Mr. Chairman, I am impelled to offer a few remarks concerning this portion of the tax bill owing to the fact that I am anxious to support the suggestion which has been made by the hon. member for Edmonton West, reinforced by the hon. member for Peace River, when they tried to impress upon everyone within sound of their voice the general desirability of passing a portion of this monstrous bill and leaving the controversial and unacceptable parts to future discussion and future examination. In this way, we could ensure that this whole bill, which after all is a matter of great consequence to the Canadian public, would be taken in stages rather than inflicted upon the people in its entirety. So, I rise for the purpose of supporting that argument and I hope it will meet with some consideration by the government.
I am not expert enough in the rules of this House to know whether or not a large bill with as many sections as this one has could be passed subject to proclamation, and then various sections proclaimed when the government decides that it is appropriate to do it. Personally, I see nothing wrong and no reason why that course should not be applicable to this bill. It seems to me to be fair and desirable, if the government wishes to have the whole bill passed, that they introduce as part of the bill a proclamation clause so that the various sections can be proclaimed as it develops that those sections should be proclaimed. I realize that any suggestion coming from over here will not necessarily be treated with tremendous respect, but I hope that this suggestion which has been advanced by the hon. member for Edmonton West and the hon. member for Peace River this afternoon and which, I understand has been advanced also by the Leader of the Opposition,-I hope my friend, the hon. member for Hamilton West will not take me to task when I say this-will meet with favourable consideration by the government.
In the white paper proposals there were certain suggestions regarding corporate taxation. I do not wish to go into the details of what took place at the various hearings which the committee held, sometimes in the east and sometimes in the west of Canada, but it has been suggested that they took these proposals to the people for the purpose of securing their opinion. I might say, as a member of that committee, that I never saw or heard tell
of any proposals which received as much opposition as did the white paper proposals almost in their entirety. So, if the government learned anything from the hearings which were held by the committee, surely they must have been impressed with the fact that in general terms the proposals were undesirable and unacceptable to the majority of the people of Canada.
I happen to think that the government is wrong in its approach to the whole question. I have said before, and I repeat it because I think it bears repeating, that they could have accomplished the changes that they wished to accomplish by amending the statutes which have been in existence in connection with taxation ever since the inception of parliament, and certainly those in connection with income tax dating back to 1917. There is no reason the government could not have taken what is acceptable to them and then added or taken away from that as it suited them. We would then not have had such a complex and difficult bill to understand. I am not the only one who says that it is difficult to understand. We have had chartered accountants and lawyers who said that they were bewildered by it and were unable to digest it.
So, I submit that the nearest approach to retaining something that is good in the present statute would be for the government to carefully consider the addition of a proclamation clause to the bill, following which it would proclaim from time to time certain sections as the staff and the general public seem to understand them and as they appear to receive that degree of acceptance which would be necessary.
The white paper proposals were examined by the committee under the very capable chairmanship of the parliamentary secretary who is piloting the bill this afternoon. I say to you, Mr. Chairman, that he handled those hearings in a most distinguished way and brought great credit to himself and to the government. I am glad to see him occupying the position he does here this afternoon in piloting this bill. I think that he is more likely to accept some of our proposals than is the other parliamentary secretary who was here last week, at least I hope that is the case, Mr. Chairman. On June 18, in his budget speech, the Minister of Finance modified the proposals in the white paper. He acknowledged that the proposals were unacceptable, not only to the business community but also to a number of provinces. As a result, the government decided to modify the existing system for taxing corporate income rather than introduce a comprehensive new system.
Then, as you know, within the last month or so the government has decided to accept the recommendation that has been advanced from this side of the House on a good many different occasions that they stimulate employment by a reduction of taxation. In other words, what the government acknowledges is that they are willing by a reduction of taxation to encourage private business to employ at least a portion of the people who are presently unemployed. That is what the minister said in his speech. As a consequence, the corporate tax has been reduced by 7 per cent of the amount payable. I hope that the parliamentary secretary will digest this. When the government accepts the proposal that it is going to take 7 per cent of the corporate tax as a means of stimulating employment and the economy, surely that means that
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when they changed the tax laws, thus increasing taxation, they must have been wrong. I do not criticize them for this reduction as I think it was necessary and I am sure every member of this House hopes and expects that some benefit will result.
I turn now to the 20 per cent dividend tax credit that is being replaced by 33 1/3 per cent. I do not propose to go into that matter in detail because it is rather complicated. I cannot follow the argument that to increase the dividend tax credit will not stimulate the ownership of companies by Canadians. I cannot see how it could fail to have that effect.
I should like to speak now about small corporations with annual incomes of up to $50,000. Under the present act the rate is 21 per cent on income up to $35,000, and under the proposed legislation it starts at 25 per cent but the amount on which that would apply is raised to $50,000. As an alternative to the present lower rate of corporate tax on the first $35,000 of income the government has introduced a small business credit to be available only to Canadian-controlled private corporations. This restriction excludes from the eligible group any private corporation controlled in any manner whatsoever by non-resident persons or by some combination of non-resident persons and Canadian public corporations.
The credit is applied to reduce the federal corporate tax and is computed initially at 25 per cent on no more than $50,000 of business income of each taxation year. The rate of credit is to be decreased concurrently with the decrease in the general corporate tax rate to 24 per cent in 1973, and by a further one percentage point per year until it reaches 21 per cent in 1976. Corporations may continue to claim the credit until such time as they have accumulated and retained $400,000 of earnings.
Since the credit is to be granted at the corporate level it has been found necessary to retain the present detailed associated company provisions, with minor modifications, and the present provision for ministerial discretion in order to restrict the amount of benefits which might be claimed. Both the $50,000 annual limit and the $400,000 retention limit must be allocated annually amongst companies which form an associated group.
I believe that a degree of foreign ownership is beneficial. I believe if you have participation in the management of a company and it brings with it the research it has established as being desirable, and the experience of its operation, it tends to distribute more jobs. I think Canadians should try to emulate this sort of thing and learn from it. Foreign ownership does not necessarily mean ownership within the United States of America. In my province there are companies controlled by the British and some by the French, and in every case they bring ideas to the country. To say that all investment of foreigners should be kept out is ridiculous and I do not subscribe to any such doctrine.
To my certain knowledge there are companies that have been doing business in Canada for 25, 30 or perhaps even 50 years and have acted as good corporate citizens. If they have established a reputation and have conducted their business in accordance with the laws of Canada, then to say that they cannot receive a particular tax benefit seems 24725-31
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to me to be rank discrimination. I repeat, these companies have established a reputation for living within the laws of Canada, being good, law-abiding citizens, paying their people well and abiding by the labour laws of the country.
I want also to speak about the total business limit of $400,000. That is what they will be allowed-
Topic: GOVERNMENT ORDERS
Subtopic: INCOME TAX ACT