problems that has come from this is the high margin of income tax rates that we have. If the marginal income tax rates were not so high, this sort of thing would not occur so much. Without some provision like this, say with limited liability, it would be almost impossible for physicians, for example, to hold property in groups and to have facilities. Most provinces do not allow physicians to incorporate their incomes; certainly Manitoba does not. I realize that Alberta does allow professional people to incorporate their incomes, but it has probably changed the rules to some extent.

I have considered this over many years and have discussed it with my accountant at various times but I could never see where it paid to incorporate a medical practice, except for the limited liability aspect. For instance, if four doctors decided to build a facility for $150,000 or $200,000, they would pretty well need to have a company to do so. It would have to be organized on a partnership basis. In any case, the tax changes of 1972 made partnerships almost impossible to carry on on an income tax basis if there was any complexity. Most accountant firms will advise against partnerships of almost any kind. As I say, the 331/3 is as neutral as can be.

The hon. member who just spoke implied that all physicians and all professionals were pretty well assured of an income. Mr. Chairman, they are no more assured of an income than the corner grocer. Physicians and lawyers who work on a salary for a firm must pay income tax just as we do. It is not necessarily true that many will come in the door demanding to be paid high salaries or be provided with a high income. I might say that in a practical sort of a way the physician in Manitoba makes about $10 or $14 per hour before taxes. Ele makes up for some of this by working 50 to 60 hours a week. Whether that is too much, I do not know.

I would to like to point out there are many professions, such as pharmacy, which are not included in this. In practice, however, pharmacists can incorporate their companies. They have to be able to incorporate because of the large stock they carry and so on. Usually about half of their income can be classified in the same way as incomes of lawyers and physicians.

If everything went very well and circumstances were exceptionally favourable, it might be that a person could use the 331/3 per cent and make considerable money. However, from my discussions with many physicians, I find they have tended to lose on this. By and large their companies have not been around for a long time. They have been holding companies or real estate companies.

It would be almost impossible to get facilities without having some kind of company. Presumably we would not have

Income Tax Act

clinics and this sort of thing where there is a physical facility. Physicians have told me that having a company has not particularly resulted in their making money. In many cases, their income has been less than had they paid the marginal rate.

The limited liability feature, the possibility of bankruptcy, suits for injuries and so on make it necessary for professionals to be able to set up companies of some kind. This may not be the best way to do that. I have gone through the white paper on taxation of 1970 and subsequent legislation. As a professional, I do not particularly ask for favours. However, something has to be set up in order that facilities can be built and manned.

Another problem that remains unsolved is those who have spent long years preparing themselves and do not earn money until they are in their thirties. They presumably then earn a high income and pay a great deal in tax. Obviously that is a difficult problem. While this change may not necessarily be the best, it seems the most neutral we can arrive at for the moment.

I would ask the parliamentary secretary whether this effective 331/3 per cent rate commenced in November of last year, or will it become effective when this bill is passed, or, in fact, is it effective at the present time?

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

Gilles Marceau

Liberal

Mr. Marceau:

Mr. Chairman, the question of reducing taxes or customs tariffs is indeed very interesting and leads to heated debates, in this House and elsewhere, the points of view often differing widely. I listened to the former speakers very closely and, though I represent a riding in which the majority of voters are workers, I also represent a number of professionals whose point of view I must also submit to the House and to the parliamentary secretary who is piloting Bill C-17.

I think all we want, we being members of the House, is justice for all taxpayers, a justice which enables governments to collect the money they need to run the country. For this purpose, it is necessary to collect more from those who earn more. But, Mr. Speaker, these laws should not cause injustice under the pretence that everybody should pay income tax. I would like to pass on to the parliamentary secretary some sensible remarks which were written to me by one of my constituents of Jonquiere, Dr. Blais, who states in all deference that in its present form the bill is unfair. In his budget, the hon. member for Saint-Maurice, the former minister of finance, had proposed some amendments which were suspended and which this government now wants to implement. Therefore, I would like him to know the remarks of Dr. Blais, and I quote;

The government and the new Minister of Finance, Mr. John Crosbie, plan to amend the tax laws concerning administrative corporations for professionals and companies affiliated to corporations without legal constitution. These would no longer be entitled to reduced tax rates.

We strongly believe that these amendments are arbitrary and that they discriminate against us professionals for the following reasons:

November 1, 1979

Income Tax Act

1. The government proposes that doctors, dentists, lawyers and accountants not be entitled to the reduced tax rates granted to corporations even if they are incorporated. (At the present time, Alberta is the only province to authorize the professions to incorporate, but it is expected that the other provinces will provide this authorization shortly.)

This clearly discriminatory legislation isolates the members of the four major professions and submits them to an arbritary taxation system. If it is passed, optometrists will pay lower taxes than ophthalmologists, chiropractors will pay less than general practitioners, administrative advisers less than accountants and denture manufacturers less than dentists, to mention but a few examples.

2. Moreover, the government wants to deprive most administrative companies which offer their services to a non-incorporated company of the right to benefit from the reduced tax rates generally granted to small Canadian businesses. In fact, if the administrative company offers its services only to a group of professionals and their associates, it will not have this right.

This other measure will be more unfavourable to the dentist who has a company to take care of the administrative side of his practice than any other businessman who might do the same. The government forgets that the dentist incurs higher costs for his equipment and his office and after has higher financial risks than small businesses in general.

It can perhaps be said that not all incorporated companies should benefit from reduced tax rates. However, we see no reason to deprive of this right the companies which take care of the administration of professional practices, whether for dentists or any other major profession. We also think that those provisions should be looked at again and that the government should postpone their passage until such time as more reasonable solutions have been found.

First of all, I should like to ask the parliamentary secretary why, in paragraph (f), on page 49, the non-qualifying business is being limited to the professional practice of an accountant, dentist, lawyer, medical doctor, veterinarian or chiropractor, and why all professions are not included generally; why is this statute limited in that way? Second, why does he, on behalf of the government, plan to deprive administrative business, that supplies services to companies that are not duly incorporated, of the right to use the reduced rates usually allowed small Canadian businesses? Finally, 1 ask the parliamentary secretary whether he has really looked into all other possible solutions to that important matter, whether the decision of the government is final and whether, if this bill having become law proves to be unfair, he will be willing to suggest to his government that it amend it in order to avoid the injustices pointed out by that voter from my riding?

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Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

Donald James Johnston

Liberal

Mr. Johnston:

My intervention will be brief, Mr. Chairman.

I need some information from the parliamentary secretary in order to fully comprehend the impact of this proposal upon our existing income tax laws. 1 am bothered by what I consider to be a flagrant violation of the principle of tax neutrality. 1 might say I was not very happy with Bill C-37 either, so it is not a question of my supporting one and not supporting another. But are we doing the right thing by providing this new special rate of 33lA per cent for a particular category while excluding others from similar benefits? Are we paying sufficient attention to the position, for example, of wage earners?

In his own press release the Minister of Finance states on page two, in paragraph three, that such corporations which

retain earnings in the business will still enjoy tax deferrals since the rate of 331A per cent is lower than the personal income tax rate on taxable incomes in excess of $15,000 gross. So here we are proposing in the case of, say, two professionals that in one instance a taxpayer will be paying tax on income in excess of $15,000 at a rate which the incorporated professional will not pay until his income reaches $150,000. This does not strike me as being a just situation from the point of view of wage earners. This leads to an underlying problem which I raised the other day with regard to the very tax rates themselves. Something has to be done.

I say, further: why single out these professionals? There is in this House a fairly representative group of the professionals we are talking about. We even have a well known chiropractor on this side of the House. I happen to be a lawyer. What distinguishes these gentlemen, say, from an engineer or an architect in terms of the proposal which is being advanced? In other words, why does one kind of professional income become entitled to an advantage which other kinds of professional incomes do not enjoy?

Turning to another consideration, we have to ask ourselves: what is the tax cost likely to be? Has the Department of Finance calculated what the tax deferment would be if every professional in this country, every professional who is listed, were to incorporate? The list covers accountants, dentists, lawyers, medical doctors, veterinarians and chiropractors. Let us assume that if this law is adopted a great deal of pressure will be placed upon professional organizations in each province to permit the incorporation of professionals for tax purposes, because given current rates of inflation tax deferrals become very significant. Tax deferred for 10 or 20 years is, in fact, tax not paid.

It can be said that in the long run the tax would be the same. The hon. gentleman said it was neutral. It is neutral if the dividends are declared or the salaries are paid out, but I submit this would not happen because these vehicles would become holding companies for all these professionals. Would the tax cost run into the millions? Or billions? I imagine it would be very substantial.

Getting back to the principle of tax neutrality, is it right for us to create a situation where provincial law will determine what the federal tax rate would be? In my own province, Quebec, lawyers cannot incorporate, accountants cannot incorporate, engineers have techniques for incorporation effectively, but professional societies, as hon. members know, have long resisted incorporation in certain jurisdictions because of the so-called client-professional relationship. It bothers me that we could have a professional in one part of the country with an income identical to that of a similar professional in another province, yet one would enjoy a substantial tax advantage over the other because one professional might be able to incorporate while the other could not. That is one departure from tax neutrality. The second departure is that we have singled out specific professions for preferential treatment.

Now let us consider the position of the ordinary wage earner. Why should he not obtain some sort of deferral? Why

November 1, 1979

should he be subjected to full tax on his income in excess of $15,000 while other salary earners, other professionals, have this opportunity for substantial benefit through deferral? All this leads me to suggest that the approach being taken to corporations and the use of incorporations in this area is unduly complicating our tax structure and must inevitably lead to situations which are completely unjustified in terms of tax neutrality, a principle with which I am sure we all agree. We may disagree about rates. The hon. member for Broadview-Greenwood, for example, might like to see us all employed by the state or he might like to see rates of 75 per cent or 80 per cent. But 1 know we would agree on one thing at least: everyone in the same circumstances should be paying the same amount of tax. The hon. gentleman is asking us to approve a provision which would make this objective more and more difficult to achieve.

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Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

Robert Hylton Brisco

Progressive Conservative

Mr. Brisco:

Mr. Chairman, there are a couple of questions 1 should like to raise on this clause. I must say I found the comments of the hon. member for Saint-Henri-Westmount interesting and informative. The background he enjoys brings to this House an expertise to which 1 think we should pay attention.

There are two matters about which 1 would like to speak, although it was my original intention to address myself to just one. In light of the fact that the particular profession to which I enjoy the privilege of association has been mentioned on numerous occasions today, there are a couple of matters within the ambit of that profession which 1 would like to set straight on the record. I am speaking of my own profession as a chiropractor.

I would like to say that I have been in practice for 25 years.

I have served for two years as the president of the British Columbia Chiropractic Association. I spent nine years on its board, served as a vice president of the Canadian Chiropractic Association and some years on its board, and for some years as a director of the Canadian Memorial Chiropractic College.

Having said that and having indicated my dedication to my profession and to the welfare of Canadians, I would like to point out that in the interval, as a member of Parliament- because 1 was elected as a member, 1 resigned as an officer of the profession to avoid any semblance of conflict of interest-I have no hesitation as a parliamentarian, with a background in that profession, in speaking out at this moment. Because with reference to this bill and to this clause, 1 have received submissions from lawyers, accountants and dentists in my community and, of course, my constituency. I have received submissions from medical doctors, but I have not received any from any chiropractors. Nor, to my knowledge, has there been any organized effort by my profession on a national or provincial level to seek any special or favoured treatment in terms of this bill.

Unlike any of the other recognized healing professions in Canada, the chiropractic profession receives not one dime of federal or provincial tax revenue for any programs. It receives absolutely nothing. It has made requests but been rejected.

Income Tax Act

The only area in which there is income accruing from the federal and provincial treasuries is medicare, through insurance programs and through compensation boards. That applies from the province of Prince Edward Island-the maritime provinces with the exception of Newfoundland-right through to British Columbia. We have applied to the Medical Research Foundation for grants for research, and those grants have not been forthcoming.

So what has the profession done? It has raised its own money. It has done so itself to conduct its own research. There is a facility in Toronto which is second to none in the world in terms of educational standards and the quality and calibre of its lecturers. Doctors from Sunnybrook Hospital, lecturers from the University of Toronto and others teach at the CMCC. The profession pays the bills. We pay them to teach our students. Our graduates support that college, and it was only a few months ago that we finally burned the mortgage on that building. That plant is worth some $2 million, and it was paid for by less than 2,000 chiropractors across this nation. So I speak with a degree of pride when I say that we have not come to the public trough except for research, and in that regard we have been denied.

I also want to reiterate the fact that we have not asked for any special privileges whatsoever in terms of this bill.

Having set the record straight on that, there is another matter which 1 find unfortunate. In dealing with the income of corporations for the year under "non-qualifying business , I see listed "prospecting". I see nothing which provides an opportunity for any kind of windfall for the prospector, who is an independent soul. In my mind there are two people with whom I am acquainted who are in the category of a free spirit. One is the trapper and the other is the prospector. I cannot imagine any other occupation in which the individual concerned is more isolated from human contact than those two. Hardships are tougher for them than for anyone else in North America.

The trapper, particularly in the winter months, and the prospector, especially during the summer months, put up with a great deal. Sometimes they are flown in by a company. Sometimes prospectors are paid by a company to prospect in a particular area, but sometimes they have to pay the shot themselves. They are flown to a location and they put on their backpacks. They have their supplies with them and they are in the wilderness for weeks. Wilderness can be pretty tough whether it is in northern Quebec, northern Ontario or anywhere in the mountains of British Columbia. The record shows that most often it is just once in a lifetime that a prospector strikes it rich and makes a windfall discovery. When prospectors do that, those gnarled, hardworking creatures of nature get shafted by the federal government in terms of taxation.

I know a prospector in Nelson right now who is in his seventies. He gets his old age pension; big deal! He is blind in one eye. He walks with a very pronounced limp because one of his legs was shattered as a result of a dynamite explosion in some rock work. He has emphysema because he breathed mine dust in the old days when he was a miner working in areas of

November 1, 1979

Income Tax Act

high silica concentration. This prospector has problems breathing. He has a bad heart and, of course, with his heart and his lungs being in rough shape, this does not make life any easier for him. However, he found his once-in-a-lifetime windfall, and what did the government do?

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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?

An hon. Member:

Not this one.

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Subtopic:   INCOME TAX ACT
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PC

Robert Hylton Brisco

Progressive Conservative

Mr. Brisco:

I refer to hon. members opposite when they formed the government. I am not kidding hon. members; this is all on file in my office, if they want to see the records. They taxed this prospector's windfall away. There was not a tear from the then minister. He could not have cared less about the condition this poor old gentleman was in.

Hon. members opposite do not know anything about human factors. They never take them into consideration. They say, "It is here in the book, and that is what we will go by". That is the problem with any big government. There is a total absence of any recognition of any human factor beyond what is in the book. I pray to God that this government will show some sensitivity in these areas.

I can think of all kinds of other examples, and I am sure other hon. members can too. I think of a person with multiple sclerosis three weeks away from qualifying under the Canada Pension Plan. She is to the point where her MS no longer allows her to do any work. It was to hon. members opposite who formed the government that I appealed on four separate occasions. I must ask, will this government recognize the fact that it should be doing something for this woman-after all, she did make her contributions-even though she was only three weeks' short of qualifying, instead of having her on the bread line? I do not think that is really what governments intend in the legislation they draft.

Let me conclude by saying that I feel it is incumbent upon the parliamentary secretary to consider that a prospector who provides opportunities for the mining community to operate in the fashion it operates should be allowed a once-in-a-lifetime windfall profit, because, if not, the next thing we know there will not be any more of these free spirits. If you look at the record and at the statistics, Mr. Chairman, you will find it is not the mining companies which find the gold, the silver, the lead, the zinc, the molybdenum. It is the hard-bitten character who may have a grizzly bear or a black bear out there breathing down his neck when he bends down to check a rock. He is the one who makes the majority of discoveries for mining companies. He is the one guy in the whole industry who has been totally ignored, and it is time he got his fair share.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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?

Some hon. Members:

Hear, hear!

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Subtopic:   INCOME TAX ACT
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PC

Charles E. Haliburton

Progressive Conservative

Mr. Haliburton:

Mr. Chairman, my interjection in this debate will, I assure hon. members, be very brief, but I was inspired, shall I say, to speak by what the hon. member for Spadina said this afternoon. I think there are a couple of points that should be made in order to set the record straight. Having listened to that hon. member, I can understand, if his

philosophy is that of the former government's, why the country fell into the economic mess in which indeed it did.

There is no suggestion in this legislation, I submit, that any taxpayer in Canada is going to have a tax free income, at least not if he uses it for his own personal benefit. Under the clause we are discussing there is no such thing as a tax free income in any case. The essence of it is that one of those companies that are incorporated for convenience, as has been suggested, or for the more efficient operation of a professional business, can attract for the chief shareholder a tax which is less than he would have to pay if he were receiving that money as an individual and putting it into his pocket in a form in which he could go out next day and buy a new car or take a holiday or spend it on various consumer products.

The effect of the changes that have been proposed in this clause, as I understand them, is that it would encourage Canadians who earn money to use it as an investment fund. Surely that is what the kind of economy we have, is all about. Unfortunately, the people who have their tax deducted at source are not the entrepreneurs in this country, and it is, after all, entrepreneurs who create jobs and who make work.

What this change in the tax law will permit is that a person who had an income which is larger than he may need to use in that particular year for his own personal comfort may delay paying income tax on that income for some time so that he can use it for other purposes. He may not want to invest his money in a pension fund, which may well have international investments; he may not want to invest his money in exploration; he may prefer to invest his money in his own community, in a local shop, a local enterprise, or a fish processing plant, as he might want to do in my riding, or a fishing vessel.

These provisions establishing this classification within the Income Tax Act will permit the high income doctor, the dentist or the lawyer, to establish such a company and to use that money before paying tax on it to encourage industry and enterprise in his own community. Clearly it gives recognition to the fact that some of these professional people have a shorter earning lifetime than a great many other people in our society. This provision gives them an opportunity to spread their tax. Certainly there is no suggestion, and no wish on my part as one of the members supporting this legislation, that it should provide a free ride for anybody or that it should permit them to permanently avoid paying tax. It would give them an opportunity to spread the tax. It would inspire them to generate jobs and provide opportunities in their communities. That is what I want to see and I would be happy if we would get on with it.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

Donald James Johnston

Liberal

Mr. Johnston:

Mr. Chairman, I have a question for the hon. member.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
Permalink
LIB

Gérald Laniel (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

The Chairman:

Would the hon. member for South West Nova accept a question from the hon. member for Saint-Henri-Westmount?

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
Permalink

November 1, 1979