Sales Tax Amendments Act, 2006

An Act to amend the Excise Tax Act, the Excise Act, 2001 and the Air Travellers Security Charge Act and to make related amendments to other Acts

This bill was last introduced in the 39th Parliament, 1st Session, which ended in October 2007.

Sponsor

Jim Flaherty  Conservative

Status

This bill has received Royal Assent and is now law.

Summary

This is from the published bill. The Library of Parliament often publishes better independent summaries.

Part 1 of this enactment mainly implements proposed measures relating to the Goods and Services Tax and Harmonized Sales Tax (GST/HST). Part 2 contains measures relating to the Excise Act, 2001 and other Acts with respect to the taxation of tobacco, spirits and wine. Finally, Part 3 contains measures relating to the Air Travellers Security Charge.
The GST/HST measures, contained in Part 1 of this enactment, are principally aimed at improving the operation and fairness of the GST/HST in the affected areas and ensuring that the legislation accords with the policy intent. In some cases, adjustments have been made to the legislation as originally proposed in response to representations from the tax and business communities.
The principal GST/HST measures are as follows:
(1) Health: confirms the GST/HST exemption for speech-language pathology services; exempts health-related services rendered in the practise of the profession of social work; zero-rates sales and importations of a blood substitute known as plasma expander; restores the zero-rated status of a group of drugs, collectively known as Benzodiazepines; broadens the specially equipped vehicle GST/HST rebate so that this rebate applies to motor vehicles that have been used subsequent to being specially equipped for use by individuals with disabilities.
(2) Charities: ensures that the exemption of supplies by charities of real property under short-term leases and licences extends to any goods supplied together with such real property.
(3) Business Arrangements: provides transitional GST/HST relief on the initial asset transfer by a foreign bank that restructures its Canadian subsidiary into a Canadian branch; removes technical impediments that hinder the use of existing group relief provisions under the GST/HST; simplifies compliance by excluding beverage container deposits that are refundable to the consumer from the GST/HST base; permits an agent to claim a GST/HST deduction for bad debts, and to claim adjustments or refunds of tax, in respect of sales made on behalf of a principal where the agent collects and reports tax; extends the existing agent rules under the GST/HST legislation to persons acting only as billing agents for vendors; better accommodates special import arrangements between businesses in certain situations where goods are supplied outside Canada to a Canadian customer; ensures that GST/HST group relief rules cannot be used to exempt from GST/HST otherwise taxable clearing services that are provided by a group member to a closely related financial institution who will then re-supply those services on an exempt basis to a third-party purchaser outside the group; clarifies the treatment of the right to use certain types of amusement or entertainment devices, such as the playing of a game, when it is provided through the operation of a mechanical coin-operated device that can accept only a single coin of twenty-five cents or less as the total consideration for the supply; confirms the policy intent and Canada Revenue Agency’s existing practice that no GST/HST or provincial sales taxes on a passenger vehicle are included in calculating the maximum allowable value for input tax credit purposes.
(4) Governments: ensures that a small supplier division of a municipality is treated in the same manner as a municipality that is a small supplier; exempts a supply of a right to file or retrieve a document or information stored in an electronic official registry.
(5) HST-related Rules: as announced by the Government of Nova Scotia, limits the availability of the current Nova Scotia HST New Housing Rebate to first-time homebuyers and reduces the maximum rebate available to $1,500; includes in the Act the draft Specified Motor Vehicle (GST/HST) Regulations, which prescribe the value of a specified motor vehicle for the purposes of calculating the 8% provincial component of the HST in circumstances where the vehicle is brought into a participating province and prescribe the manner in which that tax is required to be paid.
(6) Administration: adds a discretionary power for the Minister of National Revenue to accept late-filed applications for the GST New Housing Rebate and the Nova Scotia HST New Housing Rebate for owner-built homes, where exceptional circumstances have prevented an applicant from meeting the normal filing deadline; adds a discretionary power for the Minister of National Revenue to accept late-filed elections between closely related financial institutions for adjustments that they are required to make for the provincial component of the HST; permits the Minister of National Revenue to exchange GST/HST information with foreign governments that are signatories to the Convention on Mutual Administrative Assistance in Tax Matters; adds a discretionary power under the Act for the Chief Statistician of Canada to provide statistical information concerning business activities to the provinces similar to an existing provision in the Income Tax Act.
The measures contained in Part 2 of this enactment amend the Excise Act, 2001 to implement minor refinements that will improve the operation of the Act and more accurately reflect current industry and administrative practices. They also implement related and consequential amendments to the Access to Information Act, the Customs Act, the Customs Tariff and the Excise Tax Act.
The principal measures related to the Excise Act, 2001 are as follows:
(1) Tobacco: extends the requirement to identify the origin of tobacco products to all products, including those for sale at duty-free shops or for export, consistent with the Framework Convention on Tobacco Control, an international treaty on tobacco control; clarifies that cigarettes, tobacco sticks, fine-cut tobacco or cigars, but not packaged raw leaf tobacco, may be supplied to the export market or the domestic duty-free market.
(2) Alcohol: authorizes private laboratories, provincial liquor boards and vintners to possess a still or similar equipment and produce spirits for the purpose of analysing substances containing ethyl alcohol without holding a spirits licence; defers the payment of duty by small vintners selling wine on consignment in retail stores operated by an association of vintners until the wine is sold.
(3) Administration: permits the Minister of National Revenue to exchange excise duty information with foreign governments that are signatories to the Convention on Mutual Administrative Assistance in Tax Matters; adds a discretionary power under the Act for the Chief Statistician of Canada to provide statistical information concerning business activities to the provinces similar to an existing provision in the Income Tax Act.
The measures pertaining to the Air Travellers Security Charge (ATSC), contained in Part 3 of this enactment, include previously announced relief provisions, as well as technical changes to the Air Travellers Security Charge Act.
The principal measures related to the ATSC are as follows:
(1) Relief: relieves, in particular circumstances, the ATSC in respect of air travel sold by resellers or donated by air carriers.
(2) Administration: provides authority for the Governor in Council to add, delete or vary by regulation the schedule of listed airports.

Elsewhere

All sorts of information on this bill is available at LEGISinfo, an excellent resource from the Library of Parliament. You can also read the full text of the bill.

Sales Tax Amendments Act, 2006Government Orders

May 14th, 2007 / 4:30 p.m.
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Conservative

Rick Dykstra Conservative St. Catharines, ON

Mr. Speaker, the member can rest assured that the next part of my speech dives right into that topic.

I would like to remind the member that the next time he stands to speak to any issue that he heed the words and advice that he just gave me because I think they would be outstanding for him to follow as well.

Bill C-40 would also improve our tax advantage. It would improve fairness and efficiency in the sales tax system and would ease compliance in administration for businesses and for government.

The bill consists of three parts. The first pertains to the GST and the harmonized sales tax. The second relates to the taxation of wine, spirits and tobacco. The third concerns the air travellers security charge.

I will begin with the GST. This bill is principally aimed at improving the operations and the fairness of the GST-HST in specific sectors of the economy. The principle behind the measure encompasses important areas for Canadians.

First and foremost is health care. Canadians know that our health system is one of the best and it needs to stay that way. Bill C-40 contains a number of measures to help improve it. It would cement the GST and the HST exemption for speech language pathology services and it would add the services of social workers to the list of services exempt from the GST or the HST. This is consistent with the policy criteria for the inclusion of a particular service on the list of the GST-HST exemption in all provinces.

The criteria is as follows. If a service is covered by the health care plan in a given province, it is exempt in that province. If a service, however, is covered by the health care plan of two or more provinces, it is exempt in every province. If a profession is regulated as a health profession by at least five other provinces, the services of that profession are exempt in all provinces.

The government is also very aware of the challenges faced by individuals with disabilities. Budget 2006 went above and beyond the recommendations of the Technical Advisory Committee on Tax Measures for Persons with Disabilities. In that spirit, Bill C-40 broadens the specially equipped vehicle GST-HST rebate for individuals with disabilities. It also exempts the sale and importation of a blood substitute known as plasma expander. It also restores the tax-free status of a group of drugs commonly used to treat a variety of conditions, such as seizure control, anxiety and alcohol withdrawal.

Those measures illustrate the government's commitment to ensuring that Canadians continue to have access to timely and quality health care.

Canada's new government is committed to reducing taxes for individual Canadians as well as for Canadian businesses.

Budget 2007 reduces the paper burden on small business by 20% by no later than November 2008. It also decreases the frequency of business tax remittance and filing requirements.

These measures are technical in nature so I will not get into the details but I will say that, broadly, they will ease compliance by removing technical impediments and simplifying compliance with the GST-HST legislation.

The second part of Bill C-40 dealing with excise measures relates to tobacco and alcohol products. The bill would amend the Excise Tax Act, 2001 to implement minor refinements that would improve the operation of the act and more accurately reflect current industry and administrative practices.

The bill would also implement related and consequential amendments to the Access to Information Act, the Customs Act, the Customs Tariff and the Excise Tax Act.

The principal measures related to the Excise Tax Act, 2001 are as follows. The first is tobacco. Bill C-40 would extend the requirement to identify the origin of tobacco products to all products, including those for sale at duty-free shops or for export. This is consistent with the framework convention on tobacco control, an international treaty on tobacco control. It also clarifies which tobacco products may be supplied to the export market or the domestic duty-free market. For example, cigarettes, tobacco sticks, fine cut tobacco or cigars may be supplied but it does not include packaged raw leaf tobacco.

I will move on to the spirits licence, which is required to produce alcohol products using a still. There are still some cases where private laboratories, provincial liquor boards and vintners use stills to produce spirits, to analyze substances containing ethyl alcohol.

Bill C-40 would authorize these entities to possess a still without holding a spirits licence. However, to limit possession of non-duty paid spirits, the bill would also require these parties to immediately dispose of those spirits once the analysis is complete. This would also defer payment of duty by certain small vintners selling wine on consignment in retail stores until the wine was actually sold.

As I said, a number of administrative measures are in the bill. One has to do with the exchange of information between Canada and its foreign governments. The bill would permit the Minister of National Revenue to exchange excise duty information with foreign governments that are signatories to the Convention on Mutual Administrative Assistance in Tax Matters. The bill would also add a discretionary power for the chief statistician of Canada to provide statistical information concerning business activities to all the provinces. It is similar to an existing provision that is already in the Income Tax Act.

Third and finally are air travel security charge measures. The bill would relieve the charge in respect of air travel donated by an air carrier to a registered charity that arranges free flights for individuals as part of its charitable purposes. It means that certain charities that arrange free air transportation services for people who cannot otherwise afford the cost of flights for medical care will not have to pay the air travel security charge.

This is a good time to introduce a couple of examples. It includes the flights of a lifetime, such as those provided by the Children's Wish Foundation of Canada and other similar charitable organizations that organize dream trips for physically, mentally and socially challenged children. It is not something new. It is one of which all of us across the country are certainly aware. Now we have eliminated any additional costs that may be incurred by these individuals.

Tax legislation must be applied consistently. Proposed ATSC relief for charitable flights reflects that objective by being consistent with relief from other federal levies provided to registered charities. It is also consistent with other ATSC relief measures such as that provided in respect of air ambulance services.

Summing up, Canada's new government understands that good government and good tax policy go hand in hand. Well focused tax policies are a sign of a government with some vision, and this government is all about that. We are looking ahead and planning for the steps we need to take to build a stronger economy and a more confident Canada. In doing so, together we can make Canada a world leader with a long term focused economic plan not just for today, not just for tomorrow, but for years to come.

Sales Tax Amendments Act, 2006Government Orders

May 14th, 2007 / 4:25 p.m.
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Conservative

Rick Dykstra Conservative St. Catharines, ON

Mr. Speaker, I appreciate the opportunity to speak to Bill C-40 at third reading. The bill contains a number of amendments to Canada's sales tax system. It also reflects the goal of our government to improve fairness in our tax system and ensure that it functions smoothly for individuals and businesses alike

However, before getting into the specifics of Bill C-40, I would like to remind hon. members of the key elements of advantage Canada, a plan put into action in budget 2007. The plan has five key advantages.

The first advantage is a tax advantage. We wanted to create new opportunities and choices for people and when we lower taxes we help do that. It helps keep our best and brightest here at home and it attracts the best and brightest from across the world. We always say that Canadians pay too much tax relative to competition so we did something about it.

Since budget 2006, we have reduced taxes. We have decreased the GST. We have increased the basic personal amount of exemption. We have reduced the lowest personal rate of tax. We implemented Canada's employment credit of $1,000 for every employee in the country who pays taxes. We also have other targeted tax relief measures.

Our tax fairness plan went even further for Canada's seniors. We implemented a $1,000 increase in the age credit amount and, most important, we finally, after successive governments, introduced pension splitting for seniors.

Those were significant steps but we needed to go further, and we did in budget 2007.

In budget 2007, Canadians again come out ahead through real tax relief that benefits working families.

The House resumed from April 25 consideration of the motion that Bill C-40, An Act to amend the Excise Tax Act, the Excise Act, 2001 and the Air Travellers Security Charge Act and to make related amendments to other Acts, be read the third time and passed.

Business of the HouseOral Questions

May 10th, 2007 / 3 p.m.
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York—Simcoe Ontario

Conservative

Peter Van Loan ConservativeLeader of the Government in the House of Commons and Minister for Democratic Reform

Mr. Speaker, as you are aware, this week is strengthening accountability through democratic reform week. It has been a busy week for the democratic reform family of bills.

We sent out invitations for the first birthday of Bill S-4, the Senate tenure bill, which Liberal senators have been delaying for almost a year now.

While we are disappointed with the behaviour of Bill S-4's caregivers, we did have some good news this week with the successful delivery of two new members of the family: Bill C-54, a bill to bring accountability with respect to loans; and Bill C-55, a bill to expand voting opportunities.

There is more good news. We are expecting.

Tomorrow, I will be introducing an act to amend the Constitution Act, 1867, on democratic representation, which is on today's notice paper.

Bill C-16, fixed dates for elections, was finally allowed by the clingy Liberal-dominated Senate to leave the nest when it was given royal assent last week.

With respect to the schedule of debate, we will continue today with the opposition motion.

Friday, we conclude strengthening accountability through democratic reform week with debate on the loans bill, possibly the Senate consultation bill and, hopefully, Bill C-52, the budget implementation bill.

Next week will be strengthening the economy week, when we will focus on helping individuals, families and businesses get ahead.

Beginning Monday, and continuing through the week, the House will consider: Bill C-52, the budget implementation bill; Bill C-33 to improve our income tax system; Bill C-40, to improve the sales tax system; Bill C-53, relating to investment disputes; and Bill C-47, the Olympics bill, which help us have a successful Olympics. Hopefully, we can get to Bill C-41, the Competition Act.

If time permits, we will also call for third and final reading Bill C-10, the minimum mandatory sentencing bill.

Thursday, May 17 shall be an allotted day.

Wednesday, May 16, shall be the day appointed, pursuant to Standing Order 81(4)(a), for the purpose of consideration in committee of the whole of all votes under Canadian Heritage of the main estimates for the fiscal year ending March 31, 2008.

Thursday, May 17, shall be the day appointed for the purpose of consideration in committee of the whole of all votes under National Defence of the main estimates for the fiscal year ending March 31, 2008.

Finally, there is an agreement with respect to the debate tomorrow on the 13th report of the Standing Committee on Public Accounts. I believe you would find unanimous consent for the following motion.

I move:

That, notwithstanding any Standing Order or usual practice of the House, the debate pursuant to Standing Order 66 scheduled for tomorrow be deemed to have taken place and all questions necessary to dispose of the motion to concur in the 13th Report of the Standing Committee on Public Accounts be deemed put and a recorded division be deemed requested and deferred to Wednesday, May 16, 2007, at the expiry of the time provided for Government Orders.

Sales Tax Amendments Act, 2006Government Orders

April 25th, 2007 / 5:25 p.m.
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Bloc

Raynald Blais Bloc Gaspésie—Îles-de-la-Madeleine, QC

Mr. Speaker, I noticed the member talked about how the measures seemed small. In a way, he showed a great deal of responsibility when he said that even if the measures seem insignificant or small, they are important.

We were talking about what happened with microbreweries. I could say the same thing about the Îles-de-la-Madeleine. There is a beer made by a microbrewery in the Îles-de-la-Madeleine called À l'abri de la tempête. This is one of the ways to help small businesses. Together, these measures ensure that economies can keep going and be helped. These seemingly small measures produce big results. This company in the Îles-de-la-Madeleine has been in business for a few years. In addition, it creates a sense of belonging within a certain culture. At the same time, it also shows that, economically, it is possible to do great things in a region like ours. This beer, which is quite good, is exported to other areas.

The same goes for wine producers with respect to Bill C-40. It is an interesting analogy, and I might like to hear more about it, since he is quite familiar with this issue in his own area. Maybe this could bring us back to the fact that Obelix obviously fell into the magic potion, but others, who did not have the same luck as Obelix, still had the chance to get a good taste. I think it is worth looking at what our parliamentary leader said about microbreweries and small wine producers.

Sales Tax Amendments Act, 2006Government Orders

April 25th, 2007 / 5:05 p.m.
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Bloc

Pierre Paquette Bloc Joliette, QC

Mr. Speaker, I must say that I have already had an opportunity to speak to Bill C-40 at second reading. I find it to be a useful bill but, at the same time, it is so technical that we are sometimes not too motivated to participate in the debate. This bill amends the the Excise Tax Act, the Excise Act, 2001 and the Air Travellers Security Charge Act and other Acts. In the tales of Asterix, Obelix used to say that it did not matter whether menhirs were large or small--they were still menhirs. Similarly this bill, technical or not, must be debated and I am pleased to speak about the Bloc Québécois position on behalf of our party.

This fairly technical bill takes a very logical approach to dealing with a certain number of issues and that is why we will support this bill. First it addresses various shortcomings associated with the GST and excise tax. It removes taxes from certain medical services, which will facilitate access to these services. I will come back to that. It reduces the burden of taxation on charities, and I believe no will take issue with this point. It also provides for measures to help small wine producers. That is a positive measure for the wine producers in the Lanaudière region. It tightens legislative provisions with regard to the production and sale of tobacco in order to counter smuggling. Who would oppose that? It adjusts the air travellers security charge.

When in Ottawa, the Bloc Québécois, as a group, often feels somewhat like it is in the fictional Gaulish village to which I referred earlier, when talking about Asterix and Obelix. We must resist the federalist invaders and the invasions by the federal government. However, this time, I must say that this bill respects federal and provincial jurisdictions. As I said, the Bloc Québécois will support Bill C-40.

Bill C-40 is divided into three parts. The first part aims to institute corrective steps to improve and specify certain measures having to do with the collection of the GST. The second part amends the act in order to zero-rate particular products and services. It turns then to the excise tax, laying out certain measures related to the taxation of wine, beer and spirits. The third part amends the rules on the air travellers security charge collected at various airports.

Naturally, I will start with the first part of Bill C-40, which has to do with GST-HST-related measures. In Quebec's case, this means the Quebec sales tax.

As I said, the first of these measures has to due with health-related rules. The bill amends the act so that speech-language pathology services are henceforth effectively zero-rated. This seems, to me, a matter of common sense. A child, loved one or family member might need this type of service. In my opinion, it is somewhat immoral to tax something that is completely essential and necessary to a person's well-being. This change confirms the tax-exempt status of these services. It will make it easier for young people with language problems to access such services. This change will also help older people who have suffered strokes to access services to learn to speak again, thereby enabling them to continue living in dignity.

Then, in the area of health care again, the government will exempt services provided in the practice of the profession of social work. There are times when we need to seek the assistance of a social worker. This measure will make it easier to access such services. Nowadays, the professional duties of many social workers include acting as substitute psychologists, something which I am convinced the college of psychologists is not too thrilled about. In areas where the needs are huge, we often see shortages of specialists such as psychologists. Purchasing the services of a social worker may be a perfectly appropriate alternative. It seems totally normal to me that the government exempt from tax the services of social workers.

The government will also zero-rate the sales and importation of a product that can be used to some extent as a blood substitute. Again, it seems to me that everyone will understand that there was something sick about taxing a product making possible crucial treatments for seriously injured patients.

Back to my analogy with the village of ancient Gauls and Getafix. Members will recall that Getafix is the druid who mixed the magic potion than gave that village the strength to resist the invading Roman army. In Bill C-40, the government removes the tax on a group of drugs like Valium, Ativan and others. These are drugs needed to treat anxiety, and drug and alcohol withdrawal or as a component in preanesthetic preparations. Again, there was something predatory about government taxing drugs that do not fall under the category of consumer purchases, but are simply something that members of our society who are often dealing with enormous difficulties buy because they need it for their well-being.

Finally, as I was saying, there is an aspect of the bill that is not directly related to health, but to the welfare of people with disabilities. I am talking about the GST rebate for motor vehicles that have been used subsequent to being specially equipped for use by individuals with disabilities.

As you can see, there are measures in this bill that are relatively modest, but they cannot be criticized because, quite frankly, they are just common sense.

As far as charities are concerned, again in the first part on the GST and HST, we see changes ensuring that the exemption of supplies by charities of real property under short-term leases and licences will extend to any goods supplied together with such real property. For example, someone leases a facility with a photocopier. The leased photocopier was then taxed. In the context, this measure is minimal, especially after the cuts the Conservative government made to certain agencies. I am thinking of women's groups and literacy groups. It probably would have been better not only to have this measure, which will very slightly alleviate financial pressure, but also to re-establish all the budgets of these community groups that were cut last September.

Nonetheless, there is something there that we cannot oppose. In other words, we will also support this measure.

There are other business arrangements that affect, in particular, foreign banks that restructure their Canadian subsidiary into a Canadian branch. This a measure that affects consumer rights. We know that in Canada there is a very significant bank concentration problem. The five largest banks control most of the market, by far. Parliament, the House of Commons and the Standing Committee on Finance—I have taken part in this—have tried a number of times to find ways to improve competition on that market. I remember Bill C-8, which addressed this more or less successfully.

Having a measure that would facilitate the restructuring of a foreign bank's Canadian subsidiary into a Canadian branch seems conducive to improving competition in a very concentrated market, as I was saying. That is the first point. We also find in this bill some changes to simplify tax collection by small stores that deal with beverage container deposits that are refundable to the consumer. This simplifies life for small merchants and it seems to me that there a number of things here as well that just make sense.

There is one last measure in this first part that concerns governments. The bill will exempt a supply of a right to file or retrieve a document or information stored in an electronic official registry. This will mean, for example, that municipalities can provide information requested by taxpayers at a lower cost.

As hon. members can see, these are not sweeping measures. There is nothing to get upset about; these are small measures that make good sense.

The same is true of the second part, which pertains to excise tax. As I mentioned earlier, the measures in this part amend the Excise Act, 2001, to implement minor refinements that will improve the operation of the act and more accurately reflect current industry and administrative practices.

They also implement amendments to the Access to Information Act, the Customs Act, the Customs Tariff and the Excise Tax Act.

I want to summarize the tobacco-related measures in Bill C-40. To better defend against the smuggling of tobacco products and facilitate collection of the tax on tobacco, the bill extends the requirement to identify the origin of tobacco products to all products, including those for sale at duty-free shops.

In this case, there will be a small problem, because the government has decided to put an end to the GST visitor rebate, except in the case of conferences and tours. Although the government's intentions are good, this will have much less impact, because of what was announced in the budget regarding the GST visitor rebate.

However, the bill does extend the requirement to identify the origin of tobacco products to duty-free shops or products sold for export, consistent with international treaties including the Framework Convention on Tobacco Control.

The bill also clarifies that cigarettes, tobacco sticks, fine-cut tobacco or cigars, but not packaged raw leaf tobacco, may be supplied to the export market or the domestic duty-free market. These are relatively minor amendments, but they make a lot of sense.

As far as alcohol is concerned, Bill C-40 authorizes provincial liquor boards and vintners to possess a still or similar equipment and produce spirits for the purpose of analysing substances containing alcohol without holding a spirits licence. This measure will relieve provincial liquor boards and vintners of the entire administrative burden and cost involved in acquiring a licence for such equipment, stills or similar equipment.

Furthermore, in order to promote growth in Canada's wine industry, the government will allow the deferral of payment of duty by small vintners selling wine on consignment in retail stores operated by an association of vintners until the wine is sold. Something did not seem right, particularly asking small vintners to pay tax in advance before the product is even sold. These are often small-scale businesses that do not have enough liquid assets to assume this type of responsibility without putting the very survival of the business at risk. This is a welcome measure. The federal government has finally understood that this sector plays an important role in economic development, especially in the regions.

I remember the battle the Bloc Québécois had to wage for the reduction of excise tax on microbreweries. We finally won that battle, not in the last budget, but in the previous year's budget. This is another measure that will simplify life for small producers. When they supply their products to retail stores operated by their association of vintners, they will only have to pay GST once the product is sold—as I already mentioned. This new measure will help market local products. There are now specialty markets scattered throughout Quebec where these wine products are available.

By the way, I just want to say that the industry in Quebec is doing quite well. Wine producers have banded together in the Association des vignerons du Québec. This would not necessarily please Obelix, who does not drink alcohol since he fell into a cauldron of magic potion when he was young. In some of the books, we see that this had a rather disastrous effect on his behaviour. However, Gérard Depardieu, who played the role of Obelix in the Asterix and Obelix films, is a great fan of wine. He would be extremely interested in what I am saying.

In 2006, the Quebec vintners association had 42 members in many of the province's regions. I already mentioned Lanaudière and Île Ronde, where there are tens of thousands of vines, as well as the Eastern Townships, Montérégie and the Lower Laurentians.

Over 100 hectares of vines are cultivated annually, producing 300,000 bottles every year, primarily white wine, ice wine and fortified wine. I would invite all of my colleagues to enjoy Quebec's homegrown wines—in moderation, of course.

In both the second part and the previous part, the new legislation will authorize the Minister of National Revenue to exchange information on excise tax with foreign governments that are signatories to the Convention on Mutual Administrative Assistance in Tax Matters. The bill also adds a discretionary power for the Chief Statistician of Canada to provide statistical information concerning business activities to the provinces similar to an existing provision in the Income Tax Act.

Like the measures in the first part, these minor measures are neither very revolutionary nor very impressive, but they are very sensible. We think that these minor measures deserve to be supported, even though—as in the example I gave about charities—they do not eliminate the negative and damaging effects of the Conservative government's cuts to literacy organizations, women's groups and the aboriginal tobacco control strategy.

With respect to the air travellers security charge, I have to say that ever since the previous government brought this tax in, we have tried to find out what good it was doing, but we never really got an answer. I got the impression from various witnesses—especially when I was a member of the Standing Committee on Finance—that the money from this tax was used for a lot of things other than passenger security.

In our opinion, the costs of air travellers security should be borne by all taxpayers, and not just by those who are often required to travel by air. I remember that, at the beginning, a tax was imposed on people flying out of regional airports. I am thinking of the member for Gaspésie—Îles-de-la-Madeleine who, unfortunately, cannot always take his car to get here. Because of time constraints, he must fly. This means that he was forced to pay that tax, which was totally unacceptable. There have been reductions over time, and we are told that another one is coming. However, as regards this bill, we are not given any explanation as to why this tax is imposed, its purpose and its link with air safety. The government remains vague on this issue.

Still, a tax relief is included. First, the bill relieves, in particular circumstances, the applicable charge in respect of air travel sold by resellers or donated by air carriers. As we can see, this affects relatively few people. The bill also provides authority for the governor in council to add, delete or vary by regulation the schedule of listed airports.

The bill will change the status of three airports in Quebec, to ensure that the standards meet market demand. So, the bill removes La Grande-3 and La Grande-4 from the list of airports subjected to the surtax under the Air Travellers Security Charge Act. I can say that 95%, if not 99% of those who fly in to La Grande-3 and La Grande-4 are workers involved in the construction or maintenance of the facilities there. They definitely do not go there for a vacation. Some may, but it is not the majority.

Finally, this measure simply makes sense. I will conclude by saying that this series of small measures, of small menhirs, as I said at the beginning, deserve the Bloc Québécois' attention and support and, indeed, we do support them.

Sales Tax Amendments Act, 2006Government Orders

April 25th, 2007 / 4:35 p.m.
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Liberal

John McCallum Liberal Markham—Unionville, ON

Mr. Speaker, I first want to thank my hon. colleague from Willowdale, who took the floor about an hour ago, because I was delayed. He spoke very well, and I thank him for his remarks. I was with visiting students from a school located in my riding.

It is a pleasure for me to rise a little later than originally planned to speak to Bill C-40. This is largely a housecleaning bill on which I do not think there will be any significant disagreement among members of the House.

The bill deals with measures relating to the GST in the first part. The second part has amendments to the Excise Tax Act. Finally, the bill has measures affecting the air travellers security charge.

I was thinking I would use my time, since there is not a great deal of controversy, to talk a bit about the GST, in particular the differences in fundamental economic policies between our party and the government. One of those differences involves the GST.

However, before I get into that, I will deal with one element of the bill, which is worth raising. It has to do with the GST rebate applying to motor vehicles that have been used subsequent to being specially equipped for use by individuals with disabilities. There is a GST rebate for large vehicles for individuals with disabilities.

My party certainly supports this measure. However, it reminds me of something else that was in the recent budget, and this is an item which consequences the government has maybe not thought about. I am talking about the green levy on gas-guzzling vehicles.

In general, this may not be a bad policy, but I wonder if the government has thought about the unintended consequences of this new tax, in particular the fact that many disabled families need to buy vehicles that are appropriate for their use and have no choice but to buy larger vehicles, which might be the gas-guzzling vehicles attracting this additional charge.

On the one hand, the government is giving a GST rebate. On the other hand, it is taking more than all of it back by imposing this gas-guzzling tax on vehicles that need to be large for the use of people with disabilities.

While the Jeep Patriot may be a fine vehicle, it is not big enough to move around the sort of equipment that these families need to help transport their disabled children. As a result, these people now have to pay a few thousand dollars more out of their own pockets to cover the increased costs of these larger vehicles. I do not see how it is fair that these families should be forced to pay a large tax levy on their vehicle simply because, in their circumstances, a larger vehicle is an essential need.

Could the government not have included something in the budget to acknowledge this set of circumstances?

Obviously the finance minister put some thought into the vehicle emission tax. He studied it enough to give the car manufacturing plant next to his own riding a break on the E85 ethanol vehicles it produces. He was willing to do this even though there is not a single gas station available to the Canadian public where they can buy the 15% ethanol content gasoline.

I hope, as the budget moves through the House, the point about large vehicles for people with disabilities will be given serious attention.

Let me now turn to perhaps the broader issue I want to address, which relates to the GST. It also reflects the fundamental difference in overall economic approach between the two sides of the House.

On our side of the House, we start with the premise that the world does not owe Canada a living, that Canada has to be competitive in this modern world. We have to compete not only against the emerging giants like China and India, but established giants like Europe, the United States and Japan. In this context of competitiveness and fairness, the last thing any country like Canada needs to do is raise income tax in order to pay for a reduction in GST.

I do not think there is an economist on the planet who would advocate such a policy. On the one hand, we have an aging population that needs to save for their retirement and the government is cutting the GST which encourages people to buy more and save less. At the same time, the government is raising income tax, partly to pay for the GST cut, and by raising the income tax, it is discouraging saving, investment and productivity.

While other countries with which we compete, such as Australia, have been cutting their income tax and company tax in broad based fashion, we, alone in the world, are cutting the GST and raising income tax. That is the opposite of what our party would do in government. This is an extraordinarily foolish policy, which I do not think commands the support of a single economist.

The other thing one has to understand is that to compete in the modern world, we will not compete with India and with China on the basis of our low wages. We would not want to do that. We really have only our people with whom to compete and we have to provide those people with ideas, education and research funding.

Fundamental to successful, internationally competitive economic policy is support for research, education and commercialization. This is the second area in which we part company. The government has actually slashed funding to research and has not given a penny to students in the most recent budget. Our plan would be to significantly increase research funding, including support for taking ideas from the lab to the market, commercialization, as well as putting substantial sums into the pockets of students.

The third difference, and the final difference that I will mention today, is that we are internationalist in our outlook. We believe Canada has to take on the world. We have to expand our investment and trade opportunities around the world, whereas the government is incredibly domestically inward looking. What is the evidence of that? If we take the world's biggest emerging economy, China, the government insults China. If we take the second biggest, and in some ways equally important, India, the government ignores India. A few weeks ago I could have said it had not sent a single minister there in more than a year in office. I think a week or two ago, the first minister went there. However, the government has insulted China and has ignored India. It is also closing consular positions in Europe, in Milan, in Japan and around the world.

This is not a sign of a government that wants to expand international trade, expand investment, take on the world. This is the policy of an inward looking government that seeks only to get votes to win the next election.

Our economic policies are fundamentally different. We see Canada as taking on the world. We would have lower income tax, not lower the GST. We would fund research, commercialization and students, not slash funding for these things. We would seriously take on trade and investment opportunities with the emerging and established world, contrary to the opposite direction in which the government is heading.

Let me now move on to a second theme, which is another extraordinarily foolish thing that the government has done, and it relates to the subject of income trusts.

We all know the government broke a solemn, serious election promise, an unconditional election promise, made to all Canadians. The Conservative government promised it would not increase the tax on income trusts. What did Canadians do? They put more and more money into income trusts, secure in the knowledge that their Prime Minister had promised to them that he would not tax them.

Canadians knew there were market risks in income trusts, but they thought the political risk had been removed because their newly elected Prime Minister had promised several times, and unequivocally, never to tax those income trusts. Therefore, the market grew because Canadians took the Prime Minister at his word.

Then what happened? On Halloween, the finance minister cut those Canadians off at the knees, broke that promise and imposed a draconian 31.5% tax on income trusts. What happened? The market collapsed the next day.

In a single day, Canadians who had taken the Prime Minister at his word lost $25 billion of hard-earned savings. It went up in smoke. As if that were not bad enough, the manner in which the government executed this broken promise was extraordinarily further damaging to the Canadian economy, because the draconian 31.5% tax essentially destroys the income trust sector.

Income trusts are very valuable savings vehicles, particularly for seniors who need the proceeds from their savings to pay the bills. Seniors had been heavily invested in income trusts and now that vehicle has been taken away from them by the government's policy to destroy the income trust sector.

Not only that, Alberta in particular--but also elsewhere--had a thriving energy trust sector that, in the words of the Governor of the Bank of Canada, was contributing to productivity, to the repatriation of foreign capital and to financing other branches of the energy sector. That was before Halloween.

After Halloween, the sector has been decimated. It is sitting there at bargain basement prices. Instead of repatriating foreign capital, it is being gobbled up by foreign capital.

This policy has destroyed $25 billion of Canadians' hard-earned savings. It has deprived all Canadians, especially seniors, of the valuable savings vehicle in the form of income trusts. It is decimating an industry that was thriving before this highly inappropriate action by the government.

All of this is neither fair nor contributing to government revenue. This is why it is so particularly foolish. It is called the tax fairness plan, but it should be called the tax unfairness plan. It is supposed to tax corporations more so that individuals pay less tax. It does the opposite. Let me explain those two points.

On fairness, what does the government's so-called tax fairness plan do? It deprives ordinary Canadians of access to income trusts. They can no longer get the benefits of these income streams if they are ordinary Canadian investors, but what if it is a deep-pocketed Canadian pension plan or a deep-pocketed private equity foreign venture? Then it can still derive the benefits of an income trust because it can buy the underlying assets directly and receive that flow of money.

The income trust vehicle is still open to the deep-pocketed pension plans and the foreign private equity companies, but the government has disallowed that vehicle to ordinary Canadians. That is not tax fairness. That is tax unfairness.

To further compound that, instead of getting more tax revenue out of this policy, the government is getting less tax revenue, because the previous owners of the income trusts pay a lot of tax. It is personal tax, but it is still tax. What about the new owners? The pension plans pay no tax, except by the pensioners when the money is ultimately distributed, and the private equity companies pay little or no tax because they have ways of leveraging themselves so that they will end up paying no tax.

We have the irony here of the tax fairness plan being the tax unfairness plan, depriving ordinary Canadians of investing in income trusts and welcoming with open arms the investments in income trusts by the fat cats. In so doing, the government is in fact depriving itself of revenue because those fat cats, the Canadian pension plans and the private equity companies, pay little or no tax compared to the previous income trust holders.

It is a disastrous policy. It is an ill thought out policy. It is a policy to drop a nuclear bomb on a problem when what was needed was a more surgical approach. Indeed, the Liberal Party's approach is just that: the more surgical, sensible approach. We would immediately repeal this illogical, irrational, draconian 31.5% tax and replace it with a 10% tax which would be refundable to Canadian residents.

That would be enough to deal with the tax leakage. At the same time, according to experts, two-thirds of the value lost, the $25 billion, would be returned to savers who had lost their money, the income trust savings vehicle would still be available, and the energy trust sector would be able to return to its thriving former self. This policy cannot entirely put the toothpaste back in the tube, but it would eliminate the worst features of the government's illogical and unfortunate income trust policy.

I will deal with one last issue, because it is the third foolishness of the government. The first is the whole economic thrust, particularly the GST cut and the income tax hike. The second is the income trust fiasco.

The third is the stupendously foolish proposal on which, thankfully, the minister is now flip-flopping, and which involves interest deductibility. He said this measure would give $40 million a year in revenue. The experts say between $1 billion and $2 billion per year. That is only out by a factor of some 3,000%. That does not show great competence to begin with.

However, the real problem here is that we are forcing our own homegrown Canadian companies to compete with foreign companies with one hand tied behind their backs. If a company from Europe, the United States or Japan buys a foreign asset, it can tax deduct the interest that it has to pay on debt. Canadian companies, under the government's proposal, will not.

Let us take an example. It has been in the news. I do not know if it will happen, but it has been in the news. It is the idea that Magna might buy Chrysler. Let us say that Magna is in competition with a U.S. or European company to buy Chrysler. Purely as a consequence of the government's interest deductibility measure, those foreign companies would be able to pay 37% more for Chrysler than Magna would be able to pay. That is purely because of the government's measure. Obviously Magna or any other Canadian company bidding against a foreign company would be at a huge disadvantage in buying any foreign company. That particular number is based on a fifty-fifty debt equity ratio in the financing.

Why does that matter? That matters because companies grow beyond the Canadian borders. If companies are to continue to grow, they must grow beyond Canada. This foolish measure of the government is tying the hands of Canadian companies behind their backs and sending them out in the big wide world to compete against foreign companies at a huge disadvantage.

As a study by KPMG has said, this will result in weaker Canadian companies, a weaker ability to acquire assets and more foreign takeovers of Canadian companies.

The whole financial world, anyone who knows anything about these things, is up in arms. We have had an expert say that this is the worst tax policy in 35 years. The Conservatives are out on their revenue estimates by 3,000%. There was a Deloitte Touche conference of about 1,000 experts yesterday who were surveyed and 90% of them said it was a bad idea. It is a disaster.

Our party and our leader announced nine days ago that we would not do this. We would scrap this idea because it is so disastrous for Canadian competitiveness, Canadian jobs and Canadian prosperity.

Fortunately, the minister came to his senses. Perhaps he heard our leader speak nine days ago and understood the wisdom of our approach. The minister said yesterday that he is flip-flopping. He will not go ahead with this. He will go ahead in a much more minor, small way and he has admitted that he did not do his homework, he did not think it through, and now he is adopting the Liberal policy--

Sales Tax Amendments Act, 2006Government Orders

April 25th, 2007 / 4:05 p.m.
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Bloc

Thierry St-Cyr Bloc Jeanne-Le Ber, QC

Mr. Speaker, when I heard my colleague start his remarks by saying, “I will answer the question”, I was pleased, thinking that he was actually going to answer my question. Instead, he answered his own. That is pretty strange in terms of transparency.

I would now like to speak briefly about the bill before us, namely Bill C-40. This is a very technical bill. I have already had the opportunity to go into the details at a previous reading of this bill. I will sum up our reasons for supporting it.

We believe that Bill C-40 addresses various shortcomings associated with the GST and the excise tax. Bill C-40 removes taxes from certain medical services, which will facilitate access to these services. Bill C-40 reduces the burden of taxation on charities, something we are very happy about. Bill C-40 provides for measures that will help small wine producers, which is worthwhile. It also contains legislative provisions surrounding the sale and production of tobacco, to counter smuggling. Finally, Bill C-40 adjusts the air travellers security charge to reflect the Quebec situation. For all these reasons, we will be supporting this bill.

Naturally, this bill deals with only one part of taxation in Canada. Recently, in the budget, there were a certain number of measures that changed the tax rules and I imagine we will soon see them before us. Some of them are already being examined through a ways and means motion. They will come before us again. They are not contained in Bill C-40, of course. However, the Bloc Québécois has been fighting for some of these measures for a long time. For example, there is the matter of refunding the GST to school boards. For quite some time, the Bloc Québécois has found that it was curious, to say the least, for a level of government to impose a consumption tax on another level of administration—school boards—that provide such an essential service in our society as education.

Education represents the future of our entire society. We found it hard to understand why school boards should pay the GST. We have always believed that this tax should be reimbursed and that the federal government should not tax school board funds, which already come from taxes.

School board revenues consist of the monies received directly from the provinces for education as well as school taxes. Paying a tax with a tax was quite a unique situation. For some time, the Bloc Québécois fought to change this. Naturally, we were pleased to see that the Minister of Finance had made this correction in his last budget. In the past, there was a series of events where the Liberal government refused to follow court orders and amended the legislation. We are now in a situation where this is being sorted out. We are pleased and it motivates us, in the Bloc Québécois, to continue our work and to submit constructive proposals to the government, and often to apply the necessary political pressure because, unfortunately, things do not just happen if we do not exert constant pressure on the government. When we see such results, it shows the relevance and usefulness of our work even though sometimes, over a period of a few months, there are no immediate results. However, we see that, over time, this fundamental work produces results.

There is another area where we would have liked the government to take action. It did not, though, and we will continue to exert pressure on it to do so. I am talking about the GST on books.

In Quebec, books are exempt from provincial tax. Culture is one of the foundations of our society. Books should be considered our main source of knowledge, culture and imagination. Our societies are based largely on books, at least from a cultural standpoint. The production and sale of books should be encouraged. Quebec, which does not tax retail book sales, is a model in this regard. The Bloc Québécois will continue to call on the federal government to exempt books from the GST.

There is a connection with my previous remarks about education. Most books are consumed—this may not be the most appropriate word to use in referring to culture—or used for educational purposes. They include textbooks and other educational materials, and many students use these books for research in literature and other fields. We will continue to press the government, in the hope of convincing it that this is a good thing and that it should act quickly.

Abolishing the GST visitor rebate program is another blunder by the government. Last year, the government suddenly announced that it was doing away with the GST rebate for visitors to Canada. Previously, on leaving the country, visitors could obtain a refund of a portion of the tax they had paid. The Bloc Québécois immediately said that this made no sense, because it would hurt our tourism industry.

It makes no sense to tax tourism, which is an export industry. Although tourist activities take place in Canada, we are exporting products: Quebec, Canada, the Rockies, our culture, our knowledge, our cuisine, Gaspé and the Magdalen Islands. We are exporting all that to the rest of the world to show them the beauty our country has to offer. No country taxes consumption of its exports, including tourism.

It was absolutely necessary to backtrack because this measure was wrong and unjustified. The figures presented by the government meant nothing. At the time, we were told that only 3% of travellers asked for GST refunds when leaving Canada. This figure is biased. It does not take into account the fact that most people travel in groups, or family units. This can be two, three or four people. Let us take the example of a family of four returning to the United States. We can assume that mom, dad, junior and his sister will not make individual claims. One person from the family unit will make the claim. So clearly not everyone makes a claim, and that partly explains the figure of 3% of travellers.

Moreover, this figure was calculated based on all trips, including those shorter than 24 hours. It makes sense that many people did not make a claim for a one-day trip, simply because there was nothing to claim. The fact that a person who comes to a business meeting, eats and returns to the United States the same day does not use this service does not prove that the program is worthless. It only shows that this does not apply to that person.

Once again, the calculations were biased because they did not take into account the fact that the target clientele, the real tourists, are not business people who spend one day here or Americans who cross the border to have dinner with their in-laws.

That is not tourism. That was not the goal envisioned when this rebate program was created. The program targeted real travellers. For a clearer indication of this program's effectiveness, they should have compared the amount of money claimed to the amount of money that all travellers could have claimed. Before becoming a member of Parliament, I spent some time working on this kind of thing—measuring productivity and effectiveness—and I think this is a better way to evaluate the program's effectiveness. I was hardly surprised when I was told in the Standing Committee on Finance that this comparison was never made and that these numbers were unknown. This decision was made arbitrarily, with no thought of the consequences.

The government did not evaluate the impact of this measure on marketing, either. Offering tax reductions or rebates can encourage travellers to make Canada their tourism destination of choice even if they never claim rebates at the end of their trip. Companies that provide mail-in coupons and rebates for their products know this. Electronics companies do this all the time. Consumers are told that if they buy fantastic printer X, they will get $20 or $50 back in the mail.

Many of the people who buy such products do so because they are entitled to the mail-in rebate, but they never claim it because they forget, they lose their paperwork, or they lose their receipt. This is a good deal for retailers, because the promotion means they get another sale. If consumers do not claim what they are entitled to, the retailers win in all respects. This kind of psychology also applies to tourism in Canada.

We, the Bloc Québécois, have worked very hard and I know that other opposition parties have also worked to urge the government to reconsider its decision. We now have a partial solution. For organized groups, the rebates will be maintained. However, the program will not be reinstated for individual travellers or for families who are travelling alone. Frankly, we find this unfortunate and we feel it is a mistake, especially since the tourism industry and the industry that deals with those rebate applications were willing to do so at their own expense, meaning at no cost to the government. We will continue to work on this.

Continuing in the same vein, the GST and fiscal policy, I would like to talk about the fiscal imbalance issue. When the Séguin commission completed its report on the fiscal imbalance, one of its recommendations was, in fact, to transfer the GST, currently collected by the federal government, to the governments of Quebec and the other provinces. It should come as no surprise that the fiscal imbalance must be corrected by a fiscal measure, something which is often forgotten here in the House. Before oral question period today, during members' statements, a Conservative colleague tried to cheerfully and naively insist that the fiscal imbalance has been corrected, while no party in the National Assembly would agree that the fiscal imbalance issue is completely resolved.

Sales Tax Amendments Act, 2006Government Orders

April 25th, 2007 / 3:35 p.m.
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Liberal

Jim Peterson Liberal Willowdale, ON

Mr. Speaker, it is an honour to speak once again in this great House of debate and innovative thought.

Our party is supporting Bill C-40. This bill is the natural evolution of a fiscal policy, the goods and services tax harmonized in certain parts of the country. It is a natural evolution as we gain experience with it. We find that it does not always cover every little contingency the way we would think is best.

I commend the government on coming forth with a number of amendments which harmonize and streamline, and deal with exigencies which could never have been envisaged from the very start. We must continue to always adopt this type of attitude to changes in the tax law because we can always learn from our experience as we move along, so that the tax code becomes a living organism, a living body of law.

There are some areas where I believe that the government could have gone farther in making changes to our goods and services tax. One is with respect to the exemption for housing. The original exemption was $250,000, but we have seen how prices have skyrocketed in some cities across the country such as Vancouver, Edmonton, Calgary and Toronto.

The idea was that we would help new homebuyers overcome the difficulties of purchasing a home by exempting them on GST up to a certain level, and that level has never been changed. We should be adjusting it, not according to the ordinary inflation rules, which are around 2% a year or slightly higher, but according to the inflation rates for actual housing in particular markets across the country. I am sure the government will want to consider this type of change in the days and months ahead.

The hon. parliamentary secretary talked about a number of other tax measures. I have no hesitation in moving from Bill C-40 to the general fiscal policy of this government.

Let me just mention a few particular issues. The first is the government's treatment of the GST in general. The government has reduced the GST from 7% to 6%, costing about $5 billion. That money could have been used to pay down the debt, to invest in new productivity measures in Canada, or to help those most in need in our country. What is worse, the government did so by increasing personal income tax by .5%.

There is not one economist in the country, let alone the world, who would say that the tax cuts given on the GST sales tax consumption level are preferable to overall tax cuts to the personal and corporate income tax rates, cuts which would make us more globally competitive.

We are in a global competition for capital. Capital knows no borders. It flows seamlessly around the world. We have to be able to be competitive unless we are prepared to introduce capital controls and barriers. No sane economist would advocate that as well. Therefore, in order to remain competitive, why did the government give up this great chance to lower personal income taxes as well as reducing our corporate income tax rates so that we could attract that capital?

Under the previousfinance minister and previous Prime Minister Jean Chrétien, the Liberal government took a very important step. Even when we were dealing with the whole issue of the deficit, we were looking at what we had to do to attract new capital investment and the best jobs to this country. One of those was to reduce the corporate income tax, and we did it.

We were headed on a course down to 30% combined with the provinces. That would have compared with 35% in New York State, 41% in Michigan and 41% in California.

That was a responsible way to attract jobs to this country. We have seen how under our leadership the unemployment rate in this country fell to a 35 year low. This is great because we all remember back in 1990-91 when unemployment hit 11.4%. The toughest thing as an MP was to meet with constituents who had lost their job, who had used up all of their savings, had used up all their RRSPs, had lost their home, their car, their self-respect, and often their families.

We must never be content with a system which allows that level of high unemployment and this is why we must on an annual basis check our global competitiveness. The cut to the GST did not do that. It was stupid. It was obviously done for short term political gain, but Canadians are not stupid. They know when they are being had. The Canadian electorate is very smart and they recognize that the best politics is always the best policy.

Let me go on to a second area where I am very dismayed with the government in terms of its fiscal policy, income trusts. It is not just the broken promise where the Prime Minister said he would never touch income trusts, it is the fact that the measures taken were totally without tax foundation. They were totally without study. Did the government know it was going to cause a $30 billion meltdown in capital of investors who had put their money in savings, a lot of them seniors, a lot of them retired, as a result of the measures that it took?

If the Conservatives knew that, then they have to be condemned. If they did not do the studies as to what the impact on the capital markets was going to be, then they must be condemned. Why can they not admit a mistake? We had numerous witnesses before the finance committee who showed that the tax leakage figures suggested by the government were totally exaggerated, totally out of sight. They did not have to go from a zero tax to a 31.5% tax on income trusts in order to kill them.

We listened to those witnesses. Some of them said the government was even making more money by having in place income trusts where the distributions were taxed usually at high personal rates rather than the same amount of money coming out of a corporation being taxed at about 6.2%. As members know, personal rates go up as high as about 45% in Canada and that is why the tax leakage was not there. It might have been there with respect to some non-residents, but if we take a 6.2% tax equivalent at the trust corporation and compare that with the withholding tax on dividends going to foreigners, often we would find there was no loss.

Then take the money going into the tax exempt such as the pension funds here in Canada. Granted that dividend going into the pension fund was not taxed at that time, or the trust distribution, but those pension funds were very quickly distributed to individuals in this country because retirement depended on them and were again taxed at the full corporate rate.

Our Liberal government looked at this after having talked to the experts and we were convinced there was a better way. We said leave the cap on no new income trusts being created for the moment. Put a 10% distribution tax on funds going to non-residents and it will more than make up for any tax leakage that there might have been, if there was any in fact.

Meanwhile, the issue should be studied. Do we really want to blow away investment instruments such as income trusts, which were providing a decent rate of return to our retired citizens? If they are investing in bank instruments or government bonds, what rate do we think they are getting, 4%? That is only 2% above inflation. How can retired people live on that and how can they live on it when the government caused a meltdown of some $30 billion to the value of their savings?

Do the right thing. We are prepared to study it further. Why is the government afraid to study it further? My God, is it a sin to be wrong? We all make mistakes. The sin is in failing to admit that one is wrong and doing something about it. Everybody knows the government is wrong on this thing. Everybody knows that the emperor is wearing no clothes. Why does it not just admit what everybody knows and be prepared to look at this thing and give it a second thought?

Another area where I have great concern with what the government is doing in terms of fiscal policy is this issue of interest deductibility. It has said that if a Canadian investor or company borrows money to buy a company abroad in order to expand its global operations, in order to be globally competitive, it cannot deduct the interest on the money it borrows to acquire the shares in that foreign entity.

This last budget was not the first time that we in Canada have seen that particular measure. It was a measure brought in following the Carter commission many years ago, brought in by a Liberal government, where we said if the dividends coming back into Canada are not taxable, why should there be a deduction for the interest to acquire those tax free dividends? We established that measure and found out how stupid it was. We very quickly reversed that measure.

Why is it stupid to do this so-called type of non-interest deductibility? It is stupid because our foreign competitors can deduct the interest they pay on money borrowed to buy up our companies and foreign entitles, to grow, to become powerful, to become Canadian and global champions in terms of the competition that we face. This measure was not thought out in terms of the practical realities of this world.

Again, why would the government want to handicap Canadian companies? Why would it want to handicap our competitiveness? Why would it want to divert jobs out of Canada? I can say from experience what will happen. This is what a government in Canada tried before and the result was that Canadian multinational corporations were not going to continue to exist. They would simply move their global operations and headquarters out of Canada.

This is what we need in order to have the high level, high paying, good jobs here in this country. We want Canadian head offices here. We want the global champions to be based in Canada because that is where the best jobs are.

If anyone needs an example of what has happened, let us take Hong Kong. In the early nineties it was going downhill because of the fear of what would happen when it would revert back to China. The cover of Fortune magazine said, “Hong Kong is dead”. At that time Hong Kong had an 80% manufacturing economy. Anything that anyone picked up had “Made in Hong Kong” on it.

Today Hong Kong is no longer manufacturing. It is an economy that is about 90% service, with all of its manufacturing operations in foreign affiliates in the Pearl River Delta in China. Hong Kong, by being the headquarters for the multinational corporations, is producing the great jobs and the great wealth. It is booming.

We cannot be afraid to change. We have to be open to change in this global economy or we are going to lose the best jobs here.

This is another blatant mistake in fiscal policy by the government. Again I say, my God, we are all human and we all make mistakes, but the government must admit it and do something about it. We will work with the government to do something about it. We will make it possible to for us to have a strong, competitive economy here in Canada, producing the best jobs, with Canadian champions that are reaching out around the world.

Are we not proud of our Canadian banks and insurance companies that have offices in almost every other country in the world? They are showing the Canadian flag and the Canadian name. They are helping Canadians invest there, acquire things there and do business there.

We want more of these Canadian champions. The measures that the government has brought in are simply going to drive those Canadian champions out of this country.

I saw that back in the days of Carter, when we wanted to tax all dividends from foreign affiliates. For foreign entities, a buck earned in a low tax jurisdiction such as Singapore would be taxed at the same rate as a buck earned in an affiliate in a high tax jurisdiction such as France, the United States or even Canada. That may be great economics if one is an economist, but if one is a business person, one has to compete with other entities where they say that the rate of tax one pays globally is the rate set by the country in which one earns the income.

It is the host country where the activities are carried on that sets the tax rate. If a big corporation from the United States could do business in Hong Kong, for example, and pay a 12% tax rate, and a Canadian company had to pay a 50% tax rate, who was going to win? Who was going to get the jobs? It was going to be the American competitor of the Canadian company.

Therefore, that tax policy brought in by a government many years ago had to be reversed. It meant that we stemmed the flow of Canadian-based multinationals leaving this country. I beg of the government, which knows it is wrong, to just admit it. We will work with the government to fix this.

In closing, let me say that the tax fairness bill brought in by the government was not a tax fairness bill. It was a wealth-stealing bill. I am very pleased that our finance critic, the member for Markham—Unionville, has taken such a vigorous stand in taking the tax fairness bill to task right across this country. We will continue to do so until we get justice for all those people who lost their savings because of the idiocy of the government.

Sales Tax Amendments Act, 2006Government Orders

April 25th, 2007 / 3:20 p.m.
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Calgary Nose Hill Alberta

Conservative

Diane Ablonczy ConservativeParliamentary Secretary to the Minister of Finance

Mr. Speaker, I am pleased to introduce Bill C-40 at third reading. This bill contains a number of amendments to Canada's sales tax system.

Although largely technical in nature, the bill reflects the goal of Canada's new government to improve fairness in our tax system and ensure it functions smoothly for individuals and businesses alike.

With that goal in mind, last November, along with the economic and fiscal update, we announced advantage Canada, an economic plan to give Canada and Canadians the key advantages needed to compete today and succeed for years to come.

Before getting to the specifics of Bill C-40, I think it prudent to remind the hon. members of the key elements of our plan, a plan put into action in budget 2007. The plan focuses on creating five key advantages, one of them being a tax advantage.

The government wants to create new opportunities and choices for people. Lowering taxes, creating a tax advantage for Canadians, will help do that. It will also help to keep our best and brightest here at home, while attracting the people our country will need to build a strong economy in the 21st century. It all starts with a lower tax burden.

Before coming to office, and practically every day since, we have said that Canadians simply pay too much tax compared to other countries we compete with for talent, skilled workers and foreign investment and so we did something about it.

In our first budget last May and the months that have followed, Canada's new government began to reduce taxes. We reduced the GST rate. We increased the amount Canadians can earn without paying federal income tax by permanently reducing the bottom rate. We introduced the Canada employment credit and brought in a host of targeted tax relief measures.

The tax fairness plan we announced on October 31 went even further for Canada's seniors. We increased the age credit amount by $1,000 and introduced pension income splitting for pensions to increase the rewards from retirement saving.

Budget 2006 and our tax fairness plan took significant steps to get this country back on track and to begin to create a tax advantage for Canada.

We need to go further, and we did that in budget 2007. To create a greater tax advantage for Canada and Canadians over the coming years, we reduced taxes even further. In budget 2007, Canadians come out ahead through real tax relief that benefits working families.

Bill C-40 would help create a Canadian tax advantage. It would improve fairness and efficiency in the sales tax system and ease compliance and administration for businesses and government.

The bill consists of three parts, the first of which pertains to the goods and services tax and the harmonized sales tax. The second part of the bill relates to the application of taxation of wine, spirits and tobacco. Part three concerns the application of the air travellers security charge.

First, the GST-HST measures. These measures are principally aimed at improving the operation and fairness of the GST-HST in specific sectors of the economy.

It is important to point out that in some cases adjustments have been made over the course of time to the legislation as originally proposed in response to representations from tax and business communities. We listened.

The principal GST-HST measures encompass important areas for Canadians. One such area is health care. Canadians know that our health system is one of the best in the world but we need to work to keep it so it continues to meet the needs of Canadians.

Bill C-40 contains a number of measures that would improve our health system. For example, the bill would cement in place the continued GST-HST exemption for speech-language pathology services. The bill also proposes to add the services of social workers to the list of health care services that are exempt from the GST-HST.

These amendments are consistent with the government's policy criteria for inclusion of a particular health care service on the list of those that are GST-HST exempt in all provinces.

The criteria is as follows. First, if a service is covered by the health care plan in a given province, it is exempt in that province. Second, if a service is covered by the health care plan of two or more provinces, it is exempt in all provinces. Finally, if a profession is regulated as a health profession by at least five provinces, the services of that profession are exempt in all provinces.

Canada's new government is also very aware of the challenges faced by individuals with disabilities. Budget 2006 fully implemented and went beyond the policy recommendations put forward by the technical advisory committee on tax measures for persons with disabilities.

In the spirit of that action, Bill C-40 broadens the specially equipped vehicle GST-HST rebate for individuals with disabilities. This measure will help those individuals to participate as fully as possible in Canadian society. Moreover, this measure reflects the government's continuing commitment to ensure that all Canadians are treated in a fair and equitable manner.

Also, on the health front, the bill proposes to make the sale and importation of a blood substitute, known as plasma expander, free from sales tax. It would also restore the tax free status of a group of drugs commonly used to treat a variety of conditions, such as seizure control, anxiety and alcohol withdrawal.

The measures in the bill illustrate the government's commitment to ensuring that Canadians continue to have access to timely and quality health care.

As I said at the outset, we have made it abundantly clear that Canada's new government is committed to reducing taxes for individual Canadians as well as for Canadian businesses.

High taxes not only discourage investment in Canada, they also impede businesses from prospering. However, there is more to it than that. Businesses do not need more government meddling. They need government to get out of the way and to free them to do what they do best: invest, expand and create jobs.

Budget 2007 proposes to reduce the federal paper burden on small businesses by 20% by November 2008. The budget also proposes to reduce the tax compliance burden on small business by decreasing the frequency of their tax remittance and filing requirements.

The measures in Bill C-40 reflect the intent of this action. These measures are technical in nature. I will not go into detail now but I will say that the measures contained in the bill would ease compliance for a wide range of businesses and other organizations by removing technical impediments and simplifying compliance with the GST-HST legislation. The bill also clarifies and confirms the government's policy intent.

The second part of Bill C-40 concerns excise measures; that is to say, measures related to tobacco and alcohol products. The measures in this part of the bill would amend the Excise Act, 2001 to implement minor refinements that would improve the operation of the act and more accurately reflect current industry and administrative practices.

The bill would also implement related and consequential amendments to the Access to Information Act, the Customs Act, the Customs Tariff and the Excise Tax Act.

The principal measures included in this bill, those related to the Excise Act, 2001 are as follows: First, with respect to tobacco, Bill C-40 would extend the requirement to identify the origin of tobacco products to all products, including those for sale at duty free shops or for export. This amendment is consistent with the Framework Convention on Tobacco Control, an international treaty on tobacco control.

The bill would also clarify which tobacco products may be supplied to the export market or the domestic duty free market. For example, cigarettes, tobacco sticks, fine cut tobacco or cigars may be supplied to those markets but not packaged raw leaf tobacco.

As the House may know, a spirits licence is required to produce alcoholic products using a still. There are some cases, however, where private laboratories, provincial liquor boards and vintners use a still to produce spirits for the purpose of analysing substances containing ethyl alcohol. Bill C-40 would authorize these entities to possess a still or similar equipment for testing purposes without holding a spirits licence.

To limit the possession of non-duty paid spirits, the bill would also require these parties to immediately destroy or dispose of those spirits once the analysis is complete.

Another proposed amendment to the act would defer payment of duty by certain small vintners selling wine on consignment in retail stores until the wine is sold.

The bill also contains a number of administration measures. One such measure has to do with the exchange of information between Canada and foreign governments. Specifically, the bill would permit the Minister of National Revenue to exchange excise duty information with foreign governments that are signatories to the Convention on Mutual Administrative Assistance in Tax Matters.

One other measure relating to the exchange of information adds a discretionary power under the act for the chief statistician of Canada to provide statistical information concerning business activities to the provinces. This is similar to an existing provision in the Income Tax Act.

The third and final part of Bill C-40 relates to the air traveller security charge, or ATSC. One of the principal ATSC measures included in the motion relieves the charge in respect of air travel donated by an air carrier to a registered charity that arranges free flights for individuals as part of its charitable purposes. This means that certain charities that arrange free air transportation services for persons who otherwise cannot afford the cost of flights for medical care would not have to pay the air traveller security charge. This includes “flights of a lifetime”, such as those provided by the Children's Wish Foundation of Canada and other similar charitable organizations that organize dream trips for physically, mentally and socially challenged children.

I said at the outset that tax legislation must be applied consistently. This proposed ATSC relief for charitable flights reflects that objective by being consistent with relief from other federal levies provided to registered charities. These measures are also consistent with other ATSC relief measures, such as that provided in respect of air ambulance services.

Summing up, Canada's new government understands that good government and good tax policy go hand in hand. Well-focused tax policies, such as those reflected in the bill, are a sign of a government with vision, which is what the government is all about.

We are looking ahead and planning the steps we need to take to build a stronger economy and a more confident Canada. In doing so, together we can make Canada a world leader with a long term, focused economic plan not just for today but for tomorrow.

The House proceeded to the consideration of Bill C-40, An Act to amend the Excise Tax Act, the Excise Act, 2001 and the Air Travellers Security Charge Act and to make related amendments to other Acts, as reported (without amendment) from the committee.

Business of the HouseOral Questions

April 19th, 2007 / 3:05 p.m.
See context

York—Simcoe Ontario

Conservative

Peter Van Loan ConservativeLeader of the Government in the House of Commons and Minister for Democratic Reform

Mr. Speaker, today we will continue with the debate on the opposition motion.

Tomorrow we will begin debate, as I said earlier, on one of the government's bills to modernize the Senate of Canada, Bill C-43. This is an act to provide for consultations with the electors on their preferences for appointments to the Senate.

In fact, yesterday the Prime Minister announced that Bert Brown would finally take his seat in the Senate after being elected twice by the people of Alberta. For those who say it cannot be done, we are getting it done. We will continue to get the job done for the other provinces, with the bill, so they too can elect senators. The Senate elections bill, along with the bill to limit terms of senators to eight years will achieve meaningful Senate reform. Meanwhile, we have talked about constitutional reform. We do not think it is necessary. It can be done without it.

However, in response to the other question raised by the opposition House leader on Bill C-16, we will be bringing it forward. We have indicated that we will bring forward a motion to ask that the amendments by the Senate be removed and to communicate that to the Senate. We will bring that motion forward on Monday. We believe we have the support in the House to have that secured so we can have fixed date elections that cannot be tampered with. That will be on the agenda for Monday, followed by Bill C-52, the budget implementation bill. BillC-43 will be the backup bill on that day. That is the Senate consultations.

Tuesday, April 24 and Thursday, April 26 shall be allotted days.

On Wednesday, we will resume debate on BillC-52, the budget implementation bill, if it has not been completed Monday. It will be followed by Bill C-40 on sales tax and Bill C-33 on income tax.

Friday, April 27, we will continue with those same finance bills.

Business of the HouseOral Questions

March 29th, 2007 / 3:05 p.m.
See context

York—Simcoe Ontario

Conservative

Peter Van Loan ConservativeLeader of the Government in the House of Commons and Minister for Democratic Reform

Mr. Speaker, on the question of Bill C-16, it is obvious that the Liberal House leader is very concerned about having an election and wants to do anything he can to stop it. Having watched the news last night and having seen some numbers, I can understand his sentiments. That is not surprising.

However, I am also not surprised that he could not remember what the bill was about. That is because it has been out of this House for half a year while the Liberal Senate was trying to deal with it. If those members wanted it passed quickly perhaps they could have avoided making amendments to it. However, there are amendments and we have to consult about them. As well, certainly, the information about everyone having consented is very different from the information that has been provided to me by the other parties to this point.

We will continue to pursue that and we hope to move forward on democratic reform. At the same time, as we said earlier, we will invite the other parties to move forward with Bill S-4 in the Senate. If they want to see things move quickly, that would represent good democratic reform. As well, we invite them to indicate their support for Bill C-43.

However, this afternoon we will continue with the list of bills on today's Projected Order of Business.

Tomorrow we will begin debate on the budget implementation bill. When the House returns from the Easter break, it will continue with the budget implementation bill if it is not already completed tomorrow.

Also on the list of bills for that week are: Bill C-33, on income tax; Bill C-40, on the Excise Tax Act; Bill C-10, on mandatory and minimum penalties; the Senate amendment to Bill C-16, fixed dates for elections, if we can get everyone's agreement on that to move quickly; Bill C-27, on dangerous offenders; and Bill C-45, the Fisheries Act, 2007.

Thursday, April 19 shall be the first allotted day in this supply period.

The Liberal House leader continues to make comments about moving quickly today. I wish he had been over there in the Senate talking to his Senate friends for the past six months while we were waiting. Perhaps while he is busying hurrying things up he can go and talk to the senators about Bill S-4.

I have a motion that I would like to make at this time.

There have been consultations, Mr. Speaker, and I believe that you would find unanimous consent for the following motion. I move:

That, notwithstanding any standing order or usual practices of the House, the remaining debate on the motion to concur in the second report of the Standing Committee on Health be deemed to have taken place and all questions necessary to dispose of the motion be deemed put and a recorded division deemed requested and deferred to Wednesday, April 18, at the end of government orders; and notwithstanding Standing Order 33(2), government orders shall conclude today at 5:30 p.m.

FinanceCommittees of the HouseRoutine Proceedings

March 19th, 2007 / 3:25 p.m.
See context

Conservative

Brian Pallister Conservative Portage—Lisgar, MB

Mr. Speaker, I have the honour to present, in both official languages, the 16th and 17th reports of the Standing Committee on Finance. The 16th report concerns Bill C-40. The 17th report is rather exciting and I urge the members to read it. It is the supplementary estimates for the fiscal year ending March 31, 2007.

March 1st, 2007 / 11:15 a.m.
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Liberal

Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC

Thank you. “A fine one at that”--I'm not sure where you get that from, but anyway, I have just a quick question.

In January 2007, we had “Legislative Proposal”, “Draft Regulation” and “Explanatory Notes” relating to the excise tax. I'm wondering, what is this compared to Bill C-40? What is this document here versus Bill C-40?