Speech: To tax corporations is to tax Canadians

This is a speech that I delivered in the House of commons on June 22 in the context of a debate over a motion introduced by the opposition to lower small business taxes. You can watch the video (in French only) or read an adapted transcript of the speech below.

Opposition Motion-Small Businesses
June 22, 2011

Hon. Maxime Bernier (Minister of State (Small Business and Tourism), CPC): Madam Speaker, I would like to thank you for the opportunity to speak to the motion moved by my NDP colleagues concerning the taxation of small businesses in Canada.

Everyone knows that I come from a region that promotes entrepreneurship. I am very proud to represent the people of Beauce. Beauce is a haven for SMEs. At one time, the people there were called the Japanese of Quebec because they are entrepreneurs who do not wait for government help to create wealth. They are resourceful and independent and like to take calculated risks.

I feel very comfortable voting in favour of the motion before us today because it reflects the position of our government as well. As I was saying earlier, over the last few years, our government has always supported small businesses and small business owners, since we know that they create wealth and drive the economy. A big, intrusive government will not create wealth, as the NDP likes to say during election campaigns and even here in the House, always proposing state involvement in response to a problem in society, either through regulations on individuals or businesses or an increase in their costs. We promote economic freedom and entrepreneurship. That is what creates jobs.

That is the best recipe. If we look at the past, we can see that that is the only recipe that has produced results. Canada came out better than all the G7 countries during the latest global economic crisis, which, I must point out, originated in the United States. Canada did not create this global crisis. It originated in the United States with the subprime mortgage crisis, as members will recall. This snowballed and affected Canada, Europe and many other countries in the world. Canada was the last to enter this economic crisis and the first to emerge. Why? Because we have adopted policies that enable creators of wealth to do what they do best, which is to create wealth.

I can say that the economic indicators are positive today, but they are also uncertain. There is a problem in Europe, with the debt of various European countries that favoured socialist measures, government measures, requiring heavy government spending. In the end, it hurt the creation of wealth in their countries. We see that the global recovery is tentative. We must continue to reduce business taxes, create wealth and ensure that there is greater freedom. When I speak of freedom, I am referring to individual and economic freedom. Politicians do not create jobs. I would like to repeat that because sometimes the people here believe that we create jobs. We depend on entrepreneurs. They pay our salaries and we should remember that. The real creators of wealth are the people who work day and night, who work continually to ensure that their families have the necessary comforts of life. They are big business owners as well as small business owners.

I do not like the fact that my opposition colleagues make a distinction between small and big business. The NDP’s economic policy contains contradictions. This afternoon, the NDP is promoting tax cuts for small business, but it is also promoting tax hikes for big business. If the economic logic applies to the creation of wealth by small business, then the same economic logic should apply to big business. There is a blatant contradiction in what the NDP is saying, and I invite my colleagues to examine other countries’ economic policies for creating wealth. That is what ensures that countries do better.

With our emergence from the economic crisis and through the efforts of all Canadians, 368,000 jobs were created in 2010. Canada has one of the best results of all the G7 countries. However, we must continue to promote entrepreneurship. For that reason we created and put in place various measures in this budget, including an important measure to balance the budget and thus ensure that Canadians live within their means and that entrepreneurs can continue to create wealth.

But I would like to take a few minutes to explain corporate income tax. I think that many people here probably do not realize that taxing a company means taxing individuals and Canadians. A business is simply a collection of contracts. Businesses enter into contracts with their clients and their managers, as well as employment contracts with their employees, as the NDP members well know, since they like to defend only the one side. Thus, a business is a fiscal invention. It is a cluster of contracts that have been negotiated with employers, clients and investors.

For the business owner, taxes add to the cost of wealth creation. When a small business or large corporation is taxed, that puts an additional burden on the company, and this prevents it from creating wealth and the necessary jobs. What is important to understand is that this burden is always passed on to individuals, because the business, in a capitalist system, must be profitable. Profitability is a good thing, and I am not afraid to say that businesses should make as much profit as they can, because that profit can be reinvested in wage increases for their employees, in equipment to increase productivity and in the creation of new products. Profit is a good thing in a capitalist system, and I do not understand how the people in the NDP can be against the profits made by a small or large business owner.

When a business is taxed, this imposes an additional cost on the business owner and that cost must be passed on to real individuals. Ordinary people are the ones who pay the price. The cost is passed on to consumers, because it increases the retail price of the product, and this becomes a sort of consumption tax. So when a business is taxed, this becomes a consumption tax when the business passes the cost on to the consumer. The business can also pass it on to investors, the owners of the business, and then it becomes a tax on capital, and at the end of the day, it is the business owner, the investor, who pays the tax. The business can also pass it on to the workers, whom the NDP claims to defend. Workers are also taxed when a business is taxed. This cost is passed on to the workers, who then get a lower wage increase and therefore have less wealth.

Depending on the competitive environment the company works in, it will transfer this cost one of those three ways and at the end of the day, Canadians will pay this tax. There is therefore no distinction between corporate tax and individual tax. It is a false distinction. Everyday Canadians are the ones who pay taxes. Corporations do not pay taxes. They transfer them to consumers. We are all consumers. They transfer them to workers. We are all workers. They transfer them to investors. We are all investors through the shares we hold in our pension funds.

We are the ones who always pay taxes. When the NDP wants to increase corporate taxes, it does not tell Canadians it wants to indirectly increase individual taxes. Taxing corporations indirectly taxes individuals, and that is why we have to continue down this path. That is the mandate the Canadian public gave us. We campaigned on cutting corporate taxes from 16.5% to 15%. The NDP argued in favour of increasing corporate taxes to 19%. It argued against the workers it claims to defend, consumers and small business owners.

It is worrisome to see the NDP’s economic logic. It worries me to see the opposition MPs have such a biased economic logic and no understanding of basic economics. Everything I was just talking about is taught in first-year university courses. That is what economics is all about.

The economy is individuals. When we seek to control the economy, we seek to control the actions of individuals. That is why our party advocates for personal freedom. We believe that individuals, people, the public, Canadians know better than we do what is good for them. We believe that they should be able to keep their money in their pockets since they are the ones who will create wealth.

Have members ever seen a scandal in a company that creates wealth? Scandals stem from big-spending governments. If we look at the history of Canada, the Liberals bequeathed us a long list of scandals by wanting to regulate everything and spend freely.

I think that we need to have confidence in entrepreneurs. They are the ones who create wealth. That is why I and all of my colleagues feel very comfortable today standing up for entrepreneurs because, when all is said and done, we are standing up for Canadians.

I also said that taxing businesses means taxing individuals, but it also means putting an additional burden on our businesses because entrepreneurs become tax collectors for the government. While they are collecting taxes to jump through all the administrative hoops imposed on them by the bureaucracy, they are not doing what they should be doing, and that is making their dreams come true, creating wealth and working for themselves. By being self-centred and working for themselves, they are working for society because they are creating wealth and hiring individuals. When we tax businesses, we undermine their creative freedom. We restrict their freedom by asking them to be agents of the state.

I would prefer if entrepreneurs could be true entrepreneurs and focus on what they do best-creating wealth for themselves-because, in the end, this also creates wealth for all of society. The western world’s economic and political history has shown that more wealth is generated in the countries with the most economic freedom.

I am pleased to see that my speech has struck my opponents in the NDP, but I do not think I am surprising them. If they can at least think about economic theory tonight, then that will be something. I encourage them to read Bastiat or Hayek and learn about this. Hayek received the Nobel Prize in economic sciences, as members are aware. His peers nominated Hayek for this award. I would like my colleagues to read Hayek and to also read our budget.

Our government’s budget was written by the best finance minister in the G7. We must remember that because of our Prime Minister and Minister of Finance, Canada is the best country in the world. Canada is a great country because it believes in individuals and it has a very good budget. A number of measures in this budget are pro-business, and therefore pro-individual and pro-Canadian.

Mr. Yvon Godin: And pro-worker.

Hon. Maxime Bernier: And pro-worker, as my colleague just mentioned. He is right, and he understands the economic logic that applies: we reduce corporate taxes and employees can receive larger wage increases, since we have taken that burden from the entrepreneur.

I was also talking about red tape. I am pleased to announce to opposition members that we have reduced the red tape that the federal bureaucracy imposes on business owners by 20%. That is a start. We can and must do better, but we have reduced it by 20%. That is why I serve on the Red Tape Reduction Commission with my colleagues. We will continue our hearings across Canada, listening to wealth creators and Canadians, to continue to reduce red tape so that they can focus on what they do best: creating wealth.

I urge my colleagues to have a close look at the report of the Red Tape Reduction Commission in November. They will see that we will have some good ideas. They will be the ideas of Canadians. These should be reflected in upcoming budgets, because we are focused on creating wealth in Canada. We must continue to create wealth.

We have done well on this front and we need to keep on. We will continue to reduce the administrative burden imposed on these entrepreneurs because, as I said earlier, they must continue to create wealth. It is not the government that creates wealth. We leave that up to entrepreneurs, and they know how to do it better than we do.

I have a few minutes left to say that I am both pleased and surprised today. I am pleased to see that the NDP is starting to show some concern for entrepreneurs. It is a good first step, and that is why we will encourage them to keep moving in the same direction. However, I am a bit disappointed that they saw the light after they voted against the budget. Still, I am confident that in 2012, with the next budget, they will stay on this new path and will continue to promote entrepreneurs to ensure the creation of wealth in Canada. They will have an opportunity to redeem themselves. At least it is a good start that gives us a glimmer of hope in terms of understanding the NDP’s economic logic.

The Liberals have never understood economic logic, but I can see that my NDP colleagues are on the right track. I invite them to read Hayek and Bastiat. They are interesting books that truly reflect reality. It is encouraging. I am very pleased to be here today and speak because I also come from Beauce, a region known for entrepreneurship. I will tell the people of Beauce that, while taking part in a debate here in the House, I saw a glimmer of hope that Mr. Layton’s NDP was beginning to understand entrepreneurs. I will take great pleasure in announcing that to the people of Beauce.

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