A little of Scott's debate on interest deductibility. My question is: Didn't the Leader of the NEW - past its due date - Government attend some kind of Economic school out west?
Excerpt from debate on interest deductibility, 2007/5/10
Hon. Scott Brison (Kings—Hants, Lib.):
Mr. Speaker, I am pleased to rise today on this debate, but I am saddened by the nature of this debate. The Conservative government has inherited the best fiscal situation, the best economic environment, of any incoming government in the history of Canada. Even though it was a great economic environment and a great way to start based on the Liberal record of strong economic management, we cannot rest on any laurels. We live in a hyper-competitive, global environment where companies and countries are either moving ahead or they are falling behind. We cannot simply sit still.
A smart country, like a smart company, makes good decisions based on what is best to address the challenges and opportunities of the next 10, 20, 30 years, the next century. We have a government that instead of focusing on the challenges and opportunities of the next century is too focused on this week's polls. It is making decisions based on short terms, based on what is popular right now at the expense of the long term competitiveness of our Canadian economy, Canadian companies, Canadian investors, and ultimately Canadian workers.
We do not have smart decision making coming from the government and the sad thing is that we have Conservative economic incompetence propped up by NDP economic ignorance. This is a toxic combination for the long term competitiveness of Canadians and for the long term job security of Canadian workers.
I would like to refer briefly to the recent commentary by Diane Francis, the National Post columnist. She said:
''Canada's biggest competitive disadvantage is our poor governance model, politically and policy-wise.''
When referring to the Conservative government's handling of some of these issues, she added:
''I dread to imagine what the discussion around the federal cabinet table was last fall concerning measures such as income trusts or interest deductibility restrictions. Did anyone bring up the potential, unintended consequences? Was a huge menu, and range of varied options the topic of lively, heated and lengthy discussion? Were the nuances of capital market reactions, or taxation matters, debated? Was the obvious alternative of cutting taxes on dividends instead of trashing income trust promises a subject of great discussion? Were the studies, commissioned by the previous government, and its many other solutions, reviewed carefully over days and nights by all cabinet members so they could deliberate in an authoritative fashion? Or was talk just about how to finesse the treachery to seniors and Alberta about a promise broken?''
It is clear that the government made the wrong decisions in both cases. Conservatives have imperilled the competitiveness of Canadian companies. They have hurt Canadian economic sovereignty and have exposed Canadian equities to unparalleled levels of foreign takeover activities.
I really do believe and have tremendous faith in the ability for Canadian companies to compete and succeed globally. We have global success stories that are based here in Canada. In fact, there are companies like Onex and Magna that are building and continue to build global success stories based here in Canada. But the fact is that the Government of Canada ought to partner with these success stories and be a partner in progress as these companies move forward.
In today's global environment, economically, a company is either acquiring or is being acquired. A company is either growing or is getting smaller. It cannot sit still. We represent a fairly small percentage of the global economy here in Canada. We represent about 1.5% of global capital markets as an example of that, so because of the challenges and opportunities of globalization and the pressures of it, Canadian companies cannot grow exclusively within Canada. For Canadian companies to grow, it requires acquisitions outside of the country. Other governments in other parts of the world understand this.
The fact is in countries like Japan, the United States, Britain, countries in Europe, basically every country in the industrialized world, if a company invests in another country or purchases a company in another country, the company can write off the interest on that investment against domestic earnings. That is a tax practice that is global. That is a tax practice that is well accepted and is part of the competitiveness of those companies in those countries.
It is unspeakably naive and economically ignorant to believe that we are not hurting Canadian companies by exposing them to the competition from around the globe and at the same time imposing on them a tax measure that companies in other countries do not face.
If we are really interested in owning the economic levers here in Canada, if we are really interested in our economic sovereignty, why would we expose our Canadian companies to the fierce global competition that exists now, and at the same time tie their hands behind their backs by imposing on them a tax that no other industrialized country imposes on their domestic industries? It is wrong-headed.
The fact that the Conservative government has to depend on the support of the economically ignorant NDP on this speaks to this. I knew that the Conservative government was not progressive socially, but with this measure it is not even conservative economically.
The fact is that the Conservatives have talked over the years about reducing corporate taxes. I want to clarify. I really believe in reducing income tax, personal and corporate. The hon. member has mentioned that this is a government that actually cut the GST, a consumption tax, to raise income tax.
The Prime Minister calls himself an economist. If economists were a licensed body, he would have lost his licence over that one, because there is no economic body in the world that would endorse increasing an income tax to help compensate for the decrease of a consumption tax. It was bad economic policy. It was bad for competitiveness. It is consistent, though, with the government on a number of decisions that it is making, including hurting Canadian competitiveness with this latest tax measure, eliminating the interest deductibility on foreign investments.
As I was saying, the Conservatives have spoken over the years about the importance of reducing corporate taxes, but I want to explain to them that what we are supposed to do is reduce corporate tax rates, not to reduce corporate profits and not to reduce the actual base. Their measures will reduce the corporate tax base. In fact, perhaps over time they will not reduce corporate taxes by eliminating corporations from Canada. The Conservatives will, with the support of the NDP, drive those head office jobs out of Canada, drive those Canadian international success stories like Alcan and BCE out of Canada.
They will create the opportunities for firms on Wall Street and international takeover firms to acquire the key components of the Canadian economy. Not only will what they do hurt Canadian economic sovereignty, it will kill jobs and our ability to actually build our economic capacity and to chart an independent direction as a country in the future. If you do not own your economic levers in a country, you really do not control the future destiny of your country.
Since the government's decision on income trusts, we have seen a flurry of takeovers of the energy trust sector. That has hurt our economic sovereignty. A key industry in Canada is energy. We are seeing as a result of the interest deductibility decision an increase in the rate of foreign takeovers and bids here in Canada, the latest discussions around Alcan, and the Bell Canada discussion. That is a government that threatens to take the Canada out of Bell Canada.
On another issue, the industry minister has said on Wall Street recently that he is interested in eliminating the foreign ownership restrictions on Canadian Telco. The government is not only weakening Canadian corporate interests and exposing them to takeover interests, but it is actually putting in place tax and regulatory measures that will lead to the hollowing out of Canadian corporate assets and the end of Canadian economic sovereignty.