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

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

Mr. Speaker, I am pleased to take part in this second reading debate on Bill C-47. I will say in advance that the Bloc Quebecois is going to support this bill. We have two reservations, however, and, over the coming weeks, we are going to try to convince the government that we are right about two particular aspects of this bill.

Why are we supporting this bill? Because it simplifies matters in connection with wines, spirits and tobacco, specifically by harmonizing sales taxes, excise taxes with the general taxation system, and by creating compatibility among the commercial accounting periods. This is a clear improvement from a tax administration point of view. However, through you, Mr. Speaker, I wish to draw the government's attention to two problems related to this bill.

The first has to do with the beer sector, microbreweries in particular. The second has to do with small vineyards, which have been appearing in increasing numbers in recent years, such that in Quebec and in Canada, this has become a very flourishing industry which is winning international product quality awards.

In the case of beer, there is a major problem, a problem of fairness, as it were, internationally. In other countries, such as France, Belgium and even the United States, microbreweries are exempt from excise tax. Internationally, this is accepted under WTO rules. There is a special exemption for microbreweries so that they can perform, develop and support numerous regional communities, most of them small, as well as compete with large national breweries.

This is the case everywhere else, but not here. It is unfortunate that, in Bill C-47, the government has not taken into consideration the fact that microbreweries in Quebec and in Canada generate some 3,500 direct and indirect jobs; I would say that three-quarters of them are direct jobs and approximately 1,000 are indirect jobs. It is unfortunate that the government has not taken into consideration this important contribution by microbreweries. As opposed to the United States, for example, where the excise tax is 9 cents a hectolitre, in Canadian dollars, here there is still a tax of 28 cents a hectolitre.

Clearly, advocates of economic liberalism, even in the United States, are looking out for microbreweries and recognizing their contribution. Such is not the case here. But it is the case in France, in Germany, in Belgium, and in the United States. In Canada, however, microbreweries are treated the same as the big breweries that have much greater financial and technological resources to provide stiff competition for microbreweries.

Is this government able to understand that affirmative discrimination, permitted under trade rules, permitted in a world that is moving toward globalization, and permitted within the framework of globalization, could help microbreweries expand and provide fair competition for large breweries from virtually every country around the world? Would it not be a good idea for the government to get in line with all of the major industrialized countries and help its microbreweries?

We will be presenting an amendment to provide microbreweries with a partial excise exemption for the first 75,000 hectolitres, this is approximately the same level of taxation applied to microbrewery beer in the U.S. This would amount to a 60% reduction in the excise tax for the first 75,000 hectolitres produced by microbreweries, whether it be Unibroue or other microbreweries in Quebec and Canada.

This would be of great help to them and would constitute fair treatment. As I said, Unibroue's competitors benefit from this exemption, moreover. It is recognized and allowed under international rules.

So, as I said earlier, we are going to introduce an amendment to this bill at report stage, in hopes that the federal government, with its sizeable surplus accumulated over the past five years, could contribute some $15 million annually. This is not something that would cost the government all that much.

I would remind hon. members that the microbreweries contribute about twice as much in terms of taxes to the various levels of government, a little more than half of this to the federal level. Even with application of such a measure, the federal government would still come out on top. It would still be receiving net taxes from the microbreweries and would help maintain, even increase, employment in a sector that has undergone phenomenal expansion over the past 15 years. This measure would cost between $10 million and $15 million. That is not much to ensure that the existing 3,500 microbrewery sector jobs continue to exist, and even that this sector could become a promising and dynamic one in the years to come as far as job creation is concerned.

There are certain problems in this bill, including one concerning small wineries. As hon. members are no doubt aware—and some Liberal colleagues are involved in wine making, moreover—there has been a considerable expansion as far as small wineries are concerned in Quebec and in Canada over the past 25 years. When I was an economist for the Union des producteurs agricoles, I witnessed the birth of some of the great Quebec wineries. Back in 1986, investment in this sector was just beginning, for instance in l'Orpailleur, in Montérégie.

I was there in the early days of this sector, which has developed from its early, more amateur days to the respectability it enjoys today because of the award-winning, quality products to which I referred at the beginning of my speech. Quebec and Canadian small vineyards have been raking in the medals in recent years on the international scene for the quality of their vintages

Small vineyards are subject to a tax of 51 cents per litre. This is significantly more than elsewhere, including in France, Belgium, Italy and even in the United States. Again, we are asking that small vineyards be treated fairly.

Let us take the example of a vineyard that produces 200,000 bottles. This is not much, considering that, at the international level, large vineyards' production is 10 and 20 times larger on average, including in the United States. What the government could do—and we will again propose an amendment to this effect—is an provide exemption from this 51 cent tax per litre on the first 200,000 bottles.

Again, this exemption would be acceptable from a trade point of view and it would meet all the requirements of international treaties, including the one with the World Trade Organization. Such an exemption would also meet the requirements and provisions of the North American Free Trade Agreement, and it would help small vineyards give additional momentum to their performance.

The cost of this exemption to the federal government would be ridiculously low, but it would really help small vineyards. It would cost the government less than half a million dollars per year, $350,000 in fact. This is very little, but for small vineyards in Quebec and in Canada, it would mean a lot. It would help them tremendously. Why? Because the competition is very fierce for small vineyards. It is very fierce with large international vineyards, and also with exports from small vineyards in the United States and elsewhere in the world.

Once again, we are going to bring forward an amendment so that small vineyards with sales under approximately $2 million annually could be exempt from this tax.

Small vineyards are now working hard on quality and the development of complex varieties of vine. They are making incredible efforts to break into the international market. The quality of wine in Quebec and in Canada is therefore good, and there has been incredible improvement in recent years.

In my view, even more could be done. I am thinking of l'Orpailleur; I mentioned l'Orpailleur, in Montérégie, earlier. I am also thinking of Clos Saint-Denis, in Saint-Denis-sur-Richelieu. These are two small vineyards whose owners I know which have been making amazing progress, year after year, in research and development to improve the quality of their products. They enter all the international competitions and win awards.

It would be worth improving Bill C-47 by incorporating these two amendments. It would not cost the government very much, but it would give a tremendous boost to two flourishing industries of which we are proud. Throughout Quebec and Canada, people are very proud of the efforts being made by the microbreweries, of the quality of their products, and the same goes for small vineyards.

Again, we will be supporting Bill C-47. However, we hope that, at the various stages, the government will understand that it is to the advantage of all Quebecers and all Canadians to approve the two amendments put forward.

[Ken Epp, Canadian Alliance, Elk Island, AB]

Mr. Speaker, I am continuing an interrupted speech. The speech was interrupted about two weeks ago when 1.30 p.m. rolled around on a Friday afternoon in the middle of my riveting presentation.

I do not know whether I hold the record on the interruption of speeches but I do remember one in which my speech was interrupted in early December. I do not remember which year but I completed the speech the following year in November. I remember that because it was an 11 month interruption of a speech.

The bill we are debating today is a bill on taxation. I am sure all members present have taken the time to read Hansard from two weeks ago Friday and have re-read the first part of my speech so they have the continuity. In case some have not I will reiterate again that the theme of my speech is the insatiable appetite of the government for tax dollars. Bill C-47 is about taxation.

I talked about the three different ways in which the government can tax individuals and corporations. There are actually four different ways in which the government can earn revenue, directly and by taxation. The three different ways of taxation are: first, taking a portion of everything that a person owns, property taxes for instance; second, taking a portion of everything that we earn through income tax; and third, taking a portion of everything we spend, the much loved GST is an example of that. Many provinces have provincial sales taxes as well.

I live in a province in which there is no provincial sales tax. To my knowledge we have never had a sales tax in Alberta. Until that hated GST came in it was actually wonderful to go to a store. If someone bought something that had a price of $5.99 and gave $6.00 in payment, a penny was given back. There was no computation of a tax. There was no sales tax. I would propose that perhaps the lack of a sales tax was one of the things that helped to make Alberta so strong that it is now one of only two provinces that is a net payer into the scheme of equalization.

I went to school in Portland, Oregon for a year and was interested to find that at least at that time Oregon was one of only two states that had no sales tax. Somehow I am attracted to governments that do not have sales tax.

Economists tell us that sales taxes are a better form of taxation than income tax and that reducing income tax actually has a greater positive effect on the economy than the reduction of sales taxes. However, there is a huge psychological difference to that. When one earns money, especially if the income tax is deducted at source, one never notices it in a way because one just does not ever get to see it. If we pay too much tax at the end of the year at filing time, we find that there is a bit of a rebate and everyone is happy that they got money back.

I do not know how many people stop to think that it is money the government has taken away from them. It is part of their earnings. The government took more than it was entitled to and is now giving it back. We should be happy that it gives it back in the same sense that we would be happy if someone robbed us and gave us back the money.

It is our own money and it is important for us to never forget that when it comes to taxes the money belongs to the person who earns it. Governments who take part of that money away, either through income taxes or sales taxes, need to always be cognizant of the fact that they are trustees of the money, spending it on behalf of the public for the public good.

I am very incensed when I find the present government taking taxpayers' money and way too often spending it for the government's good and not for the public good. I will give the House an example of that. The Minister of Industry happened to be in my riding about a week ago, where he made a great speech and held a meeting at one of the new hotels. All the local dignitaries were there. Everybody was very impressed way out there in rural Alberta in the community of Sherwood Park, which is Canada's largest hamlet with a population of around 45,000. It is still considered a hamlet because it has never been registered.

At the meeting he made some announcements about federal government spending. What was curious was that these were not new announcements. They were announcements that had already been made in the budget. The government is great at announcing and announcing. It seems as if the government multiplies the use of these announcements for political reasons.

The minister basically said “Are we not wonderful?” because the federal government was giving out some money to be used for research. He said that this would be a great boon to our economy, our competitiveness, our creativity and our productivity. He used all the nice buzzwords. He gets a lot of mileage out of announcing $150 million. It takes just the snap of a finger for a Liberal to announce $150 million. A couple of Challengers and all sorts of other things can be bought with $150 million.

There he was announcing it, but I contend simply this: If that money is to be spent for the public good, why does he not just send a cheque? If the money is to go to the university, a cheque should be sent to the university along with instructions on how to use the money and how to report on its accountability. Instead we find the minister making a big announcement.

In another example, I remember the Prime Minister announcing the opening of a call centre in, I believe, Prince Edward Island. The government, through HRDC, helped to fund the introduction of this call centre. The reason I mention this is that we are talking of taxpayers and using their money in trust on behalf of the citizens of this great country of ours. There was the Prime Minister announcing to the people of Prince Edward Island that a grant would enable them to have a new call centre and would provide employment in their community.

On the surface that sounded pretty good, but the reason I remember it is that the response was incredible. I heard about it on the car radio when I was driving. The person who was given this money, and I cannot remember if it was the local mayor or the entrepreneur of the business, told the Prime Minister that he had come through for them when they needed him and they in turn would show the Prime Minister they would be there for him in the next election. That was the gist of the statement.

It ought not to work that way. If the money is needed, it should be spent. If it is not needed, it should not be spent. It is not right to tie it together with the expectation of votes in return. I think the Prime Minister would have been right on if he had told that individual that giving him the money had nothing to do with votes. This was taxpayers' money and for some reason it was taken away from people who earned it and brought there so others could earn some money. I know there is an argument there. We could say it created a new business and jobs for those people who then would generate revenue and pay income tax. They would be paying into the system instead of drawing out of the system.

I know we can make those arguments. Maybe some of them are even justified, but I object strenuously when taxpayers' dollars are used for political purposes, as in my riding with the Minister of Industry making an announcement that had nothing to do with Liberal politics or like the Prime Minister in Prince Edward Island making that announcement.

Here we are talking about increased taxation. Make no mistake about it. Bill C-47 increases the revenue of the federal government by about a quarter of a billion dollars. That is what this is about. It is about increased taxation. It is a rationalization of some taxation. In the case of cigarettes, for example, in different provinces the rates are increasing incrementally. As I said in the previous part of my speech, based on the amount by which those taxes were decreased previously, they are now being restored.

I think I have made my case very strongly. I am sure that all the members here, having listened to my argument, will now have a new resolve in their hearts to never, ever misuse the money that has been given to the government in trust by the taxpayers of Canada to be used for the public good. I hope that is true.

It may surprise the House to know that my present inclination is actually to vote in favour of the bill, a bill that would increase government revenue and taxation. My primary reason for voting in favour of it is that it will increase the price of and thereby hopefully reduce the consumption of cigarettes. I have given speeches on this topic in various contexts before. Whether it is my colleagues in the House, my friends back home or one of my staffers who may be watching this speech right now and who is currently on a quit smoking program, I encourage them to carry through with quitting smoking. Perhaps this tax helped that staffer to make that decision, although I have not actually discussed that detail with him. I would like to encourage him to carry through with that resolve for health reasons and for economic reasons. The best thing we can do is to discourage young people from smoking, thereby ruining their health.

There are also the costs of smoking. I have related before how when I taught mathematics I encouraged my students, as part of the work they did in learning to use their calculators and computers, to compute how much they would have in the bank if instead of smoking they were to put that money into an RRSP over their lifetimes. I used to have them evaluate the mathematical formulas, math and finance exponentials and things like that.

After they evaluated that, which came to around $1.3 million as I recall, I asked whether they knew what they had computed. I went through it and showed them that the 45 meant 45 years from the age of 20 when one started working until 65 when one retired. The .1 at that time was 10% the rate of return that one could get on an RRSP and the $1.3 million was the balance in the RRSP on retirement. They could retire with $1.3 million in the bank if in their lifetimes they would put their smokes money into an RRSP instead of blowing it up in smoke, so the economic argument was strong. I am proud to say that I had a number of students who actually quit on that account. That is my primary reason for voting in favour of Bill C-47. I regret that my time has now elapsed, but I hope that the Liberals will hear my message and act on it.

[Ken Epp, Canadian Alliance, Elk Island, AB]

Mr. Speaker, I think you look very good in the chair. Perhaps you aspire to making that a permanent position down the road. Learn your French and you will be okay.

I would like to address Bill C-47, an act which has to do with taxation. If members ever listen to any of my speeches they would know that taxes and I do not mix. I recognize and acknowledge that for our different levels of government to do their work a certain amount of taxation is required.

However, let us stop to think about how heavily we are taxed, whether we purchase gasoline, wine and spirits, cigarettes or food in the form of restaurant meals, vehicles, furniture, clothing or even when we give money away.

As a leader in my community, I get, as I am sure all members of parliament do, a fair number of solicitations to contribute to fundraisers. I was solicited not long ago by a group trying to get hockey tickets for a number of young people who did not have both parents. It asked me to contribute to some hockey tickets so that these young people could enjoy the Edmonton Oilers beating someone else hockey game.

I told the group I would contribute and I pledged $50 which I think provided two tickets for these young people. Members can imagine my surprise when I received a statement from the group showing the $50 I had pledged but also showing a charge of $3.50 for GST. I was being billed a tax on my charitable donation.

The federal government, even when its citizens are giving their money away to help others, wants a cut of it. It seems to have an insatiable appetite to take away the earnings of Canadians.

Over and over again we see taxes increase. Once in a while we get a little announcement of a temporary decrease. Even now we hear much crowing from the Liberal side about the reduction in taxes. However when I spoke to people who had received their cheques in January and February, they said that their take home pay did not seem to be that much different. They wanted to know what happened to all the tax cuts they were supposed to get?

We also must remember that our taxes, when it comes to the kind of taxes we are talking about in Bill C-47, the excise taxes and the GST, those taxes are all being paid with money that has already been taxed.

I was thinking about something the other day. Given that governments need some money to run their operations, where can they get the money from? First, they can do something to earn it and, in some cases, they do that.

I worked in the mathematics department at the Northern Alberta Institute of Technology. The institute had three major divisions: the technology division where I worked as a mathematics instructor, the business division and the so-called industrial division. The industrial division, among other things, trained mechanics, carpenters and many others in the hand skill trades which are so necessary in our society.

One of the things the institute did in order for their students to have hands on experience was invite citizens to bring in their vehicles. They would only be charged for the parts because the labour was provided by the students under the supervision of their instructors. I used to bring my own vehicles in there from time to time, although in those years I did most of the mechanical work on my vehicles myself.

I remember going to the institute's barber school which trained people to be hair dressers and barbers. One could go there and get a haircut for 50¢. It was a nominal charge but at least they got some revenue and the students learned how to cut hair.

Governments could raise revenues by doing things that would actually bring in money. Occasionally governments will build roads and then charge tolls on them. In a sense that is also a way of bringing in revenue. There are many other ways but I will not give an exhaustive list of how it can actually earn money directly.

The other way governments could earn money would be through taxation, that is, by separating the citizens from part of their earnings. As I see it there are basically three main classifications. They can tax people as a proportion of what they own. The municipalities do that with property tax. If one owns a house worth $100,000 the tax assessment every year would be $2,000 to $3,000.

I have not done my calculations recently but, having lived in the same house for over 25 years, I think I have paid more in property taxes than I paid for the house. In other words, the money I paid the government in property tax is greater than the money I paid to the guys who built the house. It is absolutely crazy.

Meanwhile I paid all those taxes with money on which I had already paid income tax. Most of that money was at the marginal rate of around 50%. I earned $6,000 of which $3,000 went to the province and feds and $3,000 went to the municipal government. That means that every year when I write my local municipality a cheque for my property taxes, if I write the cheque for $3,000, there goes $6,000 of my earnings. It was $6,000 of my earnings in taxes and yet all it shows is that I paid $3,000 in municipal taxes.

All hon. members here will be very pleased to know that I have introduced a private member's bill that would at least take the first step toward providing an exemption from taxable income for money that people earn to pay their property taxes. My principle is that Canadians should not have to pay taxes on money they earn for the sole purpose of paying taxes.

I am very unlucky because my private member's bill has never been drawn. My bill has been languishing in the bottom of the barrel. I would just love to have it debated and made votable. I would love to hear the members on the other side say that was a huge injustice.

If I included the amount of money I paid in property taxes with the amount of income tax I paid in order to make the money to pay those property taxes, I would have paid twice as much in taxes as I paid for the house. Of course we still have the house but it is very decrepit because I cannot afford to do upkeep due to all the taxes I have paid.

I am talking about Bill C-47, a bill that would change some tax rules. What the parliamentary secretary was very careful to keep a secret was that it would also increase taxes. I listened carefully to his entire speech and I do not remember hearing him say that as a result of these changes we will be able to suck out of Canadian taxpayers another quarter of a billion dollars, because that is what it is.

Our estimate is that this measure will result in increased tax revenues to the federal government of around $250 million. That is $250 million that will not be available to homeowners. It will not be available to moms and dads who are trying to provide for their families. It will not be available to good Canadian citizens who would love to give to charity but cannot because after they their tax bills most families hardly have enough money left to allow them to be truly charitable.

As an aside, the Liberals have a flawed reasoning when it comes to their taxation system. They claim they are justified in taxing people and then giving back to others who need it, people who make films, people who build airplanes, people who hire factory workers in Mexico to build buses that go to Kentucky and things like that. Liberals think they are justified in taking money away from all of us because we are inherently a generous people. There is a flaw in that argument.

I grew up in a family where that was practised. I have tried to be generous myself and I have tried to teach my children to be generous and charitable. If the Liberals really believed it and if the socialists really believed it, then they would not need to tax the dickens out of us because as generous people we would in fact help those people in need. We always did that.

I grew up in Saskatchewan in the rough years. Neighbours were always helping one another. It did not matter if it meant half a day of one's time. Sometimes someone would give a neighbour a ride to visit somebody who was ill in the hospital because that neighbour's vehicle did not work. My dad would pick people up and take them to the hospital. Things like that were always done.

Lo and behold, along come the socialists, the Liberals, who do not really think Canadians are generous. They take our money, whether we want to give it or not, and redistribute it. Meanwhile, they manage it in such a way so as to provide enough good slush funds in different areas to get re-elected in those ridings. I find that very offensive and so do most Canadians when they stop to think about it.

One form of taxation is property taxes. This involves taking every year from citizens a portion of what they own. In the business field there is the capital tax. That tax affects businesses, corporations and banks. Every year they have to pay into the public coffers a proportion of their capital inventory. No wonder businesses want to move to Mexico to build buses. No wonder they want to move to Ireland to invest there.

In Canada, businesses pay like crazy through the nose. Even when they buy equipment and once it is owned, they still have to pay the federal government an annual capital tax on it. That tax is in addition to any machinery tax that the provincial government may want. It is in addition to any tax that a municipality may level based on property value.

We have all these taxes that very frankly are a tremendous drain on our economy. They are a tremendous disincentive both to individuals and to businesses. We should be looking at ways to reduce that tax burden. Would it not be wonderful if Canadians could keep 90% of their earnings. If they earned $1 they would get to keep 90¢ of it. That would be great.

Before I got into politics, I was an ordinary person on a professional income. With my two degrees, I worked as an instructor. My wife and I made the decision that she would be a full time mom when our kids were small. We were struggling continuously to balance the budget.

I found it very distressing that I could not make ends meet. One day I figured out why. I earned $10,000 approximately five or six years into my career. The federal and provincial governments took about half of it, which left me with $5,000. We were told that we should put approximately 10% of our earnings away for future retirement.

My wife was not gainfully employed. She did not get paid for her labour although she worked in many instances as hard or harder than I did. She was not able to contribute to any pension plans or anything like that so I put some money away for our retirement. If we take the 10% away it reduces the $5,000 to $4,000.

I have always believed in charitable organizations and charitable contributions. For many years I used the rule of thumb of donating at least 10%. I would do that as an obligation.

It struck me one day that the reason we were having trouble making ends meet was that we were trying to live on 30% of my income. Some 50% was taken by different levels of government and the remaining part was taken through choice. We need to ease the tax burden on Canadians.

I have made allusion to other ways in which governments separate taxpayers from their money. Either they are taxed on a proportion of what they own, taxed on their income, or taxed on what they spend. Incredibly the federal, provincial and municipal governments are in collusion to make sure that all of us are burdened, stooped under a load of excessive taxes. We are taxed at all three locations. They tax us when we earn our money. They make us pay taxes on our properties. Business owners pay capital taxes. Then when we spend money to buy our kids some new clothes, we pay the GST and in most cases a provincial sales tax.

No wonder our families have problems. I read in a book that the greatest stress on marriage is inevitably financial. That is most often what leads to conflict and stress among married couples. With our taxation level and regime it is amazing that any of our families are surviving.

I was elected in 1993. Among other things my mandate was to work for lower taxes, and it still is. I believe very strongly that as individual members of parliament we need to do everything we can to reduce the tax load to leave more of the earnings in the pockets of the people who earned it so they can provide for themselves and their families. That is very important.

I want to say something specifically about the measures before us. I appreciated the speech given by the parliamentary secretary. He did a reasonably good job of going through the details of the bill and outlining its various measures. I will not bother repeating the details but I would like to bring a few issues to our attention.

It is interesting that work is being done to streamline the production of wines and spirits, the work of the vintners and distillers who produce alcoholic beverages. They want to make it more efficient. I have to applaud that. We know that our standard of living is inextricably linked to productivity in our country. Our productivity is greatly held down by all the administrative and regulatory regimes and taxes of the governments. I used the word in plural there because it is true at all three levels.

It is an admirable goal to streamline all these measures and bring them together. Presently there is an Excise Act and the Excise Tax Act. This is the first step, as I understand it, to bring those measures into one act which will be called the Excise Act, 2001. It happens to be 2002 but so be it. That will be its label.

I agree with some of the regulatory measures that are being taken. The parliamentary secretary mentioned the need for distillers to have at their expense government inspectors on site all the time. That is a regulatory expense which possibly should be changed to make us all more efficient.

As for colouring pipes certain colours I think they do this in most chemical operations. In a way producing alcoholic beverages is a chemical operation. I think it is a biochemical operation. We should let them do it if they want to do it, but we should not require by government that their pipes have to be a certain colour. That needs to be fixed. It needs to be modernized by all means.

When it comes to these taxes on alcoholic beverages, wines and tobacco I follow my father's footsteps in one regard. When a tax is levied we have a choice. We can choose not to pay it.

My father and mother taught us that drinking alcoholic beverages was not necessary and had inherent dangers if taken to excess. Neither of my parents ever drank or smoked and for some reason I picked that up as being a pretty smart thing to do.

I sometimes look back now still amazed at how insightful I was as a teenager when many of my friends were succumbing to group pressure. Some of them have since died because of either their addiction to alcohol, in some cases due to accidents caused by alcohol, or due to cancer caused by smoking cigarettes.

I have other problems. However my parents said this was a tax they would not have to pay so they did not bother buying that stuff. They not only saved the expense of the original purchase but also the taxes on it.

My dad did the same when the Mulroney government brought in the much hated GST. It is remarkable that sales tax, the GST, still resonates with people. A couple of weeks ago I saw an ad in the newspaper indicating no GST. The ad could just as easily have said 7% off everything, but they get way more attention because people say they hate the GST and will go to that store on the weekend to buy something if they do not have to pay the GST. I could use a word that would be unparliamentary which I normally do not use anyway, but other people sometimes use it when they talk about the GST.

When the GST came into effect my dad who used to trade in his car every three or four years said that was one tax he would not have to pay. He kept his car. I wonder how much that was replicated across the country when people made a decision not to make a purchase because the tax was a disincentive. We need to recognize that those taxes are a great disincentive.

Throughout our lives my family and I have not really become directly involved in the taxes we are talking about today because we buy neither alcoholic beverages nor cigarettes. However it does apply to many Canadians.

We should be aware of the fact that in this case the government will be increasing the taxes on cigarettes. As I mentioned earlier, the tax measures in the bill are to provide the government with an additional $240 million to $250 million.

Cigarette taxes in Quebec are to go up by $2 per carton, $1.60 in Ontario and $1.50 in the rest of the rest of the country. One may say that it does not seem to be fair and that the government is picking on Quebec. Why is it increasing the taxes in Quebec so much more? It is simply bringing Quebec into line because members will recall that back in 1994 or 1995 there was a big push to try to reduce smuggling. The government of the day decided it would reduce the smuggling of cigarettes by reducing taxes. If it reduced the taxes it would be able to--

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

Mr. Speaker, I appreciate the opportunity to present Bill C-47, an act respecting the taxation of spirits, wine and tobacco and the treatment of ships' stores, for second reading today.

Bill C-47 introduces a modern, legislative and administrative framework for the taxation of spirits, wine and tobacco products under a new Excise Act. This new framework does not address substantive tax rate or base matters for alcohol and tobacco products. Bill C-47 also implements other excise measures, specifically the changes to ships' stores provisions that were announced on September 27, 2001, and the tobacco tax increases announced on November 1, 2001.

Before elaborating on the details of the new Excise Act, I want to take a moment and provide hon. members with some background that will help put these new measures in context. The Excise Act is the foundation of the federal commodity taxation system for alcohol and tobacco products. It imposes excise duties on spirits, beer and tobacco products manufactured in Canada. It includes extensive control provisions relating to the production and the distribution of these products. Duties equivalent to the excise duties on domestically produced goods are levied on imported spirits, beer and tobacco products under the customs tariff. As well, excise taxes are imposed on domestic and imported wine and tobacco products under the Excise Tax Act.

Historically, commodity taxes on specific goods have been an important element of Canada's federal tax system. In the first half of the 1900s they accounted for as much as 25% of federal revenues. While their relative importance has declined in recent years, these levies are still significant. In 2000-01, duties on alcohol and tobacco products raised about $3.4 billion in federal revenues.

Why, then, is this bill needed? Quite simply because the current Excise Act is archaic. It is one of the oldest taxing statutes in Canada, existing in previous configurations before Confederation with parts of the present act flowing from the consolidated inland revenue act enacted in the 1800s. While periodically amendments have dealt with specific issues, the Excise Act has never before been the subject of an indepth review and revision.

Let me provide a few illustrations of the archaic provisions in the existing Excise Act. The existing act allows excise officers to enter premises at any time and break up or remove parts of the premises such as the walls, ceilings and doors. Taxpayers who suffer losses as a result of the actions of excise officers are only entitled to damages of 20¢. Any person found guilty of possessing or selling alcohol in contravention of the Excise Act could face up to 12 months of hard labour.

Licensed producers are prohibited from operating at night without prior authorization from the Canada Customs and Revenue Agency, CCRA, and must comply with the requirement to have an excise officer present at the licensee's expense. Licensees who intend to make any alterations to their premises are required to provide the CCRA with a detailed description of the proposed alterations and, following the completion of the work, with plans of the work. Pipes that are used in a distillery to convey spirits are required to be coloured blue and those used for beer are to be coloured green. Licensed producers are prohibited from erasing any words or figures from their books and records. The only way changes to a licensee's books may be made is by crossing out words or figures with ink in such a way as to ensure that they remain legible.

These are but a few examples of how outdated the current Excise Act is.

In recent years, both industry and government became increasingly aware of the need for a substantive review and modernization of the excise framework. In particular, industry has undertaken significant development with respect to new technology, product marketing and distribution initiatives which the existing Excise Act does not accommodate adequately.

Other factors also pointed to the need for review of the framework. For example, there is now greater foreign competition in the Canadian markets for beverage and non-beverage alcohol. However, the pervasive controls mandated by the Excise Act impose high compliance costs on industry and impair the competitiveness of Canadian producers. The Excise Act also has become increasingly difficult to administer and impedes CCRA's ability to fully adopt modern administrative practices. In addition, there was a need to address recent wine contraband pressures that have arisen in part because wine, which currently is taxed under the Excise Tax Act, has no substantive controls placed over its production and possession.

Finally, there are complexities and inefficiencies to both government and industry because tobacco manufactured in Canada currently is taxed under both the Excise Act and the Excise Tax Act. As a result, the government recognized that a revised excise framework was in everyone's best interests. A modern framework would generate stable and secure revenues and also address contraband pressures. Moreover, this could be achieved without imposing unrealistic or unnecessary costs and administrative burdens on industry participants.

Prompted by the need to update the Excise Act, the Department of Finance and the Canada Customs and Revenue Agency jointly released a discussion paper on the Excise Act review in 1997. This paper outlined a proposal for a revised legislative and administrative federal framework for the taxation of alcohol and tobacco products.

The review was guided by the following three objectives: first, to promote a modern legislative framework for a simpler and more certain administrative system that recognizes current industry practices; second, to facilitate greater efficiency and fairness for all parties, leading to an improved administration and reduced compliance cost; and third, to ensure the continued protection of federal excise revenues.

Building on this discussion paper proposal, the government followed up in 1999 with the release of draft legislation and regulations. Public consultations, an important element in any federal policy initiative of this kind, formed an integral part of the review. With the discussion paper and the draft legislation regulations as a basis, extensive consultations were conducted with affected industry groups and businesses, provincial governments, liquor boards, various federal departments, the Royal Canadian Mounted Police and other enforcement agencies. Refinements were made to the original review proposals with the result that Bill C-47 has been given broad support among the spirits, wine and tobacco sectors, the provincial liquor boards and the law enforcement agencies.

Before discussing the new legislative framework, I should mention that the bill does not address beer, which, with the concurrence of the brewing industry, will remain under the existing Excise Act for the time being.

While time unfortunately precludes me from reviewing all the measures in Bill C-47, I would like to provide the House with a brief overview of some of the key components. Bill C-47 introduces core elements of the framework outlined in the discussion paper issued by the government in 1997, including: maintaining the imposition of duty at the time of production for spirits; the replacement of an excise levy at the time of sale for wine with a production levy at an equivalent rate; the deferral of the payment of duties for spirits and wine to the wholesale level; and the introduction of modern collection tools. At the same time, Bill C-47 helps to address the government's ongoing concern about the smuggling of alcohol.

Let me be more specific. A key element of the framework is the maintenance of the production levy, which as I mentioned, is extended to wine in the bill. The production levy incorporates strict controls on the production, importation, possession and use of non duty paid alcohol and significant penalties for breaking the law.

At the same time the bill removes the current outdated and onerous controls on premises and equipment which have hindered the spirits industry operating under the Excise Act. This means that businesses will now have greater flexibility to organize their commercial affairs to respond more quickly to market changes. Anyone producing or packaging spirits or wine will be required to have a spirits or wine licence.

Although vintners must be licensed under the new framework, the current small manufacturers tax exemption will be maintained for wine produced by very small vintners, especially vintners with sales of wine not exceeding $50,000 in the previous 12 months. As well, individuals who produce wine for their personal use will continue to be exempt from having to be licensed and pay duty.

Bill C-47 also proposes a new warehousing regime for deferring duty on packaged alcohol that will place domestic and imported packaged alcohol on an equal footing. As well it will accommodate the privatization initiatives of some provinces for the warehousing of liquor.

As under the existing Excise Act, comprehensive controls will exist on non-beverage uses of spirits and wine to protect federal excise revenues derived from beverage alcohol. These controls include the licensing or registration of users, the approval of product formulations for which spirits and wine may be used without the payment of duty, and the specification of denaturing standards.

The bill also eliminates the current nominal rates of duty that apply to certain non-beverage uses of spirits, such as spirits used in the manufacture of pharmaceutical goods. These nominal duties are inconsistent and erroneous in application and disadvantage domestic products manufactured with spirits vis-à-vis similar foreign products entering Canada.

While the fundamental controls over non-beverage alcohol remain unchanged from the existing excise framework, Bill C-47 contains new measures on imported industrial alcohol to ensure the integrity of the domestic alcohol market and the production of federal revenues. In particular there will be a requirement for imported denatured industrial alcohol to be sampled and tested to ensure it meets Canadian denaturing standards.

The comprehensive controls on the possession, distribution and use of non duty paid spirits and wine will also significantly improve the offence structure and enforcement function in regard to alcohol.

Finally, fines for alcohol related offences will be substantially increased. Proceeds of crime provisions will now cover serious alcohol offences.

Turning now to some of the tobacco provisions in the bill, the new legislative framework in Bill C-47 merges the current excise duty and excise tax on tobacco products, other than cigars, in a single production levy. This will result in improved administration and reduced compliance costs for the industry.

The new legislative framework incorporates the revised tobacco tax structure introduced in April 2001 and previously enacted, which formed part of the government's comprehensive strategy to reduce tobacco consumption.

My hon. colleagues will recall that the tobacco tax structure now includes: an excise tax on imported manufactured tobacco sold in duty free shops; a customs duty on manufactured tobacco imported by returning residents under the terms of the travellers allowance; and a revised excise tax and duty structure for exported domestic manufactured tobacco.

While the measures in Bill C-47 will provide a more streamlined framework for the taxation of tobacco, I want to assure the House that the fundamental controls over tobacco under the existing excise framework will be maintained. In particular, the current stamping and marketing requirements for tobacco products will continue to apply and will play a key role in the enforcement of tobacco provisions in the bill.

In addition, the legislation incorporates the current offence provisions relating to the illegal production, possession or sale of contraband tobacco which have proven to be effective.

The new excise framework also contains a number of administrative measures that will enable the Canada Customs and Revenue Agency to improve its level of service to clients and its overall administration of the excise framework for alcohol and tobacco products.

These measures, which are consistent with CCRA's integrated accounting initiative, include: a duty remittance and return structure harmonized with commercial accounting periods and the goods and services tax and harmonized sales tax, GST/HST, legislation; new assessment and appeal provisions similar to those under the GST/HST legislation; and a range of modern collection mechanisms, such as certificates of default, garnishment, seizure and the sale of goods and director liability.

In addition, the bill provides for a range of administrative penalties that will be imposed on licensees, registrants and others dealing with excisable goods who fail to comply with particular requirements under the law.

The new legislative framework will ensure that the excise duties on alcohol and tobacco are collected in a more effective and efficient manner. As well, it provides an array of modern administrative and enforcement tools for ensuring compliance with the proposed statute.

In summary, the new legislative and administrative framework for taxation of spirits, wine and tobacco products will provide: a simple and more certain taxation structure; equal treatment for all parties; improved administration and lower compliance costs; greater flexibility for businesses to organize their commercial affairs; and enhanced protection of excise revenues.

In the few remaining minutes, I will briefly discuss three additional measures in Bill C-47.

The first concerns changes to the ships' stores provisions under the customs and excise legislation. As my hon. colleagues know, ships' stores provisions grant relief from duties and taxes for goods used on board ships and aircraft in international service.

These changes, which were announced on September 27, 2001, respond to a recent Federal Court of Appeal decision that ships' stores regulations went beyond the scope of their enabling legislation. Bill C-47 provides the proper legislative authority for these regulations. The changes will take effect on the date the provisions identified by the court were incorporated into the regulations.

A second measure implements a temporary fuel tax rebate program for certain ships that will no longer qualify for ships' stores relief as a result of the proposed amendments to ships' stores regulations effective June 1, 2002.

Ships that would be entitled to this rebate are commercial tugs, ferries and passenger ships travelling on the Great Lakes and the lower St. Lawrence River that are not engaged in international trade. This rebate will apply on fuel purchased between June 1, 2002 and December 31, 2004. It is intended to provide affected operators with adequate time to make the transition to the new ships' stores rules.

The third measure implements the federal tax increases on tobacco products that were announced on November 1, 2001. Like the April 2001 measures I referred to earlier, this tobacco tax increase is part of the government's comprehensive strategy to improve the health of Canadians by discouraging tobacco consumption.

These increases re-establish a uniform federal tax rate for cigarettes across the country and amount to $2 per carton of cigarettes for sale in Quebec, $1.60 in Ontario and $1.50 in the rest of Canada. The increases are co-ordinated with provincial tobacco tax increases.

The government has always said that it would continue to work toward restoring tobacco taxes to pre-1994 levels as quickly as possible. The measures in Bill C-47 are one more step in the process of restoring tobacco tax rates in ways that will minimize the risk of renewed contraband activity.

In closing, let me say that the three elements of the bill all deserve to be passed without delay. It makes sense to implement a new Excise Act for addressing a longstanding need of both industry and government to rationalize the ships' stores provisions and to approve the tobacco tax increases for reducing tobacco consumption.

I urge all hon. members to support the passage of the legislation without delay.

[Stéphane Dion, Liberal, for the Minister of National Revenue]

moved that Bill C-47, an act respecting the taxation of spirits, wine and tobacco and the treatment of ships' stores, be read the second time and referred to a committee.

Business of the House

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

Mr. Speaker, I am very pleased to respond in the affirmative. The government's agenda is of course a fruitful one.

This afternoon, we will continue with report stage of the species at risk legislation, Bill C-5.

Tomorrow, we will return to debate on Bill C-50 respecting the WTO. If this is concluded, we will call Bill C-47, the excise amendments.

The two weeks following this one constitute the Easter adjournment. When we return on April 8 we will resume debate on criminal code amendments, Bill C-15B, and commence consideration of the pest control legislation that the Minister of Health has introduced today.

In addition there is a very lengthy agenda of important business for Canadians. I look forward to the ample co-operation of all members of the House of Commons to move forward in an expeditious manner.

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

Mr. Speaker, tomorrow, we will conclude the third reading stage of Bill C-49, the Budget Implementation Act, 2001.

Monday and Tuesday shall be allotted days.

Next Wednesday we will consider report stage of Bill C-15, certain amendments to the criminal code. On Thursday, March 21, I expect to return to report stage of Bill C-5, the species at risk legislation or perhaps other unfinished business. On Friday, March 23, we will again consider Bill C-50 respecting the WTO followed by Bill C-47, the excise tax amendments.

With respect to the specific legislation that the House leader for the official opposition has referred to I will pursue that matter with the solicitor general to determine what plans he may have.

Reproductive Technologies

[Rob Merrifield, Canadian Alliance, Yellowhead, AB]

Mr. Speaker, recent developments underscore the urgent need for reproductive technologies legislation.

Two weeks ago a Kentucky fertility specialist pledged to clone a human being. His team was to begin this work last week outside the United States, in an undisclosed country. He says he has 10 couples willing to participate. If he were to bring this experiment to Canada, there would be no law to stop him.

In January we learned that Industry Canada has been issuing patents on human genes for years. The health committee was under the impression this was not happening and recommended against gene patenting.

Last week in the health committee the minister pledged to introduce legislation by May 10. We hope that she will keep her word. We hope that such legislation will not be introduced only to die with the prorogation of this House. We have seen that game before, with Bill C-47.

Canadians are waiting.

Excise Act, 2001

[Pierre Pettigrew, Liberal, for the Minister of National Revenue]

moved for leave to introduce Bill C-47, an act respecting the taxation of spirits, wine and tobacco and the treatment of ships' stores.

(Motions deemed adopted, bill read the first time and printed)

Science and Technology

[Rob Merrifield, Canadian Alliance, Yellowhead, AB]

Mr. Speaker, the cloning of a human embryo in the United States only highlights the lack of legislation in Canada. The government has been dragging its feet on this issue since the royal commission in 1993. It allowed Bill C-47 to die on the order paper. What do we get in the current legislation? More delay.

Will the minister commit today to an immediate ban on human cloning?