Bill C-48 (Historical)

An Act to amend the Income Tax Act (natural resources)

Income Tax Act

[Scott Brison, Progressive Conservative, Kings—Hants, NS]

Madam Speaker, the hon. member needs a hearing aid or something because he obviously was not listening. We are supportive of these changes in Bill C-48 and we have stated that.

The hon. member talks about tax policy. I will not question his knowledge of the tax system based on the expression of his views in the House today. I would accept the invitation to debate him any time on tax policy or the government record on the economy. I think that debate is great as long as both parties take some time to actually understand the issues.

On this side of the House, we have. We have taken time to understand tax policy in a way that is focused not on partisan bickering but is actually contributing in a constructive way to ideas that can build a more competitive, prosperous and productive Canada.

[Bryon Wilfert, Liberal, Oak Ridges, ON]

Madam Speaker, I would like to ask the hon. member, because I am still not clear, is the member's party in favour or against Bill C-48, very simply.

I realize that the member would like to extol the virtues of Conservative fiscal policy, which is sort of akin to asking an arsonist to give fire prevention lessons. However, this is about corporate tax rates dealing with the mining sector and oil and gas sector, and I am still not sure where his party stands. Is it in favour or not?

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

Madam Speaker, I listened to the hon. member's comments. I do not know whether he was auditioning the fiscal platforms for the next election, but I can tell him that while he talked about taxes and the importance to Atlantic Canada, before the House today is Bill C-48 which concerns the resource sector. It is very important to Atlantic Canada and very important for companies that are going to be investing in Atlantic Canada and throughout the country.

I did not hear the member talk about the importance of the bill. I heard a lot about taxes and I would be happy to debate with him any time the fiscal record of this government versus the previous Tory government, but that is not the issue before the House today. The issue before the House today is to make sure that we are internationally competitive, particularly in the resource sector. I am sure the member is very supportive of the fact that this will mean additional job opportunities for people in Atlantic Canada in particular. I would like him to comment on that.

[Scott Brison, Progressive Conservative, Kings—Hants, NS]

Madam Speaker, it is with pleasure that I rise today to speak on Bill C-48. Tax reform is an issue that I am always interested in speaking on. We see continued evidences of tax tinkering from the government, a one-off ad-hockery sort of approach to dealing with taxation, but no overall strategy to improve Canada's competitiveness, to make Canada a northern tiger as opposed to a northern kitten, and to make Canada a magnet for capital and the best minds and the brightest minds in the world.

We support the direction of this legislation. We have some concerns about the increase in the effective tax rates on the mining industry. Any increase in taxes on industry in Canada is a concern for us because all sectors in Canada are overtaxed. In the old days the government could get away with that, but today in a hyper-competitive global environment high taxes no longer just redistribute income: high taxes redistribute people and capital. So we do support reducing the taxation on resource based industries and standardizing the tax treatment of industries in the resource sector. This goes back to the Mintz report on business taxation in Canada.

In fact, I remember that when the Mintz report actually came out it was my recommendation and the recommendation of my party that the government move to implement the recommendations of the Mintz report without a lot of delay. The Mintz report is probably one of the most erudite and intelligent studies of the Canadian business tax system that has ever been conducted. It provided a very important road map on how to build a more competitive tax system in Canada.

The government often speaks of Canada having lower corporate taxes than the United States. That is just patently false. If we were dealing only in statutory rates we are closer, but the United States is far more competitive than Canada in terms of effective tax rates, corporate tax rates and taxes on investment.

If we go beyond that and look at some of the national economic success stories in the last 10 to 15 years, most of them have been based on governments that were willing to embrace significant and broad based tax reform, not just tax relief, which is often done based on politics, not on public policy parameters, but tax reform based on creating greater levels of investment.

Of course, greater levels of investment lead to greater levels of productivity. Greater levels of productivity lead to higher standards of living and to an increase in the government's ability, of course, to afford the social investment that people demand and need.

Ireland is probably one of the best examples of a country that has turned its situation around. I come from Atlantic Canada and I very much understand its situation, based on generations of Atlantic Canadians leaving Atlantic Canada and going to other parts of Canada seeking opportunities. Ireland was a lot like that for a long time, in fact for generations. Now, for the first time in a long time, children of expatriate Irish in other parts of the world, in Canada or the United States as an example, are returning to Ireland. In fact, people are going to Ireland seeking opportunities, largely based on the Irish government's dramatic, significant and innovative tax reform package, which led to one of the most competitive corporate tax regimes anywhere in the world.

There is no better tax reform in terms of its ability to attract investment and improve productivity, prosperity and the standard of living than corporate tax reform, reform of taxes on investment and capital. Ireland had a 92% growth in its GDP per capita over a 10 year period. During the same period of time, Canada had a 5% growth in GDP per capita. The Irish standard of living has grown beyond that of Canada. It is shocking. Twenty years ago Ireland was an economic basket case and today it is truly a Celtic tiger. It has set an example of what can be done if governments take some risk and present some bold public policy, particularly on the tax reform side.

Some of the ideas that I would like to see the government embrace in a tax reform package include eliminating personal capital gains tax in Canada. There was no capital gains tax in Canada prior to 1971 with the Carter commission and the implementation of the capital gains tax. The original capital gains tax was designed to replace the inheritance tax, but eliminating the inheritance tax and replacing it with the capital gains tax made Canada a great place to die but not a great place to live.

We really should take a serious look at eliminating Canada's capital gains tax, not reducing it or tinkering with it but eliminating it. That would unlock an immense amount of capital. Capital gains tax serves to lock up capital, to prevent the flow of capital to the most effective opportunities. It hurts productivity because investors are compelled to make decisions based on tax reasons and to hoard money into static investments that may not make sense from an investment or a business perspective but simply make sense from a tax avoidance perspective.

We would unleash incredible entrepreneurial potential in Canada if we actually went beyond the U.S. instead of always just trying to catch up with the U.S. in key areas. In the capital gains area, if we actually went beyond the U.S. and eliminated the personal capital gains tax in Canada it would have a tremendous impact on Canada's economic growth and prosperity and the environment for entrepreneurs and investors here.

I would also suggest that it is a good time for us to consider what Roger Martin, the dean of the Rotman school of business at University of Toronto, has proposed, and that is allowing a 100% capital cost allowance write-off at the time of the investment. That would create huge incentives for companies to invest in productivity enhancement and provide a huge advantage for Canadian companies over American companies. Currently because of our treatment of capital cost allowance we are compared to the U.S. That is one of the reasons why the United States still has a significantly lower effective corporate tax rate environment: because of our uncompetitive capital cost allowance system in Canada.

I would go further. I would suggest that we eliminate corporate welfare from Industry Canada, HRDC and regional development programs and use that money to reduce corporate taxes nationally, but also in a targeted level in the regions. I will give some examples.

I come from a region where there is a program called ACOA, the Atlantic Canada Opportunities Agency. ACOA has a $447 million per year budget. Total federal corporate taxes in Atlantic Canada are $380 million. We could actually eliminate ACOA and eliminate federal corporate taxes in the region, which would leave us with provincial corporate tax rates in the 12% range, which coincidentally is about the same as Ireland's. When we really ask ourselves the question of which strategy would have the greatest capacity to create economic growth, prosperity and opportunity in Atlantic Canada, 500 ACOA bureaucrats driving around Atlantic Canada trying to tell people how to start small businesses or the most competitive corporate tax environment in North America and one of the most competitive in the world, the answer is self-evident.

We ought to take the same approach with all regional development programs in Canada. Instead of bureaucrats and politicians trying to select between winners and losers, we should allow the market to identify the winners. That kind of approach would unleash the entrepreneurial potential of our regions. It would in this case allow Atlantic Canada to pay into equalization in the not so distant future which would be good for all of Canada. It would create a tremendous level of growth, prosperity and opportunity.

This is an important discussion right now because one of the topics we are talking about in this sessions is the reform of Canada's EI system. We should move toward individual EI accounts. We should allow Canadians to build up capital within their own individual EI account if they do not draw from it frequently or perhaps do not draw from it at all. For instance, if a Canadian were to pay into his or her own individual EI account, after 10 years of paying into it and not drawing out from it, he or she would receive a statement every year of that EI account balance. It would go up incrementally each year. It would grow over time.

People could withdraw from their accounts to upgrade their skills educationally. That would address the very real issue of underemployment. Underemployment is growing in Canada and is as significant an issue as unemployment. The ability to withdraw from an EI account to upgrade skills, to take a course which is needed to go from underemployed to fully employed would be good for Canadian productivity.

Currently, government funding is available for people to upgrade their skills if they are already drawing EI, but not if they are actually working and want to upgrade their skills and need that little bit of help. For example, some people in their 30s, 40s or perhaps 50s are at a stage in their lives where they are stuck in a career rut and they want to improve their lot and that of their families. There is nothing that the government will do for them from a funding perspective to facilitate that unless they are actually unemployed and drawing EI. This would help in that regard.

Alternatively if people did not draw from EI to upgrade their skills or only rarely drew from EI during their careers, they would have a little bit of capital in their EI accounts which upon retirement they could roll into their RRSPs. That would be a reward system in many ways for Canadians who work hard and do not draw from the EI system. It would be an EI system that works for Canadians who work. That kind of incentive and that kind of reward based system would help significantly.

Going further, we should eliminate the capital tax completely. Currently the government is phasing it out over a period of time. We have the budgetary capacity to eliminate the capital tax immediately. All of this can be done without creating a deficit. We are committed, as are Canadians, to running government deficit free, to living within our means. It is going to involve not just tax reform but part of it will also involve considering the size and the effectiveness and the role of government, what the federal government should focus on, what it could do effectively and what it should not be trying to do.

It seems ridiculous to me that we have a federal government that cannot provide a coherent foreign policy. It cannot manage a military effectively or fund a military. It cannot from a trade policy perspective protect Canadians' interests by protecting our trading relationship with the richest market in the world. The same government that cannot handle things such as the military, foreign policy and trade policy which are clearly in the federal domain is trying to run the education policies of the provinces and trying to micromanage the health care systems of the provinces.

The federal government should focus on those areas. This could mean taking a more aggressive approach in dealing with the Americans on the BSE issue, or working toward a Canada-U.S. security and economic partnership which not only addresses perimeter security issues but goes further to harmonize our regulatory burdens between the two countries and also as part of it addressing the ambiguity around resource pricing and subsidies and replacing it with clarity to avoid a lot of those types of trade disputes. If the government really focused on those federal domain areas, it would not have time to focus on trying to micromanage the affairs of the provinces.

The government, through HRDC, must stop the incredible intrusion into the private sector across Canada. An incredible amount of waste exists through small and large scale corporate welfare. The government could target some of that money toward tax reduction and tax reform in lockstep. The government must address some of the waste in government.

The fact that a ministerial assistant spent $28,000 on food over a period of a year is shocking. That individual ought to have been named by the Canadian Restaurant Association as the political staffer of the year which is probably the only award he ought to receive. Canadians have to live within their means and pay taxes. They work hard and are having trouble just maintaining their standard of living and that of their families. It is shocking for them when they see that kind of egregious waste in government.

We need to find ways to not just in an ad hoc manner tinker with our tax system but reform Canada's tax system, reform Canada's regulatory system, address the waste in government and reconsider the role and effectiveness of government in key areas.

Every one of us in the House regardless of our political party ought to be considering ways that we can improve productivity, prosperity and the standard of living of Canadians.

We cannot afford to dilly-dally and dither while other countries are embracing bold innovative approaches to economic growth and economic reform. Canada is a relatively small country on the edge of the largest market in the world. We have the opportunity for Canada to become a true northern tiger. We must make Canada a magnet for capital, make Canada a magnet for some of the best and brightest minds in the world and to allow Canadians to have an unprecedented level of economic growth.

Free trade is a policy to which my party is unequivocally committed. It has created incredible wealth and prosperity for Canadians. We need to go further in a post-NAFTA environment and strengthen our trading relationship with the United States. As a principle we must look toward a true Canada-U.S. security and economic partnership. At the same time we must revolutionize our tax system and regulatory burden so that Canadians not only have access to the richest market in the world but they have a tax system and an economic environment that makes it an advantage to be Canadian as opposed to a disadvantage.

All Canadians want to live here, but we ought to be building a tax system that makes Canada not just a good place to live but the best place to invest and grow companies and businesses. Regardless of where they are in the world, we should allow them to make Canada the location of choice within North America.

[Pauline Picard, Bloc, Drummond, QC]

Madam Speaker, I am pleased to speak today in the debate on Bill C-48 to amend the Income Tax Act regarding natural resources. This bill will undoubtedly cause a lot of grumbling, because it also concerns the tax rate for the oil and gas industry. It is a very complex bill, but I would like to get people interested in one aspect that everyone understands and is familiar with, the oil and gas industry.

If this bill is passed, the oil and gas industry will see its tax rate drop significantly. I can already hear the reaction of people in the riding of Drummond and, I think, of people throughout Quebec and Canada, as well as of a number of associations that defend the rights of consumers and taxpayers. They will certainly not be happy to hear that there is a plan to significantly reduce the tax rate for big oil and gas companies.

The government's decision to grant oil and gas companies a significant reduction in their tax rate is unusual, to say the least. It is very special, indeed. Looking at the situation, we see that the “poor” oil and gas companies really need a significant reduction, with the astronomical profits they have made in recent months. The government even gave them an income tax credit of $250 million. In the meantime, the price of gasoline was going up at the pumps. I am sure the whole population was grumbling. And they even told us about these tremendous profits in their annual reports.

The last budget contained new provisions giving these companies $250 million in tax credits. That takes a lot of nerve when there are still 1.5 million poor children in Canada, and when the pensions of senior citizens have not been indexed—in fact, $3 billion has even been taken away from them. There is also the employment insurance fund which has been pillaged to the tune of $45 billion. Income tax rates for taxpayers are still very high, and $250 million in tax credits is being given to big oil and gas companies who are making a profit. It is incredible.

We can understand why the government is giving suffering industries a tax break. There are some major industrial sectors in Canada and Quebec that require assistance. But we cannot understand giving it to sectors turning a profit, such as the oil and gas companies with their sky-high revenues.

In his February 2000 budget, the Minister of Finance announced his intention to reduce the statutory corporate tax rate applicable to resource income. He wants to lower the rate from 28% to 21%, which constitutes a 7% reduction over five years.

If we look at the resource sector overall, taking into consideration other allowances applicable to this sector, the effective rate is not 28% but 22%. Setting the figures and percentages aside, the truth comes out. CAmagazine , the official magazine of the Canadian Institute of Chartered Accountants, recently reported,

From a federal tax perspective there will be winners over the phase-in period. The winners will be companies with high royalty rates, such as oil and gas producers operating in Western Canada.

The Bloc is not the one saying this; these people are not members of the Bloc. This is the Canadian Institute of Chartered Accountants saying that, over the phase-in period, some companies will be winners when it comes to federal tax, and that these winners will be companies such as the oil and gas producers.

The magazine goes on to state that,

However, in such provinces as Saskatchewan, Manitoba, Quebec and the Maritimes... the elimination of the resource allowance deduction for companies that benefited from the resource allowance results in an increase in the overall effective rate.

Ultimately, these measures will benefit all economic sectors. However, in the short term, some sectors will be winners and others losers. The winners will be the companies working in the tar sands, oil and precious metals. The losers will be companies in natural gas, potash and diamonds.

Consequently, the hon. Liberal member who preceded me should take a closer look at this issue. I know that there are diamond mines in the Yukon and that this bill, far from helping the industry he represents, will not benefit diamond mines.

Hughes Lachance, senior tax director with KPMG, says that if it were only for the first two provisions of this legislation, the oil companies would be losers. But these are not the only changes. For oil companies, the royalties they have to pay to the provinces or the crown amount to large sums of money. In 2007, they will be allowed to include in their expenses 100% of the royalties paid to the provinces. For the mining industry, where royalties are generally low, this third provision does not significantly reduce the tax burden.

The Minister of Finance estimates that, once fully implemented, the overall program will cost him $260 million in uncollected taxes. A very large portion of this tax relief will go to the oil companies.

The impact of this bill on the oil and gas industry will actually be a 12% income tax decrease. That is incredible. Let us take a look at the consequences.

According to the Mining Association of Canada:

[when] all is said and done, the disappearance of the Resource Allowance will likely result in higher taxes paid by the mining industry, even if we are able to deduct provincial royalties and mining taxes.

The association states further that the federal government is undercuttingthe good work by Quebec and the provinces to make mining investmentmore attractive. I hope that the people opposite heard this. The Bloc Quebecois is not the only one saying that Quebec's efforts are undermined, so is the Mining Association of Canada. As I indicated earlier, not many of their members are likely to be card carrying members of the Bloc.

As for the oil and gas companies, they are no worse off. Let me quote statements from the oil companies themselves:

Petro-Canada, on page 1 of its quarterly report to shareholders for the second quarter, says:

Petro-Canada announced today second quarter earnings from operations of $455 million, which include a positive adjustment of $96 million for Canadian income tax rate changes.

Shell Canada, in its quarterly report to shareholders for the second quarter, says:

Shell Canada Limited announced July 23,2003, second-quarter earnings of $178 million... Earnings included a one-time benefit of $54 million from a future income tax revaluation following announced income tax changes.

Esso Imperial, in its quarterly report to shareholders for the second quarter of this year, states:

During the second quarter of 2003, tax rate reductions enacted by the Federal government and the provincial government of Alberta and settlement of various tax matters benefited results, mainly in the resources segment, by $109 million.

In other words, the three major oil companies are announcing additional future profits of $250 million. These reductions in the future taxation of corporate profits already earned are a one time occurrence.

I would also like to discuss the mining sector in this connection. The federal government implies that the new tax structure being proposed will be simpler because it will rationalize the way it is observed and applied, encourage investors, make the Canadian mining sector more competitive, and support investment, innovation, productivity, economic growth and job creation in Canada.

The mining industry does not feel that the tax reform program is fully achieving those objectives. Spokespersons for this sector indicate that the provisions for gradual reduction announced in the 2003 budget are too complicated and will be hard to implement.

The planned 21% tax rate will apply to revenues from non-resource activities in 2004, while for resource-related activities it will run until 2007. As a result, during the period from 2003 to 2005, the difference between the resource and non-resource tax rate will be: 3% in 2002, 4% in 2003, 5% in 2004, 4% in 2005, 2% in 2006 and finally 0% in 2007.

The Mining Association of Canada believes that the difficulties arising out of the 2003 budget and Bill C-48 demand a prompt solution, involving the federal government along with the provincial and territorial governments.

The association also feels that the proposed changes to federal income tax impact heavily on numerous mining activities in Canada and will add to the combined federal, provincial and territorial tax burden on companies, thereby affecting their bottom dollar.

A simple solution, proposed by the Canadian Mining Association, which benefits producers of minerals and metals, would be to keep the resource allowance deduction while reducing the federal corporate income tax rate from 28% to 21%. This measure would eliminate the difference between the federal resource and non-resource tax rates without necessarily changing the provisions for revenues collected under the territorial and provincial tax systems.

I know that this is very difficult to follow because this is a very complex bill. It will also be very complicated to implement. This is not fair to taxpayers. Take the oil and gas industry for example; every day taxpayers have to use their cars and they see the price of gas climbing. These are often people who earn average or low incomes and who do not benefit from the same tax credits that the oil companies do. However, the oil companies play with the price of gas and eat into low-income families' budgets. Working people or parents often have to travel to their job by car and have to pay for gas, but they cannot benefit from tax credits.

Yet, companies are granted huge tax credits, like the one we saw recently. These are tax credits to the tune of $250 million. And their tax rate should be cut significantly again? There is something illogical about this bill and that is why the Bloc Quebecois is voting against it.

[Larry Bagnell, Liberal, Yukon, YT]

Mr. Speaker, I am delighted to stand today and speak to Bill C-48, an act to amend the Income Tax Act (natural resources).

When I heard last week that the bill would be coming forward I specifically asked to be on the speaking list because the bill will be good for my constituency and for resource extraction in Canada. As members know, the resource industry is part of our history and part of the foundation of our nation, and it certainly should be on a level playing field with other industries.

This is a very exciting bill. I was delighted that the member for Medicine Hat, who does economic analyses for the Alliance, was strongly supporting the bill. I quite enjoyed his analyses. I think it helps to show what a tremendous asset these improvements will be for Canada.

I want to speak briefly about my own constituency. As the House knows, the world's greatest gold rush in August 1896, which started the European economy, is part of our history in Yukon. It has been a resource based economy, to a large extent, for 100 years, resource based and tourism. At that time the world was in a great recession and the gold rush in Yukon actually helped pull Canada out of that recession. The resource industry has been very important in my riding's history.

If I have time left at the end of my speech, I will give a bit more of the history of my riding.

However I first want to talk about the broad overall aspects of the bill and the benefits that it would provide for the nation.

First, it certainly would help the investment climate in Canada, which I am sure we all appreciate. It would improve the international competitiveness of the resource extraction industry in Canada. A previous speaker mentioned that to some extent. It would help the development of Canada's resource base and, of course, Canada has a remarkably rich and precious resource base.

The other bases are people and the knowledge based economy. However, in concert with that, we have to continue what has always worked for us. It would be a shame if we were actually importing these resources from other countries when we are so wealthy in the first place, and not paying off the national debt but importing things we already have here if we did not set up a reasonable tax regime, which is what the bill intends to do.

The bill simplifies the taxation for the resource based oil, gas and mining. I will explain a little later how it is very complex at the moment and a little arbitrary. However the bill simplifies that, which is one of the reasons I think there is so much support for it.

We have been on a movement in the last three years to reduce taxation in Canada. In the year 2000 we reduced the corporate tax rate to help us be more competitive with the rest of the world, as outlined by the previous speaker. However at that time we did not reduce that tax on the resource based sector, that sector that is so important for my constituency and much of Canada, because they had a particular credit, which I will outline later, that did not allow the reduction in the main corporate tax base, as all the other industries in Canada had. Since that time there have been many calls from industry and Canadians to reduce that tax rate. Heeding those calls, we are proceeding with that today.

We did something else in this whole regime to improve our competitiveness. There used to be and still is partly a capital tax. That particular tax was a disincentive to business in the sense that if one owned anything, whether one made any money or not, one was taxed on it. If it were over $10 million one was taxed at .225%. That is a severe disincentive to investing in this great nation and therefore will be reduced from 2003 to 2008.

A half an hour ago I talked to people in the industry in my riding and they echoed some of what I am saying now. They wanted to make sure that anything that helps level the playing field between resource extraction, which is so important to my area in the north and the rural parts of Canada, and manufacturing is put in place, which is exactly what the bill would do. They made the point that mining, in particular, has huge upfront costs, maybe millions or even billions of dollars, for development, pre-development and exploration, that other industries do not have.

In the scheme, which I will outline in a minute, there are provisions such as the 10% tax credit on grassroots exploration and pre-production base. This only applies to base and precious metals and diamonds, so it will specifically help that aspect of the pre-development, which involves very expensive costs to this industry.

For those who are watching and who do not understand exactly what we are doing, I will try to explain it in a simple way, although it is a bit complex because there are a number of elements to the bill. I will try to outline it in a simplified way so that it is more understandable than it may be in some of documents people might have received.

In the main part of the bill we will be balancing the corporate tax for resource extraction businesses, like mining and oil and gas, to be comparable to other industries. If people live in a part of the country that has these types of industries, at the moment they are disadvantaged because in 2003 we reduced the corporate tax for businesses down to 21% but we left mining and oil and gas at 28%. Therefore, we will reduce that to level the playing field. This year it will 27%; next year it will be 26%; in 2005 it will be 25%; in 2006 it will be 23%; and in 2007 will be down to 21%, the same as the rest of industries in Canada.

Regarding the provision which I mentioned before, the reason we could not do it was because of an existing deductible, a 25% resource allowance, for mining, which helped. The problem with this deduction was it was a bit arbitrary. Other deductions came before and after that so companies would have to try to figure out their business plans when they invested to get the best deductions. It was a arbitrary because it was based upon income. That deduction did not make a lot of sense nor was there a lot of fairness to it. Therefore, we are removing that deduction to balance this off. In 2003 they will only get 90% of that; in 2005 it will be 75%; in 2005 it will be 65%; in 2006 it will be 35%; and then in 2007 that deduction will no longer exist.

There is also more good news for our industries in this respect because the industries also pay royalties to the Crown, the Crown being primarily the provinces and the territories, or they pay something similar called a mining tax. Once again this is a cost of doing business for mining and oil and gas and it can make them less competitive. Therefore, we will give them a deduction for that in the new regime. That will start out this year. As I said, everything is phased in to try to moderate the effects of this bill on industry and on Canada so there is no big disruption. The first year it will be 10%. The second year they will be allowed to deduct 25% of that; in 2005 it will be 35%; in 2006 it will be 65%; and in 2007 it will be the whole 100% of all those costs.

Finally, there is another tremendous credit for the industry. That is a 10% tax credit on grassroots exploration and pre-production base. This is only for base metals, precious metals and diamonds. Of course there are tremendous upfront costs in the beginning with no return. If we want development in Canada, someone has to invest and put down the risk of that, and this tax credit will assist that.

When we add all these complicated provisions together, most of which are in favour of the industry, what is the result for a particular mining or oil company? In general, in the vast majority of the cases, they will be better off. If they do new exploration in Canada, which is what we are trying to promote in the development of the sector in a reasonable, environmentally sensitive way, then they will be better off with these provisions.

If there is critique of this, the odd company may have made its discoveries long ago and it is carrying on with its investments at the status quo, collecting its royalties. In those situations they are less well off, but in general the Government of Canada will make a substantial contribution on balance to help this industry, which is just fine by me because it is a major industry in my riding.

The bottom line in this is a great news story for Canada. The previous speaker talked about the United States and competitiveness. I will give hon. members some sample figures to see how it helps us with our closest and main competitor in this industry.

I will give a couple of examples. Other figures are available, but these are the statutory tax rates for these corporations. The tax rate for oil and gas in Alaska is 41%, in Texas it is 35% while in Canada it is 42.1%, which makes us less competitive. Our taxes are a tad higher than Alaska and quite a bit higher than Texas. After the bill comes into effect, our taxes will be 30.1%, which is far more competitive than either of those areas.

In the mining sector the Nevada statutory rate is 35% while Canada's rate is 41.1%. Once again we are at a slight competitive disadvantage. After the bill comes into effect, ours will be 30.1%, which is a great competitive advantage for Canada. I hope we will see the results of this in the coming years.

My riding desperately needs development and in other northern parts of Canada it is sometimes very hard to find jobs for rural Canadians. They live in some of the most beautiful parts of Canada and would like to stay there. This will be a great advantage to them.

If I had time I would give hon. members a brief history of the resource extraction in my community, in my riding, which is the entire Yukon Territory, just so they would know how important this might be for my riding.

For 100 years, it has existed in the modern, European type of economic existence. Of course first nations people have been living there for thousands of years, doing quite well, preserving the environment in a great way and living responsibly off the land. In the European type of economy, which has existed for the last 100 years, there have been two industries. One of course is tourism, which explores the beauty of Yukon. It is one of the most beautiful spots in the world and I hope all hon. members will come to visit. To date the tourism industry has been weighted to the summer months, although we have some beautiful dog sled tours, skiing, hiking and events in the winter, but there are not as many tourists in the winter.

Mining has also been the greatest producer of the gross territorial product over the 100 years. We have had a wealth of mineral resources with over 50,000 claims in Yukon. Of course, they are under strict regulations to be mined responsibly with environmental sensitivity. In a way that is why I take some offence to other countries because some of them do not have the things that we accept as necessary in Canada, which may be some of the reasons why companies go there. However under this regime, they will not go to the United States because of a lack of tax competitiveness.

After the gold rush, the gold resourced in Yukon was by placer mining. This type of gold is found in the stream beds. It is fine, like sand almost. Then a few nuggets, such as on my Yukon pin, are found below the bottoms of streams, right on the bedrock level. Placer mining still exists today in British Columbia and Yukon. It is a great boon to our economy because one simply washes sand to get the gold out and it is an easily saleable commodity.

Over those years a lot of other base metals have been found. Precious metals, silver and gold, have been found. Not long after the gold rush started, a silver mine area was established near the great towns of Keno Hill, Elsa and north of Mayo. The mines have been there pretty well since the gold rush. I believe those claims are up for sale now, so if people would like to invest in a silver mine and come north, I hope they will look at those opportunities.

We also had one of the world's largest zinc mines in the great town of Faro. In fact I think it was the largest open pit lead zinc mine in the world. Unfortunately, it ran out of the highest grade part of its ore, but there have been others like Kudz Ze Kayah and other lead zinc deposits. There are a lot of undeveloped deposits still that could help lead to jobs. In turn that would provide revenues to Canada which could then be put it into health care, education and all the other things that governments need to do.

There was also a copper mine right within the city boundary of the city of Whitehorse. We just recently started a tiny hobby train, Miles Canyon railway train, to go around and show the history of the copper mines and the mining belt in the area.

We have oil and gas in the area. We have some capped gas at a place called Eagle Plains, which is up near the Arctic circle. We have no pipeline to get that out yet so there is not as much development as one might think, but we are working on that as well. Also gas in the southeast part of the Yukon near the Kotaneelee Field is already being shipped through existing pipelines. Of course, we have a forest industry in Yukon which is a resource development, but it is certainly not as big as mining.

I was outlining this not only, as my colleague said, as part of a commercial so members will all come to our beautiful part of the country to work in mining and to enjoy the spectacular tourism, but also to show how important this bill is to our people. We have the second highest unemployment rate in Canada at the moment and this type of fairness would be exceptionally helpful to our industry.

I want to close by reacting to a comment that the previous speaker made about Canada's standard of living. I do not think standard of living is totally based on a corporate tax rate. Standard of living is based on all the things that are important whether it is health care, family or community. I think most people would agree that we measure the greatness of a nation by how it deals with those most in need.

The United Nations has measured Canada for the last years as among the top several nations in the world. I do not think we have much for which to apologize. This will help our industry, an important part of our history. However in the long run what we choose in values are things that are not only environmentally sound, or part of the modern new economy, or on the leading edge of knowledge and technology. Rather we will make the choices that provide for the poor, the weak, the lonely, the hungry and for our diverse country. That way we will continue to build this great nation, and this bill will help immeasurably.

[Monte Solberg, Canadian Alliance, Medicine Hat, AB]

Mr. Speaker, it is my pleasure to rise and address Bill C-48 today. To remind people what the bill is about, it has to do with amending the Income Tax Act to lower the corporate rate for resource sector companies from 28% to 21% over a period of years.

I want to say at the outset that my party is strongly in favour of this. This affects the oil and gas and mining industries. We have been advocating this for a number of years. In particular, my friend who is the Alliance natural resources critic, the member of Parliament for Athabasca, has done an outstanding job of championing this idea.

In fact, I have to say we are disappointed that this has not happened before now. It is something for which people have been arguing for a long time, because without these cuts until this point Canadian businesses have been put at a severe disadvantage. I will say more about that in a moment.

I will also comment for a moment on the direction I am going to take my speech. A number of people have stood up and talked about the relative advantages and disadvantages of cutting the corporate rate versus dealing with things such as depletion resource allowances and that kind of thing. I will not get into that. I will allow others to deal with those issues.

I do want to deal with the issue of cutting corporate taxes in general. I want to argue that when we delay the implementation of a reform that cuts corporate taxes, what we are really doing is delaying an improvement in the productivity in our country. We are ultimately delaying a rise in the standard of living for all Canadians. I argue that the government has been far too lackadaisical when it comes to addressing the issue of cutting the corporate tax rate for oil and gas and the mining industry in particular and for businesses in general. The government has taken too long and it has not gone far enough.

I will expand on this. First of all, over the last number of years, as people may know, the mining industry in Canada has been on the rocks, as some people like to say. It has been in big trouble. It has had a lot of challenges. One of the reasons for this is that there are many other jurisdictions out there in the world that provide much better tax treatment of revenues from mining than Canada does.

We have all kinds of regulations in place that make it very difficult sometimes for these companies to make a profit, whereas they can go to other jurisdictions such as Chile, for instance. Many of them have gone there, where they are doing their exploration, spending tremendous amounts of money and employing all kinds of people, because it makes sense for them to do that given the incentives that are in place in Chile versus in Canada. And it is not just Chile but other countries around the world. Chile is a good example, though, one that is often cited by the mining industry.

Therefore, we are very concerned that the government has not taken the issue very seriously. In fact, even now we are just going to phase in these cuts and not bring them in very quickly. We deplore that. Again, I argue that when this is done it is denying Canadians jobs. What it does is deny Canadians the ability to raise their standard of living.

I am not alone in saying this. I want to point out that there was a great article in the National Post the other day by Jack Mintz. Many people know who Jack Mintz is, of course. He is the head of the C.D. Howe Institute, a professor of economics who has written extensively on corporate taxation. He has prepared a report for the government in the past, urging the government to be aggressive in reducing corporate taxes. The government did not listen. It has been very slow in doing this. The government has not gone far enough.

When the government does not go far enough and quickly enough, it allows other countries to surpass us. As Mr. Mintz pointed out in his article the other day, that is exactly is what has happened in the world in the last number of years.

Mr. Mintz pointed out that it is not only the gap between Canada and the United States that is growing in terms of our standard of living, and it has grown a long way, but our output per capita right now is about $37,000 a year. It is $12,000 behind that of the United States. It is unbelievable. We remember that we used to have a standard of living that was higher than that of the United States a generation ago. But because of poor public policy decisions on the other side of the House, we have seen our standard of living decline and decline and, I am afraid to say, the gap continues to grow.

It is not just the United States. Some people do not like us comparing ourselves to the Americans. That is fine. We do not have to do that, because it is not just the United States that we are falling behind. Listen to the list of countries that have surpassed us in the last number of years because they have made better public policy decisions, particularly with respect to corporate taxation: Ireland, Iceland, Denmark, Norway, Sweden, Switzerland, and the Netherlands. They have all surpassed Canada in terms of standard of living because of better public policy choices. One of the biggest choices they made was to cut the corporate tax rate to make themselves more competitive.

I would like members to think about that for a moment, because a lot of those countries are countries that a lot of people would say are socialistic. Some countries even call themselves social democratic nations, countries like Sweden. But they made that decision because the evidence was so overwhelming that cutting corporate taxes and taxes that impede investment and impede productivity leads to higher standards of living. They were able to admit, and in some cases swallow their pride, I suppose, that the market does have some answers to improving quality of life for people. They dramatically cut those corporate taxes.

Let us look at a country like Finland, a country that like Canada is at the very northern part of a hemisphere. Some people would ask what particular advantages a country like that would have when it comes to attracting investment. There really are no natural advantages; the advantage they had was to make the right public policy choices. When they cut their corporate taxes they attracted tremendous amounts of investment. Companies like Nokia and Erickson have sprung up in Finland and in other Nordic countries that have made the same public policy choices.

What has the result been? Sweden was almost ruined when it went through a terrible financial crisis, but it finally smartened up and recognized that by making smart public policy choices one can dramatically improve the standard of living of the people one represents. That seems to be lost on this government and that really is a great shame. It is a great shame because not only does it mean depriving all kinds of Canadians of a higher standard of living, but it is a great shame because we are uniquely positioned in the world to take advantage of that massive market directly below us, the biggest economy ever in the history of the world, the United States.

Some people worry about us becoming overwhelmed by the United States. I see it differently. I see it as a great opportunity to mine the United States and to utilize its market for the advantage of Canadians. We are not doing that because we do not have the right public policy in place.

Unfortunately our government thinks it is wise to go slow in reducing corporate taxes and to only do it to a point, to where it would be 21%. By the way, Ireland just dramatically turned around its economy, and when it first cut corporate taxes it cut them to 10%. That attracted just unbelievable amounts of investment to the point where Ireland, with 1% of all the population in Europe, was attracting 20% of all the new investment in Europe. It was getting 20% because it was enlightened about how businesses make decisions about where they want to invest. Ireland of course has undergone an amazing transformation. In fact, Ireland is an inspiration to me about what can be done to help people if the right public policy choices are made.

I know I have given this speech about Ireland many times before in this place, and members are probably bored with it, but I always get excited when I talk about it. Just to remind people, Ireland in the mid-1980s was a basket case in many respects. It had terrible unemployment, big deficits and all kinds of problems. It finally decided though, after years of doing it the wrong way, that it would do a few important things. It would control its spending, get its continual labour problems in hand and it would finally cut taxes to attract investment.

Ireland tried for a long to do it the other way, where it thought it could build big government and look after people without worrying about whether anyone wanted to invest there, but it found that it did not work. In fact, it worked the opposite way. Things became worse for people.

Ireland had an amazing transformation. Ireland for 150 years, as we all know, had exported people. Its population went down and down. We all know about the Irish coming to America, Canada, Australia and going all over the world because they could not find jobs in Ireland. However when Ireland made those changes people started to come back. Today Ireland is a magnet for people who want to be successful, to start businesses and find jobs. People from all over the world are going back to Ireland.

I have a friend who lived in the little community in which I live, in Alberta, for a while. He was born in Canada. David Sarutawri is his name and he married an Irish girl. He was an accountant. He and his wife decided to go back to Ireland to pursue the great opportunities there because they were enlightened about public policy in Ireland.

People are going back there in droves. Today Ireland is a tremendous success. It is running massive surpluses. It is able to invest the money back from its surpluses to the point where Ireland now provides free university education for everyone.

That is what a country can do if it builds its tax base big enough.

Now that Ireland has its corporate taxes down, its personal income taxes down and has cut its capital gains taxes, people want to invest there. It is very exciting, but it is not just there. It is all those other countries. The Netherlands is a great success story, again, because it made the same kinds of changes.

We have to do the same sort of thing here in Canada. I mentioned a minute ago that we are uniquely positioned. I think we are. Canada has not only massive natural resources, which are almost the envy of the world with the exception of possibly Russia, but we probably have more natural resources than any country in the world. There are massive oil and gas deposits in my friend's riding, in Athabasca. My riding has a tremendous amount of natural gas. People might not be surprised to hear that when they hear me speak and say that there is a lot of gas there.

However we have tremendous amounts of gas in Alberta and in my riding. We have massive forests. We have all kinds of mineral deposits. I would argue that we have hardly even touched the surface when it comes to finding these resources. We have a tremendous resource when it comes to our people. Our people are well educated.

I want to point out that I really applaud the provinces for doing a wonderful job of educating Canadian young people. As the House may know, I think it was the OECD that just pointed out that Canada has done extraordinarily well versus the rest of the world when it comes to educating young people. I want to point out that is a provincial responsibility, just to remind people that the provinces do a lot of things very well and they should take a bow. We are recognized around the world for our ability to educate our young people.

Obviously there are problems in some provinces and that kind of thing but, by and large, we do a very good job. Therefore we have a well educated workforce. They go on to university. We have a great resource in our well educated people.

Finally, we have a great resource in the sense that we have access to the massive market in the United States. We have a free trade agreement with the United States, which is so important. I want to remind the House that it was the government that campaigned against that free trade agreement in 1993 and fought against it in 1988, but we will set that aside for the moment and just say that we have access to the United States today.

We cannot blow that access because one of the advantages we have in Canada is if companies want to set up business and have access to the North American market very often in the last number of years they would come to Canada because we had a lower cost of doing business. The economy in the United States was so hot that it drove up the cost of doing business there, so people would come to Canada and set up. They would do that because then they could access the markets in the United States because we had that open border. It was very simple.

However after 9/11 the border began to close down. It has become more difficult to move goods and services back and forth across the border. We need an extra advantage to attract businesses to Canada. I want to argue that this extra advantage is lower corporate taxes, or at least it is one of the things we can do and a very important thing to do. If we were more aggressive in cutting that, all that investment would come to Canada. With that investment comes all kinds of jobs and with all those jobs comes incomes to provide for families and, ultimately, the government of course exacts its pound of flesh and gets it back in the form of higher and higher revenues.

The NDP seem to think that if corporations are doing well that is a bad thing. I want to dissuade people from thinking that way. What are corporations in the end? Corporations are people. Is it wrong for people to do well? When a corporation does well and employs tens of thousands of people, then tens of thousands of people do well. That is not a bad thing. It is a very good thing.

People want to know about all the owners who are getting wealthy. Who are the owners of businesses? They are people who own mutual funds. People who have RRSPs invested in mutual funds, they own a bunch of big companies and we want them to do well. We want that money for retirement. In the end the government gets the money back. When we redeem our RRSPs the government gets a chunk through taxes.

What we want is to make the economy bigger and bigger where everyone benefits. Do members know who else benefits? It is not just the shareholders, the workers and consumers who have more choices in the products that are provided. Third world countries also do better because these companies purchase goods and services from third world countries. How about Africa which needs all the help we can give it? These companies can then go and purchase goods and services from places like Africa and help those people.

There are many advantages to pursuing this but I am afraid the government has, to some degree, bought into the rhetoric of class warfare that somehow suggests that if a company does well--and “company” is always an ambiguous term and people always imagine the guy from Monopoly with the monocle and the top hat, Daddy Warbucks, the guy driving the Rolls-Royce--then somehow everyone else does less well. If he gets money, then it must come out of my pocket.

However that is not how modern economies work. It is not a set pie. The pie gets bigger and bigger and therefore every piece of the pie gets bigger and bigger, including the pie for workers, for shareholders, for everyone, government included.

Finally, if I have not been persuasive to this point let me make this final argument. When an economy underperforms, who suffers the most? Is it the guy with all the skills and talent, the guy who comes from the wealthy family? No. It is the people who live in remote regions of the country, people who do not have an education, people who have been left behind for whatever reason. They are the ones who cannot get a job, so we have a moral obligation to make sure the economy runs at capacity. However the government has not put the public policy in place to make sure that happens.

The member for LaSalle—Émard, who will be the prime minister, has failed to provide any kind of vision along those lines that will ensure that people at the low end of the income scale will be able to get jobs down the road. He had 10 years as the finance minister to provide that vision but failed to do it. I want to caution people to be skeptical when they consider whether or not the man who will be the new prime minister has the right vision for the economy in this country.

In closing, I have made my case that this country needs to be more aggressive when it comes to getting those corporate taxes down. I hope the Liberals will listen to that and we will see it in the next budget.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, I am quite pleased that the hon. member concedes that Bill C-48 poses certain problems, particularly for the mining sector, and that the Standing Committee on Finance will have to propose a number of solutions.

He mentioned various possibilities in order to accelerate reducing the tax rate to 21%, and accelerate the elimination of the capital tax. However, the Mining Association of Canada had proposed a simple solution, given that mining is a unique sector.

This association proposes maintaining provisions relating to the 25% resource allowance, and lowering the rate from 28% to 21%. In short, the tax rate must be the same as in other industrial sectors; I think we all agree on that.

The mining sector, however, faces unique problems. So, if the resource allowance is maintained, as is currently the case, this could be a very simple solution to the problem.

I want to know if the hon. member could consider such a solution, if he was shown the merits of this approach.

[Pierre Paquette, Bloc, Joliette, QC]

Madam Speaker, if I understand the hon. member correctly, given the extremely technical nature of Bill C-48, there are more questions than answers.

Still, in evaluating the overall reform undertaken by the Minister of Finance, once this reform is implemented, it will cost taxpayers $260 million. This is still considered reasonable, especially when the federal government has had a very high surplus for several years.

But the annual reports of Shell, Esso and Petro-Canada are already announcing $250 million in tax savings. The mere fact that, out of $260 million, some $250 million is already going to these three oil companies, does that not pose a problem?

[Peter Stoffer, NDP, Sackville—Musquodoboit Valley—Eastern Shore, NS]

Madam Speaker, since this is the first time I am speaking formally after coming back from the summer, I first want to send special congratulations to all our new pages in the House of Commons, those young people who come from across the country in order to help serve us in running the affairs of government. I am sure they will have a wonderful experience this year in the House of Commons. I look forward to working with them, as do all my colleagues in the House of Commons, in order to give them a wonderful experience while they are here.

Regarding Bill C-48, after consultation with my colleagues in Saskatchewan and Manitoba, although there is tentative support on an issue of this nature, we also have some very serious concerns, similar to those of my colleague in the Bloc Québécois.

Does the bill actually give us a level playing field across the country? I will be honest and say that I have not fully analyzed that aspect of the argument, but I will take under consideration the concerns of my colleague from the Bloc and I will study his notes and do further study in this regard.

We in the New Democratic Party are extremely supportive of the mining industry and know its value, especially in rural areas. As a person who lived in Watson Lake, Yukon for nine years, I knew the value to the economy of the Cassier asbestos mine and the Canada Tungsten mine. When those mines closed down for various reasons, we knew the economic impact it had on the small community of Watson Lake and, for that matter, the entire Yukon territory. We can extrapolate that to other mines throughout the country when they close down. A good example is in British Columbia at Tumbler Ridge and what happened to that community after the mine shut down. There are myriad reasons why they do shut down.

The issue of mine extraction and a fair taxation rate for the corporations and companies that do it is an extremely important one, especially for rural Canada. We know the aspect of the economy that it has for us. We know the role that it plays for people throughout the country. For example, in Nova Scotia we know the role that mining played in the development of Cape Breton and, for that matter, our country. It is something we should never lose sight of.

One of our concerns is this. If indeed the government is absolutely correct that further tax considerations, further tax reductions and further tax allowances are beneficial to those in the mining industry, then certainly that avenue should play to other sectors of our economy. We can cite many examples where the government has laid additional levies and additional taxes on other aspects of other areas of our economy and seemed to focus on this particular one. We would encourage the government to be at least a little consistent in its taxation policies.

Like my colleague from the Conservative Party, we also agree with having a regulatory framework that is more simplified and less bureaucratic and has less red tape so that everybody knows, right through from the applicant to the mining company to the environmentalist and to the community and the workers involved. If everyone could have clear instructions as to the direction we are taking in a particular area, what the costs are and what is involved in the entire process, I think that would be very helpful to move our economy along.

We have a few other questions in this regard. One is the concern about a mine shutting down. Who is responsible for the ultimate cleanup? These are questions that are still left unanswered. Although not specifically pointed to with this particular bill, these are issues that need to be addressed. We can look, for example, at the Taku watershed in northern British Columbia. The Tulsequah Chief mine, which shut down in the 1950s, is still leaking effluent into that watershed and still everyone is standing around wondering what we are going to do about it and how we fix it up.

We can look at Cape Breton and the effects of Devco mining and what has happened to the steel corporation there. In fact, one of the most polluted sites in all of North America is lying right in our backyard and we are still talking about how to clean it up and who will eventually pay for all these things.

When we discuss activities when it comes to royalties and costs in the mining sector, we should look at the overall picture from the start-up to the cleanup. I think if we were to do that we would have a fairer and more honest picture. The company would benefit and the community and the workers would benefit, but the environment would benefit as well, which is extremely important.

Another point is the concern we have in Nova Scotia: the perception that our natural gas and oil is just being taken away. In fact, not one drop of natural gas is being burned in Nova Scotia. It is all being burned in New England states.

Our industries have to compete with those industries in New England. It seems quite ironic that foreign companies would come in, set up shop, extract the natural gas and ship it down south.

In terms of the actual benefits to Nova Scotia, it could be argued that they are very few and far between. Yes, it is true that some of our workers have had employment. Yes, it is true that there has been investment in the province. Yes, it is true that it has helped the province in a very little way. But we can compare it with what natural gas and oil did for the province of Alberta. Many of us in Nova Scotia were saying quite clearly that we should have had equal benefits.

In fact our own premier has asked for equality and fairness on this file and is asking the federal government not to give us handouts. We are not a have not province. We are a province with a tremendous ability and those resources should be more controlled by the province. We should be able to maximize those benefits, similar to the province of Alberta.

I have always said, and I say this as a New Democrat tongue in cheek sometimes, that if we had had Peter Lougheed negotiating our natural gas contracts with the oil and natural gas companies, that I think we would have been much better off in terms of what benefit Nova Scotians would have received from their own resource.

We hope to have further debate on this at committee. We have many other questions that we need to ask. We need more clarification from the government on precisely how this goes along. We will also be consulting with our provincial colleagues throughout the country to hear their concerns as well.

[Pierre Paquette, Bloc, Joliette, QC]

Madam Speaker, I would like the hon. member to tell me if they have thoroughly analyzed all the repercussions of Bill C-48 on the various sectors and various provinces, and, if so, what will their position be on vote at second reading?

[Rex Barnes, Progressive Conservative, Gander—Grand Falls, NL]

Madam Speaker, before I get into the topic of debate, I want to say that when we talk about taxes and tax fairness most Canadians understand it in a very simplified way. They know they are paying too much in taxes, regardless of where they live, whether they are a business person or an individual citizen. As a result, they only know that governments take more money out of their pockets for taxes than what they have been able to spend.

It is a pleasure to rise in the House this afternoon to talk about the issue of tax fairness with respect to the natural resource industry.

Today we heard how in the budget of 2000 the government announced a cut in the rates of general corporate income tax for all industries, except the resource industry, from 28% to 23%, and soon to be 21%. Cutting the tax rates now is an undertaking that I support. Canada needs lower tax rates for our industries to remain competitive.

It is important for the House to recognize that we do not live in a vacuum. Canada is a member of the international community and, in a world of increased international trade and globalization, it is important for us to position ourselves in a way where our people and our organizations can grow and bring greater prosperity to Canada.

We cannot afford to place our people and our organizations at a disadvantage by clinging on to tax rates that remain among the highest in the OECD, which is the Organisation for Economic Co-operation and Development.

We cannot afford to drive away investment and savings, which is exactly what high tax rates do. They drive away investment and savings. They punish success and encourage our entrepreneurs to move to places where tax rates are lower.

I support the cut in general corporate income tax rates from 28% to 21% but I also support the tax cut for all industries, not just selective ones. I simply do not agree that the resource industry should have been left out of the initial tax cut in the budget of 2000.

The resource industry has to compete for the same investment dollars as other industries. We know investors are looking for the highest rate of return on their dollar. It seems to me rather unfair to discriminate against the resource sector by taxing that sector higher than we were before. It is unfair to the resource based corporations and their investors. It is unfair to deny them the same opportunity to grow and expand by subjecting them to higher taxes than other corporations and investors would face. However, more important, it is unfair to workers in the resource industry, workers who indirectly rely on that investment for the industry to grow, to create jobs and to grow with the economy.

Therefore I am glad to see that Bill C-48 would address this unfairness by extending the cut in the rates of general corporate income tax to the resource industry.

Still there is more that the government can do. Canada needs a major overhaul of its tax system. Cutting corporate income tax rates is a start but to create a more competitive climate for economic growth we should also eliminate the capital gains tax.

Alan Greenspan, chairman of the U.S. federal reserve, said:

--if the capital gains tax were eliminated, that we would presumably, over time, see increased economic growth which would raise revenues for the personal and corporate taxes...its major impact is to impede entrepreneurial activity and capital formation.

The Ottawa Citizen had this to say:

The capital gains tax doesn't raise much money, isn't fair to people who've worked hard, and does more harm than good. [The right hon. member for Calgary Centre] is right. It should be scrapped.

Another way to help the economy is to reduce job killing payroll taxes such as EI premiums. With a surplus of around $45 billion, it is clear that the federal government has ignored the original purpose of the EI fund. It was set up to be an employment insurance program, but instead of simply providing Canadians with insurance coverage, it is contributing to the general government coffers by taking a large chunk out of the paycheques of ordinary Canadians.

These tax moneys would be better spent by the Canadian people and organizations. Canadians know better than the government how to determine their spending priorities and Canadian businesses have a better track record than the government does of choosing between winning and losing ventures.

Speaking of losing ventures, if the federal government could somehow learn to stay away from the spending scandals in HRDC and the public works department, considerable amounts of money could be freed up and redirected toward overhauling our tax system.

I understand that the goal of the legislation before us is to simplify and streamline the tax system for the natural resources industry. I think we all can agree that reducing the regulatory burden for industry in Canada would be good for the economy. I agree with the principle of bringing taxes in the natural resources sector in line with other sectors, so I look forward to bringing this legislation before committee.

I appreciate the opportunity to speak to this. When our critic gets back to the House he will be speaking in more detail on what he feels is the right direction for Canada with regard to tax cuts.

[Pierre Paquette, Bloc, Joliette, QC]

Madam Speaker, it is not that I want to single out Alberta or the oil industry. If there were oil in Quebec I would say the same thing.

What I find unacceptable is that Bill C-48 puts natural resources sectors at a disadvantage, mining in particular, while other sectors will benefit. I expected equitable reform with an impact on taxation for all the sectors that was at least neutral.

I did not say that. I will read a paragraph from CAmagazine from September 2003:

However, in such provinces as Saskatchewan, Manitoba, Quebec and the Maritimes where rate changes have not been proposed or the reduction in rates are minor, the elimination of the resource allowance deduction for companies that benefited from the resource allowance results in an increase in the overall effective rate.This occurs because of the loss of the resource allowance on the provincial component of the company’s overall tax rate.

I do not take issue with the fact that Alberta or the oil industry will benefit, but that the provinces and the natural resources industries will be disadvantaged. Officials at the Department of Finance could have been more imaginative and made sure that the reform was at least neutral for all the mining sectors. Nonetheless, I agree—and here the member and I see eye to eye—with the fact that reducing the tax rate from 28% to 21% is also a question of equity with all the other industrial sectors.

[Pierre Paquette, Bloc, Joliette, QC]

Madam Speaker, as the two speakers before me have said, it seems at first glance that Bill C-48, the purpose of which is to reform the taxation structure in the natural resource industries sector, is an extension of what was contained in the February 2000 budget. That was when the federal government decided to take seven percentage points off all taxes being paid by the industrial sector except the natural resources sector.

Hon. members will recall that this reduction was announced in the February 2000 budget, to be spread over five years. This meant a drop over the five years, ending in 2005, from 28% to 21%.

Initially, Bill C-48 may seem interesting. I say initially, because the bill also contains other measures to partially offset the lower taxes to be paid by companies in the natural resources sector.

We have not been able to gain a very clear idea of the overall effect on all sectors and all provinces. In this connection, I hereby announce in connection with this second reading that the Bloc Quebecois will be voting against Bill C-48, in hopes that we may get some answers in committee. I hope we do get them.

Bill C-48 clearly announces, as was done in 2000, that these companies will see their taxes reduced by 7% over five years, from 28% to 21%.

There are other measures, however: three others. What interests us is the overall effect of the four.

As far as the second one is concerned, after the tax cut, there will be a gradual application of the deduction for royalties paid to the provinces, to the Crown, in connection with mining taxes. Thus, royalties to the provinces will be deductible.

The third measure is a gradual elimination of the 25% resource allowance. So, on the one hand, there will be the deduction for Crown royalties, and on the other, the resource allowance, currently 25%, will be eliminated. Everything will be done gradually, spread over that five-year period.

The fourth measure is the implementation of a new non-refundable tax credit exclusively for diamond or metal exploration.

The issue is not simply the tax rate dropping from 28% to 21%, but the impact of all four of the measures in Bill C-48 on the different sectors of the natural resources industry and each province.

In response to our question about the net impact, we did not obtain a clear answer from the Minister of Finance or his department. As I mentioned, we want answers. If we are shown that the net impact of these four measures will, in fact, result in an overall decrease in the tax rate on all these sectors and in each province, we would probably support the government's position. But, currently, we have no guarantees. On the contrary, our initial estimates indicate that some sectors will benefit from the reform proposed in Bill C-48, and others will be penalized.

The winners will obviously be those with high royalties, such as the oil and gas sector in the west. The losers will be those with lower royalties, particularly mines, but other sectors will also be affected.

Quebec, unfortunately, does not have much oil. However, it does have a number of mines. So, our interest in knowing the impact on each sector is understandable.

Since the provinces have tended, for a number of years, to foster competition, particularly in the mining sector, and to decrease royalties—the royalties paid by oil companies remain extremely high—the proposed reform in Bill C-48 is unfair to a number of industrial sectors.

I am not the only one saying this; the Mining Association of Canada and Quebec Mining Association Inc. are too, in a press release issued in February 2003, immediately after the Minister of Finance tabled his budget.

The release read as follows:

When all is said and done, the disappearance of the Resource Allowance will likely result in higher taxes paid by the mining industry, even if we are able to deduct provincial royalties and mining taxes.

These are not my words but that of The Mining Association of Canada. Bill C-48 will put these people at a disadvantage, as l will explain later, and I have a big problem with that.

The same is true for the provinces. All natural resources are not distributed the same way, naturally, depending on whether you are in western Canada, the maritime provinces or Quebec. If we look at the application of Bill C-48, as far as we can see, there will be winners and losers among the provinces.

Alberta will be among the winners, of course, because royalties are high in that province; on average, it is estimated that actual tax rates will be reduced from 42.12% to 30.12%, if we factor in both provincial and federal income taxes.

It is therefore obvious that, as far as Alberta is concerned, and particularly its oil industry, as well as natural gas in western Canada, Bill C-48 is very advantageous. But when it comes to Quebec, Saskatchewan, Manitoba and the Maritimes, it is not obvious, far from it, that the change proposed in Bill C-48 will be advantageous because, as I indicated, the resource allowance will be eliminated and crown royalties will be made deductible.

In this context, the overall actual tax rates, taking into account federal and provincial income tax, will increase. According to financial analysts, in Manitoba, the actual tax rate for the entire natural resource sector will increase by 2.9%; in the Maritimes, the increase would be between 3.25% and 4%; in Quebec, it will be 2.25%; and in Saskatchewan, 4.5%.

You will therefore understand that we cannot support a bill that will result in an increase in actual tax rates—and even accounting analysts say it will—taking into account all of the measures, and not just the reduction of the tax rate to 21%, to match the other industrial sectors.

I am therefore waiting for answers from the Department of Finance about these figures. As I pointed out earlier, I am not making these figures up; they come from accounting firms, associations such as the Mining Association of Canada.

What I am presenting here is average rates that can vary according to industrial sector. In the case of mines, PriceWaterhouseCoopers used two mining models and compared the current system with the reform proposed in Bill C-48.

Excluding the progressive elimination of tax on large businesses announced for all the sectors—a measure that will benefit all Canadian companies—the reform proposed in Bill C-48 means an average tax increase from 39.9% to 42.8% for gold mines and from 35.8% to 46.6 for copper mines.

This does not just concern Quebec; it concerns all of Canada. Nonetheless, since there are many gold mines and copper mines in Quebec, we are sensitive to this argument and I do not see what we—as representatives of Quebec's interests—would gain from supporting a bill that would increase the effective tax rate for a certain number of natural resources sectors in Quebec and in other regions of Canada.

We expected the federal government to propose a much more equitable reform for all the sectors. These figures are very worrisome, all the more so since we would have thought that, in addition to wanting to reduce corporate tax rates, the federal government might have wanted to leave room for the provinces, in order to correct the fiscal imbalance.

The provinces could very well use some of this room in one way or another.

I should say that many of the figures I have used come from a study published in CAmagazine —CA for chartered accountant—in May 2003. This study by Neil Smith is entitled, “Energy update: following its taxation review of the resource sector, Finance has come up with recommendations on crown royalties.” In his conclusion, the author says:

It would appear that the federal administration will also be keeping a close watch on provinces to ensure they do not attempt to shift tax revenue from the federal government to the provinces by increasing provincial resource royalties or mineral taxes that gave rise to the 1974 rules they are eliminating.

I think that is extremely serious. Not only are some sectors and provinces being put at a disadvantage, but once again, the federal government is interfering in the real autonomy of Canadian provinces, of Quebec in particular, by unilaterally changing the rules of the game. Unfortunately, that is exactly the criticism the Bloc Quebecois and many Quebeckers have of Canadian federalism. The federal government acts as if it were the only important or worthwhile level of government, with the others being at best, big municipalities or, in the case of Quebec, big regional boards.

I would point out that royalties were deductible until 1974. In Bill C-48 we are not looking at something brand new. They were deductible. But that was an era when royalties were increasing in all provinces. Thus, the federal government saw its revenue declining. When it saw that, in 1974, it changed the rules of the game. It said that royalties would no longer be deductible and that it would introduce a 25% resource allowance instead.

Now, because of international competition and the difficulty our industry has in competing with a number of developing countries, royalties are declining. This is the moment the federal government has chosen to change the rules of the game because the current rules are not bringing it enough revenue.

Thus, there is this desire on the part of the federal government not only to change the rules, but also to ensure that the provinces are unable to change their own tax structures. I am not saying that they are going to do so, but they might want to. The federal government has already reworked the tax structure of the natural resource sector through its reform as seen in Bill C-48. As I said, I was quoting from a study found in CAmagazine that confirms my point.

Going still further, in the mining association press release I have already referred to, they not only state that, when all is said and done, the disappearance of the resource allowance will likely result in higher taxes paid by the mining industry, but they add:

At the very least, the federal government is undercutting the good work by many provincial jurisdictions to make mining investment more attractive.

Once again, the Bloc Quebecois is not the one saying this, it is the Mining Association of Canada and Quebec Mining Association Inc. They feel that Bill C-48 is revisiting a whole series of measures available to them from the provinces. WIth Bill C-48, something is being created that will not only disadvantage the mining industry, but will also force the provinces to behave in a certain way as far as their natural resources taxation schemes are concerned. I consider this federal interference in areas of provincial jurisdiction and in the jurisdiction of Quebec.

Such interference does not always involved direct spending by the federal government. Often, it is done with the creation of rules that tie the hands of the provinces and Quebec.

As I have said, some sectors gain and some lose. I think this needs to be acknowledged. There are winning provinces and losing provinces also. We feel this inequity is unacceptable. When it comes to winning sectors, of course the oil and gas industry is among.

What is needed is one fair rule for all industries. It is not a matter of ganging up on the oil and gas industry, but of noticing that, curiously enough, it is being systematically favoured by the federal government. We see this, for example, in the refusal by the industry minister to carry out a proper investigation into the possibility of collusion among the major oil companies. We know that the prices are changing at the present time. A blackout in New York raises gas prices in Joliette, as unlikely as that may seem. The federal government is refusing to look into the real situation of competition in the oil and gas sector.

With Bill C-48, the Minister of Finance estimates that, when fully implemented, the reform will cost in all some $260 million in uncollected taxes.

That is the department's estimate, and I challenge it. I would appreciate it if we were provided with all the data used to come up with such an estimate. A significant portion of this $260 million, assuming that is the right amount, will go to the oil industry, the one in Alberta in particular. In that particular instance, the tax rate will actually drop 12 percentage points.

It is important to note that, for once, the tax rate of oil companies will be 5% lower in Alberta than in Texas. I do not think that Texas, as a state, can be accused of being inclined to overtax its industries, and its oil industry in particular. The actual tax rate will be lower here than in Texas.

I said earlier that it seems to me that this amount of $260 million estimated by the Department of Finance as the total cost of the reform once it has been fully implemented is underestimated. The latest financial statements of major oil companies state, as this one from Petro-Canada for the second quarter, on page 1:

Petro-Canada announced today second quarter earnings from operations of $455 million, which include a positive adjustment of $96 million for Canadian income tax rate changes.

Extensive reference is made, of course, to Bill C-48.

The quarterly report to shareholders of Shell Canada Limited for the second quarter states, on page 1:

Shell Canada Limited announces second-quarter earnings of $178 million... Earnings included a one-time benefit of $54 million from a future income tax revaluation following announced income tax changes.

Again, reference is made not exclusively but in large part to Bill C-48.

The quarterly report of Esso Imperial for the second quarter reads as follows, on page 1:

During the second quarter of 2003, tax rate reductions enacted by the Federal government and the provincial government of Alberta and settlement of various tax matters benefited results, mainly in the resources segment, by $109 million.

Overall, when we look at all the estimates made in the major oil companies' annual reports, we can see that there is already approximately $250 million in tax savings. Yet we are told that, when all is said and done, the reform will only cost $260 million. it would seem to me that there is a discrepancy there. There would be, at best, $10 million left in tax savings for all other sectors.

I think that this debate lacks transparency. For this reason, during the committee stage, I hope we can hear not only from public servants, but from representatives from all the natural resource sectors so as to get to the bottom of Bill C-48.

In closing, I want to say that we are not especially surprised by this kind of situation. However, it is still great cause for concern when we see, for example, a dramatic drop in the effective tax rates for mining companies in other countries competing with Canada.

Brazil's rate of 43% will drop to 34%. Australia has a current rate of 36%, soon to be 30%. South Africa's will drop from 35% to 30%. Finland's will go from 29% to 25%. Canada will increase its effective tax rate to approximately 40% or 43% for mining companies, many of which are located in Quebec. The measure proposed in Bill C-48 will have a negative impact on their ability to compete.

As I was saying, I am not surprised. Just think of the fiscal imbalance or the debate on the GST, with school boards in Quebec or Ontario claiming victory over the federal government, which then changes the rules of the game and backtracks to avoid paying $8 to $10 million to the school boards.

Just think of the gasoline excise tax of 1.5¢ per litre introduced to fight the deficit. There has been a surplus for six or seven years now, and this tax still exists.

I could mention yesterday's vote, when all the opposition parties voted to terminate the tax agreement between Barbados and Canada. Barbados is where the future prime minister had many holdings and where he took advantage of substantial reductions in income tax.

The Bloc Quebecois' mistrust is understandable. As I said, at second reading we will be voting against Bill C-48.

[Dave Chatters, Canadian Alliance, Athabasca, AB]

That was distracting, Madam Speaker.

To now send the parliamentary secretary in with the presentation that he made to sell this as some kind of a bold initiative by the government to make the oil and gas and mining sectors more competitive is offensive. Of course, all the arguments that the parliamentary secretary made were quite true. It will do all of the things that he suggested it will, but all of the things that he said were true when the corporate tax rate was reduced for everybody else back in 2000. This sector should have enjoyed that same reduction then because it will in fact make those sectors competitive with other countries around the world, in particular with the United States.

I know we are going to hear cries, and we have already heard some, that this is a tax break for that nasty oil and gas industry and all the other things that we hear over and over again in the House. The truth is that this is an extremely competitive industry. It is an extremely capital intensive industry, particularly the mining sector.

In the last number of years, the oil and gas industry has been reasonably healthy, but it can only stay healthy if it can stay competitive and certainly the mining sector has been struggling. In our mining industry, some of our best experts have been driven out of this country by these kinds of oppressive tax regimes and driven to other countries around the world. We are only now beginning to see some return.

That was a result of an insensitive government that did not provide a competitive tax regime where a company could attract investment to this country and produce our natural resources profitably not only for the companies but also for the governments involved in a major kind of way.

For the government to suggest now that somehow it is listening to the industry and it is going to do the right thing for the industry is offensive. That should have been provided to the industry when the other sectors received the same reduction. The parliamentary secretary did speak at some length about the importance of the industry and I would like to touch on that as well because the resource industries and the oil and gas and mining industries are extremely important to the economy of this country and huge contributors to our GDP.

The oil and gas industry alone produces overall, with the spinoff benefits, approximately half a million jobs in this country and produces untold wealth in the form of taxes to governments, which is a huge contribution to governments. Certainly if one cares to compare the resource industries, for example,--and I am just picking one that I think is an effective comparison perhaps--the automotive industry in Ontario is hugely important to the economy of Ontario.

The government pays a lot of attention when the industry speaks and when the industry has problems, but when we compare the two the natural resource industries are comparable in every way in terms of job creation and taxes they pay to government, and I would suggest a considerably higher return in the form of taxes to governments than the automotive industry. In terms of investment in the economy, one would find that the automotive sector invested about $22 billion, which is the figure I have, over the last 10 years.

When one looks at the oil and gas industry alone over the last 10 years, not even counting the mining industry where there has been huge investments in diamond mining in the Northwest Territories and some other sectors, there has been $80 billion of committed investment in the sector. It is important to the Canadian economy. I cannot understand why back in 2000 the industry was singled out for that kind of discrimination. It certainly affects industry when we are looking at projects.

For example, there is an environmental hearing process going on in Fort McMurray right now on one of the latest proposed projects in the tar sands. Some $8.7 billion of investment is being proposed. That investment was in some doubt for some time because of this kind of discriminatory tax regime that the government was imposing on it, and proposing to impose on it through the Kyoto accord.

I am delighted to see that both the process and the project is moving forward. It will return in spades the investment that those who boldly took to invest that kind of money in a project that will not return any of their investment for up to five or six years.

We have heard and will continue to hear criticisms of the industry. Every time the price of gasoline spikes we hear the outcry that big industry is gouging consumers. The reality is that over the last few decades the oil and gas industry has provided us with some of the lowest priced energy in the world in the form of gasoline. If government taxes were taken off gasoline, Canadians would enjoy some of the lowest prices in the world. Until recently, the security of supply has been unquestioned. However the supply is always available at a reasonable price.

These resources are non-renewable resources; they are a finite resource. Unquestionably, the price of those resources and the products produced from those resources will rise over time. They will continue to do that, and that is not unhealthy to our economy. As those prices rise, because of the scarcity of the resource and the rising demand for the resource, that will allow us to seek out other cleaner forms of energy and more reliable sources of energy. The truth is that around the world the supply of fossil fuels has probably peaked and is in decline. Even the huge resources of the Middle East have probably seen their peak and are in decline there as well.

There are growing concerns in Canada and around the world about the effect of fossil fuel use on our environment, and a lot of other concerns are coming forward. We are beginning to look elsewhere for other forms of energy. Without the wealth and the jobs, and the standard of living that fossil fuel resources have allowed this country and other countries around the world to enjoy, we would not have the ability, the resources, or the wealth and the brains to explore and find other newer and cleaner sources of energy.

I expect that even as we move to those newer and cleaner forms of energy that fossil fuel energy resources and the mineral resources of this country will continue to be used more and more in value added products and all kinds of things that affect the everyday lives of Canadians all the time. Therefore, the future is probably bright not only from an environmental point of view but certainly from an energy supply point of view.

However, getting back to Bill C-48, our party will be supporting it. I would have wished that there would have been the kind of support in the House because of what the bill is trying to do. A grave injustice was imposed upon those industries some years back. I would have hoped that the House would have dealt with this issue at all stages in one day and passed the bill.

I am afraid, because of the time it took for the government to introduce this initiative and to bring the bill forward in the limited time we have before the government decides to prorogue and make the transition to a new Prime Minister, that the bill could get caught up in that process. That would be a terrible shame. It needs to be done quickly because it is a matter of fairness. It is not a matter of giving anyone anything that the rest of the country does not have. We should do it quickly and we will be supporting the bill.