Bill C-48 (Historical)

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

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Madam Speaker, I continue to deplore the fact that the government does not have a balanced approach to economic development. During question period on November 29, 2011, I pointed out that it is completely possible to create good-quality jobs while investing in clean energies. I also asked the government why it stubbornly refused to follow in the footsteps of a number of our trading partners that have created jobs by investing in the green economy.

Since 2006, the Conservatives have invested heavily in supporting the oil industry. For instance, there was an accelerated capital cost allowance for oil sands investment that will last until 2015 and, as another example, the preferential tax treatment in Bill C-48 that gives oil companies $1.7 billion in tax gifts each year.

The reality is that the government listens only to the oil companies. The Minister of Natural Resources showed which side he was on when he described the aboriginal people, ecologists and other Canadians who are concerned about the future of their environment as radical opponents of the authorities.

The statutory review of the Canadian Environmental Assessment Act is another example of this government missing an opportunity to better reconcile economic development and environmental protection. The Standing Committee on Environment and Sustainable Development is currently reviewing the federal environmental assessment process. The purpose of the review is to determine whether these assessments make it possible to reconcile economic development and sustainable development. It is, therefore, a crucial study. Yet, the Conservatives have done everything in their power to undermine this study by limiting the duration of committee business. Only 11 committee meetings have been dedicated to hearing witnesses. One single environmental group appeared: the Sierra Club. One single aboriginal group appeared: the James Bay Advisory Committee on the Environment.

We are currently drafting a report on the environmental assessment system, despite the fact that the Environment Commissioner and several ministers and federal organizations heavily involved in these assessments have not yet been heard. Nevertheless, over the course of the committee meetings, most of the witnesses from industry have said that they want an environmental assessment process that is more credible in the eyes of local communities. A solid environmental assessment process makes projects socially acceptable. On the other hand, an environmental assessment process that is not credible undermines public confidence, which can hamper the development of the project.

The government's hastiness is all the more worrisome given that the Minister of Natural Resources and the Prime Minister are talking about amending the Canadian Environmental Assessment Act right in the middle of consultations regarding Enbridge's Northern Gateway pipeline project, which would cut through an ecologically fragile area. Moreover, by calling Canadians who are concerned about the environment radicals, the Minister of Natural Resources has further discredited himself. In my opinion, given the wealth of scientific knowledge about climate change, it is those who deny the existence of climate change who are the radicals.

The NDP's vision is simple: we must reduce our reliance on the carbon economy. We are convinced that, by redirecting the earth's resources towards a green economy, we will protect our environment and create thousands of good, sustainable jobs here in Canada. Will the government be inspired by this vision as it prepares the upcoming budget?

Fairness at the Pumps Act

[Serge Cardin, Bloc, Sherbrooke, QC]

Mr. Speaker, Bill C-14 is obviously important, but frankly, only relatively so. For the next 20 minutes, I will try to clearly explain the Bloc's position. I may not go into every detail of Bill C-14, but I will describe the Bloc's concerns about the Competition Act and the fact that successive governments have done nothing. And, of course, I will describe the Bloc's response to this bill, which is Bill C-452. I will also briefly explain a comprehensive strategy for dealing with increases in the price of petroleum products.

As the parliamentary secretary said earlier in his speech, the government introduced its bill to protect itself and consumers against negligent retailers. “Negligent” is putting it rather mildly. There will obviously be mandatory inspections, but they will be much more frequent. The government is talking about increasing the number of inspections from 8,000 to 65,000. The bill would also authorize the minister to appoint or designate professionals to conduct these inspections. In addition, there would obviously be fines that could be quite high, especially for repeat offenders. Of course, the government says that it is doing all this to protect the consumer.

Has the government, as usual, conducted an impact study of its bill to compare it to what is being done to manage or monitor gas prices at the pump? Naturally, there will be costs associated with all that. Inspections are not free, of course, and retailers will likely be stuck with the bill in the end. I imagine that retailers' costs will go up substantially, all to save consumers about $20 million, which is the estimated difference between the prices. That may seem like a lot of money, and it is, but how many litres and how many consumers are we talking about? Are all the costs of implementing Bill C-14 really worth it? I do have to say, though, that when consumers are hurt, it is our duty to try to make things right.

So I will say right away that we support Bill C-14 in principle. But it does not directly address collusion problems, like the ones that recently came to light in Quebec, nor does it effectively prevent sudden gas price hikes.

The Bloc Québécois still believes that the government needs to work toward offering an effective response to rising gas prices by passing the Bloc's Bill C-452. This bill would strengthen the Competition Act and create a petroleum monitoring agency.

The Competition Act still does not allow the Competition Bureau to conduct an inquiry of its own accord. It has to wait until it receives a complaint before launching an inquiry. The Bloc Québécois also wants the government to establish a petroleum monitoring agency to scrutinize gas prices and to deal with attempts to collude and unjustified price hikes.

According to tools devised to measure how much this is costing consumers, the suggested figure is $20 million.

According to the April 2009 gas consumption data that I found, that $20 million corresponds to one-tenth of a cent per litre of gas purchased in Canada. The cost of gas varies from 90¢ to $1, but it always includes a decimal that people rarely look at. However, oil companies adjust their prices to a tenth of a cent, which represents an amount much higher than the $20 million per year those tools suggest.

Overall, a one-cent difference adds up to $200 million per year, not the $20 million they are trying to correct for.

The Minister of Industry introduced Bill C-14 at first reading on April 15, 2010, claiming that it will protect Canadian consumers from inaccurate measurement when they buy gas. The proposed bill would make retailers more accountable by imposing regular mandatory inspections of measuring devices, such as gas pumps.

The penalties that the courts can impose under the Weights and Measures Act will increase from $1,000 to $10,000 for minor offences and from $5,000 to $25,000 for major offences. For consumers who feel they have been wronged, this might lead them to believe they have increased protection thanks to their hallowed and benevolent government. This is just more smoke and mirrors to trick consumers who believe they are being protected from additional costs, when the government is not doing enough to protect them when it comes to gas prices.

I am going to skip the other possible fines, because I would like to get straight to the point. The new section 29.28 in the Electricity and Gas Inspection Act allows the Minister of Industry to disclose the names and addresses of people convicted under this legislation.

If the retailer can show that he did due diligence and did everything to ensure the accuracy of his equipment, his name will likely not appear on the list of those whose equipment is defective in terms of measuring the volume. We need to determine how this measure will be applied, because any retailer could wind up on that list, even by mistake.

A clarification has been made to establish that violations of this legislation are not actually offences and therefore not subject to the Criminal Code. The individual would not have a criminal record following a conviction.

If convictions are frequent, can they be subject to a prison sentence, in cases of repeat offences, of less than two years, since they are not criminal offences? Once again, the provinces and Quebec are left to pay for this. With respect to offences, recidivism and imprisonment, Quebec will have to pay, no matter what it costs to send someone to prison for less than two years.

The Bloc's main concern is that every time the price of gas skyrockets, the government invariably says the same thing, that its hands are tied because the Competition Bureau has found that there is no collusion between the oil companies to set the price of gas and therefore there is no problem.

It is always the same answer. It is never the oil companies' fault and when the Competition Bureau conducts an investigation it always comes to the same conclusion: there is no collusion.

It would be rather surprising to see representatives of all the major oil companies openly sitting around the same table at a big restaurant. It is not likely to happen. It may be more difficult, but there must be a will to find a solution.

The Competition Act has major shortcomings that prevent the Competition Bureau from initiating an investigation. Any investigation has to be requested by the department or initiated as the result of complaints. On May 5, 2003, when Konrad von Finckenstein, the then commissioner of competition and the current chair of the CRTC, appeared before the Standing Committee on Industry, Science and Technology, he pointed out the shortcomings in the Competition Act. He said:

...while the bureau's mandate includes the very important role of being investigator and advocate for competition, the current legislation does not provide the bureau with the authority to conduct an industry study.

There was some borrowing from Bill C-452, and equivalent measures were put in place as part of the January 27, 2009 budget implementation act. However, these new provisions still do not give the Competition Bureau the authority to investigate on its own initiative. A complaint is still required before an investigation can begin.

In 2003, the Standing Committee on Industry, Science and Technology concluded its study on gas prices by making two recommendations to the government: create a petroleum monitoring agency and toughen up the Competition Act.

In 2003, the Standing Committee on Industry, Science and Technology also spelled out the changes it wanted to see made to the Competition Act. The Bloc Québécois was adamant that the government respect the committee's recommendations.

In October 2005, shortly before the election, the Liberal government finally agreed with the Bloc's arguments and, as part of its federal plan to help alleviate the impact of high gas prices, introduced Bill C-19 to amend the Competition Act. It strengthened this act by raising the maximum fine for conspiracy from $10 million to $25 million and broadening the Competition Bureau's authority to investigate, which would have allowed it to inquire into an entire industry sector.

However, the government bill ignored these recommendations from the Standing Committee on Industry, Science and Technology: reverse the burden of proof to deal with agreements among competitors and to determine whether there is a conspiracy—the objective of this was to make it the responsibility of the party wishing to enter into an agreement to prove the ultimate social value of that agreement—as well as allow the Competition Tribunal to award damages to parties affected by restrictive trade practices, where applicable.

The Bloc Québécois had proposed numerous amendments along these lines.

Bill C-452 would address the shortcomings in the measures put in place under the January 2009 budget implementation act, Bill C-10

The Competition Bureau needs true investigative powers. Bill C-452 would give the Competition Bureau the authority to carry out real investigations into the industry, if warranted, on its own initiative, something it is not currently permitted to do because it must receive a complaint first.

If this legislation were passed, the Competition Bureau would be much better equipped to take on businesses that try to use their dominant position in the market to fleece consumers.

We could implement a comprehensive strategy to deal with price hikes of petroleum products. For some time now, the Bloc Québécois has been pressuring the government to take action to address the rising cost of petroleum products.

We recommend a three-pronged approach. First, we must bring the industry into line. That is the goal of Bill C-452, which gives teeth to the Competition Act. We should also set up a true monitoring agency for the oil sector.

Second, the industry must make a contribution. With soaring energy prices and oil company profits, the economy as a whole is suffering while the oil companies are profiting. The least we can do to limit their negative impact is to ensure that they pay their fair share of taxes. The Bloc Québécois is therefore asking that the government put an end to the juicy tax breaks enjoyed by the oil companies.

Third, we must decrease our dependence on oil. Quebec does not produce oil and every drop of this viscous liquid consumed by Quebeckers impoverishes Quebec and also contributes to global warming. The Bloc Québécois is proposing to reduce our dependence on oil. All the oil Quebec consumes is imported. Every litre consumed means money leaving the province, thus making Quebec poorer and the oil industry richer.

In 2009, Quebec imported $9 billion worth of oil, a reduction because of the recession. In 2008, oil imports totalled $17 billion, an increase of $11 billion in the five years between 2003 and 2008.

At the same time, Quebec went from a trade surplus to a trade deficit of almost $12 billion, not to mention that the increase in Alberta's oil exports made the dollar soar, which hit our manufacturing companies and aggravated our trade deficit. The increase in the price of oil alone plunged Quebec into a trade deficit. It is time to put an end to the tax holiday for the oil sector.

In 2003, the Liberal government, supported by the Conservatives, introduced a vast reform of taxation for the petroleum sector. Although the oil sector had special status under the Income Tax Act, with its Bill C-48 the government reduced the overall tax rate for oil companies from 28% to 21% and also introduced many tax breaks, including accelerated capital cost allowance and preferential treatment of royalties.

This made taxes for Canada's oil sector more advantageous than in Texas. As if that were not enough, in the 2007 economic statement, the Conservatives presented additional tax reductions for oil companies, which would bring the tax rate down to only 15% by 2012. These tax breaks will enable Canadian oil companies to pocket close to $3.6 billion in 2012 alone. The Bloc Québécois thinks that these measures for the oil companies are unjustified. That it why it is proposing that we eliminate handouts to the oil companies.

I was saying that the long-term solution is to reduce our dependency on oil. We must invest considerably in alternative energies; allocate $500 million per year over five years to green energies; launch a real initiative to reduce our consumption of oil for transportation, heating and industry; introduce incentives of $500 million per year over five years to convert oil heating systems; develop a plan worth $475 million per year over five years for electric cars.

By 2012, 11 manufacturers plan on releasing some 30 fully electric or rechargeable hybrid models. These cars will be more reliable, more energy efficient and much cheaper to operate than gas-powered models.

Bill C-14 is intended to save consumers $20 million. As I was saying earlier, $20 million corresponds to one-tenth of a cent per litre of gas. Therefore, just one cent per litre could save $200 million per year. Furthermore, we must strengthen the Competition Act.

Competition Act

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

Mr. Speaker, it is my great pleasure today to speak to Bill C-454, which was introduced by the Bloc Québécois member for Montcalm. First, I would like to congratulate my colleague on his excellent work and on this initiative to bring this important issue back to the House of Commons. It has not lost its relevance over the past few years with the price of gas at the pump now hovering around $1.15.

Bill C-454 is being read for the first time in Parliament, but I want to remind some of my colleagues from other parties that it is inspired in large part by Bill C-19, which the Liberals tabled shortly before the 2005-06 elections, and which the Conservatives decided not to reintroduce. Of course, it has been rewritten and improved, but it is, in essence, the same. If I were to provide a broad outline of this bill, I would summarize it by saying that its purpose is to strengthen the Competition Act.

First, it gives the Competition Bureau the power to conduct its own inquiries into the oil industry. Currently, the bureau can do no more than undertake general studies that have no consequences.

In the course of conducting such inquiries, it can summon and protect witnesses. If it could not do so, it would very likely never be able to prove anti-competitive practices.

Lastly, when companies want to enter into agreements with their competitors, they will have to prove that these agreements are in the public interest. The bill also significantly raises the amount of fines, from $10 million to $25 million.

That said, exactly what need is this bill trying to meet?

Prices of petroleum products are rising steadily, and we want Quebeckers to have a way of finding out why this is happening, who is benefiting and, most importantly, whether this is reasonable.

The first major problem that is affecting everyone to different degrees is the rising price of crude oil. This is having a direct impact on the price per barrel, which is fluctuating today between US$100 and US$110 and has increased by 230% since early 2004.

This in turn is affecting the price of heating oil, which is on the rise. It has averaged about 90¢ since early 2007 and has gone up by more than 50% in the past two years. I want to remind the House that according to Statistics Canada, approximately 500,000 Quebec households in Quebec still heat with oil or another liquid fuel.

The increase in the price of crude oil is also driving up the price of gas, which, understandably, has raised the public's ire for the past several years.

For a number of years, in fact, old records have fallen repeatedly as the price of regular gas has regularly reached new highs. Fluctuations aside, the price of gas in Quebec is going up steadily; it was 71.3¢ in May 2002, 94.4¢ in May 2004 and $1.10 in May 2007. Since the beginning of the year it has fluctuated between $1.09 and $1.18.

At the same time, oil companies have posted record sales for a number of years. But that is not all. Oil companies' net profits have also skyrocketed in recent years. The oil industry's net profits rose from $17.6 billion in 2003 to $20.2 billion in 2004 and $35 billion in 2006, a 100% increase.

What is more, with respect to the increase in costs, if we compare the price of regular gas in Quebec today with the price in 2004, we find that the retailer mark-up has remained stable, taxes have remained stable and even gone down in proportion to the price of a litre of gas, and the increase in the price of crude oil accounts in part for the increases.

But lately, the constant fluctuations in gas prices cannot be explained by crude oil prices; they are attributable to the obscene profits made by the refineries.

Is this situation intentional? We do not know, because the Competition Bureau does not have the tools it needs to conduct a serious and complete investigation. But one thing is for sure: the structure of the oil industry encourages spikes in gas prices, and is conducive to abuse. That is why the industry must be monitored, hence Bill C-454.

As members know, I am the Bloc's natural resources critic, and it is part of my duties to learn about the oil industry. That is precisely what the Standing Committee on Natural Resources did for several months last year, as part of an important study on the oil sands industry. Over the course of about 30 meetings, we heard from some 100 witnesses, many of whom came from the oil industry.

I listened to and questioned these witnesses carefully, and although our conclusions can be found in the committee's report, I would like to share how these testimonies touched me personally.

When I was listening to these professional lobbyists, I was deeply struck by the excesses of the industry, with its echoes of the gold rush.

People in the oil industry came to talk to us, they explained the challenges, confidently predicted the future, easily came up with rational solutions to complex problems in their heads, but were so detached from the effects caused by their industry, that it literally took my breath away.

As everyone also knows, I am a social worker by training, and if I wanted to draw a parallel with a type of clientele, I would say we are dealing with an industry that has a very hard time regarding itself objectively or engaging in any self-criticism, and above all, we are dealing with an industry for whom the end justifies the means and that is always right. It has a bit of a superiority complex, which places it above other things and makes it prone to over-ambition and exaggeration, often in a shameless manner.

In the case of the petroleum industry, the excessiveness of the financial stakes—we are still talking about billions of dollars—and the current importance of their products, which are practically essential to the functioning of society, create this cavalier attitude that often lacks any moral or ethical sensibility. I could give so many examples that I could easily keep the House busy until tomorrow, but let us look at just one, more recent and very typical example.

On Monday, March 10, the Minister of the Environment presented his solutions for climate change problems—a plan whose flabbiness will surely go down in history. One of his proposals is carbon capture and storage by the oil industry. Speaking through a task force that delivered a study to Natural Resources Canada, the oil industry responded that it refuses to invest great sums of money in this technology because of the uncertainty surrounding its large-scale commercialization.

And as if that were not enough, the task force, composed of one academic and four industry representatives, went even further. Try to listen to this without being too surprised:

...it is a very difficult proposition for individual private sector players to commit additional hundreds of millions of dollars...to achieve a public good...for which it may not be compensated with an adequate (or any) return on investment.

In any context that statement would be unacceptable, but in the current climate change crisis, it is totally irresponsible and insulting. This method would force private companies to contain their pollution.

The members of this task force act as if they are doing us a favour. They are completely disconnected from reality, so much so that they add even more. As François Cardinal reported in La Presse on March 11, the report recommends that the federal government allocate $2 billion immediately and that both levels of government provide “stable financial incentives”.

I would like to remind hon. members that the oil industry made $35 billion in profits in 2006. And these people are talking about the impossibility of investing in the public good unless profit is involved?

I also want to point out that in addition to $66 billion in direct subsidies from the federal government between 1970 and 1999, this industry is currently benefiting, through accelerated capital cost allowance, from tax measures such as former Bill C-48, under the Liberals in 2003, and from tax cuts announced by the Conservatives in the economic statement of November 2007 of up to $1.5 billion annually.

In the coming year alone, the oil industry will receive a $1.18 billion gift. In total, for the 2008-13 period, roughly $7.8 billion will go into the pockets of the oil companies through various measures implemented by both the Conservatives and the Liberals.

Yesterday I received a phone call from a constituent from Saint-Bruno—Saint-Hubert, who said that her heating costs have increased by 50% in two years. She thought that was totally unacceptable.

Bill C-454 is needed to help people like that and to supervise the oil industry more carefully. We hope the bill will be adopted.

The Environment

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

Mr. Speaker, this is absolutely false. We are trying to save the small investors he made promises to, promises he is now reneging on. That is what we are trying to do. This is what he should do: change his mind about the millions of dollars he is saving the oil industry, with measures such as Bill C-48, which he supported and is now maintaining.

Will the Prime Minister act so that a carbon exchange can be put in place to reward industries that have made an effort and that have attained or are attaining greenhouse gas emission reduction targets? Those that have made no effort, such as the oil companies, must pay. This is called the polluter-pay principle.

Will he stop supporting his friends, the oil companies?

Budget Implementation Act, 2006, No. 2

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

Mr. Speaker, I remind the hon. member NDP member that they too supported the budget. This is somewhat strange, speaking of marriages.

Speaking of failed marriages and odd couples, I remind the hon. member that a little less than a year and a half ago, the NDP joined the corrupt Liberals. In the midst of the sponsorship scandal, they supported the Liberals and they supported their budgets, which included measures that were never fully implemented after the Conservatives won the last election.

The bill that they supported—I believe it was Bill C-48—was incredibly vague. The Liberal government did not even have to fulfill its promise. The NDP supported the corrupt government of the former Prime Minister on measures that did not include any commitment. They made a big deal about it during the last election campaign. And now, how many of them are here? Talk about credibility.

Message from the Senate

[The Speaker]

I have the honour to inform the House that a message has been received from the Senate informing this House that the Senate has passed the following bill: Bill C-48, an act to amend the Income Tax Act (natural resources).

Income Tax Act

[The Acting Speaker (Ms. Bakopanos)]

It being 5:30 p.m., the House will now proceed to the taking of the deferred recorded division on the motion at third reading stage of Bill C-48.

Call in the members.

(The House divided on the motion, which was agreed to on the following division:)

The Income Tax Act

[Jacques Saada, Liberal, Brossard—La Prairie, QC]

Discussions have taken place between all parties and there is an agreement to re-defer the recorded division requested on Bill C-48 until the end of government orders on Tuesday, October 21.

[Serge Cardin, Bloc, Sherbrooke, QC]

Mr. Speaker, this is the second time that I have spoken to Bill C-48. The first time was at the second reading stage, and today we are debating the bill at the third reading stage.

First I would like to thank my colleagues who took part in this debate, namely the member for Joliette, the member for Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques, the member for Drummond and the member for Champlain who has taken part in this debate with a lot of passion over the last few hours.

I would say that the debate today has gone in a different direction. When we first started to talk about this bill, there were two easily identifiable aspects, namely energy and mining. In my last speech, I started to address the environmental aspect, but today I was pleasantly surprised to see the member for Davenport and the member for Lac-Saint-Louis bring the environmental dimension into this debate.

I also heard comments from other members, one being I think the secretary of state, who said that the cuts were good for businesses, for development, for employment, and so on. It is almost as if the government were saying that it would reduce taxes on cigarettes or alcohol, but it does not because it must invest in anti-tobacco campaigns, saying that people must quit smoking because it is not good for their health, and it continues to collect taxes on alcohol, saying that people must drink responsibly.

In the energy sector, we know that oil causes a lot of pollution. There are “catastrophic” consequences for the entire planet. We are talking about the environmental aspect, but maybe I should go back to the financial aspect, both on the energy side—oil—and on the mining side.

Recently, I read in the June 28, 2003 issue of the Trois-Rivières Nouvelliste an article by Hubert Reeves, who painted a very sad picture of the state of the earth. In his most recent book published in March 2003, the astrophysicist and philosopher Hubert Reeves voices his concerns about the behaviour of governments. They always have their eyes on the next election instead of managing for the long term; this is especially true of this Liberal government. Governments can look like a chicken without a head. You do not know where it is heading. It goes all over the place, darting every which way and leaving a trail of blood behind it. Currently, it is even worse, there are actually two chickens going here, there, and everywhere

While the government is lowering taxes on oil companies, the earth is hurting. Its health is getting worse. We have learned over the last few months, or even the last few years, that the most important element in our society is health. Of course, if we want to be healthy, we must live in a healthy environment on a healthy planet. Otherwise, in a few years we will have to post a sign saying “Earth for sale, garage sale”.

Mr. Reeves said also that there are indeed solutions, starting with the development of clean, renewable energies. So the money that is given to the oil companies could easily be used to develop clean and renewable energies, even though Mr. Reeves acknowledges that it would take major investments on the part of politicians and business people who manage the day-to-day affairs of the nation with short-term profits as their goal.

But on this planet, we must work together with the earth and in the same direction. We should not be afraid of investing. If we do not do it, who else will do it?

Mr. Reeves said that in the end, it is every citizen's responsibility to act; indeed by doing such things as recycling domestic waste each one of us as an individual can help stop the degradation of the planet. Again, all that money, some $260 million, which is left in the pockets of oil companies, could be invested elsewhere.

The member for Lac-Saint-Louis also talked about fossil fuels in terms of reserves.

He was talking about a 50-year horizon, of course, but it depends on our sources. If we ask Mr. Bush of the United States, he would probably say 200 years. I imagine that one of his reasons for going into Iraq was that there are reserves that have not been found or exploited.

However that may be, looking at our current consumption in North America, that is, Canada and the United States, Mr. Reeves says that we use 12 times as much energy as necessary. In Western Europe, it is 5 times more, while one-third of humanity is well below the norm.

It is this over-consumption that must be reduced in order to alleviate energy constraints. Therefore, we could use that $260 million for advertising, to persuade people that we should stop using petroleum fuels the way we do today, for moving about and staying warm.

We know that there are many kinds of renewable energy already at hand. One of the major sources will always be the sun. Mr. Speaker, I know that you must absorb a lot of sunshine in order to be able to cast so much light on our deliberations. That is why you inspire me.

Of course, in the context of sustainable development, I believe the government would have been better off to take these sums of money and reinvest them in awareness and research. We have heard a lot about wind power today. I think I have already remarked that some of the hon. members on the other side of the House do not know yet whether it is the wind that turns the vanes or the vanes that make the wind. But one thing is certain, we know that it is a source of renewable energy that should go on forever. Certainly, there are mechanical aspects and of course, there is always some maintenance, but it is still renewable energy.

Some might say that it is less than good for the visual environment, but at least we can breathe it in. And any over-supply will always refresh us.

I must return to the basics of this bill. It is a fiscal bill. A few years ago, the government decided to reduce corporate tax rates from 28% to 21% for all industries except, of course, the petroleum and natural resource industries.

Others had also wondered about the principles of justice and fairness with respect to corporate income tax rates. What kind of justice and fairness are we talking about when we basically do not want companies to increase their sales?

No restriction policies were set, but a rate existed. The income tax rate was lowered to help the rest of the economy. However, surely the legislator realized at the time that decreasing oil companies' taxes might have a less pleasant or positive impact on the entire energy sector and, of course, on the environmental sector.

To make up for reducing taxes from 28% to 21%, the 25% allowance was also eliminated.

In this context, the oil companies would have lost out in all this tax reform. Nonetheless, it is now known that there might be deductions for royalties. Look at Petro-Canada, for instance. If I am not mistaken, the government is still a shareholder and indirectly will receive a larger return on its investments if it pays less tax.

Let us look at Petro-Canada: in 2002 Petro-Canada received $227 million in royalties. If it maintains the same level of royalties in 2003, it will have saved nearly $7.5 million.

So, when they talk about going from 28% to 21%, with the 25% allowance eliminated, the oil companies would definitely have taken a hit. Naturally, tax deductible royalties are being reintroduced.

As has been said several times today, the Minister of Finance also estimates it will cost close to $260 million once the reform is fully implemented. Something does not add up: reform will be fully implemented over five years, from 2002 to 2007.

If the oil companies' earnings are any indication, things are going much faster than expected, and much faster for some than for others. In its quarterly report to shareholders, Petro-Canada had announced second quarter earnings of $450 million. That includes a $96 million adjustment related to changes in the corporate tax rate.

Shell Canada reached almost the same figure, because all our accountants use the same generally accepted accounting principles. Shell was entitled to the same tax treatment as other companies. There are deferred taxes, but I am not going to launch into a lesson on that subject, because it is quite technical.

Also in the second quarter, Shell Canada reported, on July 23, 2003, profits of $178 million. These results include a one-time benefit of $54 million from a revaluation of future income tax on profits followingannounced changes to income tax on profits.

So that is about $150 million for these two companies: Petro-Canada and Shell. We must not forget Esso-Imperial. In its report to shareholders for the second quarter, the tax rate reductions enacted by the federal government and the provincial government in Alberta and settlement of various tax matters benefited results, mainly in the resources segment, by $109 million.

So we have $150 million, $109 million and $250 million. In August, the newspaper headlines read, “Oil and gas companies get lucrative gift from Ottawa”.

We learned that the oil and gas companies were getting $250 million. Around the same time, people were emptying their wallets to put gas in their tanks because of the pump prices.

As a result, the public has a strange view of the federal Liberal government; it is like two chickens whose heads have just been cut off and are running all over the place.

These oil and gas companies announced their profits and the $250 million tax cut, and the government told us that, ultimately, it will be $260 million; so we can presume that this will increase to a quarter of a billion and perhaps soon a half a billion dollars. This money is going to the oil and gas companies; the mines have been left out, because they are in a very different situation.

The mining industry is facing serious problems. Simply reducing the tax rate from 28% to 21% or simply eliminating the tax credit and adding the deductions for royalties was too little for most of the mining industry.

Since mines were penalized quite heavily, it was decided that a new 10% tax credit would be established for eligible mineral exploration expenses, but this applies only to metals and diamonds. This does not apply to the oil and gas industry iin any way.

I was talking earlier about generally recognized accounting principles. Indeed, in CAmagazine , which is the official magazine of the Institute of Chartered Accountants, we read the following:

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

The government also talked today, possibly to make up for this shortfall, about bringing this up to 20%. Then, my colleagues from the Bloc Quebecois were accused of suggesting a 10%, 14% and 20% increase, I think.They were accused of this and were almost called every name in the book. Frankly. They suggested roughly the same increase rate or increase increment that the government is suggesting with regard to the 10%, and in the same way.

In the long run, these measures are expected to be profitable for all sectors of the economy. In the short term, however, some sectors will win and others will lose. Among the winners will be businesses working in tar sands, petroleum and precious metals. I have just heard someone say that tar sands are easy to work without excessive pollution. We probably have not been reading the same environmental analyses.

Among those who stand to lose are the natural gas, potash and diamond industries. However, Hugues Lachance, senior tax director with KPMG, says the following:

With the first two provisions in this bill, the oil companies would be losers. But these are not the only changes. The petroleum industry pays substantial provincial and crown royalties. In 2007, they will be able to include 100% of these provincial royalties as expenses. Still, for the mining industry, where royalties are generally small, this third provision of the bill does not lighten their tax burden very much.

The bill's actual impact will be that the Canadian oil and natural gas industry will be paying lower taxes than in the states of Alaska or Texas. The 2002 tax rate in Canada the rate is now 42.1% and, with the federal government proposals, the rate will drop to 30.1%.

So we can see there is a marked improvement for the oil and gas companies, at the expense of the environment and sustainable development of course. This is nothing new. Government investments in oil and gas are enormous. I would remind hon. members in closing that this is why they have had enough. It could all be terminated, with the money invested instead in sustainable development and renewable energy sources.

In the past 30 years, Canada has put $66 billion in direct subsidies into oil, gas and coal, all forms of energy that are directly responsible for climate change. Quebec taxpayers have therefore each put $27,000 into hydrocarbons, while we ourselves use hydroelectric power, which is non-polluting. We will, consequently, be voting against Bill C-48.

[Brian Masse, NDP, Windsor West, ON]

Mr. Speaker, I am glad to participate in today's debate on Bill C-48. I think it is important that we talk about the decisions made in the House which affect the actual economy of the country, not only in the short term but in the long term. That is what the bill is about. It is a very serious issue: a decision on how to spend our resources.

There is a series of things governments do to develop the strategies, the tools and the tool chest to move forward with pragmatic programs and services in developing the economy and our communities. Part of that is taxation. Another part is service fees. Another part is through assets we have acquired, and there is also revenue generation.

The bill is very important, because at a time when we are faced with so many different challenges and problems, we will witness anywhere between $1.4 billion to $2 billion in assets disappearing over the next five years. That revenue stream is so critical when we are missing the opportunity to participate in renewable forms of energy. Right now we are focusing on a tax cut for the oil and gas industry, and for others as well, but I will focus on that one. It does not take into account the planning that is so desperately needed.

It is frustrating to stand in the House and hear that there is not enough money for SARS, for the workers or for the economy in Toronto and other areas that were affected by SARS. Not just Toronto was affected. Tourism was affected in other places because they were tarred by the same image as Toronto. People thought all of Canada had SARS.

Then there are our war widows. Canada has 23,000 war widows and we do not have the resources to provide money for them, but we can have money designated as a tax cut for the gas and oil industry.

We all know about hurricane Juan in Atlantic Canada, forest fires in B.C. and Alberta, and BSE. They are all examples of very significant environmental issues that also require assets from the federal government, assets that have not been streamed to the people who need them.

But the government can find the time and the political will to move toward a tax cut to an industry that has serious repercussions on the people out there. It is a very good industry in the sense that all of Canadian society has embraced the oil and gas industry. We understand the effects it has. It has done some very positive things, but at the same time we are paying some prices. My community of Windsor and Essex county is. Because of environmental contaminants, many of them related to dioxins, toxic materials spewed out into the rivers and lakes causing environmental degradation and human health concerns, my community of Windsor and Essex country has some of the highest rates of cancer, respiratory diseases and birth defects.

Now here we are, giving an industry a tax credit when we know we still have some of the worst and dirtiest gas on the planet. I have used the example of the Oakville refinery. Petro-Canada is closing it down because it would rather produce dirty gas until 2005 and then import oil from Europe and distribute it under its flag. Even though it will be another company's gas, it will just re-brand it as opposed to investing in a plant to produce clean gas and energy products to make sure we have independence.

I believe that the recent Conference Board of Canada report card on Canada's health says a lot. The conference board itself is an organization that is not necessarily seen as being the most solid in terms of the environment. It looks at a multitude of different things. It very much takes a cautionary approach to the environment. The title of the actual Globe and Mail article about it was, “Canada's latest report card has disappointing marks”. I will quote a section of that article:

Compared with other leading industrial countries, Canada scores high marks on an economic front and does moderately well in areas of education and innovation. But its performance on a range of health and social measures falls short of many other countries and Canada is well down the list for its environmental efforts.

That is important to note, because right now we know that those social, health and environmental rankings can actually be improved with the movement to renewable energy, provided that we have the assets to do so. Without those assets, if we diminish our reservoir of capital and our ability to act, then we will have limited choice and limited options. I think a good example is the $250 million per year going into wind energy. That is deficient by far in terms of what we can achieve.

That is an interesting issue because when the wind energy project in Toronto was completed, it cost just over a million dollars for the actual wind generation capacity to be completed. However, it cost over $100,000 to ship that unit from overseas because we do not produce them here. There is an example to show that if we had an industrial strategy and a committed, strong sense of purpose and conviction on the part of the federal government, we could create that factory here in Canada.

We could create a commitment among provinces and municipalities and have other tax incentives that help consumers and help business by producing the renewable energy forms if we make it affordable. I believe that is where the incentive should be. If we really want to talk about how it can affect workers and how it can affect the economy, then this money could be used to lower other types of taxation, which we would all enjoy, and at the same time we could meet our national goal of Kyoto.

It is something that this country has put a stamp on in terms of the world. We were one of the last people to sign it. The government was dragged kicking and screaming into it by the Canadian public, but it was done.

We can actually be a leader. I think it is a positive thing to do, and not only for our current situation, because it gives hope and instills in people the idea that we can take control of our environment and have sustainability. We can also clean the air and provide an opportunity for our youth to have the things that we are so desperately losing. We are desperately losing in regard to some of the health factors and some of the pollution issues that we lack resources to fix. Once again, this is a significant loss to the federal coffers for an industry that is going to create some problems for all of us as its product is used.

That is something that I think is important to note. It is really critical when we have long term commitments to something that we have the resources. That is not happening with the government. I am concerned that the government will not follow through with the Kyoto accord in terms of providing the right resources to make it successful. This loss of revenue stream is very important.

I will return to the Conference Board of Canada and its spotlight on Canada and the environment as reported in the Globe and Mail . I note this in particular:

Canadians take pride in their country's beauty and resources, but have been “lulled into a false sense of security about the state of our environment”, the board says. Canada placed a dismal 16th among 24 countries whose data were examined.

“Yes, we have abundant resources...but we are not managing them well enough”.

That is the comment. I think that is clear. Because of the natural beauty we have in this country, the size of Canada, its diversity, not only of its people but its topography, and the ability to be on an ocean, on lakes, and in forest areas, I think we sometimes take for granted the things that we do not see.

This tax cut is for an industry which obviously has played a very pivotal role in creating jobs and in being part of the Canadian drive to be successful, but at the same time it has a byproduct that a lot of people pay a price for. That byproduct is the pollution that is created and affects human health.

Even the OECD has recognized that environmental pollutants and toxins and their effects on human health has become not only an environmental issue in itself but an economic issue. The OECD is actually rolling out some more policy platforms in order to have the confidence and also, more importantly, to address the issue. Quite frankly, an area like ours has the Great Lakes area of concern because of the pollutants and the toxins we have been subjected to. For example, that has caused a situation where we have higher rates of learning disabilities among children.

That ends up not only putting a health factor on a child, but it ends up putting a burden on the family to be productive in society. They have to deal more with those special family instances. If there are no social programs there because the programs have been cut back over the years, then it hurts their participation in the economy and it makes more people dependent.

We have to balance these things out. It is not about trying to gouge an industry. The industry has done well in getting support from the federal government over the years. It has had a successful history of lobbying for money and resources and actually was in a partnership as a crown corporation at one point in time.

That does not take away from the fact that we have to be able to mitigate the problems associated with it. That is what this money does. The money needs to be in the budget to mitigate those things. It is critical. The twilight of this industry is coming upon us. We cannot be burning fossil fuels forever. We do not have unlimited supplies, so we have to introduce more and different technologies.

Ford Motor Company was on Parliament Hill today showcasing its Ballard hydrogen fuel cell technology at the front doors of this building. That takes a commitment of resources from the government. A federal green auto strategy would be one of them. We just cannot do that without money.

If we know this situation is developing, we have to reintroduce new sustainable products that will offset that. Oil and gas is a very critical issue. We have discussed this issue at the industry committee. It is not a situation where we have an option about purchasing the product. Most people have to use this product in their daily lives, to commute to work, to do social activities or whatever it might be. We have a dependency on this product. It is part of our lives. It is part of our culture. If we do not introduce something else, or do not work toward that, we are going to be very vulnerable as a nation.

These funds that are being cut are going to jeopardize those opportunities. This is important to know because this is not like any other product; it is very different because of our dependency.

We all know the stories about gas prices going up. When I was a municipal councillor and gas prices went up, we did not have the money in our budget to pay the difference. Where could we get that money? We had to either tax more or cut other programs.

If we do not invest in a multitude of different environmental projects on sustainable energy, we will make ourselves more vulnerable to those fluctuations. Those fluctuations not only hurt municipal governments but they hurt businesses that need a sustainable price in order to predict what their costs are going to be. Reducing these tax measures in our budget will make us more vulnerable by not having the necessary consistency.

The Kyoto accord is tied to this. We send a poor message when we say that we are going to reduce our emissions, that we are going to look for cleaner fuels, but at the same time we say that we are going to reduce taxes on this type of industry which is going to have an impact.

We need funds to develop the alternatives, like a job to job transition strategy so that workers who are affected by a decline or changes in the industry will have other jobs, employment training, programs and services to make that transition. We need to have urban transit alternatives to ensure that we have mass scale transportation in the future. We need to plan for the proper infrastructure because this infrastructure takes decades to develop.

Our transit systems used to use electricity. The transit systems still in use in Toronto to a certain degree operate on the electrical grid but it was more commonplace before. In fact the city of Windsor had the first electric street trolley. Ironically the oil and gas companies actually purchased a lot of those systems and eventually put them out of business.

We need green tax reforms. We need incentives so that consumers can purchase products with reduced taxation. We need incentives that will get the cleaner technologies on the streets so people see those things. We do not need a big bureaucratic structure. What we need is a reduction in taxes or an elimination of different services.

We need to facilitate the introduction of green products into society. Another good example would be the home wind energy products. There are solar powered shingles which are not affordable right now because they are not in mass production. I believe these revenue streams should be dedicated to lowering those costs so consumers can get them on the street and they can make a difference.

We have done that to some degree with automobiles. Provincially there was a tax rebate for cleaner technology, hybrids. It is not enough because there is still about a $5,000 difference in price for a cleaner vehicle, so it is not close enough. We have to narrow that gap. How do we narrow that gap? We need to have resources.

That is why we should kill this bill. We should stop it from going through. We should send a message that these revenues will go to building a sustainable economy, one that is healthy. In that way we will send a positive message to the world that we are moving to cleaner technology.

[Clifford Lincoln, Liberal, Lac-Saint-Louis, QC]

Mr. Speaker, this year there have been catastrophes of immense dimension in Canada. Forest fires of untold proportions raged throughout the summer in British Columbia and Alberta. We recently heard that the Ward Hut ice shelf off Ellesmere Island in the Arctic detached itself and broke up. This is an area the size of the island of Montreal which gives people an idea of its dimension. More recently in Nova Scotia, hurricane Juan created a path of tremendous destruction, uprooting trees that were 200 and 300 years old. What do those things have to do with Bill C-48? The relationship is simple; it is called climate change.

Yesterday during the vote on Bill C-48 my colleague from Davenport and I stood to vote against the bill. We did not do it lightly or lightheartedly. These were tough decisions which were not done joyfully. In fact we regret them intensely. However, as environmentalists, we feel very strongly that there is a total contradiction between the government's policy toward climate change and our commitments to the Kyoto protocol.

The objective of Bill C-48 is to further promote the non-renewable energy sector, mainly the oil and gas industry which is a huge contributor to carbon emissions. These changes directly contradict the recommendations of the OECD that preferential treatment for the non-renewable sector should be eliminated. The same recommendation was made in the 1998 report of the Minister of Finance's technical committee on business taxation.

The Department of Finance technical study dated March 3, 2003 justified additional tax cuts which led to Bill C-48. It is interesting to note that there was no reference at all to the environmental or social costs of extraction of resources.

I would like to quote some very startling figures. I can vouch that they are official figures. The Commissioner of the Environment and Sustainable Development stated that direct government spending on non-renewable energy has been $202 million a year. Over five years this amounts to $1 billion. Between 1998-2002, the oil sands tax expenditure was approximately $597 million, over five years. The oil and gas investment tax credit amounted to $128 million. Over five years this amounted to $640 million. Over the last five years approximately $2.9 billion has gone into subsidies to oil and gas, and Atomic Energy of Canada for nuclear power.

In 2000 the Commissioner of the Environment and Sustainable Development published a report on the energy sector. I would like to quote from section 3.86 in the conclusion of the report:

Two important ways to address climate change are using energy more efficiently and establishing a more sustainable mix of energy sources, which means a greater reliance on renewable sources. The federal government stated in its 1996 renewable energy strategy that it wants to increase investments in renewable energy. It has also said for many years that it wants Canadians to use energy more efficiently, and the Office of Energy Efficiency is currently promoting this goal.

It is also stated in section 3.68 of the same report:

The tax system does not give any preferential treatment to certain investments that improve energy efficiency.

In other words, we are loading the dice in favour of favourable tax treatment to the non-renewable energy sector, the fossil fuel sector, while not providing any favourable tax treatment to the renewable sector.

The same report mentions in section 3.36 the various types of federal support to the non-renewable industry the following:

Since 1970, the federal government has written off $2.8 billion of its investments and loans for energy projects in the non-renewable sector.

I repeat, $2.8 billion.

I get the very strange feeling that we are speaking out of both sides of our mouths. On one side we are talking about Kyoto and climate change, putting large amounts of money, $3 billion in the last two budgets, into energy efficiency, the reduction of fossil fuel consumption and a reduction of carbon emissions into the atmosphere. This is a good side of it. On the other side we are presenting Bill C-48 to promote the accelerated use of fossil fuel resources. It seems to me there is a total contradiction which I must say as an environmentalist I cannot support. In fact, this is exacerbated by the feeling that this is an industry with so much clout that it almost dictates policy.

The Prime Minister in relation to Kyoto wrote a letter to the oil and gas industry on July 25, 2003. One section of the letter states:

1. Other environmental regulations: The “business-as-usual” reference for intensity targets will take into account future federal environmental regulations. A consistent approach across all federal policies will avoid imposing a greenhouse gas penalty on mandated actions to improve environmental performance.

This letter almost gives carte blanche to the fossil fuel industry to go ahead and continue putting out carbon emissions, that there will be a cap of 15% put on reductions so that it will not be too drastically affected and it will be able to certainly respect it. The feeling is that we are really saying one thing and certainly acting, through bills like Bill C-48, very much in the other direction.

My colleague from Davenport, who stood with me yesterday to show our disappointment, displeasure and disagreement with Bill C-48, was recently at the International Energy Agency in Paris. He asked a question about the state of the world's oil reserves. They told him that if no new reserves were identified, the mid-depletion point for oil and gas would be about 2020. Then there would be sufficient reserves for another 20 to 25 years. In other words, it goes to show that our oil reserves worldwide are being depleted at a huge rate, considering that transportation and all other uses of energy are multiplying manyfold.

In regard to gas, the answer regarding the mid-depletion point was 2020, another 20 or 25 years. We are talking about results and targets that will fall in the lifetime of most Canadians. This is not something that is one, two or three centuries ahead. The mid-depletion is there, next door, in a few year's time. The depletion point for oil worldwide might be 2050.

What conclusion should we draw from this? The conclusion we should draw is that we do not say let us not use our oil resources. Of course not. We have to and we must. At the same time we are saying to the oil industry and to the government, surely a slower depletion rate would be far better for our economy and we could keep our reserves longer. At the same time, it would open the way for parallel stream which we must push with far more vigour.

We need a parallel stream of renewable energies, such as wind, solar, biomass and cogeneration. While we slow down the depletion of our oil reserves, we accelerate the pace of our renewable energies. When the oil reserves are depleted in 25, 30 or 50 years, we will have a thriving renewable energy sector such as is in the making in places like Germany and Denmark where wind power has become a very positive, constructive and important fact of life.

The Danes have made a policy to replace all their coal and oil energy with wind power in 30 years. It seems to me that we have to embark on an overall strategy, 25 or 30 years along, to put the accent more on favourable tax treatment in favour of renewable energies and to disfavour the fossil fuel sector so that it depletes itself far more slowly. Rather, we are doing everything to accelerate depletion and are giving more profits, subsidies and incentives to the fossil fuel industry.

I would like to quote from a text from Foreign Affairs of July/August 2003, by three highly credible Americans: Tim Worth, president of the United Nations Foundation and a former U.S. senator from Colorado; Boyden Gray, partner of Wilmer, Cutler and Pickering and served as counsel to former president, George H.W. Bush, the present president's father; and John D. Podesta, a visiting professor of law at Georgetown University Law Center and was chief of staff to former president, Bill Clinton. I recommend to my colleagues to read this article which is entitled “The Future of Energy Policy”.

I will quote from it. It states:

The time has come to craft a long-term, strategic approach to energy. A central feature must be public-private coalitions for change that bring together business, labor and environmental advocates. The first step must be to focus on what is important and define what needs to be accomplished. Three far-reaching, 25-year goals encapsulate America's long-term interests and should guide its energy policies.

First, America should address its dependence on oil by cutting U.S. oil consumption by a third, setting an example for the rest of the world and breaking the grip of the global oil cartel. Second, to take on the dangers faced by the world's climate, America should cut its carbon emissions by a third as a stimulus to a two-thirds global reduction by the end of the century. Finally, the United States should develop, deploy, and disseminate clean energy technologies and institute trade policies that can increase the access of poor people around the world to modern energy services and agricultural markets. Such moves will improve the lives of billions of people, stimulate economic growth and create new markets for American goods and services.

In the course of this article, it points out that in regard to energy, of which we consume far too much, of the six billion people in the world, two billion do not know what electricity is. We just flick a switch and put on our lights. We just get into our cars and they go. Two billion people in the world do not even have electricity.

In closing, I would like to also quote from the same article. It states:

A strategic energy policy will unite diverse political constituencies and forge common cause among stakeholders that are often at odds. The environmental community's objective is not to shut down coal, it is to shut down carbon; zero-carbon coal thus is something to agree on. The automotive and oil industries' objective is to not to prop up dictators in the Middle East or to sully the natural world, it is to provide a return to their shareholders; making fuels, cars, trucks and buses that are clean and profitable thus is something to agree on.

Most of all, a collaborative strategic approach holds out hope for ending dependence on oil, eliminating excess carbon dioxide emissions, and providing clean and reliable energy services and agricultural opportunity to the world's poor. The result would be to “hurry the future” by unleashing a torrent of innovation that will stimulate economic growth, create new jobs, improve productivity, and increase prosperity and security for the United States and the world.

These same words could apply to us here. It is not through bills like Bill C-48 that we will achieve this. With great forethought, a strategic policy that will look ahead and base itself on clean energies while depleting our fossil fuel reserves, which we need, with far less speed will achieve this.

I hope that many of my colleagues will join us in voting against Bill C-48.

Business of the House

[Don Boudria, Liberal, Minister of State and Leader of the Government in the House of Commons]

Mr. Speaker, I am very pleased to answer that question. I think it is an excellent question.

This afternoon we will continue with the debate on Bill C-48, the resource taxation measures. We will then turn to a motion to refer Bill C-38, the cannabis legislation, to committee before second reading. If this is complete, then we would follow with: Bill C-32, the Criminal Code amendments; Bill C-19, the first nations fiscal institution bill; and Bill C-36, the archives bill, if we get to that. There is some discussion going on about Bill C-36.

Tomorrow we will begin with Bill C-19, if it has not already been completed, and then go to Bill C-13. If we have not completed the list for today, we could as well continue with that.

Next week is the Thanksgiving week of constituency work. When we return on October 20, it is my intention to call Bill C-49 to begin; that is the redistribution legislation, for the benefit of hon. members. When that is concluded, we would return to any of the business not completed this week or reported from committee.

Thursday, October 23, shall be an allotted day. That is the sixth day in the supply cycle.

Income Tax Act

[Paul Crête, Bloc, Kamouraska—Rivière-Du-Loup—Témiscouata—Les Basques, QC]

Madam Speaker, I am pleased to speak on Bill C-48, which concerns primarily the fiscal arrangements for gas and oil companies.

In preparing my speech for debate at third reading, I found a very convincing article in the chartered accountants' magazine by Neil Smith, Senior Tax Manager of the core tax practice with Ernst & Young in Calgary. I just want to read one sentence from this article, which refers to the bill before us:

The release came on the heels of a significant lobbying effort by the resource sector for federal corporate tax rate reductions.

Clearly, in relation to this bill, the big winners are the oil and gas companies. They have recorded significant profits over the past few years. As a result of this legislation, they will be able to pocket even more money since the government has decided to lower their income taxes. This is quite mystifying because, at the same time that the Minister of Finance is telling us that he needs money and that he might not be able to provide the provinces with the promised funds for health care, he is giving away $250 million in tax cuts to the oil and gas companies.

Here are a few examples of what the oil and gas companies are experiencing, to prove that they are not living under the poverty line.

Petro-Canada's quarterly report to shareholders for the second quarter states:

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.

This is an initial impact of this new legislation, because it was implemented by a ways and means motion. Petro-Canada has already saved $96 million in the first quarter. As a result, Petro-Canada's taxes went down by $96 million. Petro-Canada is not about to go bankrupt; it does not have a problem with profits.

The oil and gas sector has recorded phenomenal increases in profits as a result of price increases. In early winter 2003, it was not certain that low-income and middle-income earners would be able to afford home heating oil. But Petro-Canada gets a little reduction in income tax worth $96 million.

In the case of Shell Canada, the quarterly report to stockholders for the second quarter, that is, the same period, says this:

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.

In the case of Petro-Canada, there was talk of $96 million; for Shell Canada, it was $54 million less in taxes. The quarterly report of Esso Imperial, another company that is certainly not suffering, reads as follows for 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.

Therefore, the three largest oil companies are declaring future additional profits of $250 million. During this time, there are people who will have trouble paying their basic expenses.

Today we heard a little good news: the federal government has decided to extend the transitional employment insurance measures for the Lower St. Lawrence and the North Shore. It has taken a year of struggle by the Bloc Quebecois to win on this point, which will enable people to have two, three or four additional weeks of benefits.

As for the oil companies, they do not face this kind of struggle. The government gives them, in a public bill, an extraordinary advantage.

That is why the Bloc Quebecois thinks that, in the end, there is no choice but to vote against this bill. The oil and gas industry will see its tax rate decrease significantly, while the federal government did not tax this decrease enough. There is no economic incentive for such an action. This industrial sector is in good shape.

In the meantime, the mining industry in Quebec is being penalized. It will be penalized by this same measure. People in the mining industry are not satisfied with the bill, because certain measures are not to their advantage.

The federal government implies that the new tax structure will be simpler because it will rationalize the way it is observed and applied, encourage investors and make the Canadian mining sector more competitive. But the mining industry, which is going to have to operate under this structure, 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.

In other words, the government is ramming this bill through so that the oil industry will get its money as soon as possible, while the mining industry—this affects Quebec in particular—is coming up empty handed. We are not prepared to vote in favour of such a bill. We need to be able to study it in more detail and try to find amendments that will satisfy this industry.

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. This is complicated, but what is important to note is that the mining industry is not satisfied and that this plan will not provide the desired advantage.

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 text I read earlier on royalties and energy said that the publication of these documents followed intense lobbying by the resources sector in favour of reducing the federal corporate income tax rate, and clearly showed that this would be profitable for the oil companies. However, for the mining industry, the comment to note is the one about how from a federal tax perspective there will be winners and others who are neutral over the phase-in period.

There are complications in this bill which disadvantage the mining sector. Corrections absolutely must be made and perhaps the bill needs to be returned to the committee to be put in proper form.

The proposed changes to federal income tax have some serious repercussions on many mining operations in Canada. This translates into heavier tax burdens, federal, provincial and territorial combined, at the expense of net corporate income.

A simple solution, proposed by the Mining Association of Canada, which benefits Canadian mineral and metal producers, would be to keep the resource allowance deduction, while dropping federal corporate tax rates from 28% to 21%. This would do away with the difference between the federal resource and non-resource income tax rates, without any need to change the provisions for revenues collected under the territorial and provincial tax systems.

While debating this bill, we have seen the new Liberal member for Témiscamingue announce—out of inexperience only, I hope, and nothing more—that he is in favour of Bill C-48, which hurts the mining sector. If there is one part of Quebec where mining is important and where there has been lobbying in favour of rules to accommodate the administration of this sector rather than the opposite, it is Abitibi-Témiscamingue.

The Liberal member has already taken on the behaviour of the Liberal members here, which is to act as the representatives of Ottawa in their ridings, rather than representatives of their ridings in Ottawa. One of his first such actions has been to vote in favour of a bill that hurts his own riding.

This bill also does a disservice to Quebec because of its unfair treatment of mining companies. As I said, it directly opposes the efforts by the Government of Quebec to revitalize that industry. Quebec has made efforts, and those efforts have just been cancelled out by Bill C-48. We have no more positive results, no advantages.

We now see a member representing this area who is voting for such a bill. I invite the new Liberal member for Témiscamingue to do his homework again, to reread the bill and to go back and consult the mining industry in his area.

When we vote on this bill at third reading, the member will have an opportunity to make amends, to change his behaviour, to really defend his constituents, here, in the House of Commons, and not simply be the federal government's mouthpiece, and to take measures that are beneficial for his region.

As a communiqué said, “this will give pause to those who believe that a Liberal member in Ottawa can defend Quebec's interests”, and, in this case, we have shown once again that it is not possible. It is as though when they get elected as Liberal members here, they lose contact with their region. And because of the bubble of Parliament, the bubble of government, the specific interests that they may have, their strong desire to maintain a good relationship with the government, with the government members, with the ministers, they start behaving in ways that do not serve their constituents. This is a clearcut example.

Bill C-48 gives effect to a legislated federal corporate taxation rate for resource income. This rate would be reduced from 28% to 21%. This is actually where the real tax reduction lies for the gas companies, and it comes at a time when we did not need such a reduction in revenues.

This bill also eliminates the 25% resource allowance, while the deductions for Crown royalties and mining taxes will be allowed as expenses. We are therefore readjusting or recalibrating the situation. From what we have heard so far however, it seems that the main result has been to allow the gas companies to collect an extra $250 million. During this same period, benefits were not passed along to the consumer in the form of lower gasoline prices. For the year as a whole, there was no significant reduction in the price of gasoline. The ultimate result is that the taxpayers' money was taken directly out of the federal government pockets. This creates an added pressure for the government to fulfill its obligations and we now hear the government say, for example, that it is not so sure if it will be able to meet its commitments for health care services.

We are noticing that in various areas of federal responsibility such as military equipment, soldiers are not being provided with adequate equipment. In the meantime, the oil companies are getting this great gift. In my opinion, that is simply unacceptable. That is why the Bloc Quebecois will be voting against this bill.

Allow me to quote again an excerpt from the official publication of the Canadian Institute of Chartered Accountants, which says:

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

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.

This basically means a tax reduction for oil companies but a tax increase for mining companies. That is what the bottom line will be, in reality, for our economy. That is dangerous indeed. It seems to me that the government could have taken the time to develop a tidier bill, because there are many ramifications in terms of provincial taxation. It varies from province to province. A balancing act will be required. At present, nothing guarantees that the system will provide an adequate balance that really meets people's expectations.

We have before us a bill that does not deserve to be passed as it stands. That is why the Bloc Quebecois will be voting against it. It is unfair to society and the balance of our tax system. It is also unfair to the resource sector because the mining industry is being penalized, while the oil and gas industry is benefiting. This is an incomplete job, which does not meet the objectives. For all these reasons, the Bloc Quebecois will be voting against Bill C-48 at third reading.

[Joe Comartin, NDP, Windsor—St. Clair, ON]

Madam Speaker, would the member for Davenport agree with me that, if there is this type of technology available, it would be better to have tax incentives going in that direction than the blanket format that is contained in Bill C-48?

[Joe Comartin, NDP, Windsor—St. Clair, ON]

Madam Speaker, I compliment the member for Davenport, who is also the chair of the Standing Committee on the Environment and Sustainable Development, on his speech and the rationale he used in speaking against the implementation of provisions that are contained in Bill C-48.

I want to pursue the question my colleague from the Bloc just asked but in a somewhat different tangent. If one were to use the tax system by way of subsidies and incentives to advance public policy, does the member have any opinion as to how that could be used with regard to the clean burning of the fossil fuel in the form of coal? Does he think that is possible? Does he know of any specific incentives that the government could put into place to encourage either research, development or actual implementation of clean burning coal technology, if that in fact exists in his opinion?

[Charles Caccia, Liberal, Davenport, ON]

Madam Speaker, one has to note the enthusiastic and overwhelming support for Bill C-48 by that great philanthropic party, the Canadian Alliance. The official opposition is very much inclined to support the bill, as was shown yesterday in the vote at report stage.

That party is opposed to Kyoto. That party by and large is opposed to social security reform. That party is opposed to strong federalism. The fact that the official opposition supports the legislation is a source of some suspicion. We would not want to prejudge it just because the support of the official opposition is there, but there are three very good reasons to reject this legislation and I will outline them one by one.

Bill C-48 aims at reducing taxes for the oil and gas industry. This raises the question, is the industry in trouble and does it need some help? If it were the textile industry, the shoe industry, or some industry in difficulty across the country one would understand, but why apply this form of tax relief to an industry which is consistently posting large profits and is likely to post large profits in the decades ahead? That is the question.

This brings me to the heart of the first reason. The industry has free access to natural resources which are extracted from underground. It extracts a resource which belongs to the people of Canada. This resource also belongs to the next generation of Canadians, and hopefully to generations to come. The time limit available for the exploitation of this resource is not that long. In return for this free resource the industry pays taxes. Those taxes go into the system that permits governments to do the good things that they do for the public from pensions to airports to other services which keep this country together and functioning.

Bill C-48 would reduce the taxation rate from 28% to 21%. The present rate of 28% has been justified over the years as a form of payment by this industry to the Canadian public. The idea of reducing the taxation rate from 28% to 21% is a good reason why the bill should not be supported. The tax rate should not be reduced.

There is another reason and it can be spelled out in one very short word. That word is Kyoto. It is important to briefly explain Kyoto because it has now become a buzzword that implies so much.

Canada, by virtue of ratifying that accord last December by a vote here in the House, which was opposed by the official opposition but supported by all other parties, is now committed to reducing greenhouse gas emissions. These are the gases produced when we burn fossil fuels, from petroleum to oil to gas and to coal. All the fossil fuels produce gases when burned.

Canada is committed to a reduction of 6% by the year 2012, which actually seems to be very little, based on our emissions in the year 1990. But because of the increase in our economic activity this needed reduction is not just 6%; it is estimated by our scientists that we need a reduction in the range of some 23% to 25%. It is a major undertaking, a major engagement, and not an easy one. Therefore, what follows is that if we pass any form of legislation in this House, we would want to pass legislation that facilitates, that makes easier, the achievement of the Kyoto goals.

Here instead, and this is the second reason for considering this bill not worthy of support, we are putting forward a measure that will make it more difficult to achieve the goals which the Government of Canada has set for itself by way of the ratification of the Kyoto accord last December, by way of a vote in this House of Commons.

The parliamentary secretary, when he spoke earlier on the bill on behalf of the Minister of Finance, made no reference to Kyoto and how the bill would affect the achievement of Canada's goal. This lack of reference to Kyoto disturbs me very much, because at least an explanation ought to be given as to why this measure is possible in the light of the commitment to the Kyoto ratification and the heavy engagement by Canada in reducing its greenhouse gas emissions. This bill instead is introduced as a measure to facilitate this particular industrial sector, with no reference, however, to the overall government commitment.

For this second reason, and there is a third one, I submit to you that this bill should die in the Senate. It should die because it runs counter to and opposes the achievement of a goal set by the Government of Canada and counter to its policy, which was decided by the entire government and by this Parliament by way of the vote I referred to earlier. Bill C-48 is an emanation of just one department, the Department of Finance. It is not the policy of the Government of Canada as a whole and, since it runs counter to that policy, it ought to be rejected for that reason alone.

Because as we can see, we have on the one hand the Government of Canada doing the right thing in ratifying the Kyoto protocol. It was a good measure. It was a good decision. In addition to that, the Government of Canada is investing over $3 billion, as of the year 2000, toward the implementation of Kyoto in order to achieve that distant and rather difficult goal. But then on the other hand, we see here a proposition in this bill that is aimed at reducing taxes on the oil and gas industry. This measure makes no sense, because it would stimulate and accelerate emissions of the greenhouse gases we want to reduce in order to achieve the Kyoto objectives.

Evidently the Department of Finance does not know that a major objective of this government is to cut greenhouse gas emissions.

Bill C-48 should not, therefore, be allowed to be approved in the other chamber because it is not in the public interest and because it runs counter to a key government policy.

Now we come to the third reason why the bill should be rejected. The reason is related to the depletion of global oil and gas reserves. What I am going to relate to everyone in a moment is the result of consultations with the International Energy Agency in Paris, which is an agency devoted to the study of energy and its production and the resources that are available to the global community.

According to the International Energy Agency, there is a depletion point called the “mid-depletion point” of reserves for oil, which is identified at the year 2020. In other words, in about 17 years we will reach the midpoint in the exhaustion of the global oil reserves. After that, one may want to ask, how much time is left? We are told by the same International Energy Agency that there are sufficient reserves for another 20 to 25 years. That brings us to roughly the year 2045. That is when our young pages will be in their mature years; they will probably have children and they will be looking forward to retirement.

This is the horizon being described by the International Energy Agency: by the year 2020 we will reach the mid-depletion point for oil and by the year 2045, roughly, we will exhaust the oil reserves. It could be 2050, but it is impossible to determine at this stage. There may be technological breakthroughs, yes, which may extend the depletion point perhaps to the year 2060, but we are definitely approaching within this century a point when the oil reserves will be depleted and we will reach the last drop of oil, so to speak, for use by mankind of this very valuable resource.

How does it look for natural gas? We are told that the mid-depletion point is a little better. It may not be 2020; it could be around 2050. But it is not very clear whether this calculation is accurate. It could actually be reached sooner rather than later.

To compress this particular report from the International Energy Agency, what we can say with a degree of certainty is that in about 50 years we will have reached the depletion point for oil as well as for gas, give or take perhaps a few years depending on technological advancement and the ability through technology to use better and more efficiently this specific resource so as to make it last longer. That is probably the whole purpose of having efficiency programs and efficiency research in the coming years: to make the resource last not for one or two generations but perhaps three.

However, as I mentioned earlier, the resource will be exhausted within a few decades. Therefore, we have to start planning for that time.

What is the conclusion, then, from this quick tableau I have painted for members in looking at the future? Looking at the future is always a very dangerous exercise, as we know, because one might be terribly wrong, but I do have to rely on the experts. On behalf of the public, we as politicians have to listen to the experts because they are the ones who spend their lifetimes on these matters.

It seems to me the conclusion would be that if anything we should be slowing down the exploitation of oil and gas resources rather than accelerating it. That is the logic of it all. We should not do as the official opposition, which is famous for its shortsighted policies, would do. We should not accelerate the process and produce more. Therefore the bill is out of sync. It does not fit into the long term picture that we are trying to come to grips with. That is our task as elected officials.

To conclude, there is also an economic consideration, that is, when we reach the midpoint for gas and oil around 2020 or 2025, this very same oil and gas will command a higher price on the market than it commands now because the supply will be reduced. Therefore, the returns will be greater for future generations if we postpone the exploitation of this resource for their time rather than taking advantage of it now. I hope we can see the economic logic of this kind of reasoning.

There are many reasons converging to force one to conclude that a measure to reduce the taxation of this particular sector is not desirable.

I will conclude briefly, as my time is up. It is therefore in Canada's interests to exploit carefully its natural resources and to make them last as long as possible. In this particular type of industry today, the earnings are high. We can see them in the business section of newspapers. The profits are also high. So then the question arises, why reduce taxes? Why forego a revenue that is estimated by some writers at $260 million? Why move in a direction that is counterproductive and out of sync with the overall approach of the Government of Canada? The approach has been a good one, namely, ratifying Kyoto, which is the basic, fundamental and most difficult sustainable development issue we have ever encountered and which is standing before us as a very difficult challenge to overcome.

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

Madam Speaker, it is with great pleasure that I listened to my colleague from Drummond. She spoke rather eloquently to a number of aspects of Bill C-48.

I am thinking in particular of the fact that this bill reconfirms and renews the Canadian policy of financing the oil and gas industry in Canada. This $250 million exemption for the oil industry only confirms what was announced. We must remember that throughout Canadian history, major oil companies have received substantial benefits and funding for structuring development projects.

Just think of the Hibernia project in eastern Canada, which was developed using the taxes of Quebeckers in a polluting sector, when the hydroelectric system in Quebec was developed using the taxes of Quebeckers, and only theirs. No funding came from Ottawa. At the same time, Ottawa was funding polluting projects and granting exemptions to the oil industry. That is totally unacceptable.

I am having a hard time understanding certain members opposite. I am thinking of the hon. member for Abitibi—Baie-James—Nunavik, among others, who is supposed to be defending the interests of the regions, his region and riding in particular; he can see that, indirectly, this bill is very unfair to the mining industry.

In this respect, I question the sense of duty, responsibility and commitment of some parliamentarians in this House, whose sole duty—especially as MPs representing the regions, and remote regions in particular—is to defend the interests of their regions. Some members do not even stand up in debates as important as this one, and will very likely vote in favour of Bill C-48. We have a duty in this House, and this duty is to, at the very least, condemn the lack of responsibility of colleagues who think they are defending the interests of their ridings.

I would therefore like to know what my. hon. colleague thinks of these Liberal members who are supposed to represent the interests of Quebec, at least they often claim to be defending the interests of their region; yet they are about to vote in favour of a bill that creates unacceptable inequities affecting industry sectors such as mining while they sit there and say nothing. The only time they will stand up in the House will be to vote for Bill C-48. What does she think of the attitude of these members?

[Pauline Picard, Bloc, Drummond, QC]

Madam Speaker, that really takes the cake.

This is the second time that I speak on this bill, so I know it. I also know it because I took part in the work of the committee and in the clause by clause study.

Despite the progress that has been made, Bill C-48 is still unacceptable to us, in the Bloc Quebecois.

The main irritant in this bill is nothing less than the $250 million gift the Liberal government and the future leader of that party are on the verge of giving to major oil companies.

People who are watching us must fully understand what the bill means. The government wants to provide a $250 million tax cut to Canadian oil companies. This is an untimely gift, since we read in the newspapers yesterday that the current Minister of Finance is warning the provinces that they will not receive the health funds that they were expecting from the federal government.

Today, the same minister is saying that he will not put one cent more into the equalization system. The Minister of Finance has started to set the stage for the economic update that he will be tabling next month. How can the Minister of Finance talk about situations that have had a bearing on the economic performance of his government, while at the same time supporting a bill that would mean much less money flowing in the consolidated revenue fund?

What are the Liberal government's real intentions? There is no money to finance health care in the provinces, but there is money to give to the oil companies. This two-headed government does not have priorities anymore or rather its priorities are not the same as those of Quebec and the other provinces. Why is the Minister of Finance not giving Quebec the financial instruments that it needs to carry out its responsibilities?

The Minister of Intergovernmental Affairs, the great provincialist, said earlier this week:

The Government of Canada is doing its best to help the provinces live through difficult times.

The best his government can do seems rather limited. In fact, it only does its best when it is a question of continuingg to build a centralizing government that is literally crushing the other governments within Confederation. Such an attitude is an argument for rejecting Confederation in favour of Quebec sovereignty.

The Liberal government in Ottawa is willing to give a gift worth $250 million to the oil companies, which rack up huge profits, while it is hinting that it might not have enough money to give to the provinces for health care as promised. Such arrogance is beyond words.

If the Liberal government goes ahead with its plan, Quebec stands to lose $472 million. Investing in health care benefits Quebeckers and Canadians as a whole. On the other hand, Bill C-48 will only benefit oil companies. There is no sense of proportion. I hope that the member for Témiscamingue, the member for Abitibi—Baie-James—Nunavik, or both, will understand that by voting in favour of this bill they are going against the best interest of their regions.

The comments made Tuesday in the House by the Minister of Finance on Bill C-48 are not consistent. During question period, the minister said that he had to deal with a slowdown in the Canadian economy. How then can he agree to forfeit $250 million in revenues?

The Liberal government, both the current government and the parallel government headed by the member for LaSalle—Émard, is financially strangling the provinces. That way, they give themselves leeway to then invest in areas under provincial jurisdiction.

The provinces are bled white, forced to their knees, and money is rammed down their throat to meet the needs of their people. Then the government creates programs, lots of programs, and eventually withdraws from them. This is how it has been since 1993 when I first came here. That is how this government behaves. It creates programs and interferes in areas of provincial jurisdiction. It creates needs, and then it withdraws. This is what I call arrogance.

All of the provinces are headed for a deficit. Liberals can criticize the PQ's management, but the facts speak for themselves. The PQ was not the government in Manitoba, British Columbia or Ontario. Yet, these provinces are running a deficit. Liberals should change their tune or find new speech writers.

By providing a tax reduction for an industry that does not need it, Bill C-48 shows how leeway the government has.

While Liberals in Ottawa give to the rich, they continue to take from the taxpayers. This is further evidence of the existence of a fiscal imbalance. However, the people across the way continue to deny it. The intergovernmental affairs minister, the finance minister and all those yes men sitting on the back benches continue to deny the existence of a fiscal imbalance.

There actually is a fiscal imbalance, and it is a brutal reality. We can see its impact throughout the country. The Bloc Quebecois has been condemning this situation for quite some time, whatever certain reporters claim. The PQ also did it in Quebec City, the ADQ also recognized this reality and the whole civil society agreed with the Government of Quebec.

The best part of all this, however, is that sovereignists on one side, and Jean Charest's provincialists on the other, agree to condemn the fiscal imbalance. The current Liberal finance minister of Quebec, Yves Séguin, headed a commission that came to the conclusion that there was a fiscal imbalance and that it had existed for years.

When the Liberals were elected in Quebec, they tried to convince the public that things would change and that relations would improve. It was total hogwash. The fact of the matter is that a change in leadership, whether in Quebec City or in Ottawa, will do no good. The would be leader or parallel prime minister continues to deny the existence of a fiscal imbalance.

The Bloc has always taken an active part in parliamentary debates, and it also makes every effort to properly inform the public about all issues.

Today's newspapers have published a letter on Bill C-48 signed by my colleagues for Rosemont-Petite-Patrie and Joliette. If I may, I would like to quote excerpts:

Since 1970, the federal government has contributed more than $66 billion in direct grants to the hydrocarbon industry (oil, gas and coal), notably with the Quebec taxpayers' dollars. This huge sum of money has allowed Alberta and Ontario to develop highly polluting oil and coal industries. In the meantime, Quebec developed its hydroelectric network, a type of clean energy, and did not receive a dime from Ottawa. This is just one more example of how Ottawa ignores Quebec's interests.

But now, In addition to harming Quebec's interests, the help Ottawa has provided the oil industry goes against both the spirit and the letter of the Kyoto protocol, as well as its objectives. That is what the Liberals and the member for LaSalle—Émard have done by voting for Bill C-48, a bill that provides a $250 million tax break to Canada's major oil companies.

After debate at second reading, an article in the Ottawa Citizen on October 1 condemned the hypocrisy of this government, which, on the one hand, supports the Kyoto protocol and boasts about making the environment one of its priorities while, on the other hand, it blithely supports the development of polluting energies.

I will paraphrase what Matthew Bramley, an environmentalist with the Pembina Institute, was quoted in the Ottawa Citizen as saying that, to be truly equitable, “you'd make the polluting sectors pay more to compensate for the damage they do”. Instead, we have a government that wants to reduce the burden for the oil industry, which is an attitude, understandably, that will be well received by Albertans.

Mr. Bramley predicts that the new Liberal leader will not change anything, since he will need to entice voters from the west.

I have a number of questions and I would like to hear what the member for LaSalle—Émard has to say.

How can the Liberals and their future leader claim to be concerned about the environment and, in the same breath, make sure that the big oil companies enjoy such advantages, while this industry is drowning in profits and ravaging the environment? Why is that $250 million per year not being offered to the wind power or hydroelectric industries, which produce clean energy?

I am eager to see the member for LaSalle—Émard come out of his burrow to answer our questions. There are more urgent things to do than organizing parties with his supporters and there are issues on which he should speak. The public ought to understand what an immense slump it is going to find itself in, with a future prime minister whose decisions have a direct effect on the bank accounts of his businesses.

Bill C-48 is an illustration of the patent conflict of interest in which the member for LaSalle—Émard finds himself. One of his companies carries coal; it works with the petroleum industry. Worse still, the future prime minister is himself a stockholder in an Alberta oil company. That is too much. I hope that the hon. members on the benches opposite will wake up and see reason.

I talked very little about the consequences of this legislation on the mining industry. This bill does not treat mining companies equitably and undermines the Government of Quebec's efforts to revitalize this industry. This should worry the people of Abitibi-Témiscamingue, a mining region that just elected a Liberal member who voted in favour of legislation that directly contradicts the interests of his own region. This should worry those who think that a Liberal member in Ottawa can defend Quebec's interests. In fact, the Bloc Quebecois is defending Quebec's interests in Ottawa, whereas the Liberals are defending Ottawa's interests in Quebec. Bill C-48 is proof of that.

Representatives of the mining industry came before the Standing Committee on Finance to express their opposition to this legislation.

Pierre Gratton, the Vice-President of Public Affairs and Communications for the Mining Association of Canada, indicated that several provinces had established their tax rates according to the federal system implemented in 1974. He said that this bill will increase the taxes of certain companies.

We heard the comments of Frédéric Quintal, spokesman for Essence à juste prix, who told the committee that:

With this accumulated debt of over $500 billion, can our government afford a tax gift to the richest industry in Canada? We are not talking here of an industry in difficulty, not the Canadian beef, softwood lumber or airline industry, but the richest industry.

Then, in response to our questions in connection with what he said about the tax relief to the companies never making it down to the pumps, and thus having no effect for consumers, he added:

No, it will just mean additional profits or the oil and gas companies, three of whom—Esso, Shell and Petro Canada—have in the first six months of 2003 already gone 242% over the net profits for the entire year, twelve months, of 1999. And that was already considered a very good year. I feel I must point this out.

So that is the situation. On the one hand, we have a government complaining about having to bear the brunt of an economic downturn, which allows it to continue to maintain a stranglehold on the provincial governments, while on the other hand we have that same government wanting to give a tax break to the huge, and hugely wealthy, oil and gas companies.

In conclusion, since this bill is not in the best interests of the entire community; since this bill blocks the efforts being made by Quebec to make mining investment more attractive; since this bill moves us far away from the principles of the Kyoto protocol as far as environmental protection is concerned; since this bill ipaves the way for the parallel prime minister to win over the west, I, as a Quebecker, a member of a party defending the interests of Quebec in this House, and a sovereignist, am opposed to this bill.

[Guy St-Julien, Liberal, Abitibi—Baie-James—Nunavik, QC]

Madam Speaker, I wanted to raise a point of order on a matter of interpretation. The hon. member said we were not there, at committee. That is incorrect. We cannot be everywhere at once, and there are many committees of the House of Commons. Often, Bloc Quebecois members travel around the world and cannot attend committee. We do not mention it in the House. They are travelling. I am the only member not to have travelled abroad. I want to make that perfectly clear.

The hon. member mentioned the $250 million for oil companies. Well, let us talk about oil and this $250 million. There are two provinces in Canada with an energy authority These authorities set the floor price for oil. We cannot talk about oil without talking about the people who put regular gas in their vehicles. As we know, recently in Ottawa, gasoline has been selling for 66.4¢ per litre, while in the Abitibi, it is selling for 74.9¢; in Kuujjuaq, regular gas is selling for $1.22 per litre. Who established an energy authority for oil in Quebec? The PQ did, when it was in office. It should not have. It should have gone the way of the free market instead. Our gasoline price would be closer to Ontario's 66.4¢, instead of 74.9¢.

Let us look at the bill as it stands. The Bloc Quebecois contends that we did not adopt the amendments put forward. There are no amendments before the House at this time. Bill C-48 is. We all have respect for the Quebec Mining Association, the Mining Association of Canada and prospectors. We win some and we lose some; it is 50-50. But the hon. member mentioned rates. The Bloc said, “We support the mining association for 20%”. That is incorrect; what the Bloc proposed was 10%, then 14% and 20% thereafter. They should switch gears, because we are not debating amendments today.

I support the legislation in order to get at least 50%.

[Pauline Picard, Bloc, Drummond, QC]

Madam Speaker, Bill C-48 has been under review for a long time and witnesses have appeared before the committee, representatives from the mining industry, among others. The most frustrating thing about this bill is that it gives $250 million to the major oil companies.

When the mining associations appeared before the Standing Committee on Finance to talk about their problems and needs, I am sorry to say that the members for Abitibi—Baie-James—Nunavik and for Témiscamingue were not there. Today it is all well and good to—

[Some hon. members]

Oh, oh.

The people trying to interrupt me ought to ask themselves this: How much is it going to cost the taxpayer? We know that year one will cost about $100 million, and the others $35 million. It will come close to $1 billion, all told.

I understand that this is not firearms, or sponsorships, but money is important. We know that, if the government sits down with the Mining Association of Canada in the nest few years, it can come to the House of Commons with an order in council to improve it. This is a start, a half-measure compared to the Bloc Quebecois proposal, of 10% only the first year, not 20%.

This sets the facts straight, and it is important to do so, because no amendment has yet been proposed. I support the bill because we must not lose it. We must at least gain what the government is proposing. It is new, and important.

A careful examination of the record will show that we have always supported the Mining Association of Canada, the Quebec Mining Association, and the prospectors of Quebec. Bill C-48 will impact small mining operations and major mining companies differently.

The small mining companies are resource extraction industries that do not do any mining exploration. This is a grey area, as it were, because some small companies operating a mine could still be considered small mining companies. Five percent is a good start, even if we would have liked to get 20%. We are going to work in that direction with this Minister of Finance and with the next one.

As to the present situation in the mining sector, the fiscal aspect is not the only important thing to consider. I just received a report dated September 2003 concerning the mining industry in the Abitibi-Témiscamingue area. I hope that the Bloc members have a copy of it handy because it is the last document that we have received. It is a document written by Luc Blanchette, a well-known economist from the Abitibi-Témiscamingue region, explaining what is happening in that sector.

The fiscal angle is not everything. We know how important the mining industry is for the economy of Abitibi-Témiscamingue, of the whole northern region and of Nunavik. We also know the economic and environmental context in which it is operating.

Moreover, the low prices of metals have caused the temporary closure of some mines or the postponement of some mining projects. We all know what is happening now. Some mines are closing and others are opening. New projects are being developed. But what can we, together with the opposition members, do in the long term?

The revival and mineral exploration in northern Quebec, in Nunavik and in the Abitibi-Témiscamingue region will come about through better defined mining zones, mapping and the search for economical sites. The investments made in 2003 will no doubt depend on the price of the metals in demand and will certainly be influenced by the price of gold and, as we know, the diamond situation.

What matters most are the consequences of that politico-economical context, which have been apparent since 1988. They did not suddenly crop up today because of Bill C-48. The very first year, instead of accepting 10% or 14%, the Bloc Quebecois should have asked that we follow up on what the Mining Association of Canada had requested and that we go for 20%. They too accepted a halfway compromise. When this government came to power, the amount was already down to 5%.

Among the consequences that we have seen since 1988, there is a 46% decline in labour and a 44% decrease in the number of hours paid by the mining industry in Abitibi-Témiscamingue. We know that, in Quebec, although the impact on employment was still significant, it was not as great, with a 33% reduction in the number of hours paid and the number of employees.

Given that approximately 20% of all mining operations in Quebec take place in Abitibi-Témiscamingue, the decrease observed at the provincial level is probably due to the poor performance of the regional mining industry.

What do we do now? I will be supporting Bill C-48. I come from a mining area and I used to be a miner myself. It is good to have gained something. It is also something new. Reducing the tax rate applicable to corporations was not an issue before. But it is important, just as it is for the corporations to set up their headquarters in our region instead of Montreal or Toronto, where they are currently located.

We have to work with the current government and the governments to come to find solutions and improve the situation. We will see how things go in year one of the implementation of this bill, which provides for rates of 5%, 7% and 10% for the next five years. These rates could increase in every budget. In the next budget, the government might raise it to 10%, as the Bloc Quebecois asked for in committee. It could happen. We just have to wait and see.

What is important right now is to help our mining companies. Some companies are closing down in our region and more could do so in Abitibi-Témiscamingue in the months to come.

We need to go forward, work hard and work together. We cannot have our cake and eat it too, and the picture drawn by the renowned economist, Mr. Blanchette, reflects the real situation in the mining industry.

Members of Parliament do not create jobs. It is important also to think about the miners who work underground. The PQ government never agreed to set up a retirement plan for miners. If we can introduce tax credits for mineral exploration activities, then we should be able to help the miners who work underground. The PQ made that promise during the 1973 election campaign, but never kept it. The government should address this issue and think about setting up a pension plan for miners who need it when mines close down.

[Guy St-Julien, Liberal, Abitibi—Baie-James—Nunavik, QC]

Madam Speaker, I am honoured to speak on behalf of everyone in my riding, of the miners, mining companies and small mining businesses throughout the vast territory of Abitibi-Témiscamingue, Chapais-Chibougamau and James Bay, and on behalf of the James Bay Cree and the Inuit in Nunavik. The riding covers about 850,000 square kilometres in Quebec and is the biggest mining riding in Canada.

I listened to the Bloc Quebecois member who said that noboby had had spoken out. I find this passing strange, because I have documents from the finance minister dated February 2002. It is the answer of the hon. member for LaSalle—Émard to one of my letters. Back in 2002, I asked for a reduction in the general tax rate of mining companies.

We knew that the tax rate for small businesses was supposed to drop from 28% in 2000 to 21% in 2004. This goes to show that we are concerned about the same issues.

Coming back to the mining industry, a story by Juliane Pilon was published in La Dépêche , a paper belonging to Jacques Aylwin, under the title “Decline in the Abitibi-Témiscamingue mining industry”. It said that rates go up, then go down, and may well remain low. That is what we should be promoting.

The Mining Association of Canada wrote us to enlist our support for an amendment to Bill C-48. I note, however, that none of the proposed amendments has been adopted and the Bloc Quebecois did not get anywhere in committee. The Liberal member who spoke earlier has summarized the entire situation very well as far as what the mining association was calling for is concerned. The same thing is happening back home.

If, however, we examine the facts, we know that the federal government is proposing a new rate: 5%, then 7%,10%, 10% and 10% until 2007. The mining association asked us to support 20%.

I listened carefully to the Bloc Quebecois member for Joliette, who said that they too support the Mining Association of Canada. What I find strange is that this is not what they proposed in the standing committee. Their proposal was 10% the first year, followed by 14% the second, and 20% thereafter. I find it odd that the Bloc Quebecois did not call for 20% right off the bat, instead of going from 10% to 14% and finally to 20%.

[Joe Comartin, NDP, Windsor—St. Clair, ON]

Madam Speaker, I wish to thank my colleague from Windsor West for his questions. I will try to deal with them as efficiently as I can.

The vote on Bill C-325 last night was a tragedy from the perspective that it lost by only three votes. It was 99 to 96. We were recommending income tax deductions for emergency workers and people who provide emergency services to protect us from fires. Most of them come from rural areas. The government opposed it. Overall there were a number, and I will give them credit for it, of members from the government side who voted in favour. It brought us really close but did not quite get us over.

It is a pittance compared to what we are talking about in Bill C-48. Our estimate is that probably over the first five years of these incentives it will be at least a billion and probably closer to a billion and a half dollars. In terms of those emergency workers, I do not know if we would have got up to a few million in terms of the break we were trying to give them and in effect saying to them that as a government, as a Parliament, as their elected leadership in the country, we prize what they were doing for us. The message they got yesterday was obviously that we do not.

We are going to hear if the Deputy Prime Minister and Minister of Finance says that he cannot afford the money that has been promised to the provinces for health care when he makes his financial statement in November.

We look at that and see that we cannot find that $2 billion, but we can find this for a very profitable industry. We then say to the minister that this industry is a polluter and that it should be paying its share. It should not be getting tax breaks. On the other hand, the government will say it cannot find money for health and will stick it to the provinces. They will have to find ways to deal with all the health problems that have been specifically created as the result of the burning of fossil fuels. It is terrible policy making on the part of the government.

As for the consumers getting the money, it is obvious they will not. There have been any number of other times when these tax breaks have been given and incentives provided, but did we see a reduction to our cost at the gas pump or the cost of home heating fuel? The obvious answer was, no. We did not get any of those breaks. The government stayed with the companies with their high-paid executives and money going to the shareholders.

On Kyoto and the marketing issue, I am really happy to hear that question because I have not had the opportunity to raise it in the House. We had the Kyoto announcement of spending about a billion dollars at a press conference attended by the Prime Minister, the Minister of Industry and the Minister of the Environment.

We have this retrofit program. The government has set aside $75 million. Everybody in the country who knows anything about it has told the government it is nowhere near enough. It also set aside $45 million to educate Canadians. That is an insult to Canadians.

Canadians led the fight dragging and kicking the government behind it to finally ratify Kyoto. We had people in the country in the ratio of 65% to 75% saying they were convinced that we had to ratify Kyoto and they finally got the government to do it. Now, is the government going to tell them what they have to do to implement around retrofit programs in their own homes and conservation? They do not need the education.

This is going to be another one of those boondoggles. It is going to be money going to the friends of the government to run absolutely useless education programs, promotional programs for conservation and doing retrofitting. It is not necessary. The dollars that need to be spent on that are probably a small percentage of the $45 million that has been set aside.

[Joe Comartin, NDP, Windsor—St. Clair, ON]

Mr. Speaker, as I prepared some notes for my talk today, I could not help but feel like I was sort of in a surreal situation.

We have this bill before us which will give further tax breaks to the fossil fuel industry, the mining industry, the concern there being, particularly from my perspective, the coal mining industry. It would reduce the tax level and give a tax credit over a period of years. We have to juxtapose the bill before us for third reading today with what is going on in this country and in the world.

I come from an area of the country where we have major health problems, a great deal of which are directly related to the burning of fossil fuel, whether it be exhaust from cars or the coal-fired plants in Ontario and, more specifically, in the midwest of the United States that ends up being dumped into my area.

We also have to put it into the perspective of the Kyoto agreement, which the Canadian people finally pressured the government into ratifying at the end of last year, and, in the context of that, the overall natural environment of the country. We know from lots of studies, but most recently just in this last week from the Conference Board of Canada, how badly we stack up compared to other countries around the globe.

The Conference Board of Canada did an assessment of the 24 leading industrial countries in the world. Where do we stand on carbon dioxide, the direct result of the burning of fossil fuel? We stand 24th out of 24. We are dead last. We are also near the end in a whole bunch of other greenhouse gases. We are in the 21, 22 and 23 range in each one of those areas.

What we hear of course, and I think we heard it from one or two speakers on the government side, is that we have to keep doing this to keep the economy going. The Conference Board of Canada is not exactly a flaming environmentalist organization, but it makes the point, and I quote from the report that was issued this past week:

Environmental progress need not come at the expense of economic gains, as many believe....

The board goes on to say in a summary:

Many of the countries that lead the environment list also make the top 12 in the economy category.

What it is saying is that there are countries around the globe, in that 24 grouping of the top industrialized countries, that have a high performing economy, that do well for their people, that have high incomes and a corporate world that does well, and at the same time protect their environment. We do not have to play one off against the other. With good economic policy, with progressive, forward looking economic policy we can accomplish both. We can take care of our natural environment. We can take care of the physical health of our population, and at the same time run a vibrant, strong, healthy economy. The two are not mutually exclusive at all. That is the Conference Board of Canada talking.

Back to the context. We have Bill C-48 which would give more breaks to the fossil fuel industry, and we have it in that context of just how poorly we are doing as an industrialized country around the globe.

Let us look at the specifics of what we are doing. This week the Green Budget Coalition came forward and made a presentation, as it has every year for the last seven or eight years, to the finance committee and, in fact, indirectly to the finance department, on how we green our economy and, more specifically, how we green our budgetary process.

I will quote some of the statistics in its brief that it left with the committee where it talks about fossil fuels and takes a slice of the history. The brief states:

Cumulative direct Government of Canada spending on fossil fuels between 1970 and 1999 totalled $40.4 billion. In addition, $2.8 billion in federal loans to fossil fuel industries have been written off since 1970, over and above direct spending.

We are at $43.2 billion over the last 29 years and that has continued for the last four years, bringing us forward to the kind of incentives we are now increasing to that industry.

The brief juxtaposes it again to put it in some kind of context. It states:

For the period 1987 to 1998, total government support for energy investments totalled $4.3 billion for non-renewable energy and only $118 million for renewable energy.

That is a travesty when one looks at those results that we see all the time, the reason we needed to ratify Kyoto and the numbers that we see from the Conference Board of Canada.

I will repeat that: $4.3 billion over that 11 year period from 1987 to 1998 for non-renewable energy, all of it going to the fossil fuel industry and the nuclear industry, and only $118 million for renewable energy. Whether it be wind, solar, current, wave or even hydroelectric, it was only $118 million, which is just a little over $10 million a year. In the same period of time billions and billions went to the non-renewable energy sector.

In the brief there is a whole policy on to how to deal with budgetary matters, how to green the budget and how to green the economy from a tax, tax incentive, subsidy based, taking all those into account.

In spite of the previous reports the coalition has filed with that committee and with the finance department, as we heard from the parliamentary secretary today, I do not think he even understood the work it has done. I think that is a fair categorization of the response I received from him at that time.

Let us put into perspective how the fossil fuel industry has performed. It was interesting to listen to my colleague from the Conservative Party. I have no apologies to give as a member of the NDP on protecting jobs. Let us look at this industry. Since 1990 this industry has terminated the employment of some 80,000 people.

I know some members will jump up and say that we are just worried about union jobs. Very few of those were union jobs. The vast majority, about 60,000 or three-quarters of them, were as a result of the shutdowns of small companies, retailers in the oil and gas industry. The industry just put them out of work and took them over itself.

Those were small employers with five, ten or twenty employees, either full time or part time. Industry just wiped out 60,000 jobs in that sector, but what is being done? The government is continuing with a government policy to subsidize that industry.

Let us take a look at the consequences of these measures of reducing the effective tax rate from 28% to 21% and giving that 10% tax credit. Just three of the big oil companies, not all of them, but Petro-Canada, Shell and Esso, have already forecast that they will save $250 million a year. That is how much of a tax break the government is giving these companies. Over the five year period, it will be some $1.25 billion. That is how much the savings will be just for those companies.

These companies are already making profits. If we look at their profit for this year we will see that these companies are making profits. One company's profit is $100 million. One is up to $200 million. In fact, in some cases those are quarterly profits. We will see much higher ones over the course of this year, especially when we add on this subsidy.

What does all this get us? As consumers, have we seen rates go down at the gas pumps? It is almost a joke to raise the question given what has transpired through the summer and the early fall. We have seen the price of fuel go up dramatically at the pumps. For those who are on fixed incomes, the price of home fuel in particular has gone up by a tragically high amount.

We do not see those benefits passed on to the consumer. Do consumers benefit from these tax breaks? No. Does the environment benefit? Obviously not, given what is happening, nor does human health in this country. Are we somehow giving an advantage to the renewable energy sector? Again the answer is no.

Bill C-48 is being shoved through the House with the government and the official opposition supporting it in the face of that reality I have just detailed.

I will cover one more point which I heard again from the government side as some justification for this: that we have to be internationally competitive. Let us look at the result. Let us look at the effect of these tax breaks for this industry. In regard to our closest competitor, the United States of America, specifically the state of Texas, and the effective current rate of tax for the fossil fuel industry, right now our tax rates have us about 5% below the state of Texas. That is right now, before Bill C-48 is passed.

If Bill C-48 passes the industry would effectively be paying 41% in Alaska and 35% in Texas. In Canada we would be down to 30.1% across the country. This is effectively where it will end up.

Therefore, we cannot argue that this is a competitive advantage bill, that this policy somehow will make us more competitive, because we already are in that situation. Right now we are competitive with our major trading partner.

This would not help us with a competitive advantage internationally. It would not help consumers. It would not help the environment or our personal health, and it certainly would not enhance the production of energy from renewable energy sources.

It begs the question, why are we doing this? It was interesting to read the newspaper article by Susan Riley last week in the Ottawa Citizen . The headline was, “While you're not looking, Big Oil is set to get a big tax break”. As opposed to a number, the editorializing in that headline is pretty accurate.

In that article, a couple of members of Parliament are quoted as saying they were under tremendous pressure. One is from the government side and one from the official opposition and they say they have been under tremendous pressure since the year 2000 to get these breaks for the oil and gas industry.

That is really the answer to my question about why we are doing this. We are doing it because the industry asked for it and because, since the second world war, whenever big oil has asked for a break, it got a break.

That has resulted in the situation we have in my home community, where we have high rates of cancer and other high rates of illness and disease directly related to the consumption of fossil fuels. It has resulted in the international need for Kyoto to get those reductions we need in the emissions of carbon dioxide into our atmosphere. It has resulted in very high energy costs, whether for home heating fuel or to power our motor vehicles.

It is a policy that has failed from every aspect. What Bill C-48 is doing is perpetuating the economic system that is the underpinning for that industry.

It is time for this government and this House to take seriously our responsibilities under Kyoto and to take seriously what we are hearing from environmentalists and progressive economists about what we can do to reduce those subsidies to the fossil fuel industry, to phase them out. Because we have to do that. We do not have enough oil and gas to continue our consumption beyond somewhere between 2030 and 2050 at the rates at which we are consuming now. We simply cannot do it. The supplies are not there, anywhere in the world. We need to change that policy. We need to phase out that industry.

In order to do that, we must have a comprehensive policy initiative in the tax field. We cannot do this just by signing on to an international protocol like Kyoto. We do have to do that, but then we have to implement. That does not mean just starting a retrofit program, which we need to do in Canada, and not just doing a conservation program, which we also need to do. In addition, what is sorely lacking in the Kyoto plan, and we see that with the bill, is any concept from the government about understanding the need to reform our tax structure. We have to reduce the incentives provided to the fossil fuel industry, on a gradual, phased out basis, and replace them with incentives, tax breaks and subsidies for the renewable energy sector.

[Rick Borotsik, Progressive Conservative, Brandon—Souris, MB]

Mr. Speaker, the most intelligent thing I have said was that the government historically has not been very successful in managing other portfolios. It has not been very successful in managing departments. The list is endless. There are too many other things that we could add to the list, but Bill C-48 is not one of them.

I stand on behalf of my colleague from Kings--Hants on this piece of legislation. The Progressive Conservative Party will be supporting Bill C-48 simply because of the equality that is necessary in the sectors.

It is absolutely vital that we continue exploration in the oil and gas industry. It is absolutely vital that we encourage that exploration to continue. Bill C-48 is a way of doing that.

It is absolutely vital that the revenues that are generated are part of Canada's economy, part of our GDP. Our quality of life depends on it. I know the NDP would like to nationalize just about everything that we have, but that is not philosophically the way we should be going in this country. Bill C-48 will make it more fair with the tax rates that will be put into place.

We in the Progressive Conservative Party will be supporting this piece of legislation.

[Rick Borotsik, Progressive Conservative, Brandon—Souris, MB]

Now I am even getting heckled from the government side, Mr. Speaker. However those members should be our friends on this issue because Bill C-48 has to go through.

[Rick Borotsik, Progressive Conservative, Brandon—Souris, MB]

Mr. Speaker, I am pleased to speak at third reading of Bill C-48. My colleague the member for Kings--Hants has had carriage of this piece of legislation. He is now with the finance committee somewhere across the country and it has fallen to my delicate hands to take it to the next stage.

Our party will be supporting Bill C-48. I appreciate that the members from the Bloc, and certainly the member speaking after me from the NDP, have different philosophical positions with respect to business management and labour. Certainly their philosophical positions will come out in their opposition to this piece of legislation. The NDP and the Bloc make no bones about it that they are not friends of industry. They are not friends of business. They are not friends of being able to generate the economy in the natural resources sector.

I appreciate my colleague from the Bloc helping me in protecting Manitoba with respect to this legislation. He indicated many times that Manitoba would be the net loser should this bill go forward. I do not agree with that. I believe in competition. My province of Manitoba has certainly seen the benefits and the opportunities in the mining sector. It sees the benefits and opportunities certainly in the natural resources sector. As a matter of fact, the majority of Manitoba's GDP is from natural resources, whether it be agriculture, mining or forestry. We see that there are advantages.

As a matter of fact, Manitoba has put in quite a number of changes to its own tax system, tax rate and royalty system to encourage mining. We have some very large mining operations in Manitoba with Inco and Falconbridge. We want to continue to be able to compete in the world market. In order to do that Bill C-48 corrects some of that inequality.

We were somewhat dumbstruck when it was brought forward in the 2000 budget that there would be a reduction in the general corporate income tax rate from 28% to 21%. We were actually thunderstruck when we found out this did not include the natural resource industry. Oil and gas, minerals and mining were excluded from the 2000 budget. I do not know whether the NDP at that time stood up and said wow.

There is a huge industry that has been neglected. Bill C-48 brings that back into line. There is an equity issue that has to be resolved and Bill C-48 resolves it by adding the mining sector to the reduction in the tax rate from 28% to 21%.

There are other issues with respect to the legislation. There are phase-outs. Certainly the 25% phase-out is going to have some concerns. My colleague from the Bloc spoke to that. Manitoba will have a reduction in revenue streams because of that tax reduction.

That may be true, but we also have enough foresight to recognize that there should well be revenue streams or revenues increased by encouraging exploration, by encouraging mining operations to come into Manitoba, northern Manitoba specifically, and by encouraging these industries to not only explore but process the raw materials they extract from the earth. This is what we were built on and this is what we want to continue to do. We want to encourage that so there will be more union jobs developed in Manitoba, so union jobs can be increased in the sector that this is trying to assist. Bring equity back into the system.

I hear somewhere in the background the member from Windsor suggesting perhaps that is not the case. As I said at the outset, there are philosophical differences. I believe in the private sector developing economy. I believe in that. Also I believe that profit is not a dirty word. That may send them into apoplectic shock, but the fact is there has to be profit in a sector.

There has to be profit in an industry in order for that industry to reinvest in itself and reinvest in its employees, in their training and their pension plans. That is what the economy is all about. I do not have to lecture the member for Windsor West on economics 101, but I do have to lecture the member and say that the inequalities in the industrial sectors do not bode well for Canadians.

We do have tough competition in the oil and gas and the mining sectors. We have competition offshore. China has some very strong advantages compared to us. The labour costs in China are substantially less than they are in Canada. We have to compete in the way we can and that is obviously in our tax rates. We cannot take from the industries so often that they are not able to reinvest back into this area.

I appreciate the Bloc's position on most of the issues. The Bloc members are suggesting that there will be revenue losses. I appreciate the Bloc trying to protect Manitoba, but we really do not need that protection. We can look after ourselves.

More than that, I am sure the Bloc's concern is more about the federal-provincial jurisdictional issues as it always is. Obviously the Bloc has some difficulties with the federal government getting involved in any kind of provincial jurisdiction. This is one of those areas. When Bill C-48 becomes law, it will be necessary for the federal government to work with the provincial governments to ensure that the resulting provincial revenues are redirected to the affected mining industry.

Basically, my good friends in the Bloc are telling the federal government not to step on Quebec's jurisdictional toes. In fact, this is a federal responsibility. Bill C-48 is a federal responsibility in setting tax rates for the industry. It is up to the government to set those rates.

There is never any perfect legislation. We certainly know the government is not perfect; that is an understatement. We know there could have been amendments--

[Pierre Paquette, Bloc, Joliette, QC]

I never called the member a liar, Mr. Speaker. I believe you can attest to that. I said I did not understand why we did not hear the member for Abitibi—Baie-James—Nunavik and the member for Témiscamingue publicly demand, as I am doing, a simple amendment to Bill C-48 to increase the pre-production mining expenditure tax credit from 10% to 20%.

On October 1, 2003, the Mining Association of Canada presented a brief to the Standing Committee on Finance. It was not six months ago or six years ago. It was last Wednesday. The president of the association, Mr. Peeling, came to implore us to make this change; it does not eliminate all the unfairness, but it is the compromise the Mining Association put forward. The only ones who supported the amendment were the Bloc Quebecois members. In the end we got the support of the Canadian Alliance members when they understood what was at stake.

On the Liberal side, one member supported us and another one said—and I can understand him to a point—that he agreed in principle with the amendment, but that he was concerned we might lose the bill. I cannot see how we could lose a bill at this stage, if everybody agreed on a very simple amendment to Bill C-48 and if we had the support of the Liberal majority.

For our part, we work for our people in the regions. I never said the member was a liar. I would have liked him to publicly state his position on Bill C-48. He might do it in the next few minutes. He may have looked at the changes requested by the Mining Association of Canada and the Quebec Mining Association.

People at Cambior approached us. I was secretary general at the CSN and I toured mines in the Abitibi-Témiscamingue region and across Quebec. I know this situation well. It does not prevent me from still standing up for our regions and our mining sector.

[Guy St-Julien, Liberal, Abitibi—Baie-James—Nunavik, QC]

Mr. Speaker, I have listened carefully to the comments by the hon. member. Some things are true, but I cannot agree with what he has said about us, the Liberal members from Abitibi and the resource regions. I understand that some resource regions have only tobacco growing; others have mining. I am a former miner, myself.

In my remarks, I want to comment on the fact that he said no one has intervened. I have here a letter dated February 21, 2002, in which I told my government, the former finance minister, the Liberal member for LaSalle—Émard, that it was necessary to consider the same sort of reductions for small and medium-size businesses as for other sectors. It was necessary to reduce the general corporate tax rate from 28% in 2000 to 21% in 2004. As for small and medium-size businesses, it is very odd that the Bloc is not discussing what was happening in these companies, that no one took the differences between various industries into account. On the other hand, when we discuss natural resources, these members say we do not stand up for our constituents. We know that there is always room for improvement in bills.

I have here some notes from my friends in the mining sector. They point out the difference between junior and senior mining companies and explain the repercussions of Bill C-48. The issue is this: we know that we must improve the tax system not only for the large, senior companies, but also for the junior companies and small mining corporations.

Still, to go from that to saying that we have not intervened; I am sorry, but this is a false debate at the expense of our resource regions. Because in these regions, when there is no more ore, there is still a problem with respect to the price of metals. Today, our problem is the issue of the rising dollar.

One point is very important: we do intervene. I do not want anyone to say to me that we do not intervene; you are not aware of the letters we write to the minister. We work from within; we work in our ridings. We do not see these hon. members in our regions and our mines very often. I used to be a miner. We do not often see them around Chapais-Chibougamau, or even in Val d'Or. I understand that this bill needs improvement, but it is a first step and I am satisfied. Some things must be amended, but we have to work together.

If they are going to call us liars and say we are doing nothing, they can go to the devil.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, first I would like to congratulate the member for Calgary Southeast on his frankness and also on his good command of the French language.

I am pleased to speak to Bill C-48 because the government is now trying to bring the House to adopt legislation that we feel is not fair for the majority of our natural resources industries, especially in the mining area.

I appreciate the fact that it is quite a technical bill, but it seems to me that if we take a close look at it, it soon becomes obvious that it needs to be amended. Unfortunately, the Liberals did not want to listen to reason in the finance committee.

In fact, in the mining sector, it is not only Quebec that is hurt by Bill C-48, but also Ontario, Manitoba and the Atlantic provinces. It is very hard for me to understand that hon. members representing ridings in Ontario, Manitoba and the Atlantic provinces are not examining this bill to see how it will hurt the mines in their ridings, their regions or their provinces, just because it is rather technical. This is a bill that can be improved; I will return to that later. Passage of Bill C-48 will lead eventually to some mines being closed and jobs being lost. Perhaps some communities will break up because a mine is often the only reason for a community's existence.

As we know, Bill C-48 restructures taxes in the natural resources sector. The argument put forward by the Liberal government—and even by the Canadian Alliance, I have noticed—is that Bill C-48 restores equity between the natural resources sector and other sectors of the economy. Thanks to the former finance minister and future prime minister, the other sectors have enjoyed a tax reduction in the 2000 budget, which lowered the tax rate from 28 to 21% over five years.

And that is the positive aspect of Bill C-48. Now the natural resources sector, like all the other sectors, will benefit from the same reduction, although somewhat later. On that score, I agree completely with the hon. member who preceded me. Thus, Bill C-48 would lower tax rates from 28% to 21% over five years.

The reform of corporate tax structures in the natural resources industry was delayed because it is a special kind of taxation. There is not just the rate of tax on profits. There are also a number of taxes imposed through royalties, for example. That was why the ex-minister of finance and future prime minister delayed the tax reform for natural resources.

They tell us they held consultations. But this consultation must have been, like so many others done by this government, more public relations than true consultation. Thus, we find ourselves with a bill that is totally unfair and unacceptable to a certain number of businesses in the natural resources sector.

Bill C-48 cuts the tax rate from 28% to 21%. As I mentioned, this is the good part of the bill, and the Liberals and the government refer to it repeatedly. But there are three other measures in Bill C-48. We must consider the net effect of this reform, not just one part of this bill.

I want to talk about the three other measures. Other than the tax rate on profits dropping from 28% to 21%, the bill will phase in a deduction for provincial royalties, related to the use of non-renewable resources. This is a new deduction. However, and this is the third measure, the current 25% resource allowance will be eliminated.

The allowance allows natural resource companies to deduct 25% of their profits, on the extraction portion of their activities, prior to paying income tax. This 25% tax credit on resources would be dropped and they would instead be able to deduct provincial royalties.

The fourth measure is a new tax credit for qualifying pre-production mining expenditures, applicable solely to diamond mining and base metal mining.

So, as I mentioned, we cannot talk only about the first part of the reform, to reduce the tax rate from 28% to 21% over five years. The net effect of all four measures must be taken into consideration.

However, according to the Mining Association of Canada, supported by the Quebec Mining Association Inc., Bill C-48 will increase the effective tax rate of many mining companies. I am not saying that the entire industry will suffer as a result of Bill C-48, but the effective tax rate of a large segment of this sector will increase under the proposed reform in Bill C-48.

Mature mines will be harder hit simply because these mines typically pay relatively low royalties in comparison to what other natural resource sectors pay, particularly oil and gas companies.

This is easily understood. There has been competition between the provinces, as well as between Canada and other countries, which has led the provincial governments to reduce their taxes or royalties. As a result, this sector pays lower royalties to use non-renewable resources, and will not benefit from Bill C-48. However, oil and gas companies and the like will benefit greatly.

I can readily understand the member for Calgary Southeast saying, “There are oil and gas companies in my area, and they will benefit from this, so I am not looking any further than that”. But I think that, if we really want this House to represent all of the interests of Canada and Quebec, we must consider the big picture.

Because the oil and gas companies pay a lot of royalties, they will benefit from Bill C-48, while a number of the mining companies, particularly the mature mines, will be disadvantaged by this reform.

Proof of this was given by the Minister of Finance himself, when department officials and the parliamentary secretary appeared before the Standing Committee on Finance. We were told that in all the reform was going to cost the public purse $250 million once it was fully operational.

I have some doubts about that figure. I asked them to tell us the calculation method used for that evaluation, and I am still waiting for the answer.

If we start with the assumption that this figure is accurate, then 80% of that $250 million in tax cuts will, according to the finance department witnesses, go to the oil and gas companies. Imagine. The finance minister himself says that his reform will benefit the oil and gas companies first and foremost, and a mere 20% will go to all the rest of the natural resource companies combined. This is unacceptable.

According to the assessment made by Gordon Peeling, President and CEO of the Mining Association of Canada, overall, with Bill C-48, the mining sector as a whole will benefit from a tax cut of $10 million of that $250 million, or 1/25th of the entire natural resources sector tax reductions. In connection with that $10 million figure, there will be some losers and some winners.

Consequently, this reform is unfair. One of the negative effects of the proposed reform is that by replacing tax credits for resources with royalties instead, income tax rates will increase in several provinces for base metals and for some gold mining operations in particular, which are concentrated in northern Quebec and northern Ontario. It is hard to understand why Ontario MPs would support this bill without hesitation.

Manitoba and the Atlantic provinces will also be disadvantaged by this reform. I am not the only one who thinks so, and it is not just the Mining Association of Canada saying this. In the September 2003 issue of CAmagazine , there is an article by Neil Smith entitled “Energy Update”, and I quote:

All these provinces use federal taxable income as the starting point for the computation of provincial income and allow a deduction for the greater of provincial Crown royalties or resource allowance. For each of these provinces the loss of the resource allowance increases the effective rate as follows: Saskatchewan, 4.5%; Manitoba, 2.9%; Quebec, 2.25%; and Maritime provinces, 3.25% to 4%.

Association epresentatives from the association generally told us that the tax rates would increase by 3% in 2003, 7% in 2004, 10% in 2005, 19% in 2006 and 29% in 2007. And we are being asked to believe that this bill is fair to all natural resource sectors and all the regions in Canada. That is utterly untrue. Quebec and other provinces, in particular, will be disadvantaged.

The federal government will say that the provinces only have to adjust and lower their tax rates. But they should not lower their royalties, because they would put their companies at a disadvantage.

The Mining Association of Canada also said that even if tax rates were changed to take into account the reform proposed in Bill C-48, tax rates would still go up on an average by 2% in 2004, 2% in 2005, 4% in 2006 and 6% in 2007. That would make us less competitive than mining countries where the tax system is much more favourable.

Generally, across Canada, Bill C-48 will result in an effective tax rate increase from 40% to 43%, whereas in China, as you know, the tax rate on mining is quite low, I would even say symbolic. The tax rate dropped from 43% to 34% in Brazil, from 35% to 30% in South Africa, and from 29% to 25% in Finland.

So the government is telling us that by increasing the effective tax rate, especially on the base metal sector, we will increase the competitiveness of our natural resource industry. That is totally unacceptable.

To rectify such unfairness and economic nonsense, I put forward a simple amendment in the Standing Committee on Finance. It was of course rejected by the Liberals out of pure partisanship. I had the support of my Canadian Alliance colleague and I thank him for that.

My suggestion was a phased-in increase in the tax credit for pre-production mining expenditures from 10% to 20%—the fourth part of the reform—over a three year period. That would help reduce the negative impact of Bill C-48 I just talked about at some length, especially in Northern Ontario and Northern Quebec, where base metals are put at a disadvantage by Bill C-48. This would stimulate exploration and might put an end to the current downward trend with regard to our metal reserves. I will quote a few statistics in this regard.

From 1977 to 2001, Canadian copper reserves decreased by 61%; nickel reserves decreased by 44%; lead reserves decreased by 89%; zinc reserves decreased by 71%; and silver reserves decreased by 59%.

With a tax credit for the preparation of mining operations, we could offset the negative effects of Bill C-48 and redress the current drift toward the depletion of our reserves of minable metals.

This could help our regions. Mines are rarely found in the middle of an urban centre; normally, mines are located in outlying areas. Raising the tax credit for qualifying mineral exploration expenses would provide a stimulus to our regions.

The cost of that additional provision in Bill C-48 is estimated at $40 million. Given the surpluses accumulated by the federal government over the last few years, I think that $40 million is a very reasonable price to pay for ensuring equity in such a key sector as natural resources, and particularly the mining industry. Replacing one figure replaced in the legislation would have led to real reform. We proposed 20% instead of 10%, but the Liberals voted against that.

I cannot understand how the member for Témiscamingue, a recent newcomer to the House, can remain silent in the face of something so detrimental to the Témiscamingue. I cannot understand why the member for Abitibi—Baie-James—Nunavik, who is normally so talkative, does not protest against legislation that will be so harmful to the Abitibi mines.

If they are silent, it has to be because they are just yes-men who follow the party line. If they looked after their constituents' interests, they would put the necessary pressure on the government to amend Bill C-48 so that it does not hurt the mining sector, as the Mining Association of Canada and the Quebec Mining Association said it would.

Of course we know that this government heavily favours the oil and gas industry, and this is especially true of the former finance minister and future prime minister. One just has to look, for example, at the total amount of subsidies that this industry has received for its development over the last 30 or 40 years. We are talking here about $66 billion, whereas the hydroelectricity industry in Quebec received nothing, or practically nothing, for its development.

One just has to look also at the preferred status given to the oil and gas industry by the current Prime Minister's office in the form of guarantees with regard to the Kyoto agreement.

However, it is difficult to understand why members would not come to the defence of their communities, their mining industries and their workers. But I am not totally surprised because, since I have had the honour of being appointed to the position of finance critic by the leader of the Bloc Quebecois, there have been many cases where, unfortunately, common sense did not prevail.

In that context, I will remind members of the issue of the GST for school boards. A decision had been made by the courts, but it was reversed here through an act of Parliament. This was a first in Canadian parliamentary history. Quebec school boards were deprived of $8 million, and Ontario school boards were deprived of $10 million.

The fiscal imbalance has put the provinces in dire straits. Nine provinces out of ten will post a deficit next year, while the federal government will continue to rack up surpluses. The Minister of Finance tells us that these surpluses will not be as large, but even though they may not be as large as what the minister had hidden, they will still be very real.

We know that, from 1994 to 2001, this government cut $24 billion from the Canada social transfer, including $8.7 billion for Quebec alone. One third of these cuts were made at the expense of Quebec and the people of Quebec, while we account for only 25% of the Canadian population.

Take the excise tax of 1.5¢ per litre, for example. It was introduced by the former finance minister and future prime minister to fight the deficit. We have been deficit free since 1997, but the tax remains. This is money the government is taking out of the pockets of taxpayers, money that could be used for other purposes.

Let us consider how the government is handling the tax haven issue. It finds nothing wrong with these jurisdictions being used by citizens to avoid paying taxes in Canada. It is therefore not likely in the short term that Bill C-48 will be amended.

We will be voting against the bill at third reading, while hoping that this place will come to its senses as the election nears. Personally, for the well-being of our mining industry in Quebec, Ontario, Atlantic Canada and Manitoba, I hope that the government will change course on this issue, that it will use common sense and make one tiny little change to Bill C-48, raising the tax credit for preparatory activities for mining. We do hope the situation can be corrected.

However, as I said, in the current context, we cannot, in all conscience, support a bill that is fundamentally unfair, even though we agree with some of its provisions, such as the reduction in corporate tax from 28% to 21%.

Let me conclude by reiterating the hope that, on the side of the ruling party, on the Liberal side, members will speak out to have this situation corrected. As I said, it would be very easy. We could have a tax reform in the natural resource sector, one that would be really fair to all natural resource industries in all regions of Canada and Quebec.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, I listened carefully to the hon. member's remarks. I am a bit surprised at his conclusion that this reform is a win-win situation and that nobody will lose, when the Mining Association of Canada told the finance committee that it would be disadvantaged by this tax reform. Not by the reduction in the tax rate from 28% to 21%, obviously, but by the changes in other tax rules.

Gordon Peeling, the chairman and chief executive officer of the Mining Association of Canada, told us that if Bill C-48 were not amended, with the impact of this reform and other reforms announced by the government, like the capital tax, the effective tax rate of mining companies will increase by 3% in 2003, 7% in 2004, 10% in 2005, 19% in 2006 and 29% in 2007.

I cannot understand how the hon. member can suggest that this will be good for the mining industry. There is probably no mine in his riding.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I listened with interest to the member's comments on Bill C-48. I would like to remind him that the enactment includes measures to implement a deduction for crown royalties and mining taxes, to eliminate the resource allowance, to reduce the corporate tax rate applicable to resource income, and to introduce a new 10% tax credit for qualifying mineral exploration expenses.

The member agreed with the changes but had some comments about delays. He concluded that he agreed with the bill in principle, which is what we do at second reading and did at second reading.

This is third reading now. This is not the time to agree in principle. This is the time to agree with the bill, its provisions and its implementation schedule and details.

I would therefore ask the member, is there anything in this bill, not just in principle but in detail, that he has a problem with and if he has one, how would he resolve it?

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

Mr. Speaker, I am rising to speak at third reading stage of Bill C-48, an act to amend the Income Tax Act with respect to natural resources. For several years I have fought, on behalf of my constituents, to obtain tax equity for the natural resource sector.

I represent a suburban constituency in Calgary where by far the single largest employer is the energy sector. Often the energy sector is depicted as some great bogeyman, a great polluter, that rapes the resources of the earth and gives nothing back to society.

In fact, it is an absolutely vital element of our economy, both in terms of growth and employment. If it were not for the energy sector and if it were not for the remarkable technology and ingenuity that makes up our energy industry, we would not be able to live so comfortably in this cold northern climate. We would not be able to do the many things that we take for granted, all of which depend on energy.

The oil and gas sector of our economy is directly responsible for over 60,000 jobs and indirectly creates hundreds of thousands of others. It is an industry that is too often and too easily dismissed or disregarded. When the government adopted income tax changes for corporations in its 2000 budget by reducing over time the general rate to 21%, it failed at that time to provide tax equity for the natural resource sector, which includes more than just oil and gas companies. The natural resource sector also includes mining companies and forestry companies.

I suppose the government's view at that time was that it needed to encourage the new economy in Canada and thought it ought not to provide incentives for the continued growth in the traditional industries which have historically constituted the heart of the Canadian economy, that is to say, primary industries like mining, oil and gas, and lumber. That was a huge mistake.

To this day an enormous percentage of our exports upon which this economy depends come from the oil and gas, mining and forestry sectors. Collectively, those sectors constitute the largest employers in the country. Most of the remote communities in Canada are created and sustained by the non-renewable resource sector. In a sense, our very claim to sovereignty--including many remote parts of the country in the north and from Labrador to British Columbia to the territories--is dependent upon the enormous investments made and risks taken by oil and gas, mining and forestry companies.

This is a sector that we should not dismiss as part of the old economy and a threat to the environment. To the contrary, we should applaud people who work in these sectors for the enormous technological ingenuity that they have developed and applied in the past couple of decades to make the extraction of resources increasingly efficient and environmentally friendly. We should recognize the hundreds of thousands of good paying jobs for working families that these companies helped to create.

That is why I strongly opposed the creation of a two tier tax system in the 2000 budget: one tier for most corporations and another tier for the natural resources field. Unfortunately, it took three years for the government to realize that this inequity was unjustifiable after vigorous lobbying on the part of companies in that sector. It was not until the 2003 budget that the government finally proposed to correct this fundamental wrong.

Unfortunately, it has now taken five years for the government to implement the changes proposed in the 2003 budget, and this is really my concern.

I will support this bill. I voted for it last night along with my colleagues in the official opposition, but it would be our strong preference to see these changes implemented in one fiscal year so that we could move the non-renewable resource sector taxation from 28% to 21% and adopt the exemption for provincial royalties and the credit for mining in one year.

I cannot believe that we must wait five years for the government to do that technically. It is simply stringing out the process of corporate tax equity because it wants the revenue. It wants to make the process as slow as possible so it can continue to generate more revenue from this sector which already pays an enormous tax burden.

Indeed, the ostensible fiscal cost of this tax change will be relatively modest. For the federal government, whose budget is over $160 billion, once fully implemented, this tax change represents only $260 million which, as I pointed out in my question to the hon. Parliamentary Secretary to the Minister of Finance, is a relatively modest amount of money when one considers the kind of waste that we see and the kind of misplaced priorities that we observe on the part of the federal government.

I am pleased that the bill will take into account the costs that are borne by oil and gas companies in paying provincial royalties. Originally, before this bill was introduced, before the 2003 budget the federal government was playing hardball with the oil and gas sector, saying that it will give the sector tax equity at a 21% rate, but the trade-off will be that it will take away the royalty tax credit, otherwise known as the resource allowance.

Collectively these companies pay billions of dollars in royalties to provincial governments. These royalties are an important part of provincial revenue streams. We can see that now in places like Newfoundland and Labrador, and increasingly in Nova Scotia where the provincial treasuries have been enriched by new oil and gas royalty revenues coming on stream.

It was fundamentally unfair for the government to spend three years playing cat and mouse with the energy sector saying that it will give the sector tax equity but only on the face of it, because it will take away the sector's ability to deduct from federal tax the cost of provincial royalty taxes.

I am glad to see that while the government has indeed eliminated the resource allowance here, it has offset the fiscal effect of that by creating in this bill a deduction for provincial royalties against federal taxes. That is absolutely necessary and we will be watching closely to ensure that it remains the case.

Similarly, we are pleased to see that an enriched credit has been provided for mining companies to ensure that the loss of the resource allowance will not negatively affect them. I understand that the net fiscal effect on mining companies will be positive. They will not be net losers as a consequence of losing the resource allowance while moving the rate to 21%.

In closing, we support the principle of the bill. We regret it has taken so long to arrive. We believe that the eight year delay in arriving at tax equity for the resource sector reflects a basic bias that the government has against that sector of the economy, and we regret that. It will continue to be a priority for the Canadian Alliance to press toward lower tax rates across the economy generally, including the most productive sector of the economy, that is, the major employers in the corporate sector.

[Joe Comartin, NDP, Windsor—St. Clair, ON]

Mr. Speaker, in the process of developing the provisions of Bill C-48, did the government take into account the impact of the continued burning of fossil fuels, whether it be gas, oil or coal?

More particular, has there been any meaningful consultation by the government with environmental groups that have positioned themselves in a very clear fashion about the continued and now expanded use of incentives for the oil and gas industry and the coal industry?

Finally, in developing Bill C-48 was any consideration given to the facts that have now come out in the Conference Board report of this past weekend. That report states that of the 24 leading industrial countries in the world, Canada produces more carbon dioxide per capita from the burning of fossil fuels? We are the absolute worst country out of those 24 countries.

Have any of those factors been taken into account in coming up with these kind of subsidies for the continued subsidization of the oil and gas industry?

[Bryon Wilfert, Liberal, Oak Ridges, ON]

Mr. Speaker, I would have expected the member to get up and actually praise the fact that the government has brought in Bill C-48 and that we are now ensuring that we have a competitive tax regime for the mining and the oil and gas sector.

Clearly, we want to ensure on this side of the House that when we bring in legislation, we do it with the full support and concurrence of the major stakeholders, whether they be in the resource sector or with the provinces.

The hon. member also knows that the government has been a leader in not only eliminating the deficit and paying down the national debt, but also ensuring that we have the necessary dollars to do these things and that we do not go back into a deficit. We have had now six balanced budgets or better.

Rome was not built in a day. Obviously we are responding to the industry, to the provinces and we are doing it in what I believe is a timely fashion. We are implementing a phase-in over a five year period, again in concert with the consultations that we have had.

I would assume, the member being from the province of Alberta which is obviously very supportive of this, that we can expect his support on this legislation.

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

Mr. Speaker, the legislation before us, Bill C-48, implements a new federal income tax structure for Canada's resource sector, to be phased in over five years.

To begin, I want to give the House a sense of the overall importance of the resource sector, especially mining and oil and gas, to the Canadian economy as a generator of investment, exports and jobs for Canadians.

In 2001, for example, the sector accounted for almost 4% of Canada's GDP, with over $64 billion in exports and more than $30 billion in capital expenditures. As well, over 170,000 Canadians work in resource businesses.

The potential for future resource development exists right across the country. While the mining industry is vital to rural and northern economies, the oil and gas industry is important to both the western and Atlantic provinces and the territories.

Internationally, Canadian resource industries are large investors in innovative technology and they also play a significant role in the provision of exploration and extraction services.

Overall, the changes in Bill C-48 will be positive, both for mining and for the oil and gas industry, but before discussing them, I want to briefly review the existing sector specific tax measures.

As hon. members know, income earned in Canada from the extraction and initial processing of non-renewable resources has historically been subject to a range of targeted tax measures.

For example, certain provisions determine the timing of deductions for capital expenditures. They include Canadian exploration expenses, Canadian development expenses, Canadian oil and gas property expenses and capital cost allowances. These measures recognize the risks involved in investing in resource exploration and extraction and also play an important role in ensuring a competitive business environment.

In addition, the resource sector is able to use flowthrough shares to raise capital for resource exploration and development. Individuals investing in flowthrough shares for grassroots mineral exploration are also eligible for the 15% mineral exploration tax credit, introduced in October 2000 as a temporary measure to moderate the impact of the global downturn in exploration activity on mining communities across Canada.

Another resource specific provision is the 25% resource allowance. This provision was introduced in 1976 primarily to protect the federal income tax base from what were rapidly increasing provincial royalties and mining taxes, which had been deductible for federal tax purposes.

The resource allowance, however, is an arbitrary deduction that does not necessarily reflect the actual cost of royalties and mining taxes. Consequently, it can distort the returns from individual resource projects and the allocation of investment between projects within the resource sector and between the resource sector and other parts of the economy.

As well, the complexity of the resource allowance calculation has meant substantial compliance costs for the industry and administrative costs for government.

The economic conditions that led to the introduction of the resource allowance have changed significantly since the 1970s, leaving the original need for it less relevant. In today's economic environment, there is greater pressure on producers to be efficient and on host jurisdictions to levy royalties at competitive rates.

The government recognized that the resource sector tax regime is capable of generating even greater investment and jobs for Canadians. In designing a new tax regime for the sector, the government was guided by three main goals.

First, the tax regime must be internationally competitive, particularly in the North American market. Second, it must be transparent for firms and investors. Third, it must promote the efficient allocation of investment both within the resource sector and between sectors of the Canadian economy.

Following extensive consultations with the industry, and I underline extensive, the government announced in the 2003 budget that it intended to improve the taxation of resource income.

Subsequently, on March 3 the Minister of Finance released a technical paper on the budget proposals. These proposals were reviewed in the course of extensive consultation with the industry and with the provinces. In response to these consultations, some special transition measures were incorporated into the legislation before the House today.

I would now like to briefly review the measures in Bill C-48. The proposed new tax structure will ensure that the resource sector firms are subject to the same statutory rate of corporate income tax as firms in other sectors. It will also ensure that these firms can deduct their actual cost of production rather than an arbitrary allowance.

Let me explain a little further. The first measure in Bill C-48 would reduce the federal statutory corporate income tax rate on income earned from resource activities from 28% to 21% by 2007. This rate is often the first piece of information viewed by prospective investors. If Canada is to send a positive message to investors that it is competitive, then this uniform lower rate is indeed essential.

The second measure would eliminate the arbitrary 25% resource allowance and would provide a deduction for the actual amount of provincial and other crown royalties and mining taxes paid. This means that projects would now be treated in a more comparable fashion. This change would promote efficiency by ensuring that the investment decisions were based more consistently on the underlying economics of each project. It would also result in a simpler tax structure, streamlining tax administration and compliance.

The government has recognized the particular circumstances of the mining sector in Bill C-48 by proposing a new 10% mineral exploration tax credit and it will apply to both Canadian grassroots exploration and preproduction development exploration for diamonds, base or precious metals and industrial minerals that become base or precious metals through refining.

It is proposed that these new measures be phased in over a five year transition period. An exception is the new mineral exploration credit which will reach its full rate in only three years. The proposed implementation schedule provides a reasonable transition to an improved tax structure in a fiscally responsible manner.

In addition to the resource tax changes, Bill C-48 includes measures that promote renewable energy and energy conservation projects by improving the treatment of Canadian renewable and conservation expenses, the CRCE. These expenses are fully deductible in the year that they are incurred and can be transferred to investors under a flow-through share agreement.

As I clarified in the standing committee hearings, we are discussing federal tax changes only. To the extent that the provinces rely on the federal tax base though, if offsetting adjustments are not made, provincial income tax revenue from the resource sector may increase as a result of these changes.

The international competitiveness of Canadian firms will be maximized where provinces provide a mechanism to return to the industry any provincial revenue gain arising from the changes to the federal tax structure.

The new tax structure for the resource sector complements other measures in the 2003 budget. We discussed these measures during the debate last spring on Bill C-28, the Budget Implementation Act, 2003. That bill eliminated the federal capital tax over five years, which will strengthen the Canadian tax advantage for investment in the capital-intensive resource sector.

Together with the elimination of the federal capital tax, the new measures in the bill we are considering today will substantially reduce the effective tax rates, both for the mining and the oil and gas industries.

For oil and gas, this reverses a current disadvantage relative to the United States. For mining it will build on an existing advantage. In both cases the changes place the Canadian resource sector in a markedly improved position to attract capital for exploration and development.

Bill C-48 reflects the government's ongoing commitment to an efficient and competitive corporate income tax system which plays an important role in creating a stronger and more productive economy. The resource sector attaches considerable priority to the delivery of these proposed changes. I cannot emphasize that enough for the members.

During the finance committee hearings on Bill C-48, the industry representatives and many committee members indicated that they considered the timely delivery of the legislation to be of utmost importance to their constituents and, indeed, to many provinces such as Alberta, Saskatchewan, Nova Scotia, et cetera. Given the benefits of these changes for the resource industries and the communities on which they depend, I would encourage all hon. members to give quick and speedy passage to Bill C-48.

[Denis Coderre, Liberal, for the Deputy Prime Minister and Minister of Finance]

moved that Bill C-48, an act to amend the Income Tax Act (natural resources), be read the third time and passed.

The Income Tax Act

[The Acting Speaker (Mr. Bélair)]

It being 5:29 p.m., the House will now proceed to the deferred recorded division on the motion at report stage of Bill C-48.

Call in the members.

(The House divided on the motion, which was agreed to on the following division:)

Income Tax Act

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

moved that Bill C-210, An Act to amend the Income Tax Act (amateur sport fees), be read the second time and referred to a committee.

Madam Speaker, it gives me great pleasure to rise again to speak to Bill C-210. Not only is the bill a way to give a little back to the taxpayers of Canada and their families, but it is also a way to save potentially millions of dollars in our health care system and possibly even in our justice system.

The reason for that is what the bill seeks to do. People who enrol in sporting activities and clubs or who have children or dependants enrolled in sporting activities and clubs have approached me and I am sure all members of the House of Commons, regardless of political affiliation, to indicate the high cost of fees throughout the country to register children in hockey, baseball or whatever the sport may be. The bill seeks to offer people an opportunity to get a tax refund.

For example, if a person registers their child in a minor hockey program for $400, the bill provides that the person could claim the $400 as a tax deduction similar to a charity donation. The same percentage of tax refund would apply.

This is one of saying to the taxpayers of Canada, “Here is a little bit back”. And if we can encourage physical participation in sport, regardless of age, we would have a much more healthy and vibrant society.

I have been involved in sports for my entire life. The sport of which I am most fond, of course, is soccer. When I started playing soccer in Richmond, British Columbia, the fee to join was $2. Nobody complained about the fee at that time. Now in Nova Scotia the fee is $90 per child. I have two kids, so it costs $180. A lot of people find that prohibitive. They simply cannot afford to put their children in this type of sport, and soccer is one of the most inexpensive sports out there in terms of equipment required.

The reality is that we should be doing all we can to encourage physical activity for our children and, for that matter, for their families, especially the parents. People would get back into shape and we would become a much healthier society.

Does the bill address the issue of those who are on social assistance and simply cannot afford the fee to begin with? No, it does not, but being in the fifth party in the House of Commons on the backbench here I think it would be very wise for me to lob this bill over to the government members and tell them to look at it, because it is something we need to debate. This is something we need to encourage. We need to encourage more families to be involved in sports and physical activity, for a lifelong adventure, because if we are involved in sports when we are young, we will be involved in physical activity for the remainder of our lives.

We know that one of the greatest crises facing the country right now is obesity in children. Probably half the children in this country are obese. The reason is that we have become a techno-society. Kids will sit in front of the television, Nintendo games or movies and do nothing but sit. Many of us are couch potatoes. In fact, many in this House of Commons could not walk up seven flights of stairs without choking to death.

We need to change that. I think the way to do it is through the tax system by offering people an opportunity to claim some of the fees back as a tax consideration. If we do that and if people are encouraged to become involved in physical activity, I am quite sure that millions of dollars could be saved in the health care system. It is amazing that we sit in the House of Commons and demand that $2 billion or even more go to the health care system. We are always talking about the nth degree. What I mean is that we put money into the health care system to care for people who are sick but we should be trying to prevent people from getting sick because they are out of shape. We should encourage them to become involved in physical activities, in community sports for example, because nothing brings this country together better than amateur sports.

I notice that the government has no problems at all in assisting Olympic athletes or hockey teams when they compete in the Olympics, but why not help the very young to get an initial start in amateur sports by allowing their parents some of their own money back through the tax system?

This would free up more funds for families and quite possibly encourage more people to become active in sports, especially in amateur sports. Who knows: the young kids we help out today may very well be our future Olympians down the road. By doing that we would be encouraging a much better society than we have today. We all know that a healthy society is a very proactive society and one that will benefit everyone in the long term in terms of our health care.

As well, studies have shown time and time again that when groups of children are involved in sports activities those activities prevent them from getting into the justice system.

How many times in my own riding and in ridings throughout the country have MPs opened basketball courts, hockey rinks or new tennis courts, something of that nature, where a community has decided there is a need for their children that must be met?

Just a few years ago in the great community of Ship Harbour, Nova Scotia, I participated in the grand opening of a basketball court for the small community. That may not seem like a big deal, but the parents in that community identified a need for their children. The government was not there to help with any funding, although the parents did get a bit of money from their local councillor. People in that community did their own fundraising. They held bake sales and other things and built a basketball court, which is used all the time by the kids in that community. It is a wonderful thing to see the kids in this small community with an area where they can go to play.

We constantly hear about kids in communities throughout the country, especially kids in rural areas, who have nothing to do. The reason? There are no recreational facilities, no coaches and none of the framework that is required for these kids to participate. If we get them at a young age, we can encourage them to be active in sports lifelong.

Many of us in the House of Commons are active in sports. Members from both sides of the House are active in sports and all kinds of events. We have the House of Commons soccer club called the Commoners. The reason for the name is that this is exactly how we play: very common. The reality is that this gets MPs from all sides of the House together in an evening of fun. In fact, I encourage everyone to come out on October 22 and watch their fabulous members of Parliament from the five parties in the House of Commons defeat, once again, the brand new, young pages who are in the House today. This game will take place on the Supreme Court lawn. We have challenged them to a friendly sporting activity. I can assure everyone, on the record, because the pages cannot speak and I can, that we will defeat them one more time and hold the cup high for the House of Commons.

This is what I am saying. Even though that was in jest and it is fun, sports are fun. Physical activity is fun. But it is also very expensive. Again, if we can alleviate a bit of the financial pressure on families throughout the country, we will be doing them a great service. Besides, that is what we are here for. We are here to encourage a better society and to cooperate. Nobody wants to be out of shape. Nobody wants to develop bad habits at a young age. We can all change.

Not you, Madam Speaker. I think you are in great shape and I know you do a lot of physical activity in la belle province. The reality is that you are a role model and others need to follow your example.

A small way to promote activity in sports is this way, through the tax system. It would not solve all our concerns, but it would be one small way of recognizing the efforts of families, those hardworking taxpayers of this country who pay a lot of money to have their children registered in sports. If only we could say to them that if they spend x number of dollars on a particular item, they would get a bit back through their taxes. I think people throughout the country would say bravo to the House of Commons for this initiative.

We all know about soccer moms and hockey dads, et cetera. We know for a fact that many of them dedicate a large part of their lives to their children's activities. Once their kids are active in sports, that is what parents do. They dedicate their all weekends and nights and everything else to ensuring that their kids get the best of both worlds in terms of joining a team and taking part in a sporting activity.

Madam Speaker, I do not know if you yourself have ever taken part in team sports but I have done so my whole life and it is absolutely wonderful. Lifelong friendships are developed. Sports can be a lifelong healthy activity. Sports make people feel better and make them healthier.

I also cannot help but notice the number of people who have joined fitness clubs to get themselves into better shape. It is wonderful. We should encourage more people to do that. I admit that I could probably lose a few pounds myself and I am working on it. However through the tax system this is a great way we could do this.

I encourage all members of the House of Commons to carefully reflect upon the bill. I know it will not provide all the answers or solve all the problems but it is a small way that we can encourage it.

I know the government has fiscal responsibilities. I know it has concerns to meet in terms of balancing the books and everything. However if it can rush a bill like Bill C-48, which would offer millions and millions of dollars in tax concessions to the mining sector of the country, although for valid reasons, such as promoting investment and creating jobs in rural and northern parts of the country, but which will cost the treasury around $260 million by the year 2007, if we can help those companies, many of which are foreign owned, then surely we can find the time as members of Parliament to say to individuals and families, especially the taxpayers in our country, that we will look at them in a more favourable light and ensure that when they put money into sporting activities, club services or whatever, that they should be able to claim a bit of that back on their taxes.

I am not asking for the full amount to be tax deductible. I am asking for a small portion which would be exactly the same as a charitable donation. If we could achieve that it would go a long way.

In my own riding I have many people who dedicate a large part of their lives coaching their children. I also take the time to coach during the summertime. People dedicate a lot of time coaching basketball, hockey, baseball, gymnastics, whatever the sport may be. They love nothing better than to show a young person a particular skill in a sport and then watch that kid move forward.

We have a lot of people in our country who are simply not part of the sporting world because they simply cannot afford it or their parents do not have the funding or the money to get them into sports. Maybe this is one way to encourage and assist them to do that. If we can leave more money in the pockets of the average Canadian, they in turn could use those funds and perhaps be able to assist the various clubs and organizations throughout the country.

I encourage my colleagues in the Alliance, the Bloc, the Conservative Party and the Liberal Party to support the motion. I know they may have particular points of view that may differ or may even be similar in some regards but I encourage them to support the bill. I know many of them are active in sports. I know the member for Medicine Hat himself is a fine athlete and I know he would want to support the bill, especially for his families.

The member for Halifax West is an outstanding soccer player for the House of Commons. We just played soccer a couple of weeks ago. He also has his children enrolled in sports. He and his wife know exactly what it is like to drive the kids here and there. He knows it is also expensive for those particular sports. I would encourage my colleague from Halifax West, my neighbour next door, to also support the bill. What a great plug that would be for him in his next householder to say to the people that he supports this wonderful initiative.

Again I encourage support throughout the House of Commons and I thank the House of Commons very much for the opportunity to bring this important issue to debate today.

The Environment

[Charles Caccia, Liberal, Davenport, ON]

Mr. Speaker, on the one hand, the Government of Canada did the right thing in ratifying the Kyoto Protocol. It has also invested nearly $3 billion since the year 2000 toward the implementation of Kyoto goals.

On the other hand, the government is proposing a bill now before the finance committee aimed at reducing taxes on the oil and gas industry, a move which makes no sense because it would stimulate and accelerate emissions of the greenhouse gases we want to reduce to achieve the Kyoto objectives.

Evidently the finance department does not know that this government's major objective is to cut greenhouse gas emissions. Bill C-48, an act to amend the Income Tax Act, should be allowed to die on the Order Paper because it is not in the public interest and because it runs counter to a key government policy.

Committees of the House

[Sue Barnes, Liberal, London West, ON]

Mr. Speaker, I have the honour to present, in both official languages, the sixth report of the Standing Committee on Finance concerning Bill C-48, an act to amend the Income Tax Act (natural resources).

The committee has considered Bill C-48 and has agreed to report it (without amendment).

Income Tax Act

[The Deputy Speaker]

The House will now proceed to the taking of the deferred division on the motion at the second reading stage of Bill C-48.

[Serge Cardin, Bloc, Sherbrooke, QC]

Mr. Speaker, it is a pleasure to speak at second reading of Bill C-48. The main purpose of this bill is to reform the taxation of industry and natural resources.

Everyone will remember the gas price saga in August. In fact, there was a very substantial increase in gas prices this summer. At the same time, we learned that the federal government was giving a lucrative gift to the oil and gas companies.

We know that, in the 2000 budget, the federal government promised to lower corporate income tax from 28% to 21%, except obviously for businesses in the natural resource sector, such as oil, gas or mining. Because, naturally, there was also a tax credit.

Were it just a question of dropping the rate from 28% to 21% and eliminating the 25% allowance, the oil and gas companies would suffer as a result of these tax reforms. However, deductions for royalties might be allowed on their expenditures.

Consider the case of Petro-Canada. In 2002, it had royalties of $277 million. If it maintains royalties at this level in 2003, it will save approximately $7.5 million.

The finance minister also estimates that it will cost close to $260 million once the reform is fully implemented.

If we take a closer look, we can see the figures that some oil companies have made public recently.

Coming back to Petro-Canada and its second quarter report for shareholders. We know that Petro-Canada announced second quarter earnings of $450 million. That includes a positive adjustment of $96 million related to changes in the Canadian tax rate.

In the meantime, on July 23, 2003, Shell Canada Limited, in its quarterly report to shareholders, announced 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.

Meanwhile, Esso Canada in its second quarter report to shareholders, announced that tax rate reductions enacted by the federal government and the provincial government of Alberta and settlement of various tax matters had benefited results, mainly in the resources segment, by $109 million.

The three big oil companies are declaring future incremental profits of $250 million. Most of these profits can be attributed to Bill C-48.

Let us recap. We know that with the bill, the oil industry will see its tax rate decrease significantly. However, the mining industry in Quebec more than elsewhere will be penalized by this same measure. We might have expected the government to give a tax break to industry sectors that are having difficulties, but never to one of the most profitable sectors in the economy.

The bill would reduce the statutory corporate tax rate applicable to resource income from 28% to 21%.

As I said earlier, in the February 2000 budget speech the federal government announced a 7% reduction over five years of the general corporate tax rate, except for the resources sector.

The federal government did not grant the reduction to various industrial sectors, including the resources sector, which benefited from preferential corporate tax treatment.

In reality, since the resource sector benefited from other deductions, the actual tax rate was not 28% but rather 22%, according to KPMG.

Then there is the 25% resource deduction, which will be restricted, whereas the deductions for provincial and crown royalties, as well as mining taxes, might now be considered expenditures.

At the present time, the natural resources sector benefits from a 25% tax credit. Until 1974, provincial royalties were deductible. While the provinces were raising their royalties, the federal government's revenue was dropping. This 25% deduction was initiated in the 1974 federal budget to offset the non-deductibility of royalties.

Then there is the new 10% tax credit for qualifying mineral exploration expenses, but this applies only to metals and diamonds. The oil and gas industry is not included.

As far as tax rates are concerned, the benefits to these corporations can be seen. The rate will drop from 28% in 2002 to 21% in 2007. The deductible percentage of the present 25% resource deduction, which was still 100% in 2002, will drop to zero by 2007. The deductible percentage of mining royalties and taxes, which was of course zero in 2002—having only just been implemented—will hit 100% in 2007. Finally, the new mining exploration tax credit will go from zero to 10% by 2007.

To quote an excerpt from CAmagazine, the official publication of the Institute of Chartered Accountants:

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

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.

With respect to effective tax rates, I can quote a few figures. In this context, the overall effective tax rates, taking into account federal and provincial income tax, will increase. According to financial analysts, in Manitoba, the effective tax rate for the entire natural resource sector will increase by 2.9%; in the Maritimes, it will increase by up to 3.25% and even 4%; in Quebec, it will increase by 2.25%; and in Saskatchewan, by 4.5%.

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

I repeat that the figures quoted here come from prestigious accounting firms as well as the Mining Association of Canada. PriceWaterhouseCoopers compared the current system with the reform proposed in Bill C-48 for two types of mines.

Excluding the phasing out of the income tax on large corporations announced for all sectors—a measure that will benefit all Canadian businesses—the reform proposed in Bill C-48 means an average tax increase from 39.9% to 42.8% for gold mines, and from 38.8% to 46.6% for copper mines.

This does not affect only Quebec, but all of Canada. However, it is well known that there are quite a few gold and copper mines in Quebec. We are sensitive to this argument, and I cannot see what we, as the representatives of Quebec's interests, would stand to gain from supporting a bill that would increase the effective tax rate for a number of natural resource sectors in Quebec and other parts of Canada.

Finally, the association also told us that steps had been taken to promote mine development in the provinces, including Quebec. In this case, we can see that the federal government is literally encroaching upon the fiscal autonomy of the provinces and Quebec.

In the long run, these measures are expected to be profitable for all sectors of the economy. In the short term, however, some sectors will win and others will lose. Among the winners will be businesses working in tar sands, petroleum and precious metals. Among the losers will be those involved in natural gas, potassium and diamonds.

Mr. Hugues Lachance, senior tax director with KPMG, says that with the first two provisions in this bill, the oil companies would be losers, as I said before.

But these are not the only changes. The petroleum industry pays substantial provincial and crown royalties. In 2007, they will be able to include 100% of these provincial royalties as expenses.

Still—and I repeat it again even though I said it before—for the mining industry, where royalties are generally small, this third provision of the bill does not lighten their tax burden very much.

The Minister of Finance estimates that, when fully implemented, the complete program will cost him $260 million in foregone taxes. A very high percentage of this tax relief will be absorbed by the oil companies.

The bill's actual impact on the petroleum and natural gas industry will be a 12% reduction in the tax rate. Once this measure has been implemented, the tax rate for oil companies will be 5% lower than in Texas. In the United States, currently, the rate is 41.1% in Alaska and 35% in Texas. In Canada the rate is now 42.1% in Alberta. With the federal government proposals, the rate will drop to 30.1%.

The Mining Association of Canada, or MAC, estimates that “when all is said and done, thedisappearance of the Resource Allowance will likely result in higher taxespaid by the mining industry, even if we are able to deduct provincial royaltiesand mining taxes.”

The MAC goes even farther and states that the federal government is undercuttingthe good work by Quebec and the provinces to make mining investmentmore attractive.

More specifically, looking at the impact on the mining industry, they are saying that the federal government is implying that the new tax structure will be simpler, that it will streamline compliance and enforcement, attract investors, improve the competitiveness of the Canadian mining industry, and foster investment, innovation, productivity, economic growth and job creation in Canada. However, the industry does not believe that the tax reform program will meet the stated goals.

The gradual reduction provisions, announced in the 2003 budget, are too complicated and will be difficult to implement.

According to the Canadian Mining Association the hardship created by the 2003 budget and Bill C-48 would require a quick solution as well as the involvement of governments at the federal, provincial—including Quebec—and territorial level.

They are saying that the proposed changes to the federal income tax have a serious impact on a number of mining activities in Canada, and result in an increase in the combined federal, provincial and territorial taxes at the expense of the net revenues of corporations.

What can we say when we look at how this reform will benefit oil companies, especially in view of the fact that over the past 30 years Canada has given $66 billion in direct subsidies to the oil, gas and coal industry. These forms of energy are directly responsible for climate change. In other words, each Quebec taxpayer gave $27,000 to the oil and gas industry.

With the oil companies racking up huge profits, what can we say about the position of the federal government that still levies 1.5 cents per litre of gas to eliminate the deficit. We are now in a surplus situation but this tax is still being collected. Will the impact of these outrageous tax savings for the oil companies be felt at the pump? It is very doubtful.

We do not have the whole picture as far as the economic data and the impact are concerned, even though some accounting firms and experts have made some assessments. The committee will have to look very closely at the benefits claimed by the government as well as the real drawbacks for the mining industry.

Business Of The House

[Don Boudria, Liberal, Minister of State and Leader of the Government in the House of Commons]

Mr. Speaker, the hon. member across is a little impatient with his future holidays. He will probably have to wait some time.

This afternoon we will continue to debate second reading of Bill C-48, the natural resources taxation bill. I understand that the bill is nearing completion.

When it is complete, we will then debate Bill C-50, the veterans' benefits bill sponsored by my colleague, the Minister of Veterans Affairs, followed by the consideration of the Senate amendments to Bill C-10B, the cruelty to animal bill.

If time is left, we would deal with third reading of Bill C-17, the public safety bill, and second reading of Bill C-46, the market fraud bill.

In the unlikely event that we do not complete all of that this afternoon, on Friday we would begin with a reference to committee before second reading of Bill C-41, the amendments and corrections bill. The opposition House leader and I have had a brief conversation about this

We would then proceed with Bill C-37, respecting improvements to Canadian Forces pension benefits.

We will then return to any bills already mentioned today in the unlikely event that some of them are not fully completed.

On Monday, we would begin with Bill C-17, the public safety bill, and then return to the list previously described.

Tuesday, September 30, and Thursday, October 2, shall both be allotted days.

Income Tax Act

[Paul Crête, Bloc, Kamouraska—Rivière-Du-Loup—Témiscouata—Les Basques, QC]

Madam Speaker, as I was preparing to speak on Bill C-48, I wondered where such a bill might have come from. In the journal of the Chartered Accountants of Canada, in an article by Neil Smith, who is a senior tax manager, core tax practice, with Ernst & Young LLP in Calgary, we read:

The release came on the heels of a significant lobbying effort by the resource sector for federal corporate tax rate reductions—

We might wonder whether the resource companies really were winners in this respect. For example, it is interesting to read extracts from oil company annual reports regarding their semi-annual performance. For example, on page 1 of Petro-Canada's second quarter report to shareholders, we read:

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.

Therefore, these measures have already netted Petro-Canada $96 million in tax savings.

The shareholders' report issued by Shell Canada Limited for the second quarter states:

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.

Petro-Canada apparently paid $96 million less in taxes, over the first few months of the year, which is a very short period. In the case of Shell Canada, that figure is $54 million. The same goes for Esso Imperial, which reported the following:

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.

So, the three largest oil companies have declared additional future profits of $250 million. This is a direct consequence of the federal government's decision to lower the taxes applicable to oil and gas companies. They are not the companies suffering the most; they are companies that made astronomical profits in early 2003 and that introduced quite significant price hikes.

In the meantime, the federal government continues to collect 1.5 cents in excise tax per litre of gas. This tax is to pay down a deficit that has not existed since 1998. So, in a few short months, the oil and gas companies have pocketed hundreds of millions of dollars. It is not clear why they need this advantage.

Meanwhile, the federal government continues to pocket money because of a tax designed to pay down a deficit that no longer exists. We are talking about $2.8 billion in five years. No wonder taxpayers think this is ridiculous. Indeed, according to chartered accountants, the bill came “on the heels of a significant lobbying effort by the resource sector for federal corporate tax rate reductions.”

In other words, this government, which prides itself on helping the less fortunate and ensuring a better distribution of wealth, is granting $250 million in tax cuts to oil companies, and at the same time telling us it cannot give the provinces the $3 billion it owes them for health. This is a big problem. It shows an unacceptable lack of professional and political ethics. We cannot allow a bill to create this kind of situation.

[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.

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

Madam Speaker, I appreciate my colleague's intervention more than he knows.

I will go over the four provisions again: Canadian exploration expenses, Canadian development expenses, Canadian oil and gas property expenses and capital cost allowances determine the timing of reduction for capital expenditures. These provisions recognize the risks inherent to the large investments required for resource exploration and extraction and play an important role in ensuring a competitive business environment.

Also, there are two targeted income tax vehicles: the Atlantic investment tax credit that supports resources development and other investment in Atlantic Canada; and flow-through shares, which are designed to support junior exploration firms.

As well, the 15% mineral exploration tax credit was introduced in October 2000 as a temporary measure to moderate the impact of global downturn in exploration activity on mining communities across Canada.

The 25% resource allowance was introduced in 1976 to effectively put a ceiling on deductions in respect of rapidly increasing provincial and other crown royalties and mining taxes. This allowance functions as a proxy for actual royalties and mining taxes paid to provinces.

The government recognizes that the resource sector tax regime can generate greater investment and jobs for Canadians if it achieves these three goals. First, the sector must be internationally competitive, particularly within the North American context. Second, it must be transparent for firms and investors. Third, it must promote the efficient allocation of investment both within the resource sector and between sectors of the Canadian economy. I believe the measures in Bill C-48, which would be phased in over five years, meet these goals.

As we know, in a global economy with intense competition for capital, a tax system with a lower tax rate, applied uniformly across all sectors with a simpler and more efficient tax structure, is far more effective than one with a higher rate of tax applied on a less efficient tax base. Bill C-48 would address this issue by reducing the federal statutory corporate income tax rate on income earned from resource activities from 28% to 21% by 2007.

The federal statutory corporate income tax rate is important because it is often the first piece of information viewed by prospective investors. A uniform, low statutory rate sends a positive signal to investors in Canada and internationally about Canada's relative competitiveness. In addition, a single rate reduces compliance and tax administration costs. The resource tax package will result not only in more competitive tax rates but also in a more competitive tax structure.

I would like now to look at changes relating to crown royalties, mining taxes and the resource allowance. As hon. members may know, the existing tax structure disallows the deduction from income of crown royalties or mining taxes. The resource allowance can either exceed or be less than non-deductible royalties and mining taxes for a specific project annually or over its economic life.

The resource allowance also introduces complexities in the tax system, thus adding to the cost of compliance and administration. It operates in economic conditions that have changed significantly from those that gave rise to it in the 1970s and earlier 1980s. Oil and gas markets are now deregulated and international competition for exploration and development capital is more robust.

All these factors put pressure on producers to be more efficient and, on host jurisdictions, to levy royalties and mining taxes at competitive rates.

By providing through this bill a deduction for the actual amounts of provincial and other crown royalties in mining taxes paid and eliminating the resource allowance, projects will now be treated in a more comparable fashion. This means that investment decisions will be based more consistently on the underlying economics of a project.

When fully implemented, this measure will result in a tax structure that imposes the same corporate tax on resource income as on other corporate income, and one that also allows deductions for actual costs instead of an arbitrary allowance.

These changes with respect to the resource allowance and royalty deductibility present important structural improvements to the treatment of costs in the resource sector.

Another measure introduces a new 10% mineral exploration tax credit for corporations incurring qualifying mineral and pre-production exploration expenses before a mine reaches production in reasonable commercial quantities. The new tax credit will be available only to corporations and will not be refundable or transferable under a flowthrough share agreement or through a partnership or trust. It will apply to both Canadian grassroots exploration and pre-production development expenditures for diamonds, base or precious metals, and industrial minerals that become base or precious metals through refining.

I should point out that this new tax credit is not to be confused with the 15% temporary mineral exploration tax credit that Bill C-28 is extending to the end of 2004. That credit is only available to individual investors in flowthrough shares. It was introduced as a temporary measure, as I mentioned earlier, to moderate the impact of the global downturn in exploration activities on mining communities across Canada.

Bill C-48 also includes special transitional arrangements. I will provide a little background at this point.

Following the budget announcement that the government intended to improve the taxation of resource income, on March 3 the Minister of Finance released a technical paper on the proposed changes.

The government reviewed the changes with industry and the provinces. Further to these discussions the government made two changes to the transition provisions of the new tax structure.

The first change will achieve a better measure of taxable resource and non-resource income for the purposes of applying the general corporate rate reduction during the transitional period by utilizing resource pool deductions in the determination of resource income.

The second change targets the Alberta royalty tax credit, ARTC, transitional relief set out in the technical paper to get a greater number of small and medium size producers. The Alberta royalty tax credit, as many hon. members know, is one of the most significant refund programs for crown royalties. Under this program the province of Alberta refunds a minimum of 25% of the first $2 million in crown royalties paid by each corporation or group of corporations.

A special transitional measure will reduce, during a 10 year transitional phase-in period, a portion of the refund that must be included in income tax for tax purposes. It will be available to individuals who receive the ARTC and to taxable Canadian corporations that pay no more than $2 million in Alberta crown royalties. Taxable Canadian corporations that may pay more than $2 million but less than $5 million of Alberta crown royalties will be eligible for a reduced amount of special transitional fund.

This new measure will further assist smaller corporations in their transition to the new tax structure. Both the general five year transition and the 10 year ARTC transition will provide investors with the certainty they need when making investment decisions.

There will be several benefits to the changes implemented through the bill. These changes will increase Canada's international competitiveness in oil and gas and in mining. As I indicated earlier, they will result not only in more competitive tax rates but also in a more competitive overall tax structure.

Regardless of how a firm's tax base is affected by the removal of the resource allowance and deductibility of crown royalties, all resource firms will benefit from a lower rate of corporate income tax. The oil and gas sector will pay less federal corporate income tax as a whole as a result of this change. Similarly, it is anticipated that the new taxation regime for mining, which includes the new pre-production mining tax credit for corporations, will result in a lower tax burden for that sector. For the most part there has been strong positive feedback on these proposed changes from industry organizations.

When these measures are fully phased in, it is estimated that the annual revenue cost to the federal government will be about $260 million.

There is one more important element of this bill that I would like to discuss. Bill C-48 also includes a measure that will enhance the treatment of the Canadian renewable and conservation expenses, the CRCE. These expenses are associated with the development of certain renewable energy and energy efficiency projects. The measure will also allow corporations to renounce Canadian renewable and conservation expenses to flowthrough share investors in a year where the CRCE will be incurred in the subsequent year.

This change was proposed in a July 26, 2002 Department of Finance news release. It will apply to qualifying renewable energy and energy conservation projects and will provide greater flexibility in the timing of investments financed through flowthrough shares. The treatment of flowthrough share investments in such projects will now parallel that of investments in non-renewable energy projects.

This new tax structure will achieve what it is designed to do. It will improve the international competitiveness of the Canadian resource sector, in particular relative to the U.S. It will promote the efficient development of Canada's natural resource base by establishing a common corporate income tax rate for all sectors and by treating costs more consistently, both across resource projects and between the resource sector and other sectors of the economy. It will simplify the taxation of resource income, streamline compliance and administration, and send clearer signals to investors.

This is a very important new regime. It will build upon Canada's tax advantage to support investment, innovation, productivity, growth and jobs for Canadians. I would urge all members of the House to support this bill.

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

Madam Speaker, I appreciate the opportunity to present Bill C-48 for second reading today.

The bill would implement federal income tax changes that were announced in the 2003 budget for Canada's resource sector, comprising the mining, oil and gas and fertilizer industries.

The 2003 budget takes concrete comprehensive action in several areas to build the society that Canadians value, the economy that Canadians need and the accountability that Canadians deserve. Included in the budget are measures to help Canadian business become even more competitive in the North American and global economies.

This new structure for federal income taxation of the resource sector reflects the government's ongoing commitment to an efficient and competitive corporate income tax system.

As hon. members know, a better economic performance for Canada tomorrow requires a more productive, innovative and sustainable economy today. Our tax system plays an important role in creating a stronger, more productive economy.

An efficient tax structure can enhance incentives to work, save and invest. It can also support entrepreneurships and the emergence and growth of small businesses. In addition, a competitive tax system is critical in encouraging investment in Canada, which leads to greater economic growth and job creation.

That is why the government launched a five year $100 billion tax reduction plan, the largest in our history, which has strengthened the foundation for economic growth and job creation in this country.

Among other things, it lowered the general federal corporate income tax rate from 28% in 2000 to 21% in 2004. With the tax cuts implemented to date, the average federal-provincial corporate tax rate in Canada is now below the average in the U.S.

The 2003 budget builds on the Canadian tax advantage for investment.

Several measures that will benefit the resource sector were included in Bill C-28, the Budget Implementation Act, 2003, which received royal assent last June.

These measures include: eliminating the federal capital tax over five years, a move that will strengthen Canada's tax advantage for investment in the capital-intensive resource sector; increasing the amount of annual qualifying income eligible for the reduced 12% federal small business tax rate from $200,000 to $300,000; and extending the existing temporary 15% mineral exploration tax credit until December 31, 2004, and providing an additional year for issuing corporations to make expenditures related to these arrangements.

When fully implemented, the measures in the legislation we are debating today, Bill C-48, will require that firms in the resource sector are subject to the same statutory rate of corporate income tax as firms in other sectors and that they will be able to deduct actual costs of production, including provincial and other Crown royalties and mining taxes.

Before discussing the measures in detail, I would first like to put them in context.

The resource sector is an important generator of investment, exports and jobs for Canadians, indeed, a significant component of the Canadian economy. In 2001, for example, the resource sector accounted for almost 4% of Canada's GDP, with over $64 billion in exports and more than $30 billion in capital expenditures. Over 170,000 Canadians work in resource businesses.

As well, the sector in general, and the mining industry in particular, is vital to rural and northern economies, while the oil and gas industry, long important to western provinces, is now also a significant economic presence in Atlantic Canada.

The potential for future resource development exists in virtually every region of the country. Moreover, Canadian resource industries are large investors in innovative technology and major participants in the provision of exploration and extraction services internationally.

Historically, income earned in Canada from the extraction and initial processing of non-renewable resources has been subject to special tax treatment. There are three main reasons for this.

The first is that resources are key economic assets. Since the development of non-renewable resources can create significant economic and social benefits, there is a strong initiative for governments to design a sound, economic and fiscal framework for large capital investment requirements.

The second reason underlying the tax treatment of the resource sector is that governments have come to accept that there is a specific set of risks and benefits inherent in the business of resource exploration and extraction. The tax treatment acknowledges that the resource sector is operating in a distinct environment.

The third reason underlying this special tax treatment is the direct competition for international investment dollars. Historically, international capital has been critical to the development of our resource industry. Competition for this capital, including Canadian capital, is increasingly intense.

I would like to review for members the current income tax provisions that are specific to the resource sector.

There are four provisions: Canadian exploration expenses, Canadian development expenses, Canadian oil and gas property expenses--

[Anne McLellan, Liberal, for the Deputy Prime Minister and Minister of Finance]

moved that Bill C-48, an act to amend the Income Tax Act (natural resources), be read the second time and referred to a committee.

Business of the House

[Don Boudria, Liberal, Minister of State and Leader of the Government in the House of Commons]

Mr. Speaker, I will be pleased over the following weeks to continue to elaborate on the program from now until December 12 for the benefit of the hon. member and for anyone else. More specifically, about the following week, I wish to express the following by way of the business statement.

This afternoon, we will continue with the debate on the opposition motion.

Tomorrow, the House will return to the motion to refer Bill C-49, the electoral boundaries bill, to committee before second reading. This will be followed by Bill C-45, the corporate liability bill, or Westray bill if you like, and Bill C-34, the ethics commissioner bill.

On Monday, we will begin with bills not completed this week, Friday in particular. We will then proceed to Bill C-46, respecting market fraud, Bill C-50 respecting veterans, Bill C-17, the public safety bill, and finally Bill C-36, the Library and Archives of Canada bill.

Tuesday will be an allotted day.

On Wednesday and Thursday, the House will begin consideration of Bill C-48, respecting resource taxation, and will then return to any of the business just listed that has not been completed.

Supply

[Paul MacKlin, Liberal, Parliamentary Secretary to the Minister of Justice and Attorney General of Canada]

Madam Speaker, I welcome the opportunity to speak to the motion put forth by the hon. member for Joliette. While I commend the hon. member for bringing this matter to the attention of the House, I am unable to support the motion.

Following my remarks I am confident that hon. members may well share my views. In the time allotted to me today I want to focus on two issues. First, I want to set the record straight about the government's commitment to tax fairness and tax equity. Second, I want to review with hon. members why Canada has a network of tax treaties or tax conventions, as they are often called, in place.

Let me begin with the tax fairness and tax equity. Since the beginning of our mandate back in 1993, two of the government's ongoing priority areas continue to be sound fiscal management and fairness in our tax system. The government is fully aware that better economic performance for Canada tomorrow requires a more productive, innovative and sustainable economy today.

Our tax system plays an important role in creating a stronger, more productive economy.

An efficient tax structure can enhance incentives to work, save and invest. It can also support entrepreneurship and emergence and growth of small businesses.

In addition, a competitive tax system is critical in encouraging investment in Canada, which leads to greater economic growth and job creation. That is why, in the budget in 2000, the government introduced its five year $100 billion tax reduction plan, which is the largest tax cut in history.

The tax reduction plan is putting in place a tax advantage for business in Canada as a basic part of the strategy for fostering a strong and productive economy. With the tax cuts implemented to date, the average federal-provincial corporate tax rate in Canada is now below the average U.S. rate.

The 2003 budget builds on that tax reduction plan to further improve the tax system and enhance incentives to work, save and invest.

Hon. members will recall that Bill C-28, the Budget Implementation Act of 2003, received royal assent in June. That bill contained several measures that improve the tax system. We will soon be debating Bill C-48 which introduces a new tax structure for the resource sector to make it more internationally competitive, again a measure that stems from that 2003 budget.

I can assure hon. members opposite that the government remains committed to a fair and equitable tax system, one that is reasonable and compassionate and that we will continue to introduce measures as appropriate to ensure that this commitment is met.

This brings me to the topic of today's motion, that is the tax treaties or conventions. Our tax treaties our tax treaties are there to assure us of how Canadians will be taxed abroad. At the same time, these treaties assure our treaty partners of how their residents will be treated in Canada.

Canada, as we have already heard today, has over 70 tax treaties in place. This speaks volumes to the work behind the scenes on behalf of the government to set up this extensive network.

Canada's tax treaties are all designed with two general aims in mind: first, to remove barriers to cross-border trade and investment; and second, to prevent unintended tax results by encouraging co-operation between Canada's tax authorities and those in other countries.

International trade and investment decisions can be influenced by the existence and terms of a tax treaty and their importance in this regard should not be overlooked. Tax treaties do not impose tax nor do they generally restrict countries from taxing their own residents as they see fit under their domestic tax laws. Among other things, however, tax treaties set out the rules under which one country can tax the income of a resident of another country. This is particularly important for traders, investors and others with international dealings who are interested in doing business in Canada. It is only natural that they would want certainty as to the tax implications associated with their activities here and reassurances that they will be treated fairly.

The importance of eliminating tax impediments to international trade and investment has grown even more important now that the world economy has become so intertwined. It should not, therefore, come as any surprise that it can be advantageous to have tax treaties in place with other countries.

One of the most disconcerting things to a taxpayer is unrelieved double taxation, in other words, to have income taxed twice when the taxpayer lives in one country and earns income in another. Without a tax treaty, both countries could claim tax on the income without providing the taxpayer with any measure of relief for the tax paid in the other country.

To alleviate the potential for double taxation, tax treaties resort to two general methods. In some cases, the exclusive right to tax particular income is granted to the country where the taxpayer resides. In other cases, the taxing right is shared but the state where the taxpayer resides is obliged to eliminate double taxation by providing relief for the tax paid in the other country.

Put another way, tax treaties reduce the frequency with which taxpayers of one country are burdened with the requirements to file returns and pay tax in another country when they are not meaningful participants in the economic life of that country or where it would be a nuisance for them to do so.

Withholding taxes are also a common and important feature in international taxation. In Canada's case they were applied on certain income, for example, interest dividends and royalty payments that Canadian residents make to non-residents. Withholding taxes are levied on the gross amounts paid to non-residents and generally represent their final obligations with respect to Canadian income tax. Without tax treaties, Canada usually taxes this income at the rate of 25%, which is the rate set out in our domestic law or, more precisely, under the Income Tax Act.

Our tax treaties specify the maximum amount of withholding tax that can be levied by Canada and its treaty partners on certain income. These rates are almost always lower than the 25% rate provided for in the Income Tax Act.

I now want to turn to the second objective of tax treaties, namely that of preventing the unintended tax results by encouraging co-operation between Canadian tax authorities and those in other countries.

The most obvious unintended result from a tax administrator's perspective is that of tax evasion or avoidance. Like their predecessors, tax treaties are also designed to encourage co-operation between tax authorities in Canada and in the treaty countries to prevent tax evasion or avoidance.

Treaties are an important tool in protecting Canada's tax base as they allow for consultations and the exchange of information between our revenue authorities and their counterparts in these eight countries.

Because of tax treaties, tax authorities are able to deal directly with each other to solve international transfer pricing issues, to reach satisfactory solutions to concerns raised by taxpayers, to complete audits and to engage in other discussions aimed at improving tax administration.

But there are benefits. Many positive benefits ensue for taxpayers and businesses alike from tax treaties. For example, taxpayers benefit from knowing that a treaty rate of tax cannot be increased without substantial advance notice.

Investors and traders benefit from the atmosphere of certainty and stability that the mere existence of tax treaties will foster.

Our tax system works more effectively with the introduction of mechanisms to settle disputes. Our expanded tax treaty network generates more international activity which impacts favourably on the economy. Of course, assurances against unrelieved double taxation are always applauded by taxpayers.

In concluding my remarks, Canada's network of tax treaties with other countries is one of the most extensive of any country in the world. Canada's exports now account for about 40% of our annual GDP. Further, our economic wealth also depends on direct foreign investment as well as inflows of information, capital and technology.

Clearly the impact of tax treaties on the Canadian economy is significant. Without these international agreements, double taxation can adversely affect economic relationships between countries, mainly because tax treaties are directly related to international trade in goods and services and therefore impact directly on our domestic economic performance.

Let me reiterate: The passage of tax treaties results in many meaningful benefits for taxpayers, benefits that include a more simplified tax treaty system, a more stable environment for investors and traders and most important, the elimination of double taxation that might otherwise result in harmful international transactions.

Given the success of the existing tax treaty system and its contribution to creating fairness and equity in the tax system, I feel that the premise of today's motion is not relevant and I am unable to support it.

Income Tax Act

[Don Boudria, Liberal, for the Minister of Finance]

moved for leave to introduce Bill C-48, an act to amend the Income Tax Act (natural resources).

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

Copyright Act

[The Speaker]

The Chair is satisfied that this bill is in the same form as Bill C-48 was at the time of the prorogation of the first session of the 37th Parliament. Accordingly, pursuant to order made on Monday, October 7, the bill is deemed adopted at all stages and passed by the House.

(Bill read the second time, considered in committee, reported, concurred in, read the third time and passed.)

[Sheila Copps, Liberal, Minister of Canadian Heritage]

moved for leave to introduce Bill C-11, an act to amend the Copyright Act.

Mr. Speaker, this bill is in the same form as Bill C-48 from the first session of this Parliament and, in accordance with the special order of the House of October 7, 2002, I request that it be reinstated at the same stage that it had reached at the time of prorogation.

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