Debates of June 20th, 1994

Excise Tax Act

[Pierre Brien, Bloc, Témiscamingue, QC]

moved:

Motion No. 1

That Bill C-32 be amended by deleting Clause 2.

Motion No. 2

That Bill C-32 be amended by deleting Clause 3.

Motion No. 3

That Bill C-32 be amended by deleting Clause 4.

Mr. Speaker, we have decided to table amendments to Bill C-32 and I will briefly explain why. Then my colleagues will make additional comments.

First, we must put Bill C-32, which is entitled an act to amend the Excise Tax Act, the Excise Act and the Income Tax Act, in its proper context. Originally, the purpose of this legislation was to implement the federal action plan on tobacco smuggling, as well as changes proposed to the tax structure by the government, this past January or February.

However, clauses 2, 3 and 4 of that bill include measures which affect air transportation and result from the last federal budget. These clauses provide that, on flights with a ticket price of more than $500, the total tax amount, which is currently $40, will progressively increase to $50. However, for tickets costing $700 and more, the tax payable will now be $50.

We feel that this is totally unacceptable, given that most remote areas were very affected by the deregulation in the air transportation sector. Considering the current cost of airline tickets to these regions, it seems totally unacceptable to

increase the burden for consumers living in these regions as well as for taxpayers who are already making a very big contribution.

This is why, through our amendments, we propose to bring that tax back to at least the previous levels. At the same time, we urge members of the transport and finance committees to review the situation and bring airfare to a more reasonable level as regards remote destinations.

Here I do not mean the Quebec, Atlantic or western regions. I am referring to regions such as mine, Abitibi-Témiscamingue, Quebec's north shore and Gaspé regions and, in fact, most regions of Quebec and northern Ontario. Several Atlantic regions will also be adversely affected by the new tax. This measure went unnoticed in the last budget and is now hidden in Bill C-32.

We propose these amendments so that the Department of Finance does not get $24 million more this year and $44 million more next year at the expense of taxpayers living in remote areas. Indeed, we think this is totally unacceptable. I do hope that the government will realize the impact of this bill and withdraw clauses 2, 3 and 4.

[Ronald J. Duhamel, Liberal, Parliamentary Secretary to Minister of Public Works and Government Services]

Mr. Speaker, I just wanted to present the government's arguments, which I find quite rational in that they will reduce the tax burden on short-haul domestic and transborder flights.

The present uniform tax of $10 will be reduced to $6. To increase the recovery of the cost of air transportation facilities and services, the maximum air transportation tax on domestic and transborder flights will be increased from $40 to $50.

I think most people would agree that there is a substantial saving nonetheless for short flights.

The drop from $10 to $6, however, is not enough. In order to recover as much as possible to pay for these facilities and services, it seems essential to look for money elsewhere. So we, the government, decided to focus our efforts there.

Those are really the only two comments I want to make. I want to point out for those who take shorter distance flights that the tax will be reduced from $10 to $6, which is an important reduction. At the same time for those who will be taking longer flights it will indeed be increased to try and recuperate as much as possible to pay for public installations and services that these people are using.

[Bernard Deshaies, Bloc, Abitibi, QC]

Mr. Speaker, I am pleased to speak on behalf of my constituents in the riding of Abitibi, and the residents of all remote ridings, concerning Bill C-32. This bill to amend the Excise Tax Act, the Excise Act and the Income Tax Act essentially contains amendments to taxes on tobacco products and, in sections 2, 3 and 4, amendments to the air transportation tax.

It is particularly in reference to these airline ticket taxes that I would like to address the House for a few minutes, in order to show that the government has not achieved its objectives and that, in addition, regions outside the network of major population centres will be penalized.

In order to judge this new rate structure, I will take a few minutes to compare the present and proposed tax rates. The present rate consists of a basic tax of $10-as the parliamentary secretary mentioned-on each ticket, plus 7 per cent of the price of the ticket, to a maximum of $40. The new structure would feature a basic tax of $6, plus 7 per cent on the price of the ticket, to a maximum of $50 for expensive tickets.

To justify this new structure, the government cites the following objectives: first, to increase the amount of money recovered-which seems fair and legitimate-for air transportation facilities and services provided by Transport Canada; and second, to reduce the tax burden on short-haul flights to small localities. We, in remote areas of the country, are those small localities. We are directly affected, and we do not understand why the second objective could not be achieved.

This new rate structure does not achieve the targeted objectives, in particular reducing the tax burden on flights to small localities-mostly to remote areas of the country. Obviously, the new rate structure will make it possible to collect much more money to cover Transport Canada's costs. As the member for Témiscamingue put it, $24 million more will be collected in the first year and $44 million more in subsequent years.

This money will come primarily from the increase in the maximum tax from $40 to $50, notwithstanding the loss of revenue from having lowered the basic tax to $6 from $10. This meets the government's first objective to increase the recovery of the cost of facilities. Of course the government has another reason for introducing this new rate, and that is why we will focus mainly on the second objective, which is to reduce the tax burden on short-haul flights.

However, this objective has not been met. In fact, air transportation to remote areas has been adversely affected since deregulation, since the full cost is now being borne by these areas. The price of a ticket to some destinations has gone up considerably in recent years. For instance, Montreal-Rimouski costs $552 plus tax. Ottawa-Montreal-Val-d'Or, a flight I take every week, costs me more than $550 plus tax.

The reason is, of course, that there is less demand for these flights, and to make a profit, carriers have to raise their rates, as opposed to busier routes like Montreal-Toronto, where a regular ticket will cost around $400 for about the same distance. The new tax rate is based on the price and does not take traffic or distance into account. The government assumes there is a perfect correlation between price and distance, which is not the case. The price is based on two factors: distance and traffic.

This means that the government is wrong if it thinks that charging less tax on cheap tickets will benefit air transportation to remote areas. This policy will tend to benefit short-haul, high-volume flights like Montreal-Toronto, used constantly by business people, and charter flights.

Remote areas are already facing service cuts due to the present policy of privatizing air services. For the sake of fairness, people in the regions should be offered the same service as people in large urban centres. Regional air traffic control, firefighting services and weather forecasting will be mostly phased out or administered from the large urban centres.

Air services are vital to people in the north, and here I am referring to the Cree and the Inuit for whom air transportation often provide their sole access to basic services such as food, health care and postal services. In many regions, especially in the North, tourism is the only way they can develop their economy and become independent in the future.

With this new tax rate, travel will become even more expensive for foreign tourists, for the French and all the Europeans who come to see the vast expanses of our country, because of the already high cost of a regular ticket, which I mentioned earlier. This cost factor will prevent people in the North from developing their economy.

Here are a few examples of fares for these regions. If you want to go from Montreal to Iqaluit, in the Inuit territory, you may have to pay between $800 and $1,100, even more if you want to go to La Grande 2 or Saluit, and this is only one way. The return fare would be $1,100 to $1,600. Certainly, all these flights would be subject to the maximum tax of $50.

You could tell me that given the small number of flights it would not affect very many people. As I said, for Iqaluit there were 4,700 passengers in 1992, the last year for which data are available. By comparison, there were 86,900 passengers for Val-d'Or in 1992. For an area like Waskaganish, where air transport is the only thing available, 11,400 passengers. These people will have to pay increased fares.

I would like to tell the parliamentary secretary that it might have been possible-he said that they favour short distances-to add $4 or $5 to the Montreal to Toronto fare, and the Department of Transport would have collected as much money without penalizing people who depend on air transportation.

I would like to conclude that for people in my riding or any remote riding in Canada, clauses 2, 3 and 4, which may look innocuous, will mean an extra $10 per trip on the average. If you add this to all the other difficulties in remote areas, it becomes very difficult to control the tools of development. The government is siphoning more and more.

The motion presented by the Bloc Quebecois would delete clauses 2, 3 and 4 of Bill C-32, and maintain the status quo instead of hitting remote areas.

[Bernard St-Laurent, Bloc, Manicouagan, QC]

Mr. Speaker, Bill C-32 contains a deliberate glitch involving clauses 2, 3, and 4, dealing with the increase in the air transportation fee schedule for remote areas. Once again, the Liberal government has decided to pick on people who can ill afford to pay, having had the guts to be true pioneers in remote and less populated areas.

This comes after Bill C-17 and the attack on regions with a very high unemployment rate, such as my riding of Manicouagan, after the fishery adjustment program which, although it is very generous, does not take into account regional characteristics, especially regarding sports fishing which attracts a lot of tourists and is vitally important to us. And now, the Liberal government picks on these same people, striking at the key component of this region's economic development, namely air transportation.

However, the objective, which is to lessen the tax burden on short-haul flights to small communities, has not been met. As a matter of fact, deregulation has had a negative impact on air transportation to remote areas. These areas have had to assume the entire cost of transportation, and fares to these destinations have significantly increased over the past few years. As an example, let me give you a few statistics which might help us draw some comparisons. These examples will help us better understand what the problem is with the transportation system on the North Shore.

First, before getting to the statistics, let us review some basic geographical information. Let us talk about the east side of Manicouagan, a riding so huge it seems to me like a whole continent. To give you an idea, it is 46 per cent of the size of Ontario. The coast is 1,200 kilometres long. For comparison's sake, travelling 1,200 kilometres from Ottawa in a north-west direction will get you near Thunder Bay, and in a north-east direction to Sept-Îles. That is awesome. Out of these 1,200 kilometres between Franklin and Blanc-Sablon, which is only a part of my riding, 500 kilometres are connected to the national highway system, hence to the Quebec system, but the other 700 kilometres along the coast are not linked to the Quebec highway

system. You might see some sections of roadway linking together a few villages along the coast, but nothing connecting these villages to the Quebec system.

I will divide my speech in two. I will start with the communities accessible by road and then deal with the communities which are not accessible by road. In a riding like Manicouagan, where regional economic development is concerned, air transportation is very important, because it usually facilitates the first contacts between an investor and the territory he or she wishes to develop. Once they have flown to the targeted area, investors look at the various facilities they and their employees could benefit from. Of course, air services are a big consideration when advantages and disadvantages are reviewed.

That is why this issue cannot be treated lightly. For the people in my riding of Manicouagan, flying is not a luxury, it is a crucial service not only to ensure regional and economic development, but to maintain the quality of life they are entitled to as taxpayers. More that 85 per cent of small and medium sized communities are located within 150 kilometres of a major urban area.

A major urban centre is a built-up area where you can find all the important health and government services. In Quebec, we are talking about Montreal, Quebec City, Chicoutimi, Trois-Rivières, Sherbrooke. So, in those areas where there is significant population density, they are not usually lacking for much of anything to meet the basic needs to achieve a decent standard of living in 1994.

But what is the decent standard of living that the Manicouagan taxpayers have a right to expect in 1994? The bill talks about equity in relation to cost distribution. So, for analysis purposes, I did some brief calculations where equity must represent the same rate, must means that we should pay the same price for an air kilometre, no matter where.

That gives us some really interesting data. For example, between Quebec City and Montreal, which is undoubtedly the busiest corridor, some percentage of variation could be acceptable. We could agree with that, but to go from simple to double, as I will show you, is an aberration. It is not only an exaggeration, but an aberration. For Quebec City-Montreal, we arrive at more or less $1.10 per air kilometre; for Sept-Îles-Natashquan-as people cannot get to that area by road, they must take a plane for emergencies or whatever-$1.34 per kilometre; for Sept-Îles-Blanc-Sablon, $1.82. We should not forget that the rate for Montreal-Quebec City is still $1.10. The equity must be somewhere. We will talk about Natasquan-Montreal, which is $2.29 per kilometre; that is more than double the rate. Another one which is more than double: Saint-Augustin-Montreal, $2.32; for Blanc-Sablon-Montreal, $2.40. This is an aberration. But, according to the minister, there is equity somewhere in there. It does not make any sense.

Those people who are not linked to a road system, those living in communities that are not located within the road network of Quebec, have the same basic needs as those I mentioned earlier, but of course they also have particularities.

Let us take for instance health clinics. Suppose we have an emergency where a child is involved, or any other person, and needs special care. Since these clinics cannot provide the treatments, a sanitary plane of the Government of Quebec will be used to take the patient to a centre, Quebec or Montreal, as required. However, people who accompany the patients have to disburse considerable amounts of money to go with them.

Let us take Blanc-Sablon, for instance. A mother who is morally obligated to accompany her child to a Quebec hospital will have to pay almost $1,500 in transport, whereas if she resided in Baie-Saint-Paul, she would not have to bear such costs since that community is linked to the road system.

Air transport is not a luxury in the riding of Manicouagan.

That fact is mentioned in a resolution of the city council of Natashquan which I have here. The city council naturally sent a letter to the provincial minister and I would like to quote a few lines of that resolution which refer to the various preambles dealing with the specificity of those regions.

"Given the geographic difficulties", and this is not trivial, because the North Shore is not flat and you do not play golf every day in that area. "Given the health and education problems linked to transportation", teachers, doctors, people travelling to every corner of the North Shore go by plane because they have no other choice. Air travel is so outrageously expensive that the city council mentions it in its resolution. Although every city council could say the same thing but I mentioned only that of Natashquan.

They also explain how this affects supplies. I would like to tell you a short story dealing with food commodities. Here, a T-bone steak is expensive, and a tomato is certainly a lot cheaper, but if you go to Natashquan or Chevery, like I did in February, a tomato costs almost more than a T-bone because to buy a tomato in February, it has to be shipped there practically by November, so imagine what it will cost in February if it is still good to eat. This is of course an extreme example, but we have to consider these regional differences. Air transportation is a major factor here. And that is part of the reason why we are rising in the House today.

When the government thinks that its policy to charge less tax on cheap tickets will benefit air transportation to remote areas, it is wrong. Its policy will benefit the short haul, high volume flights between Montreal and Toronto, for instance. These destinations will benefit, but at what price? The price will be paid by people in remote areas, as if they were not paying enough already.

Montreal-Toronto flights have a high volume of business people, and business charter operations will benefit as well.

Bill C-32 will merely increase the burden on the regions and further isolate remote areas. And this is a measure that has absolutely no connection with the other measures in this bill. It should not even be in Bill C-32. The government put this measure in to make things difficult for everyone. Summer is coming, and they want to sneak this through the House.

The Bloc Quebecois believes that regional transportation services should benefit. The government had a chance to set up a rate system that would have benefited regional transportation. It was a wonderful opportunity for the Liberal government to prove, just for once, that it has the regions' best interests in mind. But of course, they failed to rise to the occasion.

The regions have suffered enough as a result of deregulation. It is time to turn the situation around and let the burden of regional transportation costs be shared by remote regions and urban regions. That would be fair.

In conclusion, today the regions are at a tremendous disadvantage as far as transportation costs are concerned, a fact that is adversely affecting their development and has made them second class citizens.

[Bob Speller, Liberal, Haldimand—Norfolk, ON]

Mr. Speaker, it is a pleasure for me to rise and speak on this bill.

I represent an area that has a large number of tobacco producers in it. They look quite favourably on this bill and what it will do to rationalize and give the industry which has been attacked over the years in a number of different areas more certainty on where it will go in the future.

I want to talk about a particular part of the bill. I follow this issue quite a bit. One of the areas this bill deals with is how tobacco is processed and gives a definition of a processor and manufacturer.

In section 182 on page 61 of the bill is a definition of tobacco manufacturing which states "means any activity (other than farming) relating to the manufacture or processing in Canada of tobacco and tobacco products". That could pertain to almost anything. It could pertain to people who make cartons or people

who make the paint that goes on the cartons that we put the tobacco in.

In fact there is one company in my area of Haldimand-Norfolk that is hit by this. It does not manufacture cigarettes. It had nothing to do with the smuggling situation. It is an independent group, not tied in with any of the big three. The intent of the legislation, other than to reduce taxes to deal with smuggling, was to hit back at the big three, those the government felt might have had, remotely, something to do with the smuggling that was going on cross border.

This small independent company processes tobacco, meaning it buys from the tobacco board, threshes the tobacco, bundles it up and ships a good majority of it overseas to export markets. It had nothing to do with the problem but because of the way the legislation is written it is caught up in it.

I ask the Minister of Finance if he could look into the situation of these small companies and see what he can do to help alleviate the taxes. They have to compete internationally with other companies and I do not see why they should be caught up in this legislation.

I believe the intent of the legislation is not to catch them, but unfortunately it will. Therefore I call on the government today to do something about it.

Finally, I will conclude by saying that I support Bill C-32. It will do what it is intended to do; stop the smuggling.

The 200 some odd smoke huts that were throughout Haldimand-Norfolk and on the Six Nations reserve are no longer there. Only a few of them are left. This bill has already done what it was intended to do. It has sent a strong message that we will not support this type of activity. It has done a lot for the communities, especially the Six Nations. A number of the elders have come to me to say thanks for bringing forward legislation like this. They feel that sort of activity should not happen on the Six Nations. They feel anything they can do to help us out in this regard they would gladly do.

There are other parts of the the bill which I obviously do not support, such as the export tax, but I can say quite heartily that I and the producers in my area support this bill as a whole.

[Garry Breitkreuz, Reform, Yorkton—Melville, SK]

Mr. Speaker, I have a few remarks to make in addition to what I said at the previous readings. These remarks are with regard to the amendments presented by the Bloc, the Official Opposition, on the air transportation tax.

We will be opposing the bill because of the reduction in taxes on tobacco and so on. Basically we support the government in the other aspects of this omnibus bill. We support the government's changes to the air transportation tax. It is moving toward privatization, moving toward user pay, moving toward cost recovery so that this part of the industry does not have to be

supported by government. That is why we oppose the amendments the Bloc is making because it will take away from the direction in which the government is moving.

There is currently a flat fee of $10 plus 7 per cent to a maximum of $40 on all airline tickets purchased in Canada. These fees are part of the Excise Tax Act even though they appear to be closer in function to a user fee than actual taxes. All the revenue is directed toward the Department of Transport which routes the funds to the aviation component of their expenditures. This tax makes up most of the funding for aviation services provided to all Canadian airports whether they are public or private. These services include air traffic controllers, aviation control for take off and landing and air navigation costs.

Current revenues from this tax of nearly $600 million do not fully cover the government cost of aviation which runs at about $870 million. Because of the implementations the government wants to make, this airport tax would come closer to meeting the actual costs of this by the airlines, then we would support that and therefore oppose the amendment.

To reduce the tax burden on short haul, domestic and trans-border flights by decreasing the flat charge per ticket and increasing the maximum fee is one change that was to be made, along with a flat fee decreasing to $6 and the maximum increasing to $50. This is good.

Last, the change would bring an additional $24 million in 1994 and an additional $41 million in 1995. That is a positive move. The burden on the taxpayer would be reduced.

In analysing this, this levy should not be part of a complicated tax system. The funds do not go into general revenue but are spent specifically on aviation. Therefore we should change this into a user fee on a full recovery basis.

We support these changes toward this move to more fully recover the costs that are experienced in this area. However we also acknowledge the difficulties with giving any department both a monopoly on revenues and a monopoly on service delivery. Mechanisms must be in place to ensure cost effective delivery.

Perhaps we should look closer at what the possibilities for privatization of these services are. We could probably even save the government more money if we looked at this whole area of privatization.

We support this change. It makes the air transportation tax move toward a full cost recovery basis. Further moves in this direction should include changing the tax to a user fee administered by the Department of Transport. This would necessitate adequate competition in place to ensure cost effective delivery service.

In summary, we are opposed to the amendments that the Bloc is making. We support the direction in which the government is going. It is not far enough but it is heading in the right direction. We would like to see it consider more privatization of this and more of a user fee cost recovery basis.

[The Deputy Speaker]

Is the House ready for the question?

[Some hon. members]

Question.

[The Deputy Speaker]

The question is on Motion No. 1. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Deputy Speaker]

All those in favour will please say yea.

[Some hon. members]

Yea.

[The Deputy Speaker]

All those opposed will please say nay.

[Some hon. members]

Nay.

[The Deputy Speaker]

In my opinion the nays have it.

And more than five members having risen:

[The Deputy Speaker]

Call in the members.

And the division bells having rung:

[The Deputy Speaker]

Pursuant to Standing Order 45(5)( a ), I have been requested by the deputy government whip to defer the division until a later time.

Accordingly, pursuant to Standing Order 45(5)( a ) a division on the question now before the House stands deferred until later this day at 6.30 p.m., at which time the bells to call in the members will be sounded for not more than 15 minutes.

The House resumed consideration of the motion that Bill C-30, an act to amend the Department of Labour Act, be read the third time and passed.

Department Of Labour Act

[The Deputy Speaker]

Is the House ready for the question?

[Some hon. members]

Question.

[The Deputy Speaker]

Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Deputy Speaker]

All those in favour of the motion will please say yea.