Mr. Speaker, jewellery is a powerful symbol that transcends centuries and cultures. When we think of jewels, we think of James Bond in Diamonds are Forever , or Marilyn Monroe singing Diamonds are a girl's best friend . Unfortunately, I do not think today that I would have got far offering Marilyn a $5 diamond.
Canada and Quebec both have their jewellery industries. This is why I will be supporting Bill C-259 of my colleague for Vancouver Island North. In Canada, the jewellery industry has a total worth of $1.2 billion, most of this is concentrated in small and medium businesses. Some 4,500 companies employ a total of 35,000 people. In Quebec there are about 9,000 such workers in 1,200 companies.
As has been pointed out, hon. members need to keep in mind that this excise tax was created in 1918 to help with the war effort. We won that war, but unfortunately that tax, like many others, although meant to be temporary, had a tendency to put down roots and is still with us. I would give just one other example of such a tax: the income tax that was inaugurated during the second world war.
Indeed, at that time, it was a tax on luxury goods, such as jewels and watches. While a $3 item of jewellery was a luxury item in 1918, as was mentioned earlier today, it is no longer the case today.
But what exactly is the excise tax? According to the Excise Tax Act, it is a federal tax collected on goods that are imported, or made or produced in Canada, based on the duty paid value of imports, or the sale price in the case of the item made or produced in Canada.
I will give all three examples, although the bill only applies to jewels. People at that time spoke of 10% of the portion of the selling price or duty paid value over $50 of clocks and watches for household or personal use, except railway men's watches, another example of the anachronism of those regulations, and watches specially designed for the use of the blind.
It is also 10% on all kinds of articles made in whole or in part of ivory, black amber, amber, coral, mother of pearl, natural shells, tortoise shell, jade, onyx, lapis lazuli or other semi-precious stones. Finally, something pertains a little more specifically to us, it is 10% on articles commercially known as jewellery, whether real or imitation, including diamonds and other precious or semi-precious stones for personal use or for adornment of the person, and goldsmiths' and silversmiths' products except gold-plated or silver-plated ware for the preparation or serving of food or drink.
Again, there is no denying that this tax no longer plays a role at all. We are talking about $3. I have three children who regularly ask me for some change on the weekend. They come back, indeed, with trinkets and some jewels from the discount store. I am surprised to think that they paid a 10% tax on the value of a good for which they may have paid $4 in the first place.
Worse yet, the cost of administering this tax is not known with certainty. According to the Canada Revenue Agency, its administration would cost a maximum of $1.5 million a year. However, it has to be mentioned that the Canadian Jewellers Association told the Standing Finance Committee that administering this tax would cost somewhere between $7 million and $14 million. I agree that there is a very wide gap, but given the often erroneous forecasts by the finance department, I would be inclined to grant more credibility on this issue to the Canadian Jewellers Association.
It would appear increasingly unjustified to collect such a tax on jewels as luxury items. In the current context, in other words in 2004 and no longer in 1918, other luxury items are not treated this way. One could mention, only as an example, yachts, estates, mink coats, caviar and champagne. Nowadays, they are considered luxury items, but they do not come under the scope of this tax.
Our Liberal colleague took great pleasure in mentioning the whole gamut of measures proposed in various private members' bills which increased the costs for the government. I can understand why the government is concerned to some extent, as this excise tax generates roughly $55 million in its coffers.
If the government is really concerned about how to make up for this loss of income, allow me to remind it that the Minister of Finance is planning to put $31.5 billion in the contingency reserve over the next five years. So, I do not think that a little $55 million will jeopardize the government's balanced budgets.
As part of its representations to the Standing Committee on Finance, the Canadian Jewellers Association pointed out, among other things, that while the jewellery excise tax applies only to imported and national items, Canadian jewellers are facing a relatively higher tax bite for three reasons. First, the duty paid value is generally lower for importers than the sales price of Canadian items of jewellery. Second, the popularity of Internet sales makes it easier to order from abroad jewellery that is then imported into Canada, while avoiding—bearing in mind that this is legal—duty and taxes. Third, the excise tax is in fact a tax on stocks in the sense that it limits the quantity of jewellery that a dealer may stock, display and sell.
I want to reiterate something the Liberal member opposite said in her speech because I thought it was important. She said that in her presentation to the Standing Committee on Finance, the Department of Finance and the Canadian Jewellers Association agreed that the tax favours imported jewellery over domestically manufactured jewellery and that deficiencies in the tax make it prone to tax avoidance and evasion. According to the department, if the jewellery excise tax were not already in place, it is less than certain that Parliament would want to legislate one today. I doubt it as well.
That is why we feel that the federal jewellery excise tax is outdated: it no longer meets any social policy objective nor it have the characteristics a tax should have. What are those characteristics? They are: fairness, effectiveness, ease of administration and transparency.
We believe that this tax has a negative impact on employment and the viability of the jewellery sector. Even the provincial, Quebec, and territorial ministers of mining agree that this tax should be eliminated in order to encourage the retail sale of diamonds.
Representations have been made over the last few years by various stakeholders. In committee, the Bloc Québécois, among others, expressed its position a number of times on this issue. Also, back in 1996, the Standing Committee on Finance proposed various recommendations to eliminate this excise tax, and these recommendations were adopted. I sincerely hope that Bill C-259 will be passed by the House. We will support this legislation.
