February 14, 1994


The House resumed from February 9 consideration of the motion that Bill C-9, an act to amend the Income Tax Act, be read the second time and referred to a committee.


LIB

Dennis Mills

Liberal

Mr. Dennis J. Mills (Parliamentary Secretary to Minister of Industry)

Mr. Speaker, I am happy to have the opportunity to speak on Bill C-9.

I would like to begin by informing the people who have tuned in to the debate today of the contents of this bill. A lot of the implementation measures in this bill came from the 1992 fiscal statement from the previous government and also the budget of April 26, 1993. As a government we recognized some of the constructive initiatives the previous government put forward and these are examples of legislation we supported.

I can remember discussing many of these measures when I was the opposition party critic for small business. I do not want to suggest that the implementation of these measures represents support for the previous government in its total economic thrust, but part of its tax amendments, especially those related to small business, we did our best to support when we were in opposition and made sure they went through the House as quickly as possible. I hope we can continue with that approach.

In the measures from the economic and fiscal statement touched in this legislation, our number one priority is the unemployment insurance premium relief for additional jobs. It provides a refundable tax credit in respect of an increase in unemployment insurance premiums payable by certain employers in respect of 1993.

The second measure is the temporary small business investment tax credit. It provides a temporary 10 per cent, non-refundable small business investment tax credit for eligible machinery and equipment. It is very important when manufacturing companies are attempting to modernize and upgrade so they can become globally competitive and is an inducement to make such purchases.

The extension of the small business financing program extends to the end of 1994. Under this program a small business in financial difficulty may refinance up to $500,000 of debt at low interest rates. It is very important right now, as I am sure many members would agree-and I am going to deal with this a little later in my remarks-especially when we are having such difficulty in shifting the attitudes of banks toward small business.

The bill repeals the penalty tax on excess small business properties held by RRSPs and registered retirement income funds from October 31, 1985. Another component of the bill is the labour sponsored venture capital corporations. This adds preferred shares to the list of eligible investments for these corporations and it facilitates the issuance of shares to RRSPs.

Flowthrough shares allow 100 per cent of the first $2 million of oil and gas development expenditures to be deducted by shareholders. That should certainly be supported by most of the Reform members.

The removal of mandatory deduction of Canadian exploration expenses allows corporations carrying on a resource business to choose to deduct lower amounts of Canadian exploration expenses in order to utilize non-capital losses before they expire.

Improvements to the tax credit for scientific research and experimental development introduces a simpler method of calculating the credit and allows for partial credits and clarifies definitions and improves administrations.

Three major measures came from the budget. The annual investment tax credit limit repeals the annual investment tax credit limit for taxation years that begin after 1993. It is basically housekeeping. The investment tax credit for scientific research and experimental development extends the 35 per cent tax credit to Canadian controlled private corporations with prior year taxable income under $400,000 and provides a phase-out of the $2 million expenditure limit. Last is the instalment payments of income tax. Individuals generally have to make quarterly instalment payments of taxes if the difference between the tax payable and the amounts withheld at source is greater than $2,000 in both the current and either of the two preceding years. The previous amount was $1,000. Close to 300,000 senior citizens with very low incomes had to make quarterly instalments which were a tremendous burden for them. When the bill is implemented it will be an added convenience or it will take the

burden of quarterly instalments away from over 300,000 low income senior citizens.

Essentially that represents the specific amendments in this implementing legislation. As I stated in my opening remarks, this is an example of legislation we got behind when it was introduced in the budget statement and the fiscal statement pre-Christmas last year. We are extremely sensitive. I believe actually all members of this House are extremely sensitive that we have to do things quickly to help motivate and mobilize the entrepreneurial spirit today.

All of the measures in this bill are important but I believe they are only going to be effective if the partnership of the financial institutions with small business starts working again.

It was interesting this morning when I came in from Toronto. On my desk was a speech that my colleague, our whip, gave at Memorial University in Newfoundland on the weekend. The whole theme of his speech was how the relationship between small business and financial institutions had broken down and how we, as members of Parliament, have to take a much more aggressive approach in trying to rebuild that relationship.

In his remarks he talked about how easy it was for the Reichmanns to have access to so much bank financing. Much of the money did not even have security and they got it so easily. This is a difficulty I have as a member of Parliament, with not just the Reichmanns, and I am not singling them out in a personal way, but I will give a more current example.

We have all read in the papers the last two or three days about the proposed takeover of Maclean Hunter by Rogers. About a month ago we were reading articles in the newspapers about how they were having such cash flow difficulties. They were looking for bridge financing to help them get through the next quarter and were looking for a couple of hundred million dollars. They were having great difficulty because of their debt load.

All of a sudden Rogers makes an offer to take over Maclean Hunter and the banks are throwing money at the company. An article which I am sure members read stated that close to $2 billion to $3 billion worth of commitments from all the chartered banks have lined up to try to help Rogers.

I met with one of the vice-presidents of the Rogers corporation Friday morning. The very first thing I said to him was: "How do you guys do this? How do you go from having a cash flow crunch of $200 million a month ago and now all of a sudden you have banks giving you over $2.5 billion? What is your trick? What is your secret? Tell me what it is so I can communicate what your trick is to the million small businesses that seem to be having such difficulty in getting access to capital".

Topic:   Government Orders
Subtopic:   Income Tax Act
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LIB
LIB

Dennis Mills

Liberal

Mr. Mills (Broadview-Greenwood)

The answer was what he just said, that we are in an industry that has a lot of current appeal, the cablevision and electronic highway business. Right now that is the issue that is turning on the leaders of the financial institutions.

The bottom line was they did not really have a reason why all of a sudden the banks were throwing money at them. I do not begrudge them. If they can make that kind of situation happen, it is in the spirit of entrepreneurship and free enterprise. As long as it is not too much of a concentration in power then I really do not have too much of a problem with it.

What I do have a problem with-

Topic:   Government Orders
Subtopic:   Income Tax Act
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LIB

Alfonso Gagliano

Liberal

Mr. Gagliano

Why can't the banks do the same thing for small business?

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LIB

Dennis Mills

Liberal

Mr. Mills (Broadview-Greenwood)

Exactly.

When I review, reflect and take a look at this piece of legislation that we are going to be talking about here today-I presume there will not be too much difficulty in passing it-I at the same time have to ask myself this. What can we as members of Parliament do to not just give amended tax laws to small business? What can we as members of Parliament do to address their number one problem, access to capital?

I am hoping that once again as we head toward a budget date and toward committees that all members can be seized with this notion of accessing capital to small business.

Our party believes-it was part of our red book-that the greatest hope we have in this country for putting people back to work rests with the small businessmen and women who are the ones who take the chances. They are the ones who put their homes, savings and RRSPs on the line.

I just wish there was a way that the financial institutions could realize that they are part of the responsibility of joining with us in facing the crisis of unemployment that is before us.

I do not really have a lot more to add on this bill but I want to go back to the amendment which deals with senior citizens, the instalment payments of income tax.

This is a very important amendment for our senior citizens. I am repeating this because, as many members have heard, the

parliamentary channel is watched by a lot of seniors in our country. I think this is a welcomed amendment.

Many of our senior citizens were asked to make quarterly instalments on very low incomes because of a glitch in the way the legislation was written. With this amendment we will be able to correct that instalment payment process for about 300,000 senior citizens.

I want to state again that this is a constructive piece of legislation. It is geared primarily toward assistance for small business using the tax act. Philosophically of course I would prefer a different approach to helping small business if we could do it in a comprehensive way.

I do not like using the tax act to run the economy. I prefer that we go back and have a total comprehensive review of our tax act. That of course is one of the reasons why I have been advocating for many years the idea of a single tax, a system where one basically takes the Income Tax Act, all of the 14,000 pages of exceptions to exceptions which by now most of us have had a chance to review because we have been here for almost a month. Special preferences are buried in that act. Most multinationals have the ability to benefit from the approach that exists in our current tax act. I am optimistic that many of those special preferences will be eliminated next Tuesday when the budget is presented. I am hopeful.

Is it not interesting that we are all being lobbied right now by different people for their particular measure to be attended to in the budget. I am sure many members have received the briefing from the Business Council on National Issues. In that briefing they talk about the fact that they want no new grants to business, no grants to business.

I thought this was incredible. They think that grants are moneys received directly from line departments, whether it be industry, agriculture or whatever. The real grants that big business receives in this country are buried in this tax act. I just wish when the Business Council on National Issues says no new grants or cut back on grants that it would include all the ones that are buried in the tax act.

I am happy today to at least acknowledge the fact that 90 per cent of the measures are for small business and I hope this bill goes through the House quickly.

Topic:   Government Orders
Subtopic:   Income Tax Act
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LIB

Julian Reed

Liberal

Mr. Julian Reed (Halton-Peel)

Mr. Speaker, I commend the hon. member for his comments regarding small business and senior citizens. In the riding of Halton-Peel small business dominates. There is no large industry. Therefore, between farms and small and medium sized businesses, it looks after about 90 per cent of people in those kinds of pursuits.

Not being a financial specialist as is the hon. member, I have trouble keeping my household accounts in line. I would like to make one small comment regarding the flow-through shares issues and the resource industries that are going to be positively affected by this.

Some years back flow-through shares were a common thing in this country. I do not recall what year they were done away with. We must remember that the technology of the mining industry has been centred in Canada, much of it in southern Ontario. Resource industries, which we tend to dismiss as we move into high tech and electronic highways and these types of things, still are the backbone of the economy of this country and will continue that way for many years to come.

I wonder if the hon. member could enlarge on those elements, the flow-through shares and so on that are going to positively affect the mining industry.

Being a layman, and probably many who are watching this on television will be lay people as well, I do not understand flow-through shares. I do not think many of us do.

Topic:   Government Orders
Subtopic:   Income Tax Act
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LIB

Dennis Mills

Liberal

Mr. Mills (Broadview-Greenwood)

Mr. Speaker, I would like to first of all acknowledge the sensitivity of the member for Halton-Peel to the small businessmen and women in his riding. I have been through the member's riding many times. It is a vibrant riding. This is an example. If his community has incredible growth potential and if the small business sector gets ignited again, I know it can pick up a lot of the unemployed community that exists within the greater Toronto region.

I am not an expert on flow-through shares, so I do not want to get into this in a technical way without having all of the documents in front of me. I will give the member an undertaking that I will get the specific meaning on how this will help the mining industry. I will get it to him forthwith today.

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REF

Ted White

Reform

Mr. Ted White (North Vancouver)

I would like to thank the hon. member for his speech and ask him a question in line with the small business comments which he made. He mentioned small business a number of times in his speech.

I am from the riding of North Vancouver where there is a pretty high concentration of small businesses and quite a large number of home-based businesses. They certainly are concerned about taxes and high tax levels. In fact I get a lot of feedback from them in line with the member's wish that the tax act be modified and moved toward a single tax of some sort. There is a lot of support for that.

The other side of the equation is that the area of government expenditures and spending creates the need for more and more taxation. The hon. member mentioned that small businesses in his riding give him plenty of feedback on the tax issue. Could he tell me whether he receives regular feedback from small

businesses in his area that the government should cut its spending as well.

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Subtopic:   Income Tax Act
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LIB

Dennis Mills

Liberal

Mr. Mills (Broadview-Greenwood)

Mr. Speaker, I appreciate the comments of the hon. member for North Vancouver. They are always constructive.

What I hear from the small business community in my city is, first of all, that the regulatory burden that exists for them, the paper burden, is number one. This is after bank financing. The overall complaint, of course, is access to capital. Then it is paper burden and tax reform.

In terms of government spending, I hear from small business that what we have to eliminate duplication and eliminate government waste.

If a program is meeting a good public policy objective and we are getting value for the money, most people I talk to can understand that. What they cannot stand and what they resent is government waste. I am totally in support of the member's concern for government waste. When we eliminate government waste we are cutting government spending. That type of government cutting I am totally in support of, as is our entire party.

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Subtopic:   Income Tax Act
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REF

Leon Benoit

Reform

Mr. Leon E. Benoit (Vegreville)

Mr. Speaker, I just have a few comments for the hon. minister and I would like his feedback on these comments.

First, in terms of banks not lending to small business, I think it is understandable that they are not doing so as readily as one would expect them to. The reasons have been made clear to me in my constituency.

My constituency also depends on small businesses, as do most across the country. These small business people are farmers and other types of small business people. They have told me that the biggest problem, as the hon. member alluded to, is over-regulation, too much paperwork, that it is too expensive just to set a business up and to operate a business because of regulation and, in particular, the new environmental regulations. Environmental reports that have to be filled out by banks to lend to a small business have made it too expensive for banks to lend.

The second reason I am given for banks not lending to small business is that there is just not a high enough profit margin. Taxation in this country is too high. Too much of what would be profit and what is profit goes to taxes. They are too high.

The third area is the lack of confidence that business people have in the economy. This lack of confidence is due, certainly in large part, to our incredibly large debt and our incredibly large annual deficit. If business people do not have confidence themselves why would banks have confidence enough to lend to them?

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Subtopic:   Income Tax Act
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LIB

Dennis Mills

Liberal

Mr. Mills (Broadview-Greenwood)

Mr. Speaker, I thank the member for Vegreville for his question.

First on the issue related to environmental requirements I am totally in support of it. Any business person I have ever talked to who converted to green business movement has ended up making more money because of his commitment to the environment. I would not want a lesser commitment to the environmental sustainable development. I would want as much or more than we currently have.

The second point in terms of the non-profitability of small business to banks I do not accept. Aside from clipping bonds for the Government of Canada, I think the small business community is the most profitable sector of all the banks with the spreads on interest and the service charges. It is unacceptable that a bank person would say there is no profit in the small business sector.

Besides that the banks of the country have a unique banking charter organized by the Chamber under the Bank Act of Canada. It is not only to protect depositors' funds. We recognize that, but aside from protecting depositors' funds they are also mandated in that unique charter to lend to business. It is unacceptable if any bank person would say there is no profit in the small business sector. I hope the member for Vegreville would challenge the bank person who said that to him.

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Subtopic:   Income Tax Act
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?

The Deputy Speaker

The time has now expired for questions and comments. Normally we would pass to the Reform Party but a spokesman for the party has indicated that its members have done all the speaking they wish to do on the bill.

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BQ

René Laurin

Bloc Québécois

Mr. René Laurin (Joliette)

Mr. Speaker, when the hon. member for Scarborough East, speaking for the Minister of Finance, moved for second reading and referral to a committee of Bill C-9, he said: "We have carefully reviewed the measures in this legislation and believe we can support them in their own right". He added, however, that one of the measures in the old legislation had been dropped and that, as for the other measures, to quote the minister: "Our primary criticism generally is that they represent only a small piecemeal effort by the previous government to deal with a large and pressing need in this country to strengthen the economy and to create jobs".

A little further the hon. member said the following: "I ask my colleagues and my hon. friends opposite to consider this legislation not as an indication of the approach this government takes to economic management".

Since the Liberals have now been in power for four months and we still do not know what this government intends to do, perhaps I may comment and express some of the reservations we have about the economic measures this government intends to implement very shortly.

The newly-elected federal government announced in the speech from the throne on January 18, 1994, that it attached the highest priority to job creation and economic growth. The

government has said repeatedly, both in the speech from the throne and in its red book, that it will focus on small and medium-sized businesses because they will be the decisive factor for economic recovery. So far, we have seen no significant measures to help small and medium-sized businesses, with the exception of Bill C-9, which was drafted by the now defunct Conservative Party and which, in the opinion of the hon. member for Scarborough East who introduced the bill, reflects an approach that combines slash and burn with ineffective tinkering.

It is high time the government recognized the considerable potential for job creation in the small business sector. In fact, small businesses as a whole continue to provide the jobs that are so badly needed in this country at a time when large companies are downsizing.

From 1979 to 1989, companies with fewer than 50 employees represented 85 per cent of net job creation in the private sector. In 1990, although the country's economy was not doing well, small businesses with fewer than 20 employees took up the slack created by downsizing of large companies as a result of cost cutting and business closures.

Net job creation by expanding and new small businesses represented practically all net job creation since the beginning of the recession in 1990.

Even in 1991, when due to the recession more businesses went bankrupt than were created, net job creation by very small businesses with fewer than five employees helped cushion the impact of substantial job losses elsewhere in our economy.

Canadian small businesses are ready and able to act as a springboard to a much needed economic recovery. They are better adapted to a changing economy where markets have become more specialized and decentralized. They represent an invaluable potential for job creation and economic growth. According to a survey conducted by Angus Reid for the Canadian Federation of Independent Business, these businesses survived the recession and are now ready to hire more employees. They will if small and medium-sized businesses are confident that conditions are improving. However, despite lower inflation and interest rates and the lower value of the dollar, they are still hesitant to make such decisions.

Unfortunately, this attitude is reinforced by the increasing tax burden on consumers and small businesses, generated by all levels of government. The federal government particularly has shown during the past 20 years that it is incapable of or little inclined to control a steadily growing deficit.

Now more than ever before, businesses want and need government policies that create a climate of certainty. They are justifiably afraid of being hit by more taxes, regulations and administrative red tape.

The federal government has told everyone who would listen that it understands the needs of small businesses. However, it keeps drifting off course with measures that are the exact opposite of what small businesses feel they need, for instance fewer and less cumbersome regulations, which would provide relief for small businesses and consumers.

Bill C-9 contains fiscal measures to help small and medium-sized businesses with the purchase of production equipment, including machines, materials, and so forth. We must not forget, however, that there is already a long list of federal and provincial programs to assist small businesses, all with more or less the same objectives. Just to illustrate my point, I will give a non-exhaustive list of federal and Quebec agencies in charge of helping small and medium-sized businesses modernize and conduct research and development.

At the federal level we have the Federal Business Development Bank, the National Research Council, the Department of Industry and the Federal Office of Regional Development for Quebec.

In Quebec we have the following agencies: Centre de recherche industrielle du Québec; Fonds de développement technologique; Société de développement industriel; ministère de l'Industrie, du Commerce et de la Technologie; Caisse de dépôt et de placement du Québec.

I should say that these are only the main agencies. We could add a lot of sectoral organisations, or municipal, regional, semi-public or non-profit organizations.

I excluded from the list the provincial tax incentives to encourage investment, and the federal and provincial programs for export, computerization, automation, expansion, growth or marketing. Job training or retraining programs are also excluded, as well as those dealing with technology transfer, start-up and general financing.

As you can see, Mr. Speaker, there is quite an array of programs which overlap or offer the same services in the various departments or the different levels of government.

The situation is so complex and so confusing that small and medium-sized businesses would require the services of consultants or tax experts that most of the time they cannot afford to find the programs which could best answer their needs.

I recognize that small businesses need help, but to make all the measures at their disposal effective and efficient, we urgent-

ly require serious thinking in order to try to eliminate overlaps and duplication, and their tremendous cost.

We should look first for a simpler way of qualifying expenditures to facilitate small business access to these measures; second, we should streamline aid programs to reduce their excessive administrative cost; third, we should have a single entry point for all forms of aid to small businesses, as suggested by the Montreal Chamber of Commerce; fourth, we should eliminate overlaps between the federal and provincial programs, by delegating to the provinces which apply for it, the management and preparation of business assistance measures.

In the second part of my speech, I would like to focus on another amendment to the Income Tax Act proposed by Bill C-9. This is the extension to March 1, 1994 of the home buying program. The amendment extends by one year the program which allows first time home buyers to use part of their RRSP to buy a new home.

What I will say is largely based on an analysis of the program prepared by W. Paul McCrossan for the Canadian Real Estate Association.

The federal government has often used housing programs to stimulate the economy during recession periods. This particular program was introduced in the February 1992 budget. It allows buyers to withdraw, tax-free, up to $20,000 from their RRSP to use as a downpayment when buying or building a new home. However, the money withdrawn must be returned to the RRSP by way of an equal payment plan over 15 years. Originally, people had until March 1, 1993 to take advantage of this measure, but now Bill C-9 extends the limit to March 1, 1994, a couple of weeks from now.

On September 1, 1993, the Canada Mortgage and Housing Corporation published data showing that in 1992 consumers using the home buyers' plan accounted for 26 per cent of all sales at the national level.

Department of Finance statistics show that during the first year of the plan, which ended on March 1, 1993, a total of 153,452 persons benefited from the home buyers' plan. Moreover, according to raw data for the five months from March 2 to July 29, 1993, the department has received 45,500 additional requests for withdrawal of funds from RRSPs. These data clearly show that this plan is still fulfilling real and urgent needs.

As I mentioned before, Angus Reid recently published the results of a vast survey ordered by The Canadian Real Estate Association, which clearly illustrate the relationship between the economic situation surrounding the usage of the home buying plan and the demographic characteristics, the attitudes and the views of those who take advantage of it.

According to the survey, households withdrew on average $13,965 from RRSPs for a downpayment on a house. Almost half of the households, that is 47 per cent, used their RRSPs to buy their first home. More than a third, precisely 34.5 per cent, of the total amount invested by those who took advantage of the plan came from RRSPs. However, among families with a total income of less than $30,000, almost half the capital invested came from RRSPs, that is 46.8 per cent.

Even if there are no restrictions in the plan for first home buyers, one of the social effects of the plan's provisions is to give those who otherwise would never be able to afford a house, the opportunity to buy one. Nearly half, that is 47 per cent, of those who took advantage of the plan were buying their first home.

Furthermore, among first home buyers, 86 per cent mentioned that the plan was a decisive factor in their decision to buy a house. Analysis by income category also shows that middle and low-income Canadians were mainly the ones who benefited from the plan.

Among users of the plan chosen at random for the survey: 28 per cent were from the upper middle class with an annual income between $50,000 and $70,000; 23 per cent were of the lower middle class with an income of between $30,000 and $50,000; and 10 per cent were of low income, that is below $30,000. They are the ones who have the hardest time buying a house.

The key question raised by the home buyers' plan is whether or not this plan supplements the existing system allowing for retirement income high enough to be taxable or if it encourages immediate goods consumption at the expense of retirement income security?

Participants were asked to indicate on a one to seven scale the importance of various elements with respect to retirement income security. Ownership of a house came first with 6.1, followed by personal savings-5.8, RRSPs-5.7, Canada pension plan-4.5 and old age security-4.5.

Not only do low income and lower middle class Canadian families consider owning a house as the single most important factor for their retirement income security, they also gave it the highest rating among types of incomes, that is 6.2.

Regardless of their age, all respondents said that owning a home was very important, 55 per cent said it was fairly important, 19 per cent found it to be important, and 13 per cent declared that it was important for Canadians as a whole, in terms of their retirement income security. The importance of owning a home for retirement income security was confirmed when 84 per cent of all respondents said that as far as they were concerned, it was from very important to rather important.

Only 6 per cent of respondents believed that they could count on old age security or the Canada pension plan; 90 per cent were of the opinion that they would have to rely much more on their own resources in the future. This cynicism regarding government pension plans was more pronounced in the 25 to 35 age group, 3 per cent of whom believed they could rely on old age security or the Canada pension plan, compared with 95 per cent who believed that they would have to support themselves.

To conclude, in view of such attitudes and given how important owning a home is for these respondents to secure their retirement income, it is hardly surprising that the maximum use of the RRSP home buyers' plan is found in the 25 to 45 age group.

As a result of these survey findings, I suggest that the government extend the home buyers' plan another year, or better yet, another three or five years. At the end of this period, the program should be reviewed, taking into account the suggested economic activity, the demographic characteristics of the home buyers, and the actual amount of loans paid back to the RRSP.

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Subtopic:   Income Tax Act
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REF

Ian McClelland

Reform

Mr. Ian McClelland (Edmonton Southwest)

Mr. Speaker, I have received many letters and on behalf of the constituents I represent I would like to underscore the member's comments with regard to the continuation of the RRSP program for home purchasers.

I wonder if the hon. member could speak to some degree about the validity of continuing the use of RRSP money for major home renovations. That area is labour intensive and would be very good for the economy.

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BQ

René Laurin

Bloc Québécois

Mr. Laurin

Mr. Speaker, I want to thank my hon. colleague for the interest he showed in my speech and tell him that having access to their RRSP, the only money most people managed to save allows them to tap their own savings to improve their way of life, prepare for their retirement, and invest in the only thing they still put their trust in.

Each time we open the door so that these people have easier access, either to ownership or to home improvement, we give them a greater sense of pride, at no cost to the government since it is their own savings they are using. The money in an RRSP is money invested by savers. In fact, it is a form of tax deferral, money that will eventually be put back into the public purse; it is not lost for the government. In the meantime, let these people have access to it, as easily as possible.

We could take additional measures. For example, the government is planning to eliminate the $100,000 capital gains exemption. The wealthiest members of our society already took advantage of the $500,000 exemption, which was brought down to $100,000, and only the middle class and the less fortunate members of our society could benefit from it. Unfortunately, the government is planning to do away with this exemption, penalizing once more the least fortunate. We objected to such measures and will continue to do so; we are hoping to get the support of our colleagues in the Reform Party, who should be equally interested in protecting the less fortunate members of society.

I urge them to take a position in support of our action, and I hope that they will do so.

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Subtopic:   Income Tax Act
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LIB

Paul Szabo

Liberal

Mr. Paul Szabo (Mississauga South)

Mr. Speaker, I would like to ask the member to reconsider his position with regard to the capital gains exemption. As the member knows the $100,000 lifetime exemption did come in under a previous government two Parliaments ago.

There were two very serious flaws in regard to that exemption. First, it did not establish a V-day value for investments. Therefore anyone who had a holding gain prior to the introduction of that exemption got an automatic windfall. Second, it did not restrict the types of eligible investments under that exemption. Therefore investments in matters such as Florida vacation properties were eligible for an exemption. I have to ask the member whether he believes that kind of investment really benefits Canada.

One has to consider whether or not there is a logical stopping point. There is no question that some have benefited from this exemption and there is no question that others would like to. Where do we stop the process? There is no logical ending point.

The question therefore is if today we had no exemption would the hon. member consider introducing it as a measure which would benefit Canadians today? I think the answer is simply no.

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BQ

René Laurin

Bloc Québécois

Mr. Laurin

Mr. Speaker, what I find surprising about my hon. colleague's comments is his belief that maintaining these exemptions would be dangerous. We have reached the point where it is members of the middle class and the less fortunate would could benefit from them.

Why were these same concerns not raised when the wealthier members of our society were taking advantage of the exemptions? Why did we not criticize this mismanagement or these so-called new objectives which surprised us because the plan was not producing the anticipated results? And all the while we were trying to achieve objectives we did not want, we were letting the wealthy members of society benefit from them. Now that the wealthy class has filled its pockets, it is the turn of the middle class and the less wealthy to take advantage of these

exemptions and here we are telling them: we have to put a stop to this. It is over. Your turn will never come.

This is unacceptable. There cannot be a double standard in our system. While those with money were able to take advantage of these exemptions in the months and weeks following the introduction of the measures, unfortunately this was not the case for other people who had to wait and save their money before eventually making a profit.

I am sorry to hear say that this measure must be eliminated because it is now the turn of the little people in our society. As is often the case, they will not get their kick at the can. Most of the measures we can expect to see in the government's upcoming budget could put us in the same situation.

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Subtopic:   Income Tax Act
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LIB

Dennis Mills

Liberal

Mr. Dennis J. Mills (Parliamentary Secretary to Minister of Industry)

Mr. Speaker, first I want to say that I listened to the question from my colleague from Mississauga South. He was not suggesting we should not be sensitive to middle income earners who have that exemption. He was saying we should make sure that tax measure is not designed in a way to encourage investment outside of Canada, such as Florida properties and I support the hon. member on that.

The hon. member has made a compelling presentation today for first time home owners through the RRSP and I salute him for that. It is one of the best I have heard. We can only hope in the next couple of weeks that the member's recommendation is listened to.

I want to talk about the point he made in the first part of his speech relating to the duplication of provincial programs for small business and Government of Canada programs for small business and the fact that we should streamline the process.

The member talked about decentralizing. Would he consider a decentralizing or streamlining of the programs if they were operated by the Government of Canada in the regions or in the provinces? Or, is the member advocating that the Government of Canada should just get out of the business of helping small business, period? What is the member's position?

Topic:   Government Orders
Subtopic:   Income Tax Act
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BQ

René Laurin

Bloc Québécois

Mr. Laurin

Mr. Speaker, I listened with a great deal of interest to the comments of my hon. colleague opposite, particularly when he said that the intention was not, apparently, to eliminate the $100,000 capital gains exemption, but rather to stop the flow of capital out of the country. If there were some way to do away with this irritant without denying the middle class and the less wealthy the opportunity to benefit from the exemption, then we would welcome this timely initiative and we would certainly support it.

As far as decentralization and duplication are concerned, the Bloc Quebecois maintained throughout the election campaign that the federal government should withdraw from certain areas and leave responsibility for program administration up to the provinces. We have spoken at length about occupational training. This is a good example of an area from which the federal government should withdraw. Responsibility for manpower training should be left to the provinces because it is a matter of education and under the Constitution, education falls under provincial jurisdiction. If the present situation persists, there will continue to be unproductive duplication in this area.

We could give other examples, health and research and development, for instance. It is unfortunate that we have not succeeded in eliminating duplication, the reason being that the federal government wants to maintain a high-profile in provincial areas of jurisdiction. And yet, every Quebec premier over the past 30 years, whether blue, red, separatist or sovereigntist, has called for responsibility for these areas to be handed over to the province. I think there is a major consensus within the province of Quebec, especially on this issue. And I hope the federal government ultimately recognizes this fact.

Topic:   Government Orders
Subtopic:   Income Tax Act
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February 14, 1994