Madam Speaker, I appreciate the opportunity to present Bill C-48 for second reading today.
The bill would implement federal income tax changes that were announced in the 2003 budget for Canada's resource sector, comprising the mining, oil and gas and fertilizer industries.
The 2003 budget takes concrete comprehensive action in several areas to build the society that Canadians value, the economy that Canadians need and the accountability that Canadians deserve. Included in the budget are measures to help Canadian business become even more competitive in the North American and global economies.
This new structure for federal income taxation of the resource sector reflects the government's ongoing commitment to an efficient and competitive corporate income tax system.
As hon. members know, a better economic performance for Canada tomorrow requires a more productive, innovative and sustainable economy today. Our tax system plays an important role in creating a stronger, more productive economy.
An efficient tax structure can enhance incentives to work, save and invest. It can also support entrepreneurships and the emergence and growth of small businesses. In addition, a competitive tax system is critical in encouraging investment in Canada, which leads to greater economic growth and job creation.
That is why the government launched a five year $100 billion tax reduction plan, the largest in our history, which has strengthened the foundation for economic growth and job creation in this country.
Among other things, it lowered the general federal corporate income tax rate from 28% in 2000 to 21% in 2004. With the tax cuts implemented to date, the average federal-provincial corporate tax rate in Canada is now below the average in the U.S.
The 2003 budget builds on the Canadian tax advantage for investment.
Several measures that will benefit the resource sector were included in Bill C-28, the Budget Implementation Act, 2003, which received royal assent last June.
These measures include: eliminating the federal capital tax over five years, a move that will strengthen Canada's tax advantage for investment in the capital-intensive resource sector; increasing the amount of annual qualifying income eligible for the reduced 12% federal small business tax rate from $200,000 to $300,000; and extending the existing temporary 15% mineral exploration tax credit until December 31, 2004, and providing an additional year for issuing corporations to make expenditures related to these arrangements.
When fully implemented, the measures in the legislation we are debating today, Bill C-48, will require that firms in the resource sector are subject to the same statutory rate of corporate income tax as firms in other sectors and that they will be able to deduct actual costs of production, including provincial and other Crown royalties and mining taxes.
Before discussing the measures in detail, I would first like to put them in context.
The resource sector is an important generator of investment, exports and jobs for Canadians, indeed, a significant component of the Canadian economy. In 2001, for example, the resource sector accounted for almost 4% of Canada's GDP, with over $64 billion in exports and more than $30 billion in capital expenditures. Over 170,000 Canadians work in resource businesses.
As well, the sector in general, and the mining industry in particular, is vital to rural and northern economies, while the oil and gas industry, long important to western provinces, is now also a significant economic presence in Atlantic Canada.
The potential for future resource development exists in virtually every region of the country. Moreover, Canadian resource industries are large investors in innovative technology and major participants in the provision of exploration and extraction services internationally.
Historically, income earned in Canada from the extraction and initial processing of non-renewable resources has been subject to special tax treatment. There are three main reasons for this.
The first is that resources are key economic assets. Since the development of non-renewable resources can create significant economic and social benefits, there is a strong initiative for governments to design a sound, economic and fiscal framework for large capital investment requirements.
The second reason underlying the tax treatment of the resource sector is that governments have come to accept that there is a specific set of risks and benefits inherent in the business of resource exploration and extraction. The tax treatment acknowledges that the resource sector is operating in a distinct environment.
The third reason underlying this special tax treatment is the direct competition for international investment dollars. Historically, international capital has been critical to the development of our resource industry. Competition for this capital, including Canadian capital, is increasingly intense.
I would like to review for members the current income tax provisions that are specific to the resource sector.
There are four provisions: Canadian exploration expenses, Canadian development expenses, Canadian oil and gas property expenses--