May 31, 1984

LIB

Gérald Laniel

Liberal

The Acting Speaker (Mr. Laniel):

I am sorry, but I shall have to interrupt the Hon. Minister because his time has expired.

Topic:   GOVERNMENT ORDERS
Subtopic:   ALLOTTED DAY, S.O. 62-NON-CONFIDENCE MOTION-REVENUE CANADA
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PC

J. Robert Howie

Progressive Conservative

Hon. J. Robert Howie (York-Sunbury):

Mr. Speaker, I would first of all like to congratulate my colleague, the Hon. Member for Wellington-Dufferin-Simcoe (Mr. Beatty), for an excellent address on his motion, which gives us an opportunity as parliamentarians to discuss a matter of great importance to the people of Canada. I would be remiss in my duties as well if I did not also congratulate the Hon. Member and his task force for the excellent job done in travelling across Canada and gathering such extremely useful information.

In his remarks a moment ago, the Minister of National Revenue (Mr. Bussieres) made the distinction between the role

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of the Minister of National Revenue and the role of the Minister of Finance. He was correct in making this distinction. Both Ministers are members of the same Cabinet, a Cabinet which speaks with unity. As a member of that Cabinet, the Minister of National Revenue has a rare opportunity to propose and fight for tax reform in substance, if he so desires. As Minister of National Revenue, he has the unique opportunity to correct administrative defects within his Department. The Minister is in a unique position no matter which route we take in helping to bring about the reforms which we have spoken of and will speak of in the course of this debate.

I would like to thank the Minister for being present during this debate. I hope that the points we make will be useful in helping us as parliamentarians to chart a new course for the people of Canada and correct some areas which are badly in need of correction. I agree with the Minister that the taxpayer must be convinced that the system is fair to all. The taxpayers are not so convinced, Mr. Speaker. Indeed, as late as Monday of this week, in Prince George, British Columbia, a very distinguished and prominent Canadian, Mr. John Turner, said that he has read the Progressive Conservative task force report and that if he is put into a position of authority, he will see that the administration of the Act is brought back into unquestioned equity and fairness.

I do not want to project myself into the Liberal leadership race; there are enough people already in it. However, I do want to say that I hope during the course of the leadership race other candidates will also make such frank statements. As for the Minister, I want to suggest to him that if the House continues it appears he may have some support for his position; and if the House does not continue, our Party will form the next Government and he will then see some action.

Since last year we have seen and heard growing evidence to the effect that Canada's tax collection system, once one of the most fair and effective in the world, has deteriorated very badly. We have received complaints from a wide spectrum of our population that a new hard line approach to the administration of the Income Tax Act was leaving an angry trail of taxpayers who have become disillusioned with the system and are demanding justice and fair play from their Government.

Last September the Canadian Chamber of Commerce warned there was a clear perception across the country that Revenue Canada was becoming more and more aggressive in its attitude towards the assessing and collecting of income taxes. Notices of objection filed by taxpayers jumped by 36 per cent. Significantly, over 70 per cent of all notices filed were settled in whole or in part in favour of the taxpayer. There was more evidence. In November of 1983 every chartered accountancy firm in the city of Cambridge, Ontario, signed a letter alleging that local auditors were operating under a quota system. We all know of the debate that ensued from that allegation and we all know of the results.

When the Government rejected the idea of a full parliamentary inquiry proposed by our Leader, he set up a task force to

May 31, 1984

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listen to Canadians and their concerns about how taxes are collected in Canada. The mounting evidence of problems in the system left little doubt in my mind or in the minds of those in the task force that we should provide a forum for taxpayers to present their views and should recommend ways to improve the administration of the Tax Department in Canada.

After holding meetings in 23 centres across Canada through the month of March this year, the task force received more than 300 oral presentations in addition to a large number of written and informal submissions. The meetings were both disturbing and encouraging. The picture that emerged was that of a Department with powers that even the police do not have. Tax professionals, the lawyers and accountants who have dealt with thousands of tax cases over the years, told us of a marked change in the Department in the past two years. They spoke of a new aggressiveness that presumes the taxpayers are guilty until they are proven innocent. Additionally, the collections area of the Department has been much less flexible in agreeing to repayment terms when taxpayers are reassessed.

On the positive side, we were encouraged to hear that the district office in Calgary has a co-operative attitude in dealing with inquiries from taxpayers or their representatives, and I have discovered that the Saint John, New Brunswick district taxation office has been courteous and co-operative in dealing with complaints 1 have put forward from my constituents. The Minister's office has also replied with courtesy to inquiries I have put forward on behalf of my constituents.

On the other hand, I must say that much of what we heard during our task force hearings disturbed me greatly. We were struck by the fear with which ordinary Canadians greet a call from the Tax Department, a fear that is sometimes cultivated by Revenue Canada in its attempts to frighten ordinary taxpayers. We found that the Tax Department often pursued Canadians of modest means who lack the resources to fight back and defend themselves. Accordingly, we have a recommendation that we think will help the Tax Department deal more fairly with people in this category and I will refer to it in just a moment.

We found the sheer complexity of many provisions caused serious problems for taxpayers who can least afford costly professional assistance. The growing complexity in the law, sweeping departmental powers, and a new hard line attitude towards taxpayers appears to have eroded the rights of thousands of Canadians and undermined public confidence in our tax system and our Government. We were shocked to hear testimony of poor internal communications within the Department, particularly between the computer centres, which should be supplying the service for district taxation offices, and the offices themselves. We heard testimony of one citizen's bank account being frozen even after his debts were paid in full.

Throughout Canada the task force heard evidence of problems caused by the "reasonable expectation of profit" rule as it is interpreted and applied by the Department. Under this test, small businessmen, farmers, artists and writers all have no way of knowing clearly and in advance how a loss will be treated.

Worse, disallowing losses after they have occurred creates a kind of double penalty in that having lost the money one is then deemed to be a hobbyist and must, in effect, pay tax on the loss. I suggest that at least the basis of determining whether a business loss will be allowed against other income, if not a determination itself, should be available in advance of making an investment. Equally, should the ground rules for making these determinations later change, retroactivity should not be applied.

A common complaint of farmers and artists was that the Department arbitrarily established time frames within which profitability must be achieved, although it often takes several years of hard work and financial investment before profits are made. Until a consultative group established by the Minister of Finance (Mr. Lalonde) has made its report public and it has been debated, individuals who have claimed bona fide farm losses should not have their ability to deduct those losses restricted simply because they have had to earn other income in order to support their family and business activities.

Again, a decision by Revenue Canada to alter established practice and to give at times the narrowest possible interpretation to the reasonable expectation of profit test is causing a terrible injustice to Canada's artists and scholars. Until the Standing Committee on Communications and Culture has completed its review of matters relating to the taxation of our artists and writers, the treatment of artists' and writers' expenses should revert to the old interpretation; or at the very least a moratorium should be placed on any further reassessments.

Of all the assets of Revenue Canada, its staff is unquestionably the most valuable. Unfortunately, the task force uncovered considerable evidence that a number of the Department's policies and practices have resulted in poor morale, reduced productivity and an unacceptably low standard of service to the public. These problems must be reversed. The quota system, by whatever name, should be scrapped and never be a measure for promotion and advancement. The accent should be on accuracy, not the maximization of tax revenue. The quota system is a stain on the conscience of the Tax Department as indelible as the dark spot with which Shakespeare cursed Macbeth.

It is essential that Revenue Canada move away from an attitude that taxpayers are potential crooks waiting to be caught to a more positive service attitude. Canadians are an honest, decent and law-abiding people and have every right to be treated as such by their government and all its employees. Taxpayers should enjoy the right to be presumed innocent until proven guilty, and no payment should be required on assessments until appeals are resolved.

In addition, and this is the matter I mentioned earlier, we need a small claims tribunal to deal with disputes under $5,000, and taxpayers should get a response to their cases in 30 days. This informal procedure would help cut through red tape and promote efficiency and deal more fairly with Canadians in the lower and middle-income groups. We should make taxpayers' files more accessible by returning them to their

May 31, 1984

regional offices after they have been processed. Our Party would significantly curtail the Department's powers of search and seizure.

Our task force made 76 recommendations, including the creation of a Taxpayers' Bill of Rights. It is a plain language statement of the treatment taxpayers should be able to expect. It supplements the Charter of Rights just as every other piece of legislation we passed in this House supplements it. Among our recommendations is one for a Taxpayers' Bill of Rights. This Bill would include the presumption of innocence until proven guilty; the right to privacy; the right to timely and accurate information; and the right to courteous treatment. These matters are not spelled out in the Charter of Rights; they are refinements of fundamental rights spelled out in that Charter. Surely there could be no objection to this measure.

We also recommend that taxpayers who disagree with the reassessment be given the right to a fair hearing before the Department can take away the pay cheques or their bank accounts. Surely powers given the Tax Department which exceed those in Britain or the United States should be changed to ensure that while the Department has all the authority it needs to enforce the law, taxpayers are guaranteed at least the protection our law gives people accused of serious crimes, a protection they do not now have.

Our report is non-controversial and non-inflammatory. It succinctly and coherently describes ways in which Revenue Canada could function better serving both public and administration alike. I urge the Government to act now, even at this late date before it loses power, to implement the report's recommendations and thus provide an important service for all Canadians. If the Government chooses not to act, the Government which succeeds it will.

Topic:   GOVERNMENT ORDERS
Subtopic:   ALLOTTED DAY, S.O. 62-NON-CONFIDENCE MOTION-REVENUE CANADA
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LIB

Gérald Laniel

Liberal

The Acting Speaker (Mr. Laniel):

The House will now proceed to questions and comments. Are there any questions? The Hon. Member for Humboldt-Lake Centre (Mr. Althouse) on debate.

Topic:   GOVERNMENT ORDERS
Subtopic:   ALLOTTED DAY, S.O. 62-NON-CONFIDENCE MOTION-REVENUE CANADA
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NDP

Victor Fredrich (Vic) Althouse

New Democratic Party

Mr. Vic Althouse (Humboldt-Lake Centre):

Mr. Speaker, I see by the clock that my remarks will by interrupted by the dinner bell. One of the problems which mankind has always had with tax systems is finding a system which will seem to be fair and will be administered fairly. With the income tax system we have an attempt to operate a self-assessment system.

That concept was not first developed during World War I when income tax was introduced. The self-assessment feature of taxation has been used by many civilizations in the past. One which comes to mind particularly is a self-assessment system that was used in the Sound between Denmark and Sweden. It was called the Sound tax which the King of Denmark collected. He made himself responsible for patrolling the Baltic Sea. All shipping that went in and out of the Baltic Sea did so under a method of taxation which was a relatively fair self-assessment tax. When the ship captains applied to go

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through the Sound they presented the Tax Department with an assessment of the value of the cargo. They simply paid 10 per cent of that amount. In order to keep it fair and reasonably honest, the King of Denmark had the right to buy the cargo at the rate at which the sea captain had valued it. That is a sample of a self-assessment tax system.

One of the problems which we have run into with our self-assessment tax system as it applies to income tax is that there are too many instances surfacing in which it does not appear to be fair. The self-assessment features are being challenged dramatically by the Government. In too many cases the challenge appears to be unfair and unreasonable. It is to that that this motion addresses itself.

We propose to provide an additional amendment to this motion. If it is permitted, as I understand it is at this point in time, I would like to present my motion prior to continuing with my speech so that I could address the amendment as well as the motion. I will pause for a moment to receive your ruling; my understanding may be incorrect.

Topic:   GOVERNMENT ORDERS
Subtopic:   ALLOTTED DAY, S.O. 62-NON-CONFIDENCE MOTION-REVENUE CANADA
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LIB

Gérald Laniel

Liberal

The Acting Speaker (Mr. Laniel):

I would invite the Hon. Member to read his amendment and send it to the Chair so I can look at it.

Topic:   GOVERNMENT ORDERS
Subtopic:   ALLOTTED DAY, S.O. 62-NON-CONFIDENCE MOTION-REVENUE CANADA
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NDP

Victor Fredrich (Vic) Althouse

New Democratic Party

Mr. Althouse:

Mr. Speaker, I propose to remove the period at the end of the motion which is before us and add the following words:

-and further, to recognize the inequity of the appeal process by guaranteeing to taxpayers who are successful in an appeal through the courts that their legal costs will be paid for by Revenue Canada.

Topic:   GOVERNMENT ORDERS
Subtopic:   ALLOTTED DAY, S.O. 62-NON-CONFIDENCE MOTION-REVENUE CANADA
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PC

Henry Perrin Beatty

Progressive Conservative

Mr. Beatty:

It is already done.

Topic:   GOVERNMENT ORDERS
Subtopic:   ALLOTTED DAY, S.O. 62-NON-CONFIDENCE MOTION-REVENUE CANADA
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LIB

William Kenneth Robinson (Parliamentary Secretary to the Minister of National Revenue)

Liberal

Mr. Robinson (Etobicoke-Lakeshore):

Point of order.

Topic:   GOVERNMENT ORDERS
Subtopic:   ALLOTTED DAY, S.O. 62-NON-CONFIDENCE MOTION-REVENUE CANADA
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LIB

Gérald Laniel

Liberal

The Acting Speaker (Mr. Laniel):

The Hon. Member for Etobicoke-Lakeshore (Mr. Robinson) on a point of order.

Topic:   GOVERNMENT ORDERS
Subtopic:   ALLOTTED DAY, S.O. 62-NON-CONFIDENCE MOTION-REVENUE CANADA
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LIB

William Kenneth Robinson (Parliamentary Secretary to the Minister of National Revenue)

Liberal

Mr. Robinson (Etobicoke-Lakeshore):

Mr. Speaker, it is my understanding that the matter the Member has raised as an amendment to the motion has already been carried out.

Topic:   GOVERNMENT ORDERS
Subtopic:   ALLOTTED DAY, S.O. 62-NON-CONFIDENCE MOTION-REVENUE CANADA
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PC

Charles James Mayer

Progressive Conservative

Mr. Mayer:

That is typical of the NDP. They are redundant

anyway.

Topic:   GOVERNMENT ORDERS
Subtopic:   ALLOTTED DAY, S.O. 62-NON-CONFIDENCE MOTION-REVENUE CANADA
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LIB

Gérald Laniel

Liberal

The Acting Speaker (Mr. Laniel):

It is not the responsibility of the Chair to answer that preoccupation of the Hon. Member for Etobicoke-Lakeshore. All I have to do is ensure that the amendment relates to the main motion in front of us and that it does not go beyond the scope of the intention of that motion. It does not and is well related, so I declare the amendment acceptable. I will put the amendment at this time.

Mr. Althouse, seconded by Mr. Lewycky, moved to amend the motion by removing the period at the end of the motion and adding:

-and further, to recognize the inequity of the appeal process by guaranteeing to taxpayers who are successful in an appeal through the courts that their legal costs will be paid for by Revenue Canada.

May 31, 1984

The Late George R. Pearkes

The question is on the amendment. The Hon. Member for Humboldt-Lake Centre.

Topic:   GOVERNMENT ORDERS
Subtopic:   ALLOTTED DAY, S.O. 62-NON-CONFIDENCE MOTION-REVENUE CANADA
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NDP

Victor Fredrich (Vic) Althouse

New Democratic Party

Mr. Althouse:

Mr. Speaker, we have concerns about the powers that have been used by Revenue Canada personnel and by the Act. I suppose it is not just the powers of the Act that are of concern, but more precisely some of the powers through Orders in Council and by internal operating procedures of Revenue Canada. As part of my presentation here today I would like to review three or four instances which I think highlight some of the abuses that are referred to, both in the motion and now in the amendment. I would like to go through those three or four examples. It would be more convenient if we could do them back to back, Mr. Speaker. Since it is pretty well the hour for adjournment, I propose to call it one o'clock and proceed after the lunch hour.

Topic:   GOVERNMENT ORDERS
Subtopic:   ALLOTTED DAY, S.O. 62-NON-CONFIDENCE MOTION-REVENUE CANADA
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LIB

Gérald Laniel

Liberal

The Acting Speaker (Mr. Laniel):

Before we adjourn, I would like to clarify one point. I should have put the motion at the end of the speech. I am sure the House will agree that the Hon. Member may continue his speech by unanimous consent after lunch. Is it also agreed to call it one o'clock?

Topic:   GOVERNMENT ORDERS
Subtopic:   ALLOTTED DAY, S.O. 62-NON-CONFIDENCE MOTION-REVENUE CANADA
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Some Hon. Members:

Agreed.

Topic:   GOVERNMENT ORDERS
Subtopic:   ALLOTTED DAY, S.O. 62-NON-CONFIDENCE MOTION-REVENUE CANADA
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LIB

Gérald Laniel

Liberal

The Acting Speaker (Mr. Laniel):

Order. It being one o'clock, I do now leave the chair until two o'clock this afternoon.

At 1 p.m. the House took recess.

Topic:   GOVERNMENT ORDERS
Subtopic:   ALLOTTED DAY, S.O. 62-NON-CONFIDENCE MOTION-REVENUE CANADA
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AFTER RECESS The House resumed at 2 p.m.


THE LATE GENERAL GEORGE R. PEARKES TRIBUTE TO ILLUSTRIOUS CANADIAN

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Hon. J.-J. Blais@Minister of National Defence

Mr. Speaker, it is customary to take a few moments to pay tribute to an illustrious Canadian who is no longer among us. I am of course referring to General George R. Pearkes who died this week at the age of 96. I would like to express to the House and to all Canadians, my admiration and respect for this illustrious Canadian, and recall the many services he rendered to this country.

In his long career General Pearkes touched many Canadians, as a keeper of the peace with the Royal North-West Mounted Police, as a hero among heroes in the First World War, as a staff officer and educator in the Canadian Army, as a politician, as Minister of National Defence, and as a representative of the Queen in British Columbia.

He will undoubtedly go down in history as the soldier who received the largest number of decorations and awards from the Canadian Forces. He will be remembered for his courage. He was wounded five times but was always prepared to serve his country when danger struck.

But for many Canadians who had the privilege of knowing him, General Pearkes will be remembered as a courtly gentleman of enormous integrity, a man who devoted his life to public service, and an example to all the people of Canada for generations to come.

Topic:   GOVERNMENT ORDERS
Subtopic:   THE LATE GENERAL GEORGE R. PEARKES TRIBUTE TO ILLUSTRIOUS CANADIAN
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?

Some Hon. Members:

Hear, hear!

Topic:   GOVERNMENT ORDERS
Subtopic:   THE LATE GENERAL GEORGE R. PEARKES TRIBUTE TO ILLUSTRIOUS CANADIAN
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May 31, 1984