Bill C-47 (Historical)

Excise Act, 2001

An Act respecting the taxation of spirits, wine and tobacco and the treatment of ships' stores

Excise Act, 2001

[Bryon Wilfert, Liberal, Parliamentary Secretary to the Minister of Finance]

Mr. Speaker, representatives of the Bloc again do not seem to get it. They do not seem to understand what the bill contains. Some misrepresentations were obviously made in the House today by the hon. member. There is no question that we are talking about legislative and administrative changes to the bill.

The member opposite clearly has failed again to understand that these are legislative and administrative changes. The member again has failed to understand that beer is not part of the bill. The rationale was very clear that the issues were very different.

Bill C-47 deals with spirits, wine, tobacco and ships' stores. This has been the case from the beginning when the bill was tabled in December 2001.

The comments made by the member with regard to the chair have already been addressed. We will not go into that. It is utter nonsense and he knows it. Obviously I am not sure what the motivation is on the other side. Clearly the issue at hand is that we as a government are interested in bringing in a new excise act to deal with the taxation of spirits, wine and tobacco products.

It was clear in the 1997 report that we engaged the industry, the provinces and all stakeholders and they gave us very clear messages about moving forward. That is in fact what we have been doing. It is somewhat distressing to hear the sideshow comments which have absolutely nothing to do with the bill at hand which deflect from the fact that the member cannot talk about other aspects of the bill which he obviously must support.

There is no question that we are talking about the issue of ensuring that young people do not engage in smoking by way of increasing taxes. I do not think the member has a problem with that. Clearly, we are talking about making the regime, particularly for the vintners, more realistic in terms of the 21st century, instead of having them mired as they were in the 19th century. This makes ample sense.

It is important that we keep an eye on issues such as smuggling, the illegal production of alcohol, which again the industry asked us to respond, warehousing regimes and deferring the payment of duty. The bill deals with these issues. These are the real issues, not the nonsense that we continually hear from across the way on an issue which has no basis in fact.

I suggest we deal with the real issues and the content of the bill. The bill has the support, has been articulated and is now here before the House. The bill clearly addresses the kind of issues that we want to see as Canadians. Fines for alcohol related offences will be increased substantially. Serious alcohol offences will now be subject to the proceeds of crime provision. These are very important.

Therefore, I hope that a majority of members on both sides of the House will deal with the real issues. The issue of improving the administration and reducing compliance costs for the industries are very important. These are the real issues today. These are the issues we need to talk about and on which we need to focus.

I hope that when the time comes to vote on the legislation we will send a clear message of support to the industry that this needs to move forward. We need to be more effective and efficient, and that is what the bill addresses.

As members know, there are many benefits and I have outlined these in my comments before. Very quickly, a simple and more certain taxation structure, equal treatment for all parties and improved administration and lower compliance costs are important. There has to be greater flexibility for a business to organize its commercial affairs and enhanced protection for excise revenues. These are important. This will bring an act that is mired in the 19th century fully up to date.

We have heard comments and we have responded. Bill C-47 addresses the key issues of the day. It is a strong bill. When it comes to issues such as beer, the Department of Finance is reviewing the proposals that have been put forth and we will respond in an effective and timely manner.

However that is outside the purview of the bill. Talking about beer is like talking about jet fighters. They have about as much relevance to Bill C-47 as beer does. I challenge the hon. member on the other side to stick to the issues rather than trying to debase the House with needless comments. If the hon. member has nothing to say he should do what his mother probably told him and not say anything. In this case he would be better off to stick to the facts and the issues.

At the end of the day we seek to bring forth a modern legislative and administrative framework which would be important for the industry. It would be important for the people involved with spirits, wine and tobacco. It would be important for all concerned. It is important to stick to the issues at hand. We must make sure we address what we have heard from the provinces and the industry so we can adopt legislation that would benefit everyone concerned.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, I thank my colleagues for their tireless support, especially on an issue which is not one of the easiest ones we have had to deal with since our arrival in the House of Commons.

It is always troubling that Liberal members confuse human feeling and sexism with cases of corruption and utter dishonesty. We have demonstrated this over the past few days. One cannot be both judge and jury in a position as important as that of committee chair.

Had the member for London West been a man, this would have changed nothing. We would still have tried to get to the bottom of the process whereby a bill such as Bill C-47 gets passed.

The amendment we put forward earlier allows us to voice our criticism of the unfairness and irregular proceedings in the Standing Committee on Finance and in the Department of Finance since this review of the Excise Act first began.

We are moving that adoption of this bill at third reading be postponed for six months so that we can get to the bottom of this process, which is unworthy of an institution such as the House of Commons, unworthy of us as MPs and, a fortiori, of anyone holding the position of committee chair.

This is not how Bill C-47 now before us should have looked. Why? Because Bill C-47 amends the Excise Act, a comprehensive measure. We have been studying the Excise Act since 1997. Since becoming a member of the Standing Committee on Finance in 1994 I have followed all the committee's deliberations, despite what a Liberal member may have said earlier. We have been looking at this review since 1997. We cannot have a general excise tax whose provisions cover a range of products including wine, spirits and tobacco, and leave out one of these products without something looking suspicious.

In the case of Bill C-47, that is what has been done. The government has introduced a review of the Excise Tax provisions for all products except beer. Why? Because an amendment to the Excise Act was in order with respect to beer and the way microbreweries were dealt with.

Earlier, I was listening to the parliamentary secretary to the Prime Minister. He does not know a thing about this issue. The only problem that confronts microbreweries is an excise tax that is too high compared to what their American and European competitors have to pay. That is the only problem. Eliminate this problem, ensure adequate, proper and fair competition—does the notion of fairness exist in the heads of Liberal members opposite?—and microbreweries no longer have a problem. From then on, the competition would be based on the quality of the products. Quebec and Canada are not afraid to see the various products of their microbreweries compete with beers from all over the world, because we have good products, good brewers and good workers in that industry. However, the government must provide a level playing field to ensure fair competition.

This is what we are asking of the Canadian government. This is what was supposed to be included in the new bill and in the proposed amendment to the Excise Act. But we are dealing with hypocrites in the brewery sector. Officials from John Labatt and Molson, who are members of the Brewers Association of Canada and who have been saying since 1997 that they want to help microbreweries correct this injustice, shot them in the back and stabbed them during the legislative process. This is what has happened since 1997.

Recently, we learned that there has been an agreement since 1997 between large Canadian breweries, namely John Labatt and Molson, and the Department of Finance not to include beer in the review of the Excise Act. The only product that is not included and that John Labatt and Molson asked not to be included is beer produced by microbreweries. The president of the Brewers Association of Canada, Mr. Morrison, sent a seemingly innocuous letter in which he tells the Chair of the Standing Committee on Finance that reducing the excise tax must be a priority, that it is a matter of survival for Canadian microbreweries.

It is urgent, but at the same time they do not want the excise tax to go down. What a brilliant lobbyist this president of the Brewers Association of Canada is. That was the wake-up call for microbrewers. And the secretary of state had the gall to argue that we do not have the support of microbreweries. I have to be careful here and not use unparliamentary terms.

There is now an association representing Canadian microbreweries on this issue. It is the only one. It is called the Canadian Council of Regional Brewers. We have the support of this organization, since it asked us to move, before the finance committee, the amendments that were rejected for some frivolous reasons by the member for London West, whose husband is one of the seven directors of Labatt Breweries and also the chair of the taxation committee of the Brewers Association of Canada, which urged us not to reduce the excise tax. The president of the council is Bob King, who also happens to be the CEO of a microbrewery in Alberta.

I just have one little message for my Alliance colleagues who supported our amendments on the first day but later changed their minds. They should realize that we are standing up for their own constituents. If the pressure from Labatt and Molson is getting too much, they should transfer their calls to us. We are not afraid to talk to the directors of Labatt and Molson. We were also subjected to pressure from Labatt, but we held firm. They should do the same to defend their own people. When Bob King has to write to us to extend his support, it means that he does not have the support of the Alliance, and that is too bad.

Stop being being pressured by John Labatt, join with us and stand up for your constituents who work in microbreweries, especially as the president of the brewers association is a fellow from Alberta. Bob King is from Alberta. He is not from Quebec, he is not a separatist. However, he has a social conscience. He knows that if there is no microbrewery left in Canada, the big breweries will take over their share of the market and it will result in a smaller number of products, which will be to the detriment of consumers and industry workers.

Why jeopardize the future of breweries in Quebec and Canada by maintaining an unfair tax treatment as compared to the competition? Because of a big brewery, John Labatt, which is lobbying, acting like a cowboy thinking this is the Far West and it can whip us into submission.

We will stand up to John Labatt and Molson and stand up for our own people. We will stand up for microbreweries. I am asking Alliance members to do the same and to stop acting as John Labatt's lap dogs.

Earlier, in his wisdom, the secretary of state said--I hope the Prime Minister will replace him because he is pitiful--“Listen, we cannot help microbreweries through taxation. It is not good. This is not good regional development policy”. But he knows nothing about this issue.

We are not asking to help regional development through microbreweries, they are already competitive, they put out fantastic products. All we are asking of the government is to put them on an equal footing with the foreign microbreweries that are invading our market and competing unfairly because they benefit from a preferential tax system.

We are also asking the government to open its eyes. Mr. Speaker, could you tell your Liberal colleagues to open their eyes wide open. It is not the Holy Spirit who is flooding the Canadian market with beer from U.S. microbreweries, it is the big breweries, John Labatt and Molson. They are buying exclusive distribution rights to distribute and selling beer from American and European microbreweries on the Canadian market to sink Canadian microbreweries, all the while saying that they are standing up for them.

I am asking my Liberal colleagues to stop letting people walk all over them and to open their eyes. They call themselves great Canadian nationalists. My eye! One cannot be a Canadian nationalist and work solely for big businesses at the expense of Quebecers and Canadians who want to feed their families and develop a quality product, and to do so on an equal footing with their foreign competition.

Give us the same fiscal tools. Give microbreweries the same fiscal tools and the same chances. You will see that we can beat foreign microbreweries on the Quebec and the Canadian market. Do you know why we will beat them? Because we have the best product. We have the best variety of products. We have the best tasting beers in the world. And I am not afraid to say so. We also have the best prices. However, we have to live in a fiscally competitive world and the government has to wake up and stop groveling before John Labatt, Mr. Morrison and John Barnes who, by the way, is the boss of the latest lobbyist for John Labatt who lobbied the Standing Committee on Finance and the finance department so that the excise tax would not be reduced.

I did not make this up. On the Internet, under lobbyist, you can find the name Geoffrey Trussman. His reference and boss at John Labatt's is John Barnes, the spouse of the member for London West who is also chair of the Standing Committee on Finance.

[Bernard Bigras, Bloc, Rosemont—Petite-Patrie, QC]

Mr. Speaker, I thank my hon. colleague for practically turning the floor over to me in this debate. It is with great pleasure that I speak to, among other topics, the amendment put forward by the member for Drummond concerning Bill C-47, which reads as follows:

That the motion be amended by deleting all the words after the word “That” and substituting the following:

“Bill C-47, An Act respecting the taxation of spirits, wine and tobacco and the treatment of ships' stores, be not now read a third time but that it be read a third time this day six months hence.”

The reason I am speaking to the bill today is that, in my opinion, it is seriously detrimental to businesses in Quebec, which have always done very well economically and which offer Quebecers a product which meets their expectations and which, to a certain degree, deserves the full attention of this government, with a view to providing the necessary tax incentives to enable Canada's and Quebec's microbreweries to continue to market their products.

Generally speaking, Bill C-47 amends and, of course, introduces a number of technical improvements to the Excise Act. Here is a sampling:

the continued imposition of a production levy on spirits, tobacco products and raw leaf tobacco and the replacement of the existing excise levy on sales of wine with a production levy at an equivalent rate;

the replacement of the excise duty and excise tax on tobacco products other than cigars with a single excise duty;

more comprehensive licensing requirements and new registration requirements for persons carrying on activities in relation to goods subject to duty;

explicit recognition of limited exemptions for certain goods produced by individuals for their personal use;

tight new controls on the possession and distribution of goods on which duty has not been paid;

updated administrative provisions, including new remittance, assessment and appeal provisions that are similar to those under the Goods and Services Tax/Harmonized Sales Tax legislation;

updated enforcement provisions, including new offence, penalty and collection provisions;

Basically, we find it regrettable that the bill contains no provisions to reduce the excise tax on beer and microbreweries. We thought that the bill should naturally include beer and reflect the situation in which the microbrewers of Quebec and Canada find themselves.

I would remind the House that a number of Quebec and Canadian microbreweries are in dire straits. I would also remind the House that several of them have gone bankrupt and have had to close down because in Canada there is a preferential tax rate, clearly enshrined in the legislation, favouring the big breweries. Finally, I will remind the House that 38 out of the 86 microbreweries in Canada have had to close down. These small businesses do not represent a significant part of the Canadian beer market--only 4% to 5%--while the big breweries account for 90% of the market.

It is a growing industry. These dynamic small businesses are offering a product that meets consumers' expectations. It also meets the expectations of people in the regions.

Such a small sector as that of the microbreweries, which accounts for only 4% of the market and is steadily growing, should not be faced with tax measures or a tax system that puts them at disadvantage compared to the big breweries, which already have a huge share of the market.

I say it quite frankly because when we look at the situation in the United States, we realize that the American tax system is quite different from to the one we have here in Canada. For instance, 28 cents a litre is levied on Canadian products while only 9 ¢ a litre is levied on microbrewery products in the United States. Thus, in the United States, the government is collecting 9 cents a litre for beer produced by a microbrewery as compared to 28 cents a litre in Canada on beer produced here.

There is also the whole issue of the definition of microbreweries. In the United States, a microbrewery is a brewery producing less than 1 million hectolitres per year. In Canada, a microbrewery is defined as a brewery producing 300,000 hectolitres of beer. Therefore, in the United States a brewery producing less than 1 million hectolitres is by definition a microbrewery and, as such, is entitled to a more preferential tax rate, 9 cents, whereas in Canada, the threshold and the definition are, to a certain extent, a disadvantage for microbreweries.

Let me give the House a very real example: for every 24 bottle case of microbrewery beer produced in Canada, the federal government gets $4.09 when this beer is sold at a grocery store and $6.12 when it is sold in a bar. In the U.S., the tax on 24 bottles of microbrewery beer produced in the States is $1.12.

What does this all mean? It gives a clear competitive and tax advantage to microbrewery beer produced in the U.S. and sold in Canada, which, in turn, has led to the demise these last few years of a number of microbreweries; 38 out of 86 microbreweries had to close their doors, including seven in British Columbia. That expertise was developed not only in Quebec, but also in British Columbia. Thirteen microbreweries went out of business in Ontario, 11 in Quebec. In regions like Saint-Hyacinthe, Amos, Saint-Eustache, Baie-Saint-Paul, Montreal and Cap-Chat, small local businesses had to close down. Microbrewers themselves blame the tax system for placing them at a severe competitive disadvantage compared to the major brewers.

If the government opposite wants to make regional development one of its priorities, it should realize that its current tax policies have hurt smaller businesses that only have a 4% share of the market. Since the government keeps picking on small businesses, it is not surprising that jobs are being lost and that some of the businesses that had become a symbol for a whole region are no longer able to provide Quebecers and Canadians with top quality beer and even cottage brewery beer.

[Jocelyne Girard-Bujold, Bloc, Jonquière, QC]

Mr. Speaker, I am pleased to speak again today on Bill C-47, more particularly on the amendment of my colleague from Drummond.

I would like to commend my colleague for her amendment. She has been insightful. Thus, she is allowing the government to get out of a mess that the committee chair put it in, and that it agreed to.

We know that, in the Standing Committee on Finance, government members suffer from the fish school syndrome. When someone on their side says something, they do not try to know what is happening; they follow, they follow the fish school approach.

I would like to read the amendment to the motion at third reading stage of Bill C-47, which my colleague from Drummond has moved:

That the motion be amended by deleting all the words after the word “That” and substituting the following:

“Bill C-47, An Act respecting the taxation of spirits, wine and tobacco and the treatment of ships' stores, be not now read a third time but that it be read a third time this day six months hence.”

This is working seriously: working to solve problems that have been created since 1997. Those who acted in good faith did not expect this. As the Alliance member said earlier, the excise tax is a major source of revenue for the government. The Excise Tax Act mentions wine, spirits, tobacco, and beer as well. Since 1997, there have been talks about modernizing the excise tax. The Bloc Quebecois was in favour.

My colleague from Drummond said that in clause 2, on line 15 of page 2, beer is mentioned. However, we realized during the debate in committee that beer was not mentioned anywhere else in Bill C-47.

Yesterday, the Parliamentary Secretary to the Minister of Finance told me that this would be discussed later on, that it was not necessary to discuss it now. When a bill deals with a particular issue, we must talk about it. Why take a small part of an act and put it elsewhere saying that it is going to be discussed later? We never know what later means. To reassure everyone, we must do a complete study of everything that is included in a particular piece of legislation.

That is not what the Liberal Party is doing, nor is it what the finance committee and its chair did. As my colleague from Joliette, whom I congratulate on his remarks, was saying earlier, the issue of microbreweries is a regional concern.

In my region—I said it yesterday and I will say it again today because it is very important—we have a microbrewery called Brasserie de l'Anse, which is located in the small community of Anse-Saint-Jean. This small community needs small businesses to survive and to retain its identity. The Brasserie de l'Anse enables that community to do that. It is located in the riding of the member for Chicoutimi.

He rose in the House yesterday. I said to myself “He is finally going to say something to defend the interests of his constituents”. But I was very disappointed. He talked about public funding, about members of the Bloc Quebecois who are lingering in Ottawa and who are not doing anything. I never thought that I was not doing anything here. If he is only a liaison officer for the Liberal Party, then it is not surprising that he should behave this way.

I can say that we are here and that we are working very hard to defend the interests of our constituents. As a member of the Bloc Quebecois from the Saguenay—Lac-Saint-Jean region and as chair of the caucus of Bloc Quebecois members, I look after the riding of Chicoutimi—Le Fjord.

I am very pleased to support the brewers in L'Anse-Saint-Jean, and I take their interests to heart. That is why I support the amendment moved by my colleague. The government should pause and reflect. It has left out of this bill an important part, and it affects the interests of workers and communities as a whole in the regions. It should do its homework once again, and undertake a new examination of this bill.

We are not asking for anything special. We are not asking for something that did not exist before. We simply want to abide by the Excise Tax Act. That is all.

I am very happy that my colleague moved this amendment. If the government is serious, it will rise to the occasion, and we will have a real debate on the microbreweries issue.

Microbreweries are found not only in Quebec, but throughout Canada. Our communities are proud of them. As my colleague from Joliette said earlier, I am very proud of my sense of belonging, and I am very proud of my own identity inside Quebec. I am very proud to say I am from the Saguenay region. A microbrewery is in touch with the identity that has developed within a specific area.

Mr. Speaker, you come from another region. You have another sense of belonging and other tastes, and you are proud to express them. Microbreweries are small or medium size businesses that represent a region and they also play that role.

I want them to keep on doing that. I want the government to remove its blinkers and say “Yes, we will look at the bill again. We will look into this excise tax business, which concerns everything we wanted to deal with at the beginning”. The government should review the matter seriously.

As we were saying, we agreed with Bill C-47 before our colleague from Saint-Hyacinthe--Bagot realized what had happened. We could not let this go through as it stands; it was too important. The Bloc Quebecois members are here to defend their respective communities. This affects my province and other communities throughout Canada.

I am a sovereignist from Quebec, but I have always respected everybody else's sovereignty and identity. We want each and every element to have its proper place in this bill. We want to ensure that each person and each company concerned, whether by the beer or by the tobacco issue, and each association be taken into consideration. We want a serious review of this bill.

Let the government members remove their blinkers, recognize reality and say “Yes, we will do our homework”. The Excise Tax Act has not been reviewed for a long time. Let us update it. There will not be another review for a long time. We have to do our homework carefully. It is true that this is an important source of financing for the government. It is also true that small communities and the microbreweries, which are important in their area, need some help.

The ball is in the government's camp. It is up to the government to do something. I hope that all the members will support the amendment moved by my colleague from Drummond.

[Pierre Paquette, Bloc, Joliette, QC]

Madam Speaker, I would like to comment on the amendment standing in the name of the hon. member for Drummond. It represents an adequate response to the problem the Bloc Quebecois raised yesterday, actually, several weeks ago, concerning Bill C-47. This amendment is a six month hoist. We are moving this amendment to give us the time to correct unfair provisions in Bill C-47.

The legislation on excise tax and excise is comprehensive. It deals with wine, spirits, tobacco products, and beer. What is beyond comprehension is that Bill C-47 deals with all these products, except beer. It does not deal with beer, and it does not deal with the excise tax microbreweries have to pay.

How is it that this bill, which improves a general act that dealt with beer, does not mention it now? Even according to the brewers association, the situation is urgent. As I said yesterday, the president of the Brewers Association of Canada pointed out in a letter dated April 12, 2002:

We fully support a reduction in the excise tax for small brewers. It is a priority of the BAC and we want to point out that small brewers in Canada urgently need such reduction. We will support any measure aimed at attaining this objective.

Everyone agrees that it is urgent, for the beer industry and microbreweries, to have measures that would reduce the excise tax. Strangely enough, the only sector where it is urgent to make a decision is the one that has been excluded from Bill C-47.

With the amendment, we would have the opportunity to solve this problem for good within six months. This is urgent, and if we want to have a reasonable solution, it seems to me that the deadline that has been mentioned is really a maximum. I believe this is the spirit of the amendment, that is, to solve the problem as soon as possible, within six months at the latest.

Why must it be solved? This has been said before, but I think we must remind the House because the government side does not seem to be listening. In Canada, brewers, whether they are small, medium or large, pay an excise tax of 28 cents a litre. In the United States, large breweries pay 28 cents a litre and microbreweries pay 9 cents a litre. We immediately see the difference, which is huge. The American authorities collect three times less tax.

Of course, if we add to this the fact that, in Canada, a microbrewery is defined as a brewery that produces less that 300,000 hectolitres annually, while in the United States it is one million hectolitres, we realize that there are businesses three times as large as our Canadian and Quebec microbreweries that also benefit from tax reductions that are three times as great. This explains the catastrophic situation in the microbrewery sector, 38 of which have disappeared in recent years. There are only 48 left, including 19 in Quebec.

To illustrate what the loss of these microbreweries means, it is important to name some of them. I am convinced they will remind our listeners and most members of some brands they have seen or might even have tasted.

There is for instance Brasserie Massawipi, which was quite well known throughout Quebec, Brasserie Portneuvoise, Brasseurs Maskoutains, Beauce-Broue, Brasseurs de la Capitale, Brasse-Monde, microbreweries in the lower St. Lawrence and the Gaspe peninsula, Brasal, a German microbrewery, which was located, I believe, in the finance minister's riding, Aux-quatre-temps and Broue-Chope. These are a few of the microbreweries that have disappeared because of the government's inaction. The Brewers Association of Canada has said it, this is an urgent situation.

As I mentioned earlier, the only thing missing in Bill C-47 is the issue of microbreweries and the whole beer industry. Why? Because the big breweries do not want to talk about it. They decided to oppose it because they want to increase their share of the market. I mentioned it earlier, some microbreweries have disappeared over the last few years, but the others have seen their market share drop by 1.5% to 2%. So the disappearance of these 38 microbreweries benefited either foreign microbreweries or traditional breweries.

But this is not all. Not only are the big breweries hoping to increase their market share, but all of them are distributors for U.S. microbreweries. So they indirectly benefit from a higher excise tax on the production of Canadian microbreweries. They are taking advantage of the disappearance of the microbreweries to take over their share of the market. As we know, things are getting much more complicated in terms of consumption. With their American products, they are taking over the microbreweries' share of the market at the expense of our Canadian and Quebec products.

Despite what the letter sent by the president of the Brewers Association of Canada says, it is not in the interests of the major breweries to solve this problem. The government is helping the larger breweries to get rid of the smaller ones. This is unacceptable.

The microbrewery sector is extremely important in terms of regional development and cultural identity, especially in Quebec. What we drink and what we eat are part of our culture. Our microbreweries make us unique. And we are always delighted to taste products from other countries.

However, if the microbreweries were to disappear, no one would have the opportunity to taste these distinctive beers, for which we are well known all around the world. So, it is extremely important for regional development as well as cultural diversity, which is a clearly stated objective of the federal government as well as of the Government of Quebec and the Bloc Quebecois. The lack of provisions in Bill C-47 to promote the development and survival of Quebec and Canadian microbreweries undermines our cultural diversity. It also goes against the positions of the Liberal government.

Microbreweries are the victims of the collusion between the Liberal government and the major brewers. How did the government manage to avoid any discussion on this matter?

First of all, Bill C-47 just pretends to ignore the problem of beer and microbreweries. It does not address it, but it includes a definition of beer. Therefore, they initially had intended to deal with the problem.

When the government rejected the amendments proposed in committee by the Bloc Quebecois, and in particular by the member for Saint-Hyacinthe--Bagot, it met the expectations of the large breweries. I think many of us suspect that the government was mainly concerned with the Liberal Party fund when it made that decision. It is sad to say.

Yesterday, someone on the government side said that we were no longer interested in public funding. It is not true. The Bloc Quebecois does receive contributions from private businesses, but up to a maximum of $5,000. On the government side, it is like an open bar. In fact, the ethics counsellor had to ask the finance minister to return a $25,000 cheque given to him for his party leadership campaign. We are not talking about funding the party's activities or its election arrangements. We are only talking about a leadership campaign. Astronomical amounts are involved here, which have nothing to do with the kind of money received by the Bloc Quebecois from businesses. Unlike this government, we are truly at arm's length with the lobbies.

Discussions must resume, in the interest of the microbreweries, the regions and cultural diversity. That is why the amendment must be passed, so that the government can rectify the situation and do justice to microbreweries and the regions of Quebec.

[Lorne Nystrom, NDP, Regina—Qu'Appelle, SK]

Madam Speaker, I want to say a few words on the bill before the House today as well. Bill C-47 is basically a technical bill that applies to duties regarding wine, spirits and tobacco products.

It is a bill we support. It is not a bill of great significance in terms of a lot of change. We support the amendments from the finance committee regarding microbreweries. My friend from the Bloc Quebecois just mentioned the problems of microbreweries and I agree with him wholeheartedly as well.

While we are talking about this important tax bill I want to say that we need a debate about a fair taxation policy that would be fair and just for the ordinary citizens of Canada. It has been a while since we have had that kind of debate. The last time we talked about taxation was during the 2000 election campaign when the Liberal Party made a commitment to a $100 billion tax cut over five years. We had that debate during the campaign but there has been very little in parliament itself in terms of a debate about a taxation policy that might be of benefit to Canadians.

When I think of the bill before us and our taxation system we must look at two or three different changes. I remember talking to people in my riding on the weekend in Indian Head, Saskatchewan. People were talking about three priorities: the need for more investment in the public health care system, the need for greater investment in public education, and the need for an investment to deal with the farm crisis that is extremely dire now right across the prairies and indeed right across the country.

Not many people realize this but according to statistics, 2001 was the driest year in the history of the province of Saskatchewan. The 1930s were very dry years. In particular 1936 and 1937 were extremely dry years. They were the years of the great drought and the great depression across the prairies. However last year was the driest year in recorded history.

These are the priorities of the government. We must talk about a taxation system that is fair enough to meet the public's agenda and priorities and do what is best for the common good. In addition to this we have concerns about the lack of infrastructure in the big cities including rural Canada, the national highways policy, environmental cleanup and ensuring that we have a safe water supply.

These are all issues that require a great deal of public investment, which in the last number of years has been curtailed radically by the federal government. We have to talk about a taxation system that is both fair and provides enough money to ensure we have public investment for the good of all Canadians.

When we look at these we think of the projections the Minister of Finance has made time and time again. Every year he has made projections and underestimated the revenue available to the Government of Canada. We now have surpluses that go strictly into the national debt.

Last year, at the end of the year, the federal government had a surplus of $17 billion. That was applied to the national debt automatically, except for the $101 million the Prime Minister decided to spend on Challenger airplanes on the last day of the fiscal year. The money went entirely to the national debt.

I am suggesting we give ourselves as parliamentarians some flexibility to decide where we spend these unexpected, non-anticipated surpluses that are not budgeted for. In Saskatchewan, and in some other provinces, we have a fiscal stabilization fund. It is a fund that governments pay into during good times and draw money out of in difficult times to balance the budget, to meet public expenditures, public expectations, and to meet a crisis like the farm crisis and so on.

If we were to have a fiscal stabilization fund that the $17 billion would have gone into instead of being applied automatically to the national debt, this parliament could have had a debate as to what to do with the $17 billion surplus. We may have decided to spend it in four or five different ways. Perhaps some of that surplus would have been spent on paying down the national debt.

I am sure in all likelihood the majority of that surplus would have gone into investment, public health care, public education, environmental cleanup, infrastructure, housing and the farm crisis, and other issues that are facing Canadians. After all every parliamentarian that goes back to his or her riding gets people lobbying on behalf of those very important causes. However, today, because we do not have a fiscal stabilization fund, parliament is not just handcuffed it is absolutely impotent in terms of deciding where to spend this unexpected, non-anticipated service.

I appeal to the House that we look at ways and means that will allow parliament to make the decision over the expenditure of taxpayers' money after debate in the House of Commons instead of allowing all of that money to go to the national debt by default. That is what has happened and it will happen again.

Two months ago, the Minister of Finance projected in his budget a $1.5 billion surplus for the fiscal year 2001-2002.

More recent projections by the finance department put the surplus at somewhere between $7 billion and $10 billion. Many members, including Bloc Quebecois members, have said in the House that, if a bill is not passed, all of the surplus will be used to pay down the national debt.

We are not against paying down debts. In fact, the debt to GDP ratio in Canada was much too high in the mid-1990s when the debt represented 70% of our GDP. We were the second highest indebted country in the G-7 next to Italy. Now the debt to GDP ratio is down to about 50%. That is considerable progress. We are roughly in the middle now of the G-7 nations.

Instead of automatically applying all of that money year after year of unexpected surpluses to the national debt, let us set up a mechanism in the House where we can have a debate in parliament to decide where that money will go. This is not a partisan issue as I look across at my friends on the Liberal side of the House.

What role does parliament have that is more important than scrutinizing taxpayers' money and deciding what is best to do with taxpayers' money? There are three things we can do with taxation revenue: first, is to pay down the national debt, second, is to reduce taxes in the case of a surplus, and lastly, is to put more money in terms of public expenditures on issues of concern like health and education.

What has suffered in the last few years since the 1995 budget of the Minister of Finance? Less and less money has been proportionately going toward investment into programs for people.

I have seen many frustrated Liberal backbenchers over the last few months who have expressed a concern, because of the rules of parliament, that the government is now being run by the Prime Minister's Office, a few bureaucrats across the way in the Langevin Block, and the Minister of Finance and some of his people without any input from the ordinary member of parliament. They are so right when they say that.

This is something that parties in the House should unite on and ensure we have a mechanism in parliament such as a fiscal stabilization fund. When we have that unexpected surplus the money would go into the fund and parliament would have a debate as to how the money is to be spent.

Is it a radical idea to call for a public democratic debate and call for transparency in terms of how we spend taxpayers' money? That is my plea in this debate, that we in parliament have a debate over where that surplus would be going for this fiscal year. We should have had a debate over where the surplus went in the last fiscal year when $17 billion was applied to the national debt. These are some of the things that should be done.

During the minute I have left to conclude, I would like to talk about the report the auditor general made public three or four weeks ago.

The auditor general stated in her report that we have $7.1 billion now invested in six or seven different foundations and none of them are subject to an audit by the auditor general. Once again this is an issue of accountability and transparency over how the public's money is spent. The auditor general must have the right to audit all these foundations. I hope the House will agree with me and help me make these representations to the Minister of Finance and others.

[Gilles-A. Perron, Bloc, Rivière-des-Mille-Îles, QC]

Madam Speaker, I rise to speak on Bill C-47 with some degree of regret and bitterness.

Why so? Because the bill deals with excise tax, which by its very definition, gives the full significance of beer, what a beer is, what a brewery is, what a microbrewery is. Whether unwittingly or otherwise, the people over there have neglected to legislate on beer. This is a major omission, particularly where the microbreweries are concerned, when these are virtually all in the process of having to shut down.

I would like to draw my colleagues' attention to a very important point, the taxation of the small breweries, the tiny ones, commonly called microbreweries. When the representatives of the Brewers Association of Canada came before the Standing Committee on Finance last October, they told us about the difficult situation the microbrewery sector is currently going through. They presented solid arguments for the reduction of excise tax for the microbreweries.

In the context of globalization, these small companies have to compete with foreign companies that are less heavily taxed than in Canada. In a market that is becoming increasingly open, the competition does not necessarily come from within the country, but rather from other countries. The foreign competition often benefits from beneficial tax treatment, which allows them to provide a product at a price that is more than competitive. The Canadian parliament must not ignore this situation when passing legislation.

At present, Madam Speaker, France, Germany, Belgium and, most particularly, our U.S. neighbour to the south charge their microbreweries less excise tax. Canada is the only industrialized country that has refused to grant its microbreweries this privilege, or equity, or parity, as far as excise taxes go.

Take, for example, the case of a microbrewery from my region, Les Brasseurs du Nord, which brews the wonderful Boréale, naturally, and its competitor in the United States. Here a brewery producing 6.5 million litres pays a federal excise tax of 28 cents per litre, which comes to $1.8 million.

In the United States, in Boston—and speaking of Boston, I would like to take a moment to congratulate our glorious Canadiens for their win against Boston—the same business would pay $585,000, or 9 cents a litre. The figures speak for themselves. For the same production, there is a $1.2 million difference in taxes.

This is why the Brewers Association of Canada is calling upon the Government of Canada to reduce the excise tax by 60% on the first 75,000 hectolitres produced by Canadian breweries that produce a maximum of 300,000 hectolitres annually. This proposal has received support from the four largest Canadian breweries belonging to the association.

It should be noted that between them, the 53 breweries that pay excise taxes shell out $19 million a year. A 1995 study of Ontario breweries showed that the excise tax is nine times greater than profits in the sector, which are estimated to be $2.1 million.

Microbreweries can be found in just about every region. They are small businesses set up in small communities, which contribute a great deal to their development. They are tourist attractions, which generates employment, and consequently, more financial resources. Unfortunately, this unfair and untenable situation that the industry is up against constitutes a very real threat.

Only three months ago, there were 19 craft style breweries in Quebec. Now there are six, including one in my riding, Broue-Monde in Saint-Eustache, which has disappeared.

The situation demands to be rectified. The government must now make decisions that will help these small entrepreneurs. The question is: given the current state of affairs, why should microbrewers continue to invest in Canada, when there are incredible benefits to setting up shop in the United States? The excise tax represents a very heavy burden for these small Canadian businesses. It is therefore urgent that the excise tax program be amended.

In other sectors of activity, small businesses investing $1 million in land, equipment and facilities are successful. They hire fifteen or so people and have sales of $1.5 million to $2 million. They make a profit and shareholders take a profit. They are successful.

However, for microbreweries, it is a completely different scenario. With sales of $1.5 million to $2 million, they barely break even; no clear profit, but a requirement to pay a little over $200,000 in excise taxes to the federal government. The excise taxes are unrelenting. Let us be clear: in the case of microbreweries, excise taxes are higher than labour costs.

The government must recognize that small breweries are distinct and should be taxed accordingly. Unfortunately, it is the only party that still does not recognize this.

The amendment being requested is minimal compared to the revenues generated by the general tax. The proposed tax break would represent only 2% of what the government collects in excise taxes. Let us be clear that this concerns a small sector which is highly labour-intensive, manufacturing-intensive, requiring major investment, a sector that plays a vital role in small communities in their provinces.

The current taxation system will have to undergo a comprehensive review, something which has not been done since 1964, with the Carter commission.

[Shawn Murphy, Liberal, Hillsborough, PE]

Mr. Speaker, like the other speakers I greatly appreciate the opportunity to speak to third reading of Bill C-47 which would introduce a modern legislative and administrative framework for the taxation of spirits, wine and tobacco products under the new excise act.

As a member of the finance committee I have followed Bill C-47 closely. It has gone through considerable review at committee. We have heard from witnesses. It is good legislation and should be adopted by the House. I urge all members on both sides to support it.

Bill C-47 deals with commodity taxes. As all speakers have indicated today, commodity taxes are an important and vital part of the Canadian taxation system. In the year 2000-01 duties and taxes on alcohol and tobacco products raised approximately $3.4 billion in federal revenues.

The Excise Tax Act is an antiquated piece of legislation. Many of its provisions date back to the 1800s. It cries out for reform. It is cumbersome and burdensome for manufacturers and wholesalers to fill out the forms and all the duplication that is required. That is the basis on which Bill C-47 came forward to the House.

Intertwined with this legislation we have had two wars going on at the same time. First, we have had the ongoing war on tobacco which is not only a federal issue. All provincial governments are engaged in it. A growing number of municipalities across the country including the city of Ottawa have come forward with strict regulations and bylaws on the sale, consumption and use of tobacco. I believe all members are in favour of this.

Second, there is the issue of the illegal importation, sale and distribution of spirits to avoid the Excise Tax Act. This issue is covered to a certain extent in Bill C-47.

Bill C-47 is an example of legislation that did not go through the House quickly. The discussion paper has a five year history in the House. There has been a lot of stakeholder consultation. Because of that the final product is good legislation. As other speakers have alluded to, the bill started with a draft discussion paper circulated by the Department of Finance in 1997. This was followed by draft legislation which was circulated in 1999 and followed by extensive public consultations mainly with the major stakeholders.

Bill C-47 proposes a modern, legislative and administrative framework which would generate stable and secure revenues while at the same time addressing contraband pressures. An important component of the bill is that it could be implemented without imposing unrealistic and unnecessary costs and administrative burdens on the industry.

There has been an issue at the finance committee and in the House with respect to microbreweries. Bill C-47 is not the legislation to deal with that issue. Having said that, I have heard a lot of arguments from members of the House about the excise tax paid by microbreweries. I agree with the arguments. The excise tax ought to be reduced.

The microbrewery industry throughout Canada is under stress and the excise tax should be reduced so that these breweries can become more competitive. It is interesting that the Brewers Association of Canada supports this and has indicated that in writing to the finance committee. I support it but this legislation is not the place to bring forward this initiative.

We have received assurances that the Department of Finance will study the issue, and I hope it will follow through with this. I hope the study is done sooner rather than later and that the Department of Finance will see the competitive pressures that the microbrewery industry is under. I hope the government will see fit to lower the excise tax on beer brewed by microbreweries.

It is interesting that the Brewers Association of Canada, which I assume is controlled to a certain extent by the major brewers, supports the reduction of the excise tax for microbreweries. At the same time, it clearly has indicated to the finance committee, the government and the House that the act is not the place in which to deal with the issue.

The act also deals with the issue of penalties for persons and companies convicted of illegally importing, possessing, distributing and selling spirits which is an important part of the act and which should be dealt with sooner rather than later.

Under the new excise framework, the current excise duty and tax on tobacco products, other than cigars, will be merged into one production levy. According to my reading of the act and to the evidence I heard, this will be very beneficial from the industry point of view because it will reduce compliance costs for the industry.

This is an important part of the whole government strategy on tobacco use. It levels the tax right across Canada. This is not the answer to the problem but it is one additional issue that has to be dealt with and it will help in our ongoing war against tobacco use.

Yesterday I heard the excellent speech on this whole issue by the member for Esquimalt--Juan de Fuca, a medical doctor. He concentrated his talk on the legislation to deal with the whole issue of tobacco use. It was an excellent presentation, and I agree wholeheartedly with what he said.

The act introduces modern collection tools and helps address the government's ongoing concern about the smuggling and possession of alcohol and tobacco use.

I will summarize the benefits. First, it provides a simpler and more certain taxation structure. Second, it provides equal treatment for all parties. Third, it improves and lowers the administrative costs for industry. Fourth, it provides business greater flexibility and enhances the protection of excise revenues. Those are some of the benefits in addition to the whole issue of illegal contraband spirits and the ongoing war on tobacco.

I urge everyone on both sides of the House to give full support to the bill. The new excise tax act introduces a modern administrative framework for the taxation of spirits, wine and tobacco products and addresses a longstanding need of both the industry and the government.

[Inky Mark, Canadian Alliance, Dauphin—Swan River, MB]

Madam Speaker, I thank the hon. Bloc member for her question.

I support the amendment. Any time we have legislation which would increase taxation on Canadians and have a negative impact on entrepreneurs, travellers and even beer drinkers it is not a good thing. It does not make any sense to support Bill C-47.

I support the amendment to defer the bill until the government takes a close look at the impact it would have. I raised the point during debate that taxing duty free stores make absolutely no sense at all. If they are to be taxed the name will have to be changed. They could no longer be called duty free stores if the government started taxing them. I therefore support the amendment to the bill.

[Inky Mark, Canadian Alliance, Dauphin—Swan River, MB]

Madam Speaker, I am pleased to rise in debate at third reading of Bill C-47, an act respecting the taxation of spirits, wine and tobacco and the treatment of ships' stores.

Let me begin by saying that Canada continues to lead the G-8 when it comes to taxing its citizens. In fact, has the Liberal government ever seen a tax that it did not like? Canadians are very concerned about the high rate of tax they pay. Certainly working Canadians are concerned about the high rate of tax they pay: All they need to do is look at their pay slips.

The bill would further increase the taxes on tobacco sold in Canada, which would include tobacco sold in Canadian duty free stores. However, because of the special status of duty free stores this legislation will have a disproportionate effect on them. Canada probably would be the first country to impose a tax on products sold in duty free stores, thereby undermining their reason for existence. It does not make any sense that we would tax duty free stores on the spirits and tobacco they sell when in effect their reason for being is to avoid having customers pay tax.

This new tax undermines the fundamental principle on which duty free shops were established in Canada, namely, that customers could shop there free of taxes and customs duties. Once customers' perceptions change, traffic patterns are affected. All provinces have duty free stores for Canadians who leave this country to visit other countries. Sales of all other products would be hurt as a result as a result of this tax, which would undermine the viability of the outlets and their key role in the local economies.

The federal government created and promoted the duty free industry to support small business, job creation and the sale of Canadian made goods. The outlets also provide an essential service for travellers, making vacations in Canada more attractive. The duty free industry has been profitable, allowing it to generate local economic benefits like jobs, purchases from suppliers and rents in commercial buildings and at airports. Most people who leave and return to the country by air shop in these duty free stores.

However, the imposition of a new tax on tobacco products threatens to undermine these economic spinoffs. Imposing this tax on duty free outlets in order to benefit health is symbolic. Duty free stores account for only a very small portion of tobacco sales in Canada. Moreover, applying this tax to duty free tobacco outlets would more than likely shift sales to another retailer rather than stop sales outright, thus the disadvantages of the bill far outweigh the benefits.

I will speak briefly about the business tax policy. Increasing taxes is a Liberal habit that is as harmful to the economy as smoking is to someone's lungs. Business taxes in Canada need to be reduced to the average rate of the OECD countries so that Canadian businesses can be competitive. This would mean a combined provincial and federal tax rate of about 35%. Allowing for various provincial rates of taxation, this means that the federal portion would need to decline to a little over 20%.

We should also target capital taxes, high sales taxes on business inputs and high personal taxes on business owners and their workers. A more progressive step would be for the government to shift from investment and savings taxes to consumption based taxes. This would only be fair to all wage earners in this country. In other words, one's taxes would be based on how one spends.

Canada could adopt a personal expenditure tax and more taxes based on the user pay principle. This would reform business taxes by reducing rates and eliminating distortions that impede the business sector from taking full advantage of the best economic opportunities.

The PC Party is the only party that advocates the complete elimination of the capital gains tax, not only because its elimination would free up capital for investment and make a difference in our actual economic performance but also because it would be a bold and symbolic act that would capture the attention of and send a message to the people around the world who invest. As we know, our country depends on overseas investment.

The bottom line is that there is strong evidence that lower capital gains tax rates induce higher revenues in the longer run, largely as a result of increased economic growth and subsequent payment of more personal and corporate income taxes. A study in the United States demonstrated that completely eliminating the capital gains tax in that country would lead to a $300 billion increase in national output. That amounts to nearly one million new jobs and an addition $46 billion in tax revenue due to economic growth. In other words, the more money the government leaves in the wage earner's pocket, the further it will go. We all know that money needs to go around in cycles in order to make the economy grow.

The United Kingdom, Germany, Norway and Sweden have all adopted more aggressive tax cutting strategies than Canada has. Germany reduced its capital gains tax by 50% and Great Britain by 75%. Norway completely eliminated all forms of double taxation of capital income.

President John F. Kennedy spoke disparagingly about the capital gains tax as early as 1963. That is a long time ago. He stated:

The tax on capital gains directly affects investment decisions, the mobility and the flow of risk capital...the ease or difficulty experienced by new ventures in obtaining capital--

Capital gains tax also creates economic inefficiencies because it encourages a locking in effect, whereby owners of capital hold on to their investments and miss more profitable investment opportunities. The United States has a very accommodating capital gains rate of approximately 20%. Last year Canada reduced the capital gains inclusion rate to 50%, putting us closer to the United States levels, but that parity is fleeting. We will soon be lagging behind again.

A deeper look reveals that even after our tax cuts, the U.S. tax on costs for industries is about 14.2 percentage points below the Canadian tax regime. This means that rather than making us a haven for jobs and investment, we are still at a competitive disadvantage when compared to the United States. The United States is Canada's only significant competitor for investment capital and it is beating the pants off Canada. Despite admittedly impressive growth in venture capital in Canada, the United States enjoyed a 170% increase in 1998-99, from $32 billion to $87 billion. In the first half of 2000, Canadian venture capital was $2.3 billion compared to $80 billion in the United States. That is quite a disparity.

Let us look at that statistic in a different way. New United States venture capital disbursements were 19 times larger than those in Canada in 1998 and 32 times larger in 1999. Although this gap is now starting to reduce, more needs to be done.

In the old economy the purpose of taxes was to redistribute income. In the new economy high taxes redistribute people. Over the last few years we have heard of people moving to the United States to work because the American rate of income tax is lower. When Canada's tax policy dictates that workers earning $100,000 must pay 52% of their income in taxes those highly valued workers will look elsewhere. We know of people who have looked elsewhere and moved elsewhere. This is particularly risky for Canada in the digital economy where valuable intellectual property assets, expertise and energy depart with every professional who crosses the border.

In the United States the highest rate of taxation does not apply until income reaches $400,000. An American earning $100,000 pays a rate of only 26%. That is quite a difference from the Canadian rate of 52%. It takes a considerable act of patriotism to choose Canada. The people who are tempted to leave are those with fewer roots in the country and fewer attachments to our lifestyle advantages like health care. They are often young people the country needs to grow and prosper.

Taxing income discourages people from earning, saving and investing, all of which are crucial to economic growth. If the government took 52% of every dollar people earned many would ask why they should earn any more. According to Jack Mintz, a professor of taxation at the University of Toronto's J.L. Rotman School of Management, the costs in terms of lost output are $15 billion to $140 billion a year, or from $500 to $4,500 per person per year. Replacing income taxes with sales taxes would be a drastic but beneficial move.

As I have illustrated, taxation has many negative effects on the economy, investment and job creation. It would certainly have a negative effect on microbreweries and tax free shopping. There is no doubt the microbrewery in Winnipeg would be negatively impacted by Bill C-47. Besides the fact that it would attack the tobacco industry by increasing taxes, Bill C-47 is another example of the distortionary and harmful effects of myopic Liberal tax policies.

Has the Liberal government ever seen a tax it did not like?

[Gilles-A. Perron, Bloc, Rivière-des-Mille-Îles, QC]

Madam Speaker, I wish to congratulate the hon. member for Drummond on her fine and interesting speech.

Since the beginning of the 1960s, there has been no substantive reform of the Canadian tax system. Does the hon. member think that, instead of a piecemeal approach to fiscal issues like we had with Bill C-28 and now with Bill C-47, it would be important to have substantial changes to the Canadian tax system?

[Pauline Picard, Bloc, Drummond, QC]

I am told that it is the current Minister of Justice. So, they supported microbreweries and they generated hope by saying “Indeed, it does not make sense. You cannot be competitive under such circumstances, considering the excise tax rate imposed on you. Therefore, we promise you that we will update the legislation. You will get what you want”.

Microbreweries are currently experiencing serious problems. They are paying more excise tax than they make profits. They were given reasons to hope. This act comes from the Standing Committee on Finance. It comes from the Department of Finance and it is the Minister of Finance himself, who is currently engaged in the leadership race, who promised to change things, to modernize the act, but instead he is crushing microbreweries with this legislation.

Beer has been deliberately excluded from the bill. The law has not been modernized. Promises have not been kept. Clause 2, line 14 on page 2 of the bill—the interpretation of the Excise Tax Act—provides the following, “'beer' means beer or malt liquor as defined in section 4 of the Excise Act.” They hushed this up thinking that we would let it go.

Resorting to such tactics is an insult to our intelligence and an insult to small brewers who have put their skill, energy, and hard work into building up their businesses. They want to compete on the market. Here is the answer we received in committee, “Wait. Other measures are in the works”.

These promises were made in 1997. We were told, “We will see about this in five years. We must wait another five years, because the act will not be reviewed until then”. This means that in the next five years, if the act is not amended or if no other measures are taken rapidly, there will not be many microbreweries left in Quebec and in Canada.

I cannot understand why my colleagues, whether they are from Ontario or Alberta, or whether they represent constituents who, through their entrepreneurship, have built up their microbreweries in order to sell their products, quality products, would not rise in the House. These members, who were elected to represent the interests of their fellow citizens, remain seated and hang their heads at such terrible legislation for microbreweries. This is a disgrace and I am ashamed for them.

The Canadian government talks a lot about how our businesses must be competitive. We agree. There is much talk about globalization. The government uses the taxes it collects from Quebecers and Canadians to set up programs to support businesses in Quebec and in Canada. That is the right thing to do. That is what our tax money should be used for. But the thing with the microbreweries is that they are not being allowed to compete. They are being squeezed out. Right now, our taxes are being used to support the big breweries.

How is that? Because in Canada, the tax on all beer producers, large and small, is 28 ¢ a litre. In the United States and in Europe, microbreweries pay only nine cents a litre. In Canada, both large and small companies pay 28 ¢ a litre. Large companies agree with paying 28 ¢ a litre. They were also in agreement with the government lowering the excise tax for microbreweries to the same rate as in the United States and Europe so that they could be competitive.

American owners of microbreweries producing so-called regional beer who want to import their products into Canada pay only nine cents a litre. How can our breweries compete on the U.S. market when they are paying 28 cents a litre? There is a huge difference. Either the microbreweries literally get swallowed up by outside markets, such as the United States and Europe, or we allow them to try to compete elsewhere. Everyone also knows that the methods we are using here are just as good as, if not better than those being used elsewhere. Our beer market is recognized world wide. Why not allow the microbreweries access to the international market?

The truth is out. We have here a letter the chair of the Standing Committee of Finance received from the president and CEO of the Brewers Association of Canada. I find it hard to understand that it was only after we put forward our amendments in committee that we found out that the chair of the Standing Committee of Finance, for whom I have a great deal of respect, was the wife of Mr. Barnes, the very one who deals with tax issues and one of the shareholders in John Labatt Ltd., a major brewery.

It seems to me that something here is not entirely transparent. Could there be the appearance of a conflict of interests. Ethically, someone who chairs a committee should act like a judge and remain neutral.

Such a person should not take sides but make decisions based on the rules and authority given to the committee by parliament. We have here a situation where our judgment can be skewed, as an opposition party has moved amendments that would include the beer industry in Bill C-47, a situation that makes no sense, according to some legislators. When we modernize an act, we have to modernize it completely. Why deliberately exclude beer?

This was done deliberately. The committee chair received a letter from the Brewers Association of Canada, which states:

—we fully support a reduction in the excise tax for small brewers... we strongly support a reduction of the excise tax for small breweries... We will support any measure aimed at attaining this objective, but in light of our prior agreement with the government—

I am thinking of Quebecers and Canadians who are listening today. When we hear “we fully support a reduction in the excise tax for small brewers, but in light of our prior agreement with the government”, could this actually mean that a very powerful lobby is saying to legislators “We do not willingly accept a reduction of the excise tax on beer because each time we gain a 1% share of the market, it is $17 million more in our pockets”? This is why beer and microbreweries are excluded from the bill.

At this point, I wish to show what is actually happening in the microbreweries sector. The big brewers like John Labatt and Molson currently control 90% of the market. As I pointed out earlier, each time the big brewers get 1% of the market, they make $17 million in net profits. It is easy to understand why the big brewers are so interested in seeing microbreweries disappear.

This is all fine and well. The big brewers say, “We support you”, and then they stab you in the back, saying, “We do not support you”. Each time they take over 90% of the market, they in fact grab 91% of the market, that is, $17 million more. They support the microbreweries, because it makes them look good, then they lobby the government saying, “No, not yet, we are not ready. We may need 98% of the market. There will perhaps remain a couple of microbreweries in Quebec and in Canada. This will please us”. This does not make any sense whatsoever.

My time is up but I would like to move an amendment to the motion at third reading stage of Bill C-47. I move:

That the motion be amended by deleting all the words after the word “That” and substituting the following:

“Bill C-47, An Act respecting the taxation of spirits, wine and tobacco and the treatment of ships' stores, be not now read a third time but that it be read a third time this day six months hence.”

[Pauline Picard, Bloc, Drummond, QC]

Madam Speaker, I am pleased to rise again to speak to Bill C-47, which seems to be very controversial.

Yesterday and this morning, my colleagues explained the origin of the conflict that exists with regard to this bill and that puts several small breweries in jeopardy both in Quebec and elsewhere in Canada.

As regards this bill, there seems to be some kind of collusion between the government and large Canadian brewers, who negotiated and put enough pressure on the government to bring it to exclude beer in a most unacceptable way, by ignoring certain provisions of its own legislation.

Clause 2, the interpretation clause of the bill, proposes a series of definitions. A definition of beer, meaning beer or malt liquor as defined in section 4 of the Excise Act, can be found on page 2, line 14. The problem is that beer has been excluded from Bill C-47. Everybody wonders why. Why would beer be excluded from this bill when the Excise Act is a general act that covers all sorts of things? It is wide in scope and covers all the products that are included in Bill C-47, as well as beer.

In other words, the only product that was not included in Bill C-47 is beer. We talked to people who draft legislation here and elsewhere, and they find it rather strange that Bill C-47, introduced by the government to modernize the Excise Act, covers all the products that were included in the Excise Act, which it is supposed to replace, except beer.

Before this new bill, the legislation included wine, spirits, beer, tobacco and distillery products. The existing act makes reference to breweries and tobacco products. It deals with everything, every single product touched by excise. There are provisions on licensing, rights of accession, offences, collection, record, accounts, required documents, warehousing and remission of duties, or what they call drawbacks in international trade. Bill C-47, which is supposed to bring that Excise Act up to date, also deals with everything, except beer.

How do we explain the fact that beer is not included in this bill? Is it an oversight? I asked that question in committee to the hon. member for Oak Ridges, because I wanted to know what would happen if we had forgotten to include beer in the legislation. After all, it is possible to amend a bill. I did not get any answer. Just a blunt rebuttal. We did not get any advice from the people who surround and support members of parliament in their work in committee, including the parliamentary secretary and public officials. We did not get any interesting advice. I was a little taken aback by the answers that I was given. Things did not make sense.

I had to come to the conclusion that something was going on. This is an act that the government has wanted to modernize since 1997 and everyone agreed—they even made promises to microbreweries—including the Minister for International Trade, the Minister of Finance, secretaries of state who have now become ministers, ministers who live in Quebec, including in Montreal, and they expressed their support to microbreweries. This is because they have one in their region.

[Robert Lanctôt, Bloc, Châteauguay, QC]

Mr. Speaker, I thank you for giving me the opportunity to speak to Bill C-47.

On the face of it, the Bloc Quebecois believes that the provisions in this bill were really acceptable and even necessary. We know the government is looking at changing the Excise Act and the Excise Tax Act. I believe the time had finally come to look at this change.

There is something rather incongruous however. The government claims that this bill is replacing almost entirely a good part of the Excise Act and the Excise Tax Act. The strange thing is that all the elements already provided for in these acts are in Bill C-47, except for a very important one, that is beer.

The problem is with microbreweries. In this case, the story began during a meeting of the Standing Committee on Finance, when it was asked, following requests from the Canadian council, that a tax reduction be included, which I will explain later.

Because of this nonsense, microbreweries here in Canada are currently paying 28 cents per litre of beer in tax, while in a country such as the United States and even in Europe, the microbrewery industry is protected with a tax of 9 cents a liter.

So it is very strange to see how the government could let this bill be introduced, which says nothing about the beer produced by microbreweries. We got to the Standing Committee on Finance and, through my colleague from Saint-Hyacinthe—Bagot, we asked that this bill be complemented by an amendment to reduce the excise tax, particularly for microbreweries.

Yesterday, government members talked about various conflict of interest problems that could arise and they said that there could be no conflict of interest. Further on, I will refer to what happened with the chair of the Standing Committee on Finance, the member for London West. For the government, there is no conflict of interest because beer and microbreweries are not mentioned anywhere in the bill. There is absolutely no mention of beer whatsoever. Thus the amendment that my colleague from Saint-Hyacinthe--Bagot wanted to submit was rejected by the chair.

Clause 2 of the bill, which takes up several provisions of the Excise Act and Excise Tax Act, includes a definition of beer. However, there is no provision in the bill about beer. Is it an involuntary omission or worse, should the bill have addressed the issue of beer?

Under pressure from major breweries, they perhaps forgot to remove the definition of beer. Why would the legislator talk about something if he does not intend to go any further? Why include a definition of beer if no provision of the bill deals with beer?

More incredible still is the fact that my colleague and the Canadian Council of Regional Brewers are saying that the time has come to act. People have been asking the government to change the Excise Act and Excise Tax Act since 1997. We have been asking for this change for five years and, yesterday, we were told that results, more figures were needed before a decision could be made whether to go ahead or not. It is just unbelievable.

Five years ago, in 1997, there were 89 microbreweries in Canada. Over the last five years, 38 microbreweries have had to close down and many did so because of that huge excise tax. I mentioned 28¢ a litre. Foreign competitors, from the United States and Europe, pay 9¢ a litre, as I said earlier.

At last, this government has the opportunity to move instead of saying: “Yes we will review the issue; we will look at it; we are waiting for figures”. The government has been looking at those figures since 1997! Microbreweries are asking the government to include an amendment so that the Standing Committee on Finance can look at how to lower those taxes. As chance would have it we are not dealing with it. It is easy to understand now why the committee, chaired by the hon. member for London West, is not dealing with it.

That member was been appointed as chair of that committee a short time ago and we wonder why considering what happened. Her spouse, Mr. Barnes, is a member of the Brewers Association of Canada taxation committee. He is also a director of a multinational or a large national brewery.

Those large breweries say that excise taxes have to be lowered in general, but all the more so for microbreweries. However, I find it strange that the committee chair got a letter from the Brewers Association of Canada saying they do not agree, when we know that the chair's spouse not only sits on its taxation committee but is also its chairman.

The Brewers Association of Canada, of which the committee chair's spouse is a member, says it is in favour of a tax reduction, even more so in the case of microbreweries, but sends the committee chair a letter asking that beer not be included in the bill and tax reductions—indirectly—not be included either in the bill. Yet the association says it is in favour of that reduction. It is important to act immediately, but this association is now telling us not to do it.

Between you and me, when the president received such a letter, knowing that her husband is the director of a large national brewery, that he chairs the taxation committee for the Brewers Association of Canada and that she is the president of a House committee, it seems to me she should have said, and should still say, “I think there is an apparent conflict of interest, if not an actual one. I think it would be a good thing to tell each and every member of the committee that I will not be participating in any discussions on those amendments because, not only is my husband, John Barnes, a member of the association, but he is the chair of the taxation committee of that association”.

I think she should at least have told the members of the committee about that situation, but she did not. She only read the letter and played the game of the big Canadian breweries to harm the microbreweries.

Motion No. 2 gives excessive authority to a committee president. We voted against this motion at the beginning of the 37th parliament. It is already being misused, as we are told that the rules on conflicts of interests apply to ministers, to the Prime Minister, to secretaries of state and parliamentary secretaries, but not to a committee president.

Just imagine, the conflict of interest rules not applying to a committee president, and her actually having more authority than a minister. A minister would not even have the power to do what she did. She took upon herself to refuse to accept the amendments. These were not only amendments from the Bloc Quebecois. We are used to our amendments being constantly rejected at committee.

They are always rejected, and we get calls at our offices from people who say they are Liberals. Here is an example. With respect to Bill C-15B, people who support the bill concerning cruelty to animals and the protection of the latter call me at my office. They are aware of the amendments that were presented. I now send my speeches to all the people who write to me. They can then read the amendments proposed by the Bloc. The people who are in favour of the protection of animals tell us that the right position was to accept the amendments to Bill C-15B proposed by the Bloc. They even say “We will change party because of that”. These are people in the animal industry.

I simply wish to send the following message: through its committees, the government rejects all amendments, not only those from the Bloc Quebecois, but also those from any opposition party. It rejects those from the Bloc in particular because they come from Quebecers and are put forward by the Bloc Quebecois. What the Liberals are doing is incredible.

But there is worse still. Coming back to Bill C-47, how can the members of this House accept such important powers that allow a person to reject amendments coming not just from a political party, but from people affected by these rules, the existing taxation rules?

I will give figures. I said earlier that in 1997, when we started to examine this aspect of the taxation and excise duties, there were 89 microbreweries. Five years later, 38 of these have closed down. There are only 46 left. This is serious. Nearly 40% of the microbreweries have closed down. This has affected the diversity, the people and the jobs that are created in the regions.

The big breweries want to see the microbreweries disappear. There are reasons for that. In 1997, the microbreweries had 5.5% of the market. Today, they have only 4% of the Canadian market. This is 1.5% less. Let us look at what this 1% drop in net profits for microbreweries—a drop caused by shutdowns and by the inability to sell the beer—means for the big breweries. It is a net amount. That is a lot of money for the shareholders.

As we know, one of the big breweries, Labatt, just happens to be established in the finance minister's riding of Lasalle-Émard. It is a bit odd, but this is what is happening once again. This was better, because the big breweries make donations to the Liberal Party. The big breweries, whether Molson or Labatt, give a lot of money to the Liberal Party.

We know why. It is even part of the riding of the Minister of Finance. It is bizarre that the Brewers Association of Canada has written us to say: “Yes, we want a tax cut, but we do not want the amendment to be presented. We do not want any reference to beer, do not want any tax reduction on beer”. Nothing complicated about this; a 1% tax reduction gives them $17 million net in their pockets. Now it is at 1.5%. If you do the calculation, you will see how much money the shareholders are making now, simply by doing away with the possibility of including beer and the tex on beer.

This is not only happening in Quebec. For this reason, when the Bloc Quebecois makes its frequent representations to protect the interests of Quebecers, the interests of other breweries in Canada will also be protected.

Out of the 38 that have closed, 11 were in Quebec, 13 in Ontario and seven in B.C. As well, there were five in Alberta, one in Nova Scotia and one in Manitoba.

The government has told us already in its speeches during the debate: “Yes, they are the ones who asked us to wait before looking at the figures”. Five years is not enough. They still need longer. The calculations are not that difficult. In five years, 38 of 89 breweries have disappeared. In another five years, how many microbreweries will be left? How long will it take for this government to react and protect the microbrewery industry, not just in Quebec but everywhere in Canada, in their own interests? It is in the best interest of their party.

Democracy means respecting the will of the House of Commons. What the government wants is to line its pockets in order to get re-elected. Its interest is precisely this, to protect the big national breweries at the expense of the others, because this is in their best interest financially. Not in the best interests of the public, of society, and even less so of the House of Commons. How can we accept such a situation?

I am somewhat disappointed by the Canadian Alliance's position, which accepts a bill such as this. I agree, and the Bloc Quebecois agrees with what the bill contains. What is put down in black and white is good. Yes, the provisions regarding tobacco are good. We also believe that the changes are good. However, the problem that was raised is much more serious.

The member for Esquimalt--Juan de Fuca reacted last week by raising the Mace to demonstrate the government's lack of democracy in the House. He forcefully expressed to Canadians what is happening here. There is another opportunity to demonstrate what has happened, how the chair of the Standing Committee on Finance and member for London West could act in this manner.

We must stop saying that there is no conflict of interest because the word beer is not included in the bill. I already mentioned that is was supposed to be included, even in the definition. Why then is there no provision regarding beer in this bill? This bill contains nothing on beer because of the government. It did not want to accept the amendment introduced by my Bloc Quebecois colleague from Saint-Hyacinthe--Bagot. It is rhetoric to say that there is no conflict of interest simply because the word beer is not written in the bill. The government prevented it from being written and it prevented us from studying this amendment, they prevented us from lowering the tax. It is unbelievable. This is their only argument of defence, to say that there is no appearance of conflict of interest.

To close, let me say that it is time that the code of ethics that applies to ministers, to the Prime Minister and to secretaries of state should also apply to chairs of standing committees.

This is important for democracy and out of respect for the opinions of Canadians.

[Steve Mahoney, Liberal, Parliamentary Secretary to the Deputy Prime Minister and Minister of Infrastructure and Crown Corporations]

Mr. Speaker, it is astounding. If this is a holiday, I think I will pass. It is not exactly what I would call a day at the beach.

I think all members realize that people work diligently and have their own style and interests. I find it interesting to listen to a debate on issues that are not even in the bill we are debating. Obviously the holiday issue is not here. The issue of election donations is nowhere in the wording. Not once was I able to look through any of the documentation and find anything about beer. Maybe there is a relationship between beer, holidays and good times, I do not know, but it does not deal with the issue at hand.

In the short time I have left I will focus on the bill, which would be an unexpected treat I am sure for members opposite. The bill does three things. First, it is designed to provide a modern legislative framework for a simpler and more certain administrative system that recognizes current industry practices. We are talking about the tobacco industry, the spirits industry and the wine industry. We are not talking about beer. I am sorry but it is not here.

For years we have heard people say that the government should respond to current industry practices, whatever they may be, so that we can help people who are fighting against foreign competition and who are dealing with the burden of collecting and remitting taxes. It puts in place a more modern system to allow people to pay the tax at the time they actually sell the product instead of when it goes into a warehouse. That seems to me to be something the industry would want and, as my friend says, that everybody would want, including my colleagues on the other side.

I do not understand. They want to continue casting aspersions against members on this side, throwing out all kinds of nasty comments about political fundraising and making comments that do not relate to Bill C-47.

The second thing the bill does is it facilitates greater efficiency and fairness for all parties. Who is against that? This is an industry that needs to be modernized from the point of view of tax revenue. It is $3.4 billion to the federal treasury. We are not talking about small potatoes. This is a major revenue generator for the Canadian public and for the government so that we can deliver the programs that need to be delivered to the benefit of all Canadians.

This fairness to all parties issue will lead to improved administration. Are the folks on the other side against that? I do not think they are. It will lead to improved administration and reduced compliance costs.

Let us take a look at what happened with the merger of the GST and the PST in the maritimes. We tend to forget. We always say that we have one taxpayer in the country. Would it not be interesting if we only had one tax collector? We have all these different taxes going out by all these different levels of government. It is unfortunate that Ontario and the western provinces refuse to co-operate in terms of tax collection so that we can reduce the administrative burden. The bill would make it easier for companies to comply with the collection of those taxes.

The third thing the bill does is it ensures the continued protection of the $3.4 billion in excise tax revenue. Why not deal with the substance of the bill instead of the allegations and the nonsense? Why not deal with related issues such as who actually will provide the retail facilities?

In my province of Ontario we all hold our breath as we watch the current Ontario government sell off Ontario Hydro. We all suspect that the next item on the list might just be the Liquor Control Board of Ontario.

It is an interesting phenomenon: taking what amounts to a public monopoly and turning it into a private monopoly with the absolute reality that the taxpayers, the people who are the purchasers of the product, will face increased costs. Why not do what the bill does in terms of providing more effective and efficient operations for the industry rather than just selling off pieces of it willy-nilly wherever the government seems to think it may be a good political hit?

It is provincial but there is a relationship. I will use the relationship of the PST and the GST as they are collected on a co-ordinated basis. What we are talking about is more efficiency and more opportunity for the industry and government to work together.

I understand that perhaps members of the Bloc are against that kind of efficiency. They would rather use any opportunity they get to raise a point of order or to speak to issues that have nothing to do with the bill. They would rather use it to perhaps make themselves look a little better back home. Being at 25% or less in the polls in the province of Quebec causes them some concern, and I understand that.

What we are dealing with here is the streamlining of a collection mechanism that generates a substantial amount of revenue. Why not talk about the spin off effects? Why not talk about the taxation effect on smuggling?

We will all recall when we had boats running across the river and people shooting guns in the middle of the night. The police were very concerned about the situation when the smuggling was going on. We all remember those days with great trepidation.

Another issue that I think is very serious in the area of tobacco is the impact on our young people. Would taxation have an impact on whether or not these young people buy single cigarettes in the schoolyard while people actually treat them as contraband and sell them to young people? I did not hear any concerns being expressed on the impact this will have on our young people. We know from targeted experience that young girls are prime candidates to begin smoking because of the peer pressure that exists.

All of this ties in and is related to the tax burden that is involved in this industry.