Mr. Speaker, I am rising to speak at third reading stage of Bill C-48, an act to amend the Income Tax Act with respect to natural resources. For several years I have fought, on behalf of my constituents, to obtain tax equity for the natural resource sector.
I represent a suburban constituency in Calgary where by far the single largest employer is the energy sector. Often the energy sector is depicted as some great bogeyman, a great polluter, that rapes the resources of the earth and gives nothing back to society.
In fact, it is an absolutely vital element of our economy, both in terms of growth and employment. If it were not for the energy sector and if it were not for the remarkable technology and ingenuity that makes up our energy industry, we would not be able to live so comfortably in this cold northern climate. We would not be able to do the many things that we take for granted, all of which depend on energy.
The oil and gas sector of our economy is directly responsible for over 60,000 jobs and indirectly creates hundreds of thousands of others. It is an industry that is too often and too easily dismissed or disregarded. When the government adopted income tax changes for corporations in its 2000 budget by reducing over time the general rate to 21%, it failed at that time to provide tax equity for the natural resource sector, which includes more than just oil and gas companies. The natural resource sector also includes mining companies and forestry companies.
I suppose the government's view at that time was that it needed to encourage the new economy in Canada and thought it ought not to provide incentives for the continued growth in the traditional industries which have historically constituted the heart of the Canadian economy, that is to say, primary industries like mining, oil and gas, and lumber. That was a huge mistake.
To this day an enormous percentage of our exports upon which this economy depends come from the oil and gas, mining and forestry sectors. Collectively, those sectors constitute the largest employers in the country. Most of the remote communities in Canada are created and sustained by the non-renewable resource sector. In a sense, our very claim to sovereignty--including many remote parts of the country in the north and from Labrador to British Columbia to the territories--is dependent upon the enormous investments made and risks taken by oil and gas, mining and forestry companies.
This is a sector that we should not dismiss as part of the old economy and a threat to the environment. To the contrary, we should applaud people who work in these sectors for the enormous technological ingenuity that they have developed and applied in the past couple of decades to make the extraction of resources increasingly efficient and environmentally friendly. We should recognize the hundreds of thousands of good paying jobs for working families that these companies helped to create.
That is why I strongly opposed the creation of a two tier tax system in the 2000 budget: one tier for most corporations and another tier for the natural resources field. Unfortunately, it took three years for the government to realize that this inequity was unjustifiable after vigorous lobbying on the part of companies in that sector. It was not until the 2003 budget that the government finally proposed to correct this fundamental wrong.
Unfortunately, it has now taken five years for the government to implement the changes proposed in the 2003 budget, and this is really my concern.
I will support this bill. I voted for it last night along with my colleagues in the official opposition, but it would be our strong preference to see these changes implemented in one fiscal year so that we could move the non-renewable resource sector taxation from 28% to 21% and adopt the exemption for provincial royalties and the credit for mining in one year.
I cannot believe that we must wait five years for the government to do that technically. It is simply stringing out the process of corporate tax equity because it wants the revenue. It wants to make the process as slow as possible so it can continue to generate more revenue from this sector which already pays an enormous tax burden.
Indeed, the ostensible fiscal cost of this tax change will be relatively modest. For the federal government, whose budget is over $160 billion, once fully implemented, this tax change represents only $260 million which, as I pointed out in my question to the hon. Parliamentary Secretary to the Minister of Finance, is a relatively modest amount of money when one considers the kind of waste that we see and the kind of misplaced priorities that we observe on the part of the federal government.
I am pleased that the bill will take into account the costs that are borne by oil and gas companies in paying provincial royalties. Originally, before this bill was introduced, before the 2003 budget the federal government was playing hardball with the oil and gas sector, saying that it will give the sector tax equity at a 21% rate, but the trade-off will be that it will take away the royalty tax credit, otherwise known as the resource allowance.
Collectively these companies pay billions of dollars in royalties to provincial governments. These royalties are an important part of provincial revenue streams. We can see that now in places like Newfoundland and Labrador, and increasingly in Nova Scotia where the provincial treasuries have been enriched by new oil and gas royalty revenues coming on stream.
It was fundamentally unfair for the government to spend three years playing cat and mouse with the energy sector saying that it will give the sector tax equity but only on the face of it, because it will take away the sector's ability to deduct from federal tax the cost of provincial royalty taxes.
I am glad to see that while the government has indeed eliminated the resource allowance here, it has offset the fiscal effect of that by creating in this bill a deduction for provincial royalties against federal taxes. That is absolutely necessary and we will be watching closely to ensure that it remains the case.
Similarly, we are pleased to see that an enriched credit has been provided for mining companies to ensure that the loss of the resource allowance will not negatively affect them. I understand that the net fiscal effect on mining companies will be positive. They will not be net losers as a consequence of losing the resource allowance while moving the rate to 21%.
In closing, we support the principle of the bill. We regret it has taken so long to arrive. We believe that the eight year delay in arriving at tax equity for the resource sector reflects a basic bias that the government has against that sector of the economy, and we regret that. It will continue to be a priority for the Canadian Alliance to press toward lower tax rates across the economy generally, including the most productive sector of the economy, that is, the major employers in the corporate sector.