Bill C-47 (Historical)

Excise Act, 2001

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

Microbreweries

[Stéphane Bergeron, Bloc, Verchères—Les Patriotes, QC]

Mr. Speaker, considering the economic importance of microbreweries and the difficult situation in which they find themselves because of the unfavourable treatment to which they are subjected, compared to their foreign competitors, should the government not urgently use the opportunity provided by Bill C-47 to ensure microbreweries are extended the same treatment as small wine producers and ignore the intense lobbying by major breweries?

[Gilles Duceppe, Bloc, Laurier—Sainte-Marie, QC]

Mr. Speaker, what is shameful is pretending not to know that amendments were put forward so that beer could be considered in connection with the review of Bill C-47. But these amendments were rejected by the chair herself. That is what has us worried.

By using this twisted logic, is the government not taking the side of the big breweries to the detriment of microbreweries, when the person representing the former is the husband of the committee chair?

Committees of the House

[Sue Barnes, Liberal, London West, ON]

Mr. Speaker, I have the honour to present the 14th report of the Standing Committee on Finance regarding its order of reference of Tuesday, April 9 in relation to Bill C-47, an act respecting the taxation of spirits, wine and tobacco and the treatment of ships' stores.

The committee has considered Bill C-47 and reports the bill with amendment.

Microbreweries

[Ralph Goodale, Liberal, Leader of the Government in the House of Commons]

Mr. Speaker, as the law officers of the House pointed out, Bill C-47 does not in any way deal with the beer industry. Accordingly, there is no possible conflict of interest between the chair of the committee and the beer industry.

As the secretary of state has pointed out, the matter of the excise taxes in relation to beer is being considered in an entirely different forum in which, in fact, the chair of the finance committee is not involved.

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

Mr. Speaker, she kept that advice to herself until the process was over without telling a soul.

Now that we know that the husband of the finance committee chair is not only one of the seven directors of the John Labatt Company, but that he also chairs the taxation committee of the Brewers Association of Canada, that he is the one who conspired with his wife and the Minister of Finance to exclude beer from Bill C-47, what does the government intend to do to correct this deplorable situation, support the microbreweries and end the scheming between the large breweries, the Minister of Finance and the member for London West?

[Gilles Duceppe, Bloc, Laurier—Sainte-Marie, QC]

Mr. Speaker, we got the answer yesterday. The excise tax review under Bill C-47 includes wine, spirits and tobacco, but not beer. Indeed, the government has decided that Quebec and Canadian brewers, large and small, will continue to pay an excise tax of 28 cents on each litre of beer.

Could the Prime Minister explain to us the twisted logic whereby beer is the only product that is excluded from the excise tax review?

Committees of the House

[Rob Merrifield, Canadian Alliance, Yellowhead, AB]

Mr. Speaker, I move that the second report of the Standing Committee on Health, presented on Wednesday, December 12, 2001, be concurred in. It is a privilege for me to speak to the motion.

Almost a year ago the former health minister introduced draft legislation on assisted reproductive technology and related research. Before I get into that piece of legislation that was brought down as draft legislation I would like to give a history as to what brought us to that point because that was not the first attempt at such legislation.

The events leading up to it began in 1991. A royal commission report was tabled in 1993 just to sit on a shelf and accumulate dust. Nothing came of it. However, in 1997 Bill C-47 was put on the order paper only to die on it at the call of an election.

This is the third attempt at such legislation that would allow us to deal with an issue that is becoming more and more important. In fact, our newspapers are filled with reports of cloning and how stem cell research is being developed at the present time.

The former health minister presented a fairly extensive bill last May. Some of the subject matter of the bill dealt with cloning, surrogacy and stem cell research. There were two sides to that piece of legislation. There was a scientific side and a family building side, which is the reproductive side dealing with in vitro fertilization, surrogacy and all of that. It was a thorough two-stage piece of legislation.

There were a number of things that were prohibited in that piece of legislation: reproductive and research cloning, which some people term as therapeutic cloning; and commercial surrogacy. We said there should be no modification in the whole area of gamete donation and surrogacy. The maintaining of an embryo outside of a womb was prohibited and there were many others.

One of the activities that would be allowed under licensing was embryonic stem cell research. However, the most important piece in the legislation was the regulatory body that would oversee the prohibitions and the licensing of the overall department of assisted reproductive technologies and related research. Notably when the minister introduced the bill he said:

There must be a higher notion than science alone…that can guide scientific research and endeavour. Simply because we can do something, does not mean that we should do it.

That bill was sent directly to committee. It was the first piece of legislation that came into this parliament and went directly to committee. It was a novel approach, one that I believe should have been taken up in many pieces of legislation introduced here because it gives us a non-partisan opportunity to deal with an issue before entrenchment, party lines and party division take over a subject.

The committee met over an extensive period of time, nine months, and dealt with several issues and heard from dozens of witnesses. We heard from the scientists who were eager and excited about getting into this subject matter. We heard from the ethicists and faith communities. We heard from parents struggling with infertility and surrogates. We heard from the offspring of assisted reproductive research. We heard from the disabled, legal counsels, legal experts, et cetera. All of these groups were very important.

I mention these groups because when we deal with a subject matter that is on the cutting edge of scientific research we sometimes think it should be driven by science and scientific interests alone. However, when we look at the subject matter it has many different facets to it.

It has much to do with parents and children. It has much to do with legality, with interest groups from the disabled and others. This is why we looked at all of those. There were differing perspectives and sometimes compelling testimonies on the complex subject that had many considerations. We heard compelling and moving evidence.

Meanwhile, development in this area kept rolling around, it did not stand still. Over this last year we have seen some phenomenal things happen. Members will recall some of the reports that came forward this past summer that groups were intent on human cloning. Something significant happened in the United States in August when President Bush announced that funding guidelines for embryonic stem cell research, and notably public funds, would not go into pre-existing embryonic stem cell lines. There would be no more killing of embryos with public money was basically what he was saying.

There is a memorable phrase that is well worth noting. He said that we did not create life in order to destroy it. However, things kept rolling along and we saw another challenge to this whole idea of human cloning in November when headlines proclaimed the first human had been cloned. This came out of an advance cell technology when an American privately funded company announced that it had used the clone technology to grow a cell that could eventually serve as a source of a human cell line. This embryo died in the Petri dish at six days of age.

We can see how this is developing and how things are moving along very quickly. During this same period the Canadian Alliance argued in committee that legislation should be tabled and the bill broken up in order to deal with the issues that we all agreed should not go forward and that we should stop therapeutic and reproductive cloning which are internationally recognized as deplorable acts. We suggested this and brought it to committee only to be turned away.

We continued with hearings throughout the fall and wrapped up in November. In December the committee met in camera to draw its final recommendations to the minister on the new legislation. One thing that was significantly different was in the intent of the legislation when it was introduced in May compared to what we had discovered over the nine month period. We wanted to change the original name to focus on building families because reproduction is all about reproducing cells and growing healthy families as a society. That is what is important as a nation. That is what is important as society goes forward.

We introduced the majority report and minority reports. The majority report included many provisions that the Canadian Alliance supported, such as a greater primacy for the principle of respect for human dignity, individuality and integrity of the embryo. We agreed with the banning of human cloning, whether it be reproductive or therapeutic, of commercial surrogacy or of animal-human hybrids, the combining of animal and human DNA.

We also agreed with having an accountable, regulatory body to deal with this legislation as this science develops into the 21st century. We need a body that will deal with the things we could not have recognized, that we could not have come to terms with or foreseen, but we must have a body that is truly accountable to Canadians and truly accountable to the House if we are to be able to move forward.

Unfortunately the Liberals would not agree with a moratorium on embryonic stem cell research. Their recommendation number 14, on page 16, stated:

Research using embryos be a controlled activity requiring a licence--

As we thought through exactly where we should go on this very important piece of legislation,we came up with a minority report. There were eight things that we wanted to highlight. One was the urgency of the legislation. We cannot afford to wait any longer. We cannot afford to fail with this piece of legislation because of the way science is moving forward, so we said that it should happen by the end of March.

We said that there should be respect for human life. We said that in the conflict between ethics and science, where ethical accountability conflicts with scientific possibility, the ethical should prevail. With regard to regulations on the embryonic stem cell research, we said that we should back off for three years and allow science to work on the adult stem cell side, which is not fraught with ethical dynamics and dilemmas in any of the research being done or anything coming out of the research. We said we should take a breather as science catches up and we should put our energies where they can be most valuably used, where our precious Canadian dollars for research can accomplish the most. We are seeing many things happen even in the last few months with regard to the excitement that adult stem cells are creating and what actually can be accomplished. We are seeing such things as Parkinson's and muscular dystrophy actually being cured through the adult stem cell.

We said that we should respect provincial jurisdictions. With respect to privacy and accessibility to information, we said that when the rights of the donor conflict with the rights of the child, the rights of the child should prevail. We are saying that we must have statutory standing in front of that regulatory body for all interests, not just the scientific interest. As well, we should have a free vote in the House when the legislation comes forward.

Since we tabled our report there have been several developments. I would like to underscore some of them and the need for this legislation in Canada. In January we learned that for years Industry Canada has been issuing patents on human genes. The health committee was under the impression that patents would not be issued for human genes. We recommended against gene patenting. The concept here is no different from that of developing a telescope, looking out into the universe and discovering a star. It is fine to patent the telescope. It is not appropriate to patent the star. Patenting a human gene is no different.

In February, a Kentucky fertility specialist, Dr. Zavos, pledged to begin efforts to clone a human being, in an undisclosed country outside the United States. Everyone has to understand that in the cloning process only .5 of the clones are really ever born healthy enough to grow into a full human being. In the United States, for example, if only .5 of clones, only one out of every 200, are born whole, then we would want to have those born in a society or in a country that socially picks up all of the disasters that come out of that. I would suggest that they are very possibly targeting Canada and we could potentially be seeing this kind of experiment happening on our soil.

Also in February it was announced that a woman with faulty genes would get an embryo without those faulty genes. We are hearing story after story with regard to designer babies. We are talking about deaf parents who wanted to ensure that they had a deaf son so they had another embryo from a surrogate to make sure it would happen. We are seeing designer babies happening before our eyes, particularly in the last six months.

Recently a committee in the United Kingdom's House of Lords recommended that research on the embryonic stem cell would be permitted to continue, that therapeutic cloning would be allowed and that the first embryo bank of stem cell research would also be established. It is interesting to look at the United Kingdom and its experience over the last 10 years. It had a regulatory body that would allow only the destruction of embryos that were left over from in vitro fertilization. Just a month or so ago it changed the rules and now it is allowing embryos to be designed solely for the purpose of research and also allowing them to be developed to take stem cells from them, which would be the same as therapeutic or research cloning.

We can see the slippery slope we would be on as a nation if we were to open the door and go beyond the line, killing life to be able to do research on that life.

In March the Canadian Institutes of Health Research, and this is a Canadian institute, announced guidelines allowing federal research funding to be directed to embryonic stem cell research. It was a complete end run on parliament. There is no regulatory body in place to deal with this, but the CIHR decided it would take it upon itself. It was interesting yesterday when we heard from the president of the CIHR, Dr. Bernstein. We asked him about some of these important issues and why he would bring forward his guidelines at the eleventh hour, after waiting a decade, and pre-empt the work of parliament. His answers were less than convincing.

It is interesting as well to see how his guidelines differ from the standing committee's report, a report that recommends a declaration of human dignity, individuality and integrity. As well, it is important to note that this all party report stated that research on an embryo should take place only if there is no other category of biological material that can be used. We can see that after 20 years of research of embryos being used in animals, we have cured nothing.

The new CIHR rules ignored these recommendations.

Early last week it was reported that the first cloned baby was on its way through the efforts of an Italian fertility specialist, Dr. Antinori. He claims to be in an Arab country and to have cloned a child that is eight weeks along in its mother's womb at the present time. We do not know how many others are happening around the world, but we know this is coming. We know the urgency is there.

Also last week, President Bush denounced all forms of human cloning and announced his support for legislation currently in progress on the banning of human cloning. He said “Life is a creation, not a commodity”. Finally, last week scientists linked to a group in Quebec claimed that they have already implanted cloned embryos in women. If they are experimenting on our soil, there no law to stop them. Science fiction is quickly becoming science fact.

On Friday we asked the government to assure us that the cloning experiments were not taking place in Canada. We received no such assurance. It is imperative that legislation on cloning and research on human embryos be debated in the House as soon as possible. We know that there are groups intent on cloning humans. The CIHR has pre-empted parliament by saying that research on embryos should go ahead.

The minister has pledged to have that legislation by May 10. We have now waited eight years for legislation on these issues. The House of Commons Standing Committee on Health has carefully considered draft legislation and made its report to the House. Parliament is eagerly waiting to receive and debate the legislation on assisted reproduction, promised by the minister within the next month.

The CIHR's announcement has pre-empted that debate and has usurped the authority that rightly belongs to parliament in regard to making fundamental decisions on human life. The minister's acquiescence in this regard is an affront to a long process involving parliamentarians that precedes this announcement. Decisions on issues of such importance and controversy as embryonic stem cell research and human cloning must be made by parliament, not by unelected, unrepresentative, arm's length organizations funded by federal governments. Genome Canada stepped over the line last week, as it has now $11 million, $5.5 million from federal funds, toward embryonic stem cell research.

Canadians deserve to have their voices heard in parliament before a decision is made on these issues. The time for action is now.

Microbreweries

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

Mr. Speaker, it is all well and good for the issue to be under consideration, but the government must act, because the situation is urgent.

Large Canadian breweries such as Molson and Labatt claim to support a reduction of the excise tax for microbreweries but, at the same time, they are putting the brakes on, with the complicity of the Liberals, when the time comes to take action under Bill C-47.

By its inaction on this issue, is the government not confirming that it is in collusion with the major breweries, and therefore responsible for maintaining a situation that has been deteriorating year after year in the microbrewery sector?

Research and Development

[Rob Merrifield, Canadian Alliance, Yellowhead, AB]

Mr. Speaker, we warned the government last fall that this would happen. We called for an immediate ban then but it refused to listen. A royal commission reported back in 1993 and it went nowhere. Bill C-47 died on the order paper in 1997. Meanwhile, human cloning is becoming a reality and in fact may already be too late.

Will the government promise that its long overdue legislation will not die on the order paper this time?

Excise Act, 2001

[Jason Kenney, Canadian Alliance, Calgary Southeast, AB]

Mr. Speaker, I am pleased to rise in debate on Bill C-47, an act respecting the taxation of spirits, wine and tobacco and the treatment of ships' stores. Members of my caucus have already addressed the principal aspects of the bill, which we intend to support, while I note that we have certain very pertinent concerns. My colleague from Edmonton--Strathcona outlined them as they relate to the provisions of the bill dealing with the excise tax on tobacco products, which will increase revenues to the federal treasury by at least $240 million.

It is our concern that this could lead to an increase in the black market in tobacco products and furthermore that the $240 million will find its way into general purposes in the general revenue fund. We believe that any targeted tax increases of this nature, which are designed to achieve a certain social outcome such as the reduction of tobacco use among youth, ought to be offset by a commensurate reduction in general tax rates elsewhere. To do otherwise is to fail to recognize that Canada continues to have an inordinately high tax burden, which disadvantages Canadian industry entrepreneurs and reduces the amount of capital available in the country for investment in job creation. I share those concerns with other members of my caucus.

I would like to take most of my time to join with the member who just spoke in addressing a pertinent issue that did not find its way into the bill, namely, the treatment of microbreweries, which are an important part of Canadian industry. The bill would have been the perfect place in which to address the inequity of taxation of microbreweries. Indeed, the government has received representations from the Brewers Association of Canada, as has the House of Commons finance committee, to rectify the discriminatory application of excise taxation on these very small, entrepreneurial, craft style breweries.

The House of Commons finance committee heard from the Brewers Association of Canada last October, when it recommended in a very compelling submission that the government reduce by 60% the excise taxation for the first 75,000 hectolitres of production for microbreweries, which the association defines as those that have an annual production output of less than 300,000 hectolitres per year.

Currently small breweries pay $19 million a year in excise taxes. Those are the 53 breweries in Canada that produce less than 300,000 hectolitres a year. That $19 million in federal excise tax exceeds by nine times the $2.1 million of collective profits reported by those 53 companies. In other words, the amount the federal government is taking from these struggling entrepreneurs outstrips by nearly a factor of 10 the profits they are able to retain to reinvest in their companies to purchase capital assets that are necessary for these companies to continue. This is a very grave situation for the microbrewery industry in Canada.

Several provinces have addressed this. British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia and Newfoundland have all adopted a lower rate of provincial excise tax to be applied to microbreweries. Indeed, this reflects international precedents throughout the world and among our major economic competitors in the United States.

About 21 million hectolitres of beer are sold and consumed annually in Canada. Of that enormous amount only 3.4%, and I admit to having contributed to a small part of the figure, has been produced by small breweries, namely those with a production of less than 300,000 hectolitres per year. This gives us an idea of how small a piece of the overall market they are.

I am a partisan of microbreweries. I am a big fan of what I think is Canada's finest microbrewery and finest brewery, period. It is known as Big Rock and it happens to be in my riding. It produces tremendous products like Traditional Ale, Grasshöpper Wheat Ale, Warthog Cream Ale, and my favourite, McNally's stout. Its products are famous throughout Canada. It is an award winning microbrewery founded by distinguished Calgary lawyer Ed McNally. It has done very well notwithstanding the discriminatory tax regime it finds itself fighting against.

It is interesting. There are only four companies responsible for 93% of the beer sold in Canada, and they support the proposal for the government to adopt a lower rate for smaller breweries. They are not threatened by the small microbreweries. They see microbreweries like Big Rock in my riding and Unibroue in Chambly, Quebec as an opportunity to increase their market share by increasing beer consumption. They are not afraid of this kind of competition. They see that the application of one excise tax to all companies of all sizes is not fair.

Total excise duty revenues to the government for beer currently amount to about $580 million. If the government were to adopt the recommendations of the Brewers Association of Canada, remembering that they produce only 3.5% of the product and pay about $19 million in excise tax a year, the reduction would represent only 2% of the total excise for beer collected by the federal government. A 60% reduction in the excise rate for small brewers on the first 75,000 hectolitres would be a tiny reduction in government revenues. As the brewers association points out, “the impact would be no greater than could be felt from the market effects of poor summer weather”. It would have no significant impact on the federal treasury.

Were we to allow these breweries to generate a small profit and reinvest it we would see them expand their market share and exports. Even at a lower excise rate the federal treasury would see an increase in the total amount paid by the companies. It would likely see total excise tax revenues for microbreweries increase at a lower rate given the incentive it would create for new investment, production and consumption in the industry.

I will illustrate the magnitude of the tax and address the impact it would have on small brewers. Excise is the highest federal tax paid by the brewing industry. It is the highest cost borne by microbrewers. It is currently $27.98 per hectolitre. That means the excise duty equals the average cost of operating a small brewery. The cost is estimated to be about $30 per hectolitre. Direct labour costs are estimated at about $27 per hectolitre. This means the excise tax, which is insensitive to profit and is charged and collected even if a brewery is losing money, equals the total cost of running a small brewery in Canada.

A benchmark study conducted by the brewers association in Ontario in 1995 found that taxes represented the largest category of costs, amounting to the equivalent of total production costs including raw materials. The study said the tax burden was extremely high “particularly considering that microbrewers are effectively small businesses often competing with large companies”.

Most of the companies reviewed in the study lost money. Normal rates of return fell short by $17 per hectolitre. The companies are producing a great product, they are working hard and they are entrepreneurial. Yet they are not able to generate a profit. That is why many of them are going under. There is a high bankruptcy rate in the microbrewery industry in Canada.

The findings suggest the federal excise rate places brewing companies at a significant disadvantage compared to other small business in Canada. The Income Tax Act sets out a preferential lower rate for small businesses as opposed to large businesses. We do not expect family owned corner stores with capitalizations of a few hundred thousand dollars to be able to compete while paying the same fixed level of taxation as a Safeway or Loblaws. It is not possible given their much smaller economies of scale and higher costs. That is why I think all parties in this place support the principle of a lower small business tax rate.

The brewers association is simply asking that the same logic be applied to the brewing industry. This would allow us to recognize that the costs of producing microbrewery products in small operations are much higher than for Labatt or Molson, companies which retain profits and have huge factory operations across the country, enormous economies of scale and great capitalization. They can afford to pay a higher excise tax rate. Indeed, they have endorsed the idea of a differential rate.

Another important factor is international competitiveness. The United States has a much lower federal excise tax rate on microbrewery products. It charges only $9.35 per hectolitre for products sold in the United States while Canada charges $24.06. That is a difference of 146%. When Big Rock Brewery in my constituency, Granville Island Brewery in Vancouver or the brewery in Chambly, Quebec try to export their products into the United States they are at a 146% cost disadvantage because of the difference in federal excise tax rates. That means we will never be able to penetrate the U.S. market with our superior products as we should.

This has been raised at the GATT panel. In 1992 Canada filed a complaint to the panel of the General Agreement on Tariffs and Trade. The panel reported that the U.S. was violating free trade rules by not permitting national treatment in terms of excise tax on microbrewery products sold domestically.

However the United States has not corrected the problem. Most countries in the European Union have adopted separate lower excise tax rates on the output of small breweries notwithstanding trade action that has been taken against the European Union. They have retained the differential as a matter of policy, which makes it difficult for Canadian microbrewers to sell their product in the European Union.

It is interesting. Adopting the proposal of the Brewers Association of Canada would reduce the premium paid by Canadian brewers from $16.30 per hectolitre over like sized U.S. competitors to $1.26 per hectolitre, or 11% as opposed to the 146% I quoted earlier. The suggestion the Canadian Brewers Association is making would not bring us precisely in line with the domestic excise tax rate in the United States. It would simply bring us into the ballpark so Canadian brewers could sell their product in that country at much higher levels without the penalties we impose on them in Canada.

Canada currently receives microbrewery products from about 95 different breweries throughout the world. About 60% of the companies that sell microbrew products in Canada receive favourable excise tax rates in their domestic markets. We are putting our companies at a competitive disadvantage. The trade actions we have taken have not resulted in national treatment for our products in those countries. We have only one policy option left, and that is to do what the Americans and Europeans have done. We must come up with a second, lower rate for small brewers.

I will quote from the submission of the Brewers Association of Canada to the House of Commons finance committee. It said:

Over time, as other countries have failed to introduce trade compliant policies, the industry has concluded that competitor neutrality within the small segment can only be achieved by introducing a tax measure that has come to be accepted internationally as a means of supporting small brewers.

The official opposition calls on the government to take up the matter urgently in the strongest possible terms. There is no sound policy or fiscal reason why the recommendation of the brewers association ought not be accepted with due haste to allow the microbrewing industry in Canada, an important fledgling value added industry, to survive and prosper both here and abroad.

Once more, the recommendation we and the brewers association are making to the government is a 60% reduction in the rate of duty on the first 75,000 hectolitres of production for brewers producing not more than 300,000 hectolitres annually. An excise duty reduction for small brewers in Canada would be consistent with policies adopted by major beer producing nations like the United States, Belgium, Austria, Denmark, Germany and the Czech Republic. The countries providing the benefit account for about a third of worldwide beer production. The reduction's impact on government revenues would be minimal but the benefit to the small brewer segment would be significant.

There is a precise reason the Brewers Association of Canada came up with a figure of 60%. A 1994 study indicated average Canadian small breweries were falling behind in the amount of money they should be reinvesting to purchase new capital assets, by $16.89 per hectolitre. The study said a 60% reduction in excise tax for such breweries would return about $16.80 to the sector.

There is a clear symmetry here. The reduction in excise tax would not be a giveaway to the industry. It would allow small struggling breweries to run just enough of a profit to invest in needed capital assets so they could sustain themselves and grow in the future. It would create thousands of new jobs. It would generate prospectively tens of millions of dollars in revenue to the federal treasury. It would help our country become more export oriented in this important industry.

I hope the government takes heed and soon introduces legislation to adopt the recommendations presented at the finance committee.

[Rahim Jaffer, Canadian Alliance, Edmonton Strathcona, AB]

Mr. Speaker, I am pleased to rise in the House today to speak to Bill C-47. At the outset, I would like to say that I will be splitting my time with my friend and all around great guy, the member for Medicine Hat.

Bill C-47 attempts to amend the Excise Tax Act. I will begin my remarks by taking this opportunity to first of all thank my leader, Stephen Harper, for entrusting me with the responsibilities of critiquing the government as the senior opposition critic for national revenue.

As we know, the Canadian Alliance is dedicated to reducing the size and scope of the federal government in order to deliver meaningful tax relief to hard-working Canadians. As a small business owner, I have firsthand knowledge and experience in dealing with the difficulties inherent in complying with CCRA regulations and remittance schedules. I look forward to being an advocate on behalf of millions of Canadian small and medium sized businesses that prosper in spite of the federal government's insatiable appetite for tax revenues.

Bill C-47 addresses excise tax. Although I am opposed to the government's intervention into the freedom of choice of Canadians through taxation, I will be supporting the legislation as it has been endorsed by industry stakeholders and modernizes the framework of excise taxation on wine, spirits and beer.

The proposed excise tax 2001 aims to replace the existing old and antiquated administrative and enforcement structure governing alcohol and tobacco products with a modern regime reflecting current practices. It does not address the tax rate and base matters other than to ensure equitable treatment between domestic and imported products.

The proposed act shifts compliance and point of taxation from a sales levy to a production levy for the production of wine. This is already the case for distillers.

The changes introduced for spirits and wine are regulatory in nature and tax neutral. The primary purpose of these changes are to modernize how these products are taxed to allow distillers and vintners the greatest flexibility in their production practices and to ensure an internationally competitive tax regime.

From an industry perspective the proposed legislation also provides for an appeal and assessment process. Previously industry had no recourse against the government if it felt unfairly treated.

The motion also contains significant enforcement tools to crack down on contraband products. This is a major feature of the proposed legislation and is welcomed by industry.

Changes in the act make it easier to enforce existing laws and provide stiffer penalties for conviction. For example, under the proposed legislation the maximum fine for producing contraband alcohol would be up to $1 million and up to five years in jail for indictable offences. These are industry-led, spirits and wine, and supported changes. There are no losers because of this legislation with the exception of contraband producers.

It is the second aspect of Bill C-47 with which I personally have problems. The bill also seeks to increase the federal excise taxes on tobacco products and to re-establish a uniform federal excise tax rate for cigarettes across the country of $6.85 per carton. The stated purpose of this tax increase is to improve the health of Canadians by discouraging tobacco consumption.

The federal excise taxes on cigarettes will increase $2.00 per carton in Quebec, $1.60 per carton in Ontario and $1.50 per carton in the rest of Canada. This will bring the total federal excise burden on cigarettes to $12.35 per carton. Federal revenues will increase by approximately $240 million per annum through this tax hike.

We all want Canadians to live a healthier lifestyle, especially our youth. The reduction of smoking is a big part of that. My problem with this legislation is philosophical and based on the process. The past decade has proven that high levels of excise tax on cigarettes do not reduce consumption. It only creates an underground market. The role of government is to provide information for consumers to ensure that citizens have an informed choice. Make no mistake, it is the right of individuals to choose whether or not they want to smoke.

It is my belief that the government is increasing the tax levels simply to increase revenues. It is the only politically correct tax increase at its disposal, and the finance minister has never found a tax he did not like.

There are many Canadians out there who believe that excise taxes are dedicated to specific spending, that tax revenues on cigarettes and alcohol are spent on health care and that gas tax revenues are spent on roads. The truth is that while federal excise revenues have increased, transfers to provinces for health care have decreased.

What are Canadians going to get in return for this blatant tax grab? I challenge the government opposite to detail what its plan is for the revenues.

Contrary to what the government thinks, Canadians are not stupid. The tax increase is of the same ilk as the airport security tax. The Liberals are manipulating the concerns of Canadians to finance their next election campaign. The government opposite cannot escape its past nor its record. The transitional jobs fund, Shawinigan, Groupaction and everything Alfonso Gagliano ever touched raised doubts in the minds of Canadians regarding Liberal accountability, ethics and fiscal restraint.

The Liberals have once again piggybacked meaningful legislation and political opportunism. The Prime Minister in the past has appointed a qualified Canadian and a Liberal hack to the other place at the same time. When one criticizes a patronage appointment, the Liberals defend it with the credentials of the qualified candidate. Today they are hiking taxes under the guise of tax fairness, and that is unethical. The Liberals are politically savvy and ethically devoid.

I will support the legislation because it is in the best interests of Canada's emerging industries. However through this piece of legislation, the government has added another chapter to the red book of Liberal shame.

[Bill Casey, Progressive Conservative, Cumberland—Colchester, NS]

Mr. Speaker, somehow I could tell he was going to ask me a question by the way he was looking at me.

Increased tobacco taxes could be part of a strategy, but certainly not the only part of the strategy to discourage smoking especially among young people, to decrease the terrible cost to health and health care in Canada in actual dollars. It could be part of the strategy but it has to be a wide strategy of education, restrictions, maybe higher taxes and a variety of other things.

Much of the revenue from Bill C-47 could go toward preventing tobacco smoking and toward encouraging people to quit smoking. Should the revenues be offset by others? I do not think that is necessary at this time. I think the revenues should be dedicated to fighting tobacco addiction.

[Bill Casey, Progressive Conservative, Cumberland—Colchester, NS]

Mr. Speaker, it is a pleasure to speak to Bill C-47. Based on the debate I heard from the member for Regina--Qu'Appelle and others we would not know it was Bill C-47 because they talked about the airport security tax, the Tobin tax and all these things. I will follow his lead and talk about something else myself.

Bill C-47 is a housekeeping bill that would do a lot of things to clean up the act as far as tax collection goes and to define things for people involved in the wine, spirits and tobacco industry. It would do a variety of things including increasing the tobacco tax by $240 million annually, which will be the lead-in to the subject I want to talk about.

I feel obligated to mention a few things about Bill C-47. It would change the framework governing taxes on spirits, wine and tobacco. It would make the duty charged on wine the same as the duty currently charged on spirits.

The bill would bring in licensing registrations and regulations for the transportation industry to prevent trafficking and control of the movement of spirits and wine. It would create new provisions for offences for those breaking the law with regard to wine, spirits and tobacco.

The legislation would merge some already existing taxes which should make it simpler for industry to handle. It would make the federal tax on cigarettes the same all across the country which it should have been all along in any case.

I was watching television the other evening and I saw a Health Canada ad that said 45,000 Canadians die from smoking cigarettes every year. I thought to myself that figure could not be right. That is 10 times the number of people killed in the World Trade Center attack, and according to the ad it happens every year. I thought it must be wrong.

I contacted the Department of Health to clarify the figure and to ensure it was not providing the wrong information to Canadians. The department sent me a report confirming that in Canada 40,000 to 45,000 Canadians die of smoking related diseases. That is the same as having a World Trade Center attack every month. It is absolutely incredible. If we were to think about this, 45,000 Canadians die every year, year in and year out.

The report goes on to say that this impacts on the cost of living in our society of $15 billion a year. It is $2.5 billion directly to our health care system at a time when it is strained to its very edges, and yet we have this extra burden that does not have to be there.

The report from the Office of Tobacco Control, Health Protection Branch, stated:

According to this analysis, smokers cost society about $15 billion while contributing roughly $7.8 billion in taxes.

If it is killing 40,000 to 45,000 people a year it hardly seems like good value. A rough calculation indicates that at 41,000 people dying per year with a $7.8 billion tax revenue, that amounts to $190,000 per person. This is crazy. It is absolutely ridiculous that 45,000 people a year die from tobacco related diseases.

I commend and encourage the health minister to use these ads more that tell us about the dangers of smoking and about the incredible costs incurred. I encourage her to do more of these ads and make them clearer. I want her to point out the number of people who die every year in Canada is the same as 10 World Trade Center attacks. In the U.S. it extrapolated into an unbelievable number, but we are not talking about the U.S. we are talking about Canada.

The Canadian government, the military, everybody in Canada has turned a focus on the horrible terrorism act in New York which killed 4,000 people, but we have 45,000 people dying every year from smoking related diseases. It seems to me a misguided focus. If we are to address this issue the government has to come up with more ways to discourage people.

In the documents provided on Bill C-47 the government says it would increase the taxes on tobacco by $240 million annually. It claims that this would discourage tobacco consumption. I do not think that $240 million will discourage tobacco consumption enough. It does not provide educational material for young people, for smokers and does not help people get off the smoking habit. That is not nearly enough based on the numbers available and based on the study on the costs of smoking in Canada.

The numbers are absolutely incredible. They just go on and on in this report about the damage. It says that in 1991 approximately $2.5 billion in health care costs was attributable to smoking. That was 4% of the total health care budget in Canada.

That is just the beginning. There are extra costs for hospitals, physicians and absenteeism, and all other costs attributed to the smoking habit, which in 1991 was estimated at $15 billion. If we were to think about that, the whole health care budget was only $66 billion and the smoking attributable costs were $15 billion.

While we are talking about Bill C-47 and extra taxes on tobacco I raise the alarm bell and encourage the Minister of Health to increase those ads and put them into perspective for people so they can understand how dramatic the damage is that smoking is doing to our health, especially to young people, based on the charts and information that Health Canada supplied me. I hope we can raise the level of public awareness on this.

I compliment the Minister of Health for placing these ads. I have spoken to her today about how effective they were on me. In fact, they were so effective I thought they were wrong. The numbers are so high, they are hard to believe. I hope the Minister of Health will continue those ads, maybe even broaden them out and put them into perspective for people.

When I say that 45,000 people a year die in Canada people shake their heads and say that it is a lot. However, when I put it into perspective and say that it is 10 times the number of people that were killed in the World Trade Center they are flabbergasted. That is almost a World Trade Center catastrophe every month in Canada.

We should not accept this. We should not stand for it. We should do everything we can to bring this awful disease or addiction or whatever we want to call it to a minimum level at all costs because the real cost in money and in lives is incredible, especially at a time when much of the time we spend in the House is talking about health care.

Here we are spending $3, $4 or $5 billion on health care costs which could be controlled or reduced. I hope we do that in this case. I want to say those numbers again. That is $3 or $4 billion in health care costs because of smoking related and smoking attributable ailments.

When the government is talking about raising an extra $240 million in taxes as opposed to the cost directly attributable to our health care system of $4 billion, it is incredible. We should all be aware of this and the government should be doing more to raise public awareness of the situation and push for a correction.

I will now go back to Bill C-47 which is what the bill is about, although the bill does mention tobacco. It has several clauses with respect to tobacco, tobacco controls and tobacco taxes. I would like to see much more of that restriction. I would like to see a more concentrated, focused and increased effort on controlling tobacco and helping people get off the tobacco addiction.

Does Bill C-47 have some positives? We think it does. Bill C-47 would merge taxes which already exist to make it simpler for businesses to handle. It would make the taxes on tobacco the same right across the country, which is what it should have been all along. It would change the form of penalties resulting from excise tax, and we support the move in that direction. The increase in the export duties should discourage smuggling Canadian cigarettes back into the country which has been a problem in the past although it is reduced now.

On the down side, Bill C-47 increases the taxes but again does not specify where the taxes will go. Will it go toward helping people to understand their addiction to tobacco and the terrific price it costs in human lives, sickness, dollars and the strain on our health care system? Will that be where the money goes or will it go into general revenue like the EI fund? It is absolutely wrong for the $40 billion surplus in the EI fund to be going into general revenue. I consider that to be fraud. Every employee in Canada who gets a paycheque pays an EI premium but it is not an EI premium. It is an extra tax. If the government wants to take this money and put it into general revenue as a tax it should be marked extra Liberal tax, but it is not. It should be designated as a Liberal tax and not an employment insurance premium.

I appreciate the chance to speak to Bill C-47. We will be supporting Bill C-47 but I do hope my comments have not fallen on deaf ears. I hope the Minister of Health understands that I appreciate what she has done in the direction of raising public awareness of the damage smoking does to health and the costs to our health care system but I hope she will enhance that. I hope she will put more money into that budget and maybe take some of this money and put it into a budget to increase public awareness and help people get off the addiction to tobacco.

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

That would be extremely unwise. However here we bring in an airport tax without an economic impact study to see what the impact of that tax will be on communities, on the country and on the travel industry. I do not think it makes any sense.

The last point I want to make concerns a new vision of taxation in the country or in the world. I refer to the whole area of the Tobin tax. The Tobin tax was an idea suggested by Professor James Tobin who passed away about four or five weeks ago. He suggested a very small tax on the trade of currency in the world. Today in the world we have about $1.5 trillion to $2 trillion a day of currency being traded and exchanged. About 90% of the currency trading that is going on is strictly for speculation and mostly done by the large investment banks.

What Professor Tobin had suggested was a very small tax of 0.1%, 0.2%, 0.25% which would slow down some of the speculation in currency that creates havoc in currency around the world. It was done with the Mexican peso and the Japanese yen and many other currencies of the world over the years.

As these investment banks play around with people's currencies they in effect play around with people's lives, throw people out of work and cause all kinds of poverty and despair in the world.

If we had some kind of small international tax it would not affect the ordinary people of this country at all. We could have an exemption on that of $10,000, $20,000, $50,000 or whatever we wanted. If we had a tax of 0.1% it would only be $1 out of $1,000. We would slow down some of the speculation and create a bit more order in the financial markets.

A consequence of this kind of tax would be to create a huge international development fund of several hundred billion dollars to fight world poverty, the AIDS pandemic in Africa and to do environmental cleanups. A lot of that money could go back to the countries that collected the tax to help pay for health care, social services and the fight against cigarettes and smoking that I referred to earlier in my comments.

Three years ago in March I had the honour to introduce a motion in the House of Commons asking parliament to endorse the principle of the Tobin tax or the tax on the speculation of currency in concert with the world community. It passed in the House of Commons by a vote of 164 to 83. We became the first parliament in the world to endorse the idea of a Tobin tax. We had people from all five political parties who actually supported the bill.

Since then we have seen a lot of movement in different parts of the world. The French have actually introduced legislation to participate in a Tobin tax or a currency tax regime once we reach a critical mass in the world community to make this tax effective. Studies are now going on in the European community. The idea of the Tobin tax is being endorsed by many different countries and politicians around the world. There is a growing movement for a global approach toward taxation.

We now have trade deals that are basically charters of rights for international co-operation or charters of rights for investment in the globalized world. These are now very lopsided. What we need is an international global vision where we also would have some rights for the ordinary people in terms of international labour and social standards and goals and objectives, environmental standards and financial institutions that would have the ability and the power to levy a tax against the speculation of currency.

That is the kind of international vision that I think more and more people are supporting, certainly the churches, many of the NGOs and many of the people who live in various parts of the world.

These are some of the things that I believe we should do. We need this new international vision, a new and a modern day global plan to develop many parts of the world that are today suffering from hunger and famine.

Sadly speaking, hundreds and hundreds of people have died of starvation in the last 15 minutes. I think about 20,000 people a day in the world die of starvation. Every hour of the day, hundreds and hundreds of people die of starvation, yet we have this great disparity of wealth around the world. We have the ability through a currency speculation tax to build up an international fund where people of the world could be fed, where there could be the development of agriculture, food production and processing around the world. The technology is there to feed the people of the world, to develop the world and to clean up the environment. We have those abilities. What we lack is the vision and the political will to make it happen.

When we debate a bill like Bill C-47, when we support a bill like Bill C-47, which I do, which I certainly do, we should also look at other parts of taxation such as the unfairness of the levy of employment insurance, the EI fund, which is sitting now with a $43 billion surplus of ordinary people's money. All the time fewer people qualify from the fund. Some 64% of the people who now do not qualified for the fund earn less than $20,000 a year, yet they have to pay premiums.

We should be looking at the unfairness of the airport security tax, this new GST that has been imposed on us and that the government now is using as a tax grab on ordinary citizens. We should look at some new vision in the future in terms of international stability and funding of international programs. The idea here, which is getting momentum around the world, is that of a small tax on the speculation of currency which is causing havoc in so many countries of the world.

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

Mr. Speaker, I will say a few words about the bill before the House today as well.

Bill C-47 it is a technical bill. It is a bill we in the House support. It would impose a levy on spirits, wines and tobacco products. It would defer payment of duties on spirits and wines to the wholesale level, place domestic and imported products on equal footing, impose tight controls on possession of non-duty paid products and so on. It is a technical bill that would implement some tax changes. There has been a review of the bill. We in my party have no real problems with its technical proposals.

I will comment on a couple of things in the bill. One is the tax on tobacco. I agree that there should be a higher tax on tobacco products in Canada. The biggest health care expenditures we have in Canada are a result of smoking and all the ailments and health problems it causes.

There has been an unofficial agreement between the provinces to raise the tobacco tax. It has happened in Alberta. It happened in the Saskatchewan budget two weeks ago. I suspect the same thing will happen in Manitoba shortly and in other provinces across the country where the price of cigarettes is in roughly the $9 range. The revenues could be used to promote a non-smoking campaign to show the hazards of smoking, particularly for young people. In most cases high cigarette prices are a deterrent for young people to start smoking.

There is a problem on the other side of the issue. A lot of people who smoke are lower income people. When the price of cigarettes gets high it becomes a hardship on them because they are addicted to cigarettes and tobacco products. We get caught in a difficult situation. We are doing the right thing in terms of health and principle, yet at the same time we are catching people who are already addicted to tobacco.

It is a long term process. People need to be educated about the hazards of tobacco. We must make every effort to get people off cigarettes. This involves federal and provincial government campaigns through schools and the like. This is one of the things Bill C-47 talks about.

I will mention two or three things that are not in the bill but which are important when it comes to taxation policy. We have had a government over the last while that has decided to make lowering taxes a huge priority. Before the last election campaign in the fall of 2000 it brought in a budget that would lower taxes over five years by some $100 billion. That was an attractive thing for a lot of Canadian people.

On the other side of the ledger we have seen a tremendous rip-off of employers and employees through employment insurance premiums being much too high. We have seen increased restrictions on who qualifies for employment insurance benefits. The eligibility period has been reduced for those who do have benefits. We now have a surplus of about $43 billion in the EI program. The surplus is predicted to hit $50 billion sometime in the calendar year of 2003.

We are debating a tax bill today but at the same time we are turning a blind eye as a parliament to a great injustice. Workers are being taxed excessively for their employment. The $43 billion EI surplus goes into the Consolidated Revenue Fund. The surplus is there to provide a balanced budget for the Minister of Finance. It is there to provide money for other programs. It is there to pay down the national debt.

Last year $17 billion was put toward the national debt. The $17 billion came directly from workers because of the excessive payments they made into the employment insurance fund. That is very unfair and actually should be a national scandal. The insurance fund should be roughly balanced at all times. I do not mind seeing a surplus of a few billion dollars because at a time when unemployment is low, we can build up a bit of a surplus and when the unemployment rate increases, without increasing the premiums or increasing them only marginally, we can have a deficit running for a while and come out balanced over a five or ten year period.

That was the whole purpose behind EI in terms of funding. Today about two-thirds of the surplus in the employment insurance fund is being generated by low income Canadians not by Canadians who make a lot of money. We tax the poor and people of modest incomes. That is not fair or just.

Many people have lost access to the EI fund because of the tighter qualifying restrictions brought in by the federal government. About one million families have lost access to the fund since 1993 when the Liberal government took office. About 41% of the people who have lost access to the benefits make less than $15,000 a year. Another 23% who have lost access to EI benefits make between $15,000 and $20,000. That is 64% of the people who have lost access to these benefits make less than $20,000 a year. Although they have lost access to the benefits, they still pay into the EI fund. They have provided the federal government with almost a $43 billion surplus today and will provide $50 billion over the next calendar year. It is a very unfair tax from a government that calls itself liberal. That is of course something that is not referred to in the bill that we are debating today.

I want to talk now about the airport security tax which was debated in the House and went into effect on April 1. It was no April fool's joke. It is a tax that will not fly in this country. It is a flat tax of $24 on a return ticket. People will pay $24 tax whether they fly from Saskatchewan to Prince Albert, Regina to Saskatoon, Edmonton to Grande Prairie, Edmonton to Calgary or Toronto to Ottawa. The tax is the same if one flies from Regina to London, Paris or New Delhi. There is no relationship whatsoever to the price of the ticket.

The tax will hurt small communities and short haul flights. It will harm the small airlines such as Athabasca Air in Saskatchewan which has short haul flights between Regina and Saskatoon. The $24 on a $100 or $150 ticket is a huge percentage on a short haul flight. That is another example of a very unfair and unjust tax.

The tax will apply to everybody from the age of two and up. Infants up to the age of two who travelled with an adult could fly free and children between the ages of two and 12 received a large discount but not today. The $24 tax applies equally to every Canadian citizen from the age of two and up. I see that as an example of an unfair tax.

Another reason the tax is unfair is that it was supposed to be implemented to pay for enhanced security at airports. No one in the House would oppose the idea of increased security at airports after September 11 but the tax will collect $1 billion or $2 billion more than is needed to provide for security at airports. In some cases the tax will collect as much as it costs to run the airport. In Saskatoon the city and airport authorities who studied this security tax estimated that Saskatoon will raise some $5 million a year from passengers who fly through the Saskatoon airport. Meanwhile, it costs $5 million a year to run the entire airport, which includes the costs of heating, cleaning and everything else.

Regina will raise $4.5 million through the security tax paid by people leaving Regina. The cost of running the airport in Regina is about $4.8 million. The money coming in from the security tax is enough to run the entire airport but it is supposed to cover security. No wonder people get cynical of politicians and governments when we have this kind of a regime and this kind of tax.

The security tax was implemented without an economic impact study being tabled by the Minister of Finance or the Minister of Transport. The most fundamental thing we do in parliament is taxation. The whole philosophy of parliament is representation. We do not have taxation without representation. We have representation in the House of Commons from all the people of the country yet we have a bunch of puppets in the House of Commons who get up and say yeah to the Minister of Finance for implementing a new tax without tabling a study or a document in the House showing the impact it will have on the Canadian people.

It is like having a benevolent dictator sitting over there. Sometimes he is being very benevolent when he brings in the bill without a study.

What do we teach kids? Normally we teach them to do their research and their homework when they go to school. They need to have some data and facts on which to base an argument or write a term paper. However here in the House of Commons we bring in an airport security tax without an economic impact study. That does not make any sense. It would be like the member for Edmonton North going off and riding her motorcycle without learning how to ride a motorcycle.