Mr. Speaker, this private member's bill, Bill C-259, asks parliamentarians to legislate the repeal of the excise tax on jewellery. I am very pleased to have the opportunity to further debate this proposal. It is an issue that I have been very active on and I was very pleased that we were able to have this tax removed over five years.
Given that Bill C-259 touches on the taxation system and has implications for the fiscal framework, let me begin by making reference to Canada's fiscal record over the past 10 years and the impressive social and economic progress that has followed.
This government has recorded eight consecutive surplus budgets and has reduced the federal debt by more than $60 billion. At the same time, more than $100 billion in cumulative tax cuts has been delivered since 1996, with a primary focus on middle and low income families, and more than $200 billion has been invested in Canada's highest social and economic priorities: health care and equalization; the well-being of children and families; learning, skills and innovation; affordable housing, community infrastructure; and the environment.
We achieved these results through our unwavering commitment to budget balance and fiscal prudence. Indeed, the commitment to fiscal responsibility is a cornerstone of this government. Furthermore, the federal budget tabled in this House on February 23 projects balanced budgets or better in 2004-05 and in each of the next five fiscal years.
According to the Organisation for Economic Co-operation and Development, the OECD, Canada was the only group of seven, or G-7, country to record a total government budget surplus in 2004, for the third consecutive year, and is projected to be the only country in surplus again in 2005-06.
Against this backdrop I would like to turn now to discuss private members' bills, in particular those that affect the taxation system. It is worth noting that the number of such bills tabled in the current session is now approaching 20, all of which propose tax relief in specific circumstances and could collectively represent a total fiscal cost of as much as $3 billion in annual tax relief measures.
Each of these private members' bills deals with a unique aspect of the taxation system. The measures that are proposed in these bills range from the income tax treatment of tools required by employment to deductions for public transportation costs and to the creation of a deduction for charity workers and volunteers.
There can be no doubt that these bills put forward by private members are done out of genuine concern for Canadians and their interaction with the taxation system. At the same time, it is important to remember that each and every one of these bills carries a cost for the fiscal framework.
For example, one private member's bill, Bill C-252, proposes a tax credit for fees pertaining to participation of an individual in physical activity or amateur sport. There can be little doubt as to the many benefits of physical activity and exercise, but with an estimated cost of over $400 million per annum, it is plain that this proposal needs to be rigorously evaluated against other fiscal priorities, including both spending priorities and tax relief priorities. That is to say, we all may agree that encouraging physical activity is a good thing, but we need to consider whether it is the best way to spend over $400 million per year or whether there are more pressing priorities.
This is one of the central points I would like to make: that no matter how laudable or defensible any given proposal might be on its own merits, it is imperative that we not lose sight of the broader implications for the integrity of the taxation system and fiscal framework.
For example, individual proposals, even those that are relatively inexpensive, may create unfairness relative to other taxpayers who then need to be considered as well. Bills may create difficult precedents, have unintended effects or even create opportunities for tax avoidance or evasion and hence end up costing more money. Indeed, the continued consideration of one-off measures may over time increase the complexity of the tax system and affect its overall operation.
Given these concerns, I would suggest that caution must be exercised when giving consideration to private members' bills affecting the taxation system. Rather than being considered on an ad hoc basis, what is required is that these proposals be managed in the context of an integrated policy and fiscal framework.
Indeed, this is precisely the type of approach that underlies the annual budget process, whereby the government consults with Canadians on their priorities for the next budget in order to help determine the important choices that must be made in a world of limited resources. It is this type of comprehensive approach to fiscal planning that has not only preserved the robustness and integrity of the federal tax system, but has also facilitated Canada's impressive economic and social progress over the past decade.
This performance, which has required some difficult choices along the way, provides the foundation for the continued delivery of initiatives that matter most to Canadians, including announcements concerning additional funding for health care, improvements to the equalization system and new funds for community infrastructure across Canada.
These and other initiatives can only be addressed where our economy continues to thrive and it is rooted in a prudent and disciplined approach to fiscal and taxation policy. Within the context of a comprehensive approach to consultation and evaluation of budgetary proposals, I would like to draw the attention of members to the important role that is played by the House of Commons Standing Committee on Finance in advising the government on the initiative proposed in budget 2005 respecting the excise tax on jewellery.
Going back to the lead-up to budget 2005, it is noteworthy that budget 2004 referred to the importance of suggestions from entrepreneurs and small business as part of the budget consultation process. In order to assist the government in identifying the best options for future consideration among the broad range of competing priorities, the government indicated at that time that it would seek the advice of the Standing Committee on Finance.
This provided the finance committee with an opportunity to assess the merits of proposed small business tax relief measures and to advise the government on the relative priority that should be accorded to them, taking into account limited fiscal resources.
In fact, the finance committee delivered in October of 2004 its second report on small business tax measures, focusing on excise duties and taxes as they affect Canada's winemakers, small brewers and jewellers. The finance committee put forward as its priority recommendation two options for phasing out the excise tax on jewellery over five years, either by reducing the rate or increasing the threshold at which the tax applies.
In deciding between these options, the committee indicated that consideration should be given to which of the options would be the more expeditious and involve greater administrative simplicity for the jewellery sector.
The finance committee went on to note that there are many other small business sectors that would benefit from the implementation of appropriate tax changes and that the committee would welcome comments from these sectors during the next round of prebudget consultations. Significantly, the committee was also expressly mindful of the fact that the number of worthy tax relief proposals brought to its attention exceeded the ability of the government to finance them all in a fiscally responsible manner.
The government was very pleased to receive the report from the committee and gave careful attention to the views of the committee on these and other proposals for tax relief in the deliberations leading up to budget 2005. Indeed, the government followed the advice of the finance committee in budget 2005 and proposed that the excise tax on jewellery, clocks and watches and items made of semi-precious stones be phased out through a series of rate reductions over the next four years.
The budget stated that this phase-out would be accomplished by an immediate reduction in the rate of tax on jewellery to 8% from 10% and would then be reduced by an additional two percentage points in each of the next four years until the tax was eliminated. This proposal sets out a clear plan to remove the excise tax to benefit the Canadian jewellery industry in a manner that is entirely consistent with the report and recommendation from the finance committee and that also respects the need to develop and deliver tax policy in a comprehensive, integrated manner.
Bearing these facts in mind, I must admit that it is somewhat disconcerting and disappointing to see that the finance committee is no longer willing to follow its own advice to the House that the excise tax on jewellery should be phased out over a number of years. Instead, contrary to its own report and recommendation, the finance committee has chosen to endorse the private member's bill, Bill C-259, which would repeal the existing tax, although not on all items, on royal assent.
Accordingly, I would like to conclude by noting that the endorsement of Bill C-259 by the finance committee simply does not demonstrate the kind of fiscal prudence and financial responsibility that has allowed Canada to enjoy eight consecutive surplus budgets.
