Bill C-40 (Historical)

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

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.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

So what I would like to do now is touch on the key measures in this bill and then open the floor, of course, to questions and discussion.

First, there is little doubt that Canadians want to have an affordable health care system that is there for them when they need it. To this end, Bill C-40 proposes to continue GST/HST exemption for speech language pathology services indefinitely. It also exempts health-related services rendered in the practice of the profession of social work.

Mr. Chairman, this new government is also sensitive to the special needs of persons with disabilities. As you may know, the existing GST/HST rebate for specially equipped vehicles applies only to purchases and importations of new vehicles. The proposed amendment in Bill C-40 will allow purchasers and importers of used motor vehicles that are specially equipped for persons with disabilities to receive a rebate of the GST/HST paid on the portion of the purchase that is attributable to the special equipment.

Canada's new government recognizes the important contribution made by small businesses to our economy, and we want to provide them with an environment that will allow them to grow and prosper. Bill C-40 responds to these needs, introducing measures that will ease their compliance with the sales tax legislation. For example, the scope of certain rules has been expanded to remove unintended impediments to the use of provisions that could exempt businesses from the GST/HST. This bill also proposes amendments to the legislation to better accommodate special import arrangements between businesses in certain situations where goods and services are supplied outside Canada to a Canadian customer. These amendments and others contained in Bill C-40 reflect policy initiatives to improve the application of the GST/HST. This will ease compliance requirements for Canadian businesses and allow them to flourish, Mr. Chairman.

Turning now to excise measures, the second part of Bill C-40 contains measures to implement minor refinements to the Excise Act, 2001, related to tobacco and alcohol. These proposals will improve the operation of the act and more accurately reflect current industry and administrative practices.

One such example is a proposed modification of the exemption of excise duty for small wine producers to take into account that smaller wine licensees may not have their own packaging facilities or equipment. The proposed amendments also permit wine that is packaged on behalf of a wine licensee to be covered by the duty exemption. This proposed amendment will simplify administration and compliance for small wine producers and allow them to concentrate their efforts on producing and promoting their excellent Canadian products.

As I mentioned, this bill also proposes amendments related to the taxation of tobacco products. Bill C-40 proposes to extend the requirements so that the origin of all tobacco products be identified, including those for sale at duty-free shops or for export. This ensures consistency with the Framework Convention on Tobacco Control, an international treaty on tobacco control sponsored by the World Health Organization.

Of course, committee members probably do not need to be reminded that this bill comes about as a result of extensive consultation with the alcohol and tobacco industries. The proposals in this bill are therefore expected to be received favourably by industry.

Part 3 of the bill contains measures pertaining to the air travellers security charge. The charge, as members know, was implemented following the events of September 11, 2001. Among other technical measures, Bill C-40 proposes that the charge not apply to air travel that is donated by an air carrier to a registered charity that arranges free flights for individuals as part of carrying out its charitable purposes. This would include, for example, flights made for medical purposes.

In closing, Mr. Chairman, the amendments proposed in Bill C-40 are intended to maintain a fair and efficient sales tax system. For businesses, this bill also promotes ease of compliance and administration. Moreover, the business community supports the introduction of this bill as it represents improvements to the administration and efficiency of the tax system.

I now welcome the questions that are burning in the minds of my colleagues on this committee and welcome the officials from the Department of Finance who have joined us here today to clarify any technical questions you may have about the bill.

Thank you very much, Mr. Chairman.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Mr. Chairman, Bill C-40 complements the measures I've just outlined by increasing the fairness of the sales tax system. It increases fairness for many individuals with special needs, it increases fairness for charitable organizations, and it eases compliance for a wide range of businesses and other organizations.

Let me illustrate for the committee how Bill C-40 will help meet the government's goals of ensuring fairness in Canada's tax system.

The GST/HST measures contained in the first part of this bill are principally aimed at improving the operation of the GST/HST. These proposed measures will also ensure that the sales tax legislation is in accordance with the policy intent when the law pertaining to these measures was first introduced.

In some cases, adjustments have been made to the legislation as originally proposed in response to representation from tax and business communities. This illustrates the importance this new government attaches to the consultation process. Time, I'm sure the honourable member who just spoke will be glad to hear, does not permit me today to outline everything in this comprehensive bill.

[Diane Ablonczy, Conservative, Parliamentary Secretary to the Minister of Finance]

Thank you, Mr. Chairman.

This is my second time representing the minister in front of this committee. It's always a pleasure to wear another hat, so to speak.

The purpose of this meeting is to discuss Bill C-40, the Sales Tax Amendments Act, 2006. The intent of this bill, I'm sure you all know, is to implement measures aimed at increasing the fairness, efficiency, and ease of compliance in administration of the sales tax system. The Minister of Finance spoke in the House when he tabled this bill. He said:

Canada's New Government is committed to reducing taxes and eliminating red tape. We believe this will make our economy stronger and that it will give a competitive advantage for Canada.

The bill we're discussing today reflects that commitment. We want to make sure that our tax system is fair for all taxpayers, and with Bill C-40 we are moving in that direction. I will outline how we are doing that in a moment, but first I'd like to take a moment to make a few remarks about Canada's new government improving the fairness of Canada's tax system in general.

We believe that like charity, tax fairness begins at home. That's the approach we took in Budget 2006, a budget that delivers real results to individuals and families. It did so in a focused and fiscally responsible way. We started by lowering the GST to 6%. We also delivered broad-based personal income tax relief combined with targeted tax cuts, cuts that over two years will provide almost $2 billion in tax relief for individual Canadians. That, of course, is more than the last four Canadian budgets combined.

These cuts, Mr. Chairman, will remove about 655,000 low-income Canadians from the tax rolls altogether. That is good news for over half a million Canadians and their families. As a result, Canadians will have even greater opportunity to keep more of their hard-earned dollars so they can invest in the things that matter most to them and their families.

In recognition of the Canadian entrepreneurial spirit, and the fact that it helps drive our economy, Budget 2006 also delivered on the government's promise to reduce business income taxes. This action will create an environment for jobs and growth, which in turn will make Canada's tax system more internationally competitive. But this new government has not and will not rest on those laurels. We recognize there is more work to be done.

In October, the finance minister announced a tax fairness plan for Canadians. The plan will restore balance and fairness to the federal tax system. It will protect Canada's long-term economic future and ensure that the tax burden is not unfairly shifted onto the backs of hard-working individuals and their families.

The plan increases the age credit amount, and for the first time ever in Canada, seniors will be able to split their pension income.

We didn't stop there, Mr. Chairman. Along with this fall's economic and fiscal update, the Minister of Finance, before this committee, released Advantage Canada: Building a Strong Economy for Canadians. This is a long-term, national economic plan designed to make Canada a true world economic leader.

Among other initiatives, this comprehensive plan will further improve tax fairness by featuring a reduction in taxes for all Canadians.

Getting to the substance of Bill C-40 before us, the bill complements the initiatives I've just outlined.

[The Chair, Conservative, Brian Pallister]

We will commence.

Welcome to our new members to committee. It's nice to see you again.

It's a very great pleasure for me to be back here.

Pursuant to the Order of Reference of Tuesday, January 30, 2007, we have before us 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.

We have appearing before us today, no stranger to this committee, Madame Diane Ablonczy, Parliamentary Secretary to the Minister of Finance.

I understand that you have some comments to make, Diane, so please proceed.

Sales Tax Amendments Act, 2006

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Mr. Speaker, I congratulate my colleague from Joliette for his excellent speech.

I am pleased to speak to Bill C-40, first of all to tell you that the Bloc Québécois has given its support to this legislative change to the Excise Tax Act, the Excise Act, 2001, the Air Travellers Security Charge Act and other acts. Following my colleague's speech, members will have understood that there are two major parts in the act, even though we say that it was divided in four parts. There are two major parts: the GST rebate, that is the cancellation of the GST on certain goods, and changes in the application of the Excise Tax Act to other goods.

I will not repeat what my colleague has said about all the services on which the GST will no longer apply. First I will talk about what is not in Bill C-40 as it pertains to the GST rebate. My colleagues have talked about this. First, the GST rebate for visitors has been abolished. This rebate used to be there. Theoretically, in Bill C-40, we should not have seen a new paragraph, we should simply have seen: “The existing act continues to apply”. However, the Conservative government has decided to go back and to abolish this GST rebate for visitors. This is directly affecting tourism, especially in Quebec.

When Europeans discovered America, Quebec was where they first settled. It is no coincidence that this is where we find the most beautiful cities, the oldest cities, in North America. It is a very hospitable land. When you arrive in the Gulf of St. Lawrence, you have the Gaspé, the North Shore, the Magdalen Islands, all of the beautiful ancestral sites that are worth visiting and that play host to many tourists. This industry is continuing to develop. Continuing up the St. Lawrence River, you come to Quebec City, which will celebrate its 400th anniversary in 2008 and is therefore the oldest city in North America. There you see everything it has to offer, including the beauty of the history it has bequeathed to future generations. This is the reason why so many visitors come to see Quebec City every year, and the city benefited from their spending and the GST rebate given to foreign visitors. Obviously, this affects all of the regions, because when people come to Quebec City they go on to visit the Saguenay and Lac-Saint-Jean. These are beautiful regions, with lakes and mountains; they are home to hospitality businesses where conventions and business meetings from around the world can be held.

Next you come to the Mauricie region and Trois-Rivières, and on the other shore, the Centre-du-Québec region. Of course, there is history in Trois-Rivières, the second oldest city in North America, and its representative, who is fortunate to sit in the House of Commons, is one of our colleagues. The Bloc Québécois represents all of these ridings along the river. And then you come to Montreal, with all its attractions, which is now internationally recognized. You should not forget to stop and see the Beauce and Appalaches regions. Next come the Eastern Townships, where you can see Lake Memphremagog and part of Lake Champlain. There are also the Laurentians, Mont-Tremblant and part of the Outaouais, where a portion of my riding is. I have one foot in the Laurentians and the other in the Outaouais, where you find the Château Montebello and everything you see here on the other side of the river.

Once again, Quebec has more to lose than other regions of Canada from this elimination of the GST rebate. For members of the public listening to us—Quebeckers and Canadians—it will be clear that before the Conservatives came to power, foreign visitors could get a refund of the GST they paid on tourist products. This was to assist in the development of that industry. The Conservatives have cut the GST to 6% from 7%, but still they have eliminated the refund. Foreign visitors have therefore had to pay 6% more since the Conservatives came to power. This is the Conservatives' gift to foreign visitors. Obviously, the damage, the harm, to the Quebec economy from this is enormous. I do not want to go on and on about this, but Quebec is increasingly seeing an industry that it wanted to prosper being affected by climate. The weather is also playing nasty tricks on the industry.

We see the winter we have with global warming. It is a phenomenon that the Conservatives do not want to recognize. We are not meeting our Kyoto commitment. We saw how the Liberals wasted time before getting behind Kyoto. That is the harsh reality. The result is that now we have this kind of weather that affects the tourism industry.

The tourism industry, in winter, spring, summer or fall, depends heavily on foreign visitors and the 6% refund they received, which they often spent in our region. That was the reality. I believe my colleagues referred to that previously. Before leaving, visitors obtained a refund of the GST that they had paid on their purchases or on what they used as tourism products. They got that money back and they often invested it in the local economy. That money they left behind represented significant investments in the local economy.

The Conservatives have said that the system was too expensive to administer. Obviously, we know that there has been a succession of Conservative and Liberal governments since Canada became a country. Indeed, there have been no other governments than Conservatives or Liberals, with the result that the machinery of government has grown so large that it is now expensive. In fact, they can not even give refunds to the public. That is the reality of successive Liberal and Conservative governments.

Now, the Conservatives have decided to eliminate this refund. The residents of Quebec who operate tourism businesses are badly in need of this revenue at present. Considering that they have been sorely affected by the Canadian dollar and by the fluctuations of climate change, we must support the industry in some way. One way would be to maintain the refunding of GST. The Conservatives have decided instead to increase the bill for foreign tourists by 6%. That is a choice they have made and they will have to live with it.

It is fortunate that members of the Bloc Québécois are here to try to make the Conservatives understand that what they think are good ideas are often very costly for industry. That is certainly the case for the tourism industry.

My colleagues have previously highlighted what we do not find in Bill C-40. My colleague from Chicoutimi—Le Fjord presented a strong argument concerning the GST paid by school boards. Personally, I find that outrageous. I come from the municipal sector. There are many refunds to municipalities, including a full refund of GST. They do not have to pay it. Recently, the Government of Quebec did the same thing. To help overcome their problems, municipalities no longer have to pay the Quebec sales tax.

Municipalities are faced with infrastructure problems and outdated equipment. Cuts in federal funding for the provinces have led to cuts to municipalities, which now must do more with less. The governments have finally understood this and have not bled them dry. They have refunded the GST and the QST to the municipalities. But they have not given rebates to the school boards.

Quebec has given a QST rebate, but the federal government has not given a GST rebate. The government thinks that when it cut provincial funding and the provinces cut municipal funding, they also cut education transfers. That is the hard reality. At that point, the municipalities are not on an equal footing with the school boards. It is time the Conservative woke up. As for the Liberals, they were always asleep when it came to this issue and never woke up. They will never wake up to this issue. But the fact remains that the education sector needs this 6% it pays on purchases of goods and services. As hon. members are aware, the GST is a tax on goods and services. It does not apply just to purchases of goods, but also to purchases of services, including maintenance contracts and any contracts that are awarded.

There was a court decision. My colleague from Chicoutimi—Le Fjord was right to mention it. The court ruled in favour of the school boards. Yet the Liberal governments, and the Conservatives after them, do not want to comply with that judgment. The government is still not repaying the school boards the phenomenal amounts of money they need to keep up their buildings and provide their students with a few more school supplies. The boards need this money. Once again, the federal government is turning a deaf ear.

That was the part of Bill C-40 that applies to sales tax and is not included in this bill. Obviously, there were many rebates. I will not repeat what my colleague from Joliette said about sales tax breaks under Bill C-40. I will perhaps talk a bit about what my colleague did not mention and what he said briefly about excise tax.

There are several measures in Bill C-40 that apply to excise tax. I will go over them. They are in Part II of the bill.

They implement minor refinements that 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. I will summarize the content and what will be changed.

Let us talk first about tobacco. Tobacco measures are aimed at clarifying certain provisions pertaining to the Excise Act, which will make it easier to fight tobacco product smuggling, while facilitating tobacco tax collection. To this end, the bill 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, and it 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.

This helps to clarify the situation. Tobacco smuggling is a plague that must be countered. I know this because, in my riding, there are many itinerant sellers of tobacco—if I may say so. People who use highway 344 will know that several individuals have opened shops. We often laugh about this, but it is very hard for the businesses. Within 500 feet, there are 18 or 20 smoke shacks selling tobacco, which directly affects businesses and corner stores. People who used to making a living selling tobacco products in my riding have been severally affected. Consequently, everything that will attempt to restrict and hinder the smuggling of tobacco products will be well received in the riding of Argenteuil—Papineau—Mirabel, especially around Oka and the districts of Deux-Montagnes.

As for alcohol, the bill has two objectives. First, it authorizes provincial liquor boards and vintners to possess a still or similar equipment for the purpose of analyzing substances containing ethyl alcohol without holding a spirits licence. That will relieve the provincial liquor boards and vintners of all the red tape and the costs related to that licence.

Of course, you know that there are more and more vintners in Quebec and that they are developing more and more wine products. Climate change, which is often mentioned, has a negative impact for many and for the tourist industry, but it seems that more and more regions are seeing new wine producers. Thanks to milder temperatures, the grapes grow better.

The measure will allow vintners to save on costs. Moreover, to stimulate the growth of the wine industry in Canada, the government will allow the deferring of 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.

Thus, when vintners supply their products to a store operated by their association, they will not have to pay the GST until the product is sold. That will be beneficial to the marketing of local products.

In a growing number of regions—and this is the case for the vintners of Saint-Benoit, Saint-Joseph-du-Lac, Saint-Placide, Oka, Pointe-Calumet and Mirabel, in my riding—we are seeing wine producers sell their products on the farm or in small shops or with the support of a regional association.

They form an association and sell their goods through various middlemen. Rather than being obliged to charge GST when the product leaves their farm, or their winery, the GST is paid once the wine has been sold in the shop. These shops are now often part of the tourism infrastructure.

With regard to agri-tourism, increasing numbers of citizens from the greater Montreal area, or elsewhere in Quebec, tour the stands that sell fruits, vegetables and local products in the fall, summer and even spring. These shops are often supported by regional associations. I repeat, this will enable producers to sell their goods without paying the GST and Quebec sales tax as soon as their goods leave the farm.

To provide some background for our colleagues from other Canadian provinces, Quebec wine producers have formed the Quebec vintners' association. In 2006, this included 42 vineyards located in the regions of Quebec City, Lanaudière, the Eastern Townships, Montérégie and the Lower Laurentians. More than 100 hectares are cultivated producing almost 300,000 bottles of wine every year. The main products are white wine, ice wine and fortified wines sold by Quebec producers as part of the agri-tourism trade . The wine industry is a growing industry and the government is supporting it in this case.

There is also the matter of law enforcement. As in the previous section—my colleague from Joliette mentioned it—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. This must be done, of course. In the matter of tobacco and smuggling, we must be able to exchange information with other countries. That is as it should be.

We are able to better monitor production. Recently, some large quantities of loose leaf tobacco were seized in Quebec ports, among others. Authorities seized huge quantities of tobacco bales that were intended for smuggling. They were able to make these seizures because the GST had not been paid on the products. The individuals involved were not properly registered.

So, these are measures that allow us to counter smuggling at the source. In this case, the tobacco came from various countries around the world, including Bangladesh and other countries that we might not even think of. This means that we must be able to counter smuggling activities that originate from all parts of the world. The purpose of these tax measures is to provide customs officers and all those who monitor these imports with a new tool, a tax tool. It allows them to see that the taxes were not paid, and they can then seize the whole shipment, because they know it does not belong to bona fide merchants, since the individuals involved are not registered. This automatically means that they are not allowed to have this product. This is in addition to the fact that they did not pay tax on it. This is a hard blow to smugglers. We cannot stop our efforts in this regard, if we want our merchants, who pay their taxes and part of our salaries, to continue to make profits. One way to help them is to fight smuggling. Hon. members can count on Bloc Québécois members to do that.

Next, there are measures concerning the air travellers security charge. As the Bloc Québécois transport critic, I would like to summarize what this is about. The measures concerning the air travellers security charge are in part 3 of the bill. They include previously announced tax relief measures and minor amendments to the Air Travellers Security Charge Act.

In a nutshell, the government is proposing tax relief. The bill would relieve, in particular circumstances, the air travellers security charge in respect of air travel sold by resellers or donated by air carriers. Obviously, a lot of trips and gifts are given to tour operators. Tax relief would be granted so that these parties, which advertise to encourage people to travel, do not have to pay GST on donated products and services. I think this makes sense. The industry appreciates this relief. To encourage Quebeckers and Canadians to travel by air, companies often have to offer package deals, some of which are given away by lottery. This measure will encourage them to keep doing this by not making them pay the GST on these products and services.

The bill also states that the Governor in Council may, by regulation, amend the schedule by adding, deleting or varying the reference to an airport. The bill removed the La Grande-3 and La Grande-4 airports from the list of airports that must collect the ATSC. As you may know, some airports that were required to charge the ATSC will no longer have to, nor will they have to charge GST. Once again, this will promote development in our beautiful regions. La Grande is in northern Quebec, and we would be delighted to help that vast region's economy.

I hope I have made it clear that although the Bloc Québécois supports these amendments, we think there are some major flaws, such as cancelling the GST visitor rebate, a decision we deplore immensely.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Mr. Speaker, I too would like to congratulate the member for Joliette for his explanation and presentation on Bill C-40. I will not speak directly to the bill, but rather will deal with the GST.

The Bloc Québécois has intervened on this subject in the House on many occasions. When the Conservative government was in opposition, it was in agreement with us that the GST related to school transportation should be refunded to school boards.

In Quebec, this matter concerns 26 school boards, and in my region the Lac-Saint-Jean school board would be able to look forward to receiving about $300,000 if the GST were refunded.

I would like to know what is the justification and motive behind the government’s position in refusing to apply a judgment rendered by the court that orders the government to refund GST to school boards in Quebec and in Ontario.

The House resumed 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 second time and referred to a committee.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, we have before us an extremely technical bill. It contains a whole series of measures. In terms of necessary adjustments, as well as the collection of GST and the various excise taxes, it is definitely a bill that makes sense. And this is why the Bloc Québécois will support it.

However we must say that it is not the most exciting of bills. Accordingly I found it quite characteristic, significant and symptomatic that the previous member should broach matters pertaining of course to finance, but that raise rather more issues than this necessary bill which, as I mentioned earlier, is not all that exciting.

Before going any further in describing the bill and the Bloc Québécois' assessment of it, I would point out, as the previous member did, that we in the Bloc Québécois are extremely concerned about the Conservative government’s decision to take another look at the visitor rebate program.

We know that a notice of ways and means was announced in this connection, but that it has not yet been put to a vote, which is a good thing. I hope that it is because the Conservatives have realized that they were on the wrong track, since this program is found in more or less all countries seeking to have a vibrant and productive tourism industry. It is a bit strange that the government and the Minister of Finance should want to reconsider a program that many countries are thinking about putting in place to attract, in particular, international conventions and groups coming from abroad.

So I take this opportunity to ask the Minister of Finance and the government to think carefully about what they hope to achieve by reconsidering this program. For example, when we go to Europe, everyone is very familiar with this program. Mexico is thinking of setting up an equivalent. So careful thought has to be given to the place of Canada and Quebec as tourist destinations, at a time when the Canadian dollar has risen significantly. Abolishing this program would increase the costs of large conventions in particular by 6%.

Obviously, there is probably room for improvement in this program. I hope that in the next budget, or at another time, the Conservative government will implement an effective program with the same objectives, in other words, to encourage conferences and groups of foreign tourists to come here.

There is another comment I want to make about this bill. It has to do with the fiscal imbalance and the reductions in the GST. We know full well that during the election campaign the Prime Minister announced a reduction in the GST from 7% to 6% and then from 6% to 5%. On July 1, we had the first reduction from 7% to 6% and were told that in a few years time there would be a second reduction from 6% to 5%.

I want to take this opportunity to warn the Prime Minister and the Minister of Finance against confusing the issue of resolving the fiscal imbalance with the issue of reducing the tax burden on Canadian and Quebec taxpayers.

I remember the election campaign very well. The Prime Minister was a candidate and leader of the Conservative Party and made his GST reduction announcement standing next to a cash register. In no way could this reduction be interpreted as the tax room that could have been left to the provinces who wanted it to resolve in part—since this is not enough—the fiscal imbalance.

I am therefore warning the government and the Minister of Finance not to try to have it both ways in the next budget by announcing the reduction of the GST from 6% to 5% and by announcing that the provinces, such as Quebec—perhaps—that want to recover this tax room, will be able to do so as part of a solution to the fiscal imbalance. This would be totally unacceptable. It would be unbelievably cynical. I think the public, Quebeckers in particular, would not fall for it. I prefer to let the Minister of Finance and the Prime Minister know right away that such a move would be totally unacceptable to the Bloc Québécois.

This bill has given me the opportunity to relay my two messages. I hope they will be heard.

I will now talk a little about what is in Bill C-40. This bill amends both the GST and the excise tax collection. It is comprised of four parts. First, some changes are aimed at improving and specifying certain measures pertaining to the collection of the GST. Second, the act is being changed to exempt certain goods and services from the tax, particularly medical and social services. I will get back to this. Third, the government is amending the excise tax to specify different measures concerning the taxation of wine, beer and spirits. Finally, a fourth part changes the rules pertaining to the air travellers security charge, a charge that is currently collected at different airports.

Let us start by examining in greater detail the bill as it concerns the measures affecting the GST and the harmonized sales tax. In Quebec, it is the Quebec sales tax. These measures are comprised of five distinct categories. Thus, the bill changes the rules concerning health, charities and business arrangements. These rules also affect governments, particularly municipalities. Furthermore, some provisions change the GST administration process.

Concerning health measures, the first category under the goods and services tax, the government is amending the act so that speech-language pathology services will now be tax exempted. For parents who use speech-language pathology services because their children have language difficulties, this is excellent news. This will make it easier to access these services and minimize costs. This is true for parents of children with speech problems, but also for many of our fellow citizens who have had strokes. Often, they are forced to re-learn to speak and also need speech-language pathology services. In a sense, costs will also be reduced there and access to these services will be easier.

I think it is interesting that in its bill, the government decided to exempt health-related services rendered in the practise of the profession of social work from the GST. Here too, there may be groups, institutions, families and individuals who need the expertise of a social worker. They will no longer have to pay the GST. For people who have insurance, this means their deductible will be lower. Insurance rarely covers the entire cost of social workers. This reduction would therefore apply to the cost paid by the institution, the organization or the individuals for the services of a social worker.

Next, in its bill, the government wants to zero-rate sales and importations of a product that can, to a certain extent, replace blood. This product, plasma expander, is a blood substitute that can be injected during treatment of major hemorrhaging, serious burns or open fractures. Although they do not contain the red blood cells and anticoagulants found in blood, these substitutes offer an alternative at various stages of critical intervention to save the lives of seriously injured patients. Here too, I think it is simply humane to exempt these products from the GST, an indirect taxation measure.

The government will also zero-rate a group of drugs known as benzodiazepines, which includes Valium, Ativan and other similar drugs.

These drugs are used to treat anxiety, for example, during withdrawal in cases of detox, and as preanaesthetic medication. Once again, it is simply of question of humanity to not tax these products, which are used in extremely difficult situations and when there is no other choice. It is not a matter of saying: “Should I take this or not?” The patient has no choice but to use these products.

Lastly, the government is going to rebate the GST on motor vehicles that have been used subsequent to being specially equipped for use by individuals with disabilities. We see a number of amendments on the health side that are most welcome, that are not likely to be the subject of any history classes in the future, but that are certainly consistent with common sense.

As for charities, that is the second category regarding the GST and other sales tax. These amendments will ensure 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. For example, a charity leases a building and, at the same time, leases a photocopier, phone service and computer system. At present, those products must be supplied not only at a cost, but taxes must also be paid on those goods and services. Charities will be able to use the same supplies without paying the GST. Obviously, anything that can help reduce the operating costs of charities is most welcome. In that sense, this is also a step in the right direction. A step, once again, that will not answer all of the funding problems facing charities in terms of the support they need from our government, but at least some openness has been shown in this regard. Let us hope that the government will take such steps even further in the future.

As for business arrangements, I think there are some good changes. A foreign bank that has a subsidiary in Canada will now be able to restructure it into a Canadian branch in its own right and enjoy GST relief during a transitional period.

The Finance Committee, this House and the various governments we have witnessed recently have all tried to foster competition in the financial institution sector and especially among banks. Unfortunately, though, there is still not enough competition for us to really speak of a marketplace where supply and demand play a key role. We know very well—and have had recurrent debates about it—that many of the bank fees added over the last few years are due to the fact we have oligopolistic competition, that is to say, just a few big players, especially five large Canadian banks. Despite the legislative changes made over the years to encourage the establishment of banks or foreign banks to move to Canada, there is still not enough competition to generate sufficient pressure to ensure that consumers get their money’s worth. There are certain other group relief provisions as well, but I will not get into that.

In another area, the bill simplifies the application of the GST to beverage container deposits refundable to the consumer because this was a rather bureaucratic obstacle to recycling and the collection of the tax on these cans. This measure excludes the container deposit from the GST and will thereby facilitate recycling, the protection of the environment, and the lives of all the small retailers who now handle these deposit returns.

There are a few other technical measures as well. For example, there are provisions on agents who sell products and have bad debts that they cannot recover. When this happens, they will have GST deductions.

The same applies to persons acting as billing agents—they are not the ones who will have to pay the GST—and for special arrangements between businesses in certain situations where goods are supplied outside Canada to Canadian customers. Things will be made simpler in this case also.

The bill also ensures that GST group relief rules cannot be used to exempt from the GST otherwise taxable clearing services that are provided by a group member to another in order to avoid a situation where a third-party purchaser outside the group would benefit from the GST exemption even though the services were provided by one member to another.

It also confirms the policy intent and Canada Revenue Agency’s existing practice that no GST or provincial sales taxes on a passenger vehicle are included in calculating the maximum allowable value for input tax credit purposes.

In the case of 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 means that the GST will not apply, which will facilitate the transfer of a certain amount of information by municipalities and government agencies. In some way, this is what the bill is all about. It will facilitate the flow of information. It will also ensure that a small supplier of a municipality is treated in the same manner as a small municipality.

Other amendments deal with the application of the law with regard to the GST. For example, the bill 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 in exceptional circumstances.

A number of measures such as these give some latitude to the Minister of National Revenue as well as to the revenue agency to take into account exceptional circumstances.

A number of amendments were made with regard to the excise tax. For example, the rules pertaining to tobacco were tightened. Everyone here will agree it is very important to tighten the rules because of smuggling. There will have to be greater compliance in terms of the origin of tobacco products and their source, in particular for duty free shops.

In the case of alcohol, the bill contains measures to support the development of the Canadian wine industry. This industry is flourishing, particularly in Île Ronde in the Lanaudière region, which is producing wines comparable to those being imported. Once again, this measure will help this increasingly important and high-end industry—associated with regions such as Lanaudière—to develop.

I would like to close by saying that there has been some relief with respect to the air travellers security charge. Under this legislation, airports that should not have been included, in our opinion, on the lists have been removed from them. For example, La Grande III airport and La Grande IV are not commercial or tourist airports. Some tourists use them, but the majority of users are workers.

In conclusion, although this bill does not represent a tax revolution, it is moving in the direction of common sense. The Bloc Québécois will support this bill because it corrects certain shortcomings, reduces the cost of access to some medical services, reduces the tax burden on charities, assists small producers of wine, tightens provisions pertaining to the sale and production of tobacco in order to help the fight against smuggling, and adjusts the air travellers security charge to reflect reality, particularly that in Quebec. We are therefore pleased, not in the name of revolution but rather in the name of common sense, to support this bill.

The House resumed 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 second time and referred to a committee.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

Mr. Speaker, for a while I thought the NDP was going to claim authorship of the Constitution and one of the books of the Bible.

I am pleased to continue the debate on Bill C-40. It is a tax amendment bill. Many have called it a technical amendment bill and it certainly is that.

One of the points I would like to make is that it is never possible to make tax policy changes in a vacuum. Even though this bill may be regarded as technical, Parliament must always be vigilant, as should taxpayers, to make sure that tax changes, however small they are said to be, do not radically change the strategic direction of tax policy unless it is the will of Parliament to do so.

On at least three occasions not involving this bill, the government appears to have made three separate policy moves to alter tax policy, I feel, in a vacuum, in a way that has had negative impacts.

One of them was the possibility of revoking the GST rebate for visitors. Reference has already been made to this. The government appears to have walked from that, but the very fact that the statement was made may have altered the perception of visitors to Canada and travel agents who organize visits to Canada. That was a mistake, frankly. The amount collected in that tax is relatively small.

I realize one of the reasons for considering the revocation was the extent to which fraud had taken up some of those resources, but again, it is a small amount of money and it is probably worth the enforcement costs to make sure our visitors feel they are welcome in Canada and welcome to spend here in Canada. That was a mistake.

Another mistake, as my friend from the NDP discussed at some length, was the 1% reduction in the GST. That reduction is small to many Canadians. One could class that GST 1% reduction as regressive because it is the big spenders who will get the biggest tax reduction. If one lives hand to mouth in Canada, if one is not spending big bucks, if almost all of one's money goes out for rent and food, then 1% of nothing is nothing. There is no tax rebate available to those people. Maybe the government would rather have the photo op and the glamour tax reduction statement instead of really considering the tax impact on individual Canadians.

The third mistake had to do with the taxation of unit trusts. In a flagrant, obvious, blatant reversal of an election promise, one Friday afternoon the finance minister announced that the government would terminate the tax vehicle known as the unit trusts. This had huge downside financial implications for thousands of Canadians who had put their savings into unit trusts relying on that commitment and the existence of the tax interpretations. This issue is being canvassed at this time by the finance committee.

These are all examples of why Parliament cannot let a government make tax policy decisions in a vacuum. One has to look at the entire picture.

Mr. Speaker, I realize we are getting close to members' statements. Perhaps this might be a point when we could pause and I will resume my remarks later.

[David Christopherson, NDP, Hamilton Centre, ON]

Mr. Speaker, I appreciate the opportunity to join in the debate.

Let me begin by saying that we have a lot of paperwork here. It is a big bill. There is the bill itself and the explanatory notes that go with it. The bottom line is, though, that most of this is indeed housekeeping. It happens in all parliaments and all governments that from time to time there is a need to bring things up to speed, to perhaps reflect an unfairness that has been identified that does justify its own bill. Often it is a matter of other changes that have been made and now we are catching up with the legislation, either with numbers or words. Primarily, that is what we found here.

Once we get into committee, we reserve the right to acknowledge that there may be problems that have not come to our attention. Certainly, we would encourage anybody impacted, any industry, any business, any individual anywhere who is affected by this in a negative way that we have not yet sussed out, by all means to give us a shout. It will go to committee and we will get a chance to deal with it there.

It would seem on the surface, as my colleague from the Bloc has pointed out, that this is indeed a housekeeping bill and by rights should not warrant us all getting ourselves twisted up in this minority government. We have bigger fish to fry and more important things to deal with. However, it does give us an opportunity to speak to what has happened so far.

I agree with much of what my colleague from the Bloc had to say. We view it very similarly in that some of the best things about it is what is not in there. The whole notion of cutting the rebate for tourists coming here and allowing them to apply for the GST rebate was a foolish suggestion, absolutely foolish. It is amazing it got as far as being announced in the throne speech that it would be put in the original budget document. It is a really dumb idea.

Number one, it is not that much money, and second, as has already been pointed out, not everybody applies for it. It is more a matter of being a selling point to say that it is available to people, particularly when conferences, conventions, trade associations meet with local officials to determine where they can get the best deal. If we are comparing Canada to any other country, this is an opportunity for our competitor countries to point out quietly that Canada used to be pretty good, but look at some of the things it has done now. That hurts. It hurts more than the reality of the money that is lost, actually.

Conversely, it has the ability to be used as a marketing tool to say to the world that we have a beautiful country, we are very fortunate, we are blessed, and we offer the world to come and enjoy. People should come and visit with their families. Whether it is for business, pleasure or a combination, Canada is a place that should be on the short list of convention destinations. Leaving the rebate in place is a part of being able to sell Canada around the world.

We should make no mistake, to a community like my home town of Hamilton, conventions are a huge part of our local economy, more than people might think. Again, it is because of the proximity to Toronto. I have nothing to say against our good friends in Toronto, but costs are a little higher there and we are able to provide some things that Toronto cannot at a lower price. It still provides us with access to Niagara Falls, a world renowned beauty, as well as all the media centre that exists in Toronto, so there are a lot of good reasons why Hamilton is an important destination, usually for medium sized conventions and conferences. For the truly large ones, it makes sense they would go to the larger capitals of the country.

However, it is important to Hamilton and it is important to Canada. It is good that it is not in here. Let us hope we never hear from it again. We do not want to hear about it because it is a bad idea.

It is interesting, when we look at the website of the hon. the House leader of the government, there is a news release dated September 6, 2005, which of course was before the election. I would just take a moment to point out that the government of the day, the Conservatives, had a lot to say when they were in opposition about taxes in terms of gasoline, stating all they would do, rightly pointing out that the Liberals were not doing anything, but making all kinds of commitments.

I will read it in part. It states:

Part of the gas price is a series of provincial and Federal taxes. Two components of the Federal Government’s taxes on gas are actually quite offensive. For some time, we have been calling on them to be eliminated. The first is best described as a “tax on a tax”. The feds impose both an excise tax (the gas tax) and they also impose the GST, just like they do on everything else. Fair enough, so far. But unbelievably, the Feds actually charge the GST on the excise tax portion of the gas price, as well as on the commodity. You actually pay the GST on the provincial and federal excise tax as part of the gas price, a tax on a tax.

It goes on and on. It makes another point about the evils of what is in place right now. It condemns the Liberals further for doing nothing, which is accurate, and then it goes on to say all the great things a Conservative government would do. Well, they are not in here. The Conservatives are good at the promises when it comes to gas and taxes, and like usual, they make a much better argument on paper than they do in law and this is another reflection of that.

I might also add that the big economic move, the last big real supposedly huge change that the government made was to cut the GST. The Conservatives are going to talk about that in the upcoming election, whenever that is. They are going to go on and on, but what is surprising for the average Canadian is that it cost us almost $5 billion a year. A tax cut is a tax expenditure. When we make a choice to have a tax cut, it is exactly the same as saying we could spend the $4.5 billion on health care, on child care or cleaning up the environment.

When we put a tax cut in place, it is a trade-off for a whole host of things that would impact Canadians' lives. That is not going to happen. I ask any Canadian watching to think about how many times in his or her life since that change was made has the reduction in the GST made a noticeable difference in his or her disposable income. I would say that for the most part, unless one made a really big major purchase, one is not going to see it.

If one is in the position to make a purchase like that it is not for the most part where we need the stimulation in the economy. That is certainly not where we need extra money. We need more money in the hands of ordinary working Canadians. Those who do not have jobs need some means of having money in their pockets to survive.

The close to $5 billion could have been far better spent on investments that would really improve the quality of life for all Canadians, not just the select few who are going out to replace their 50-foot yacht with a 60-foot yacht.

When the government talks about planning to do that again, I remind colleagues in the House that they are planning to do another cut sometime. Just remember, that as appealing as it might sound at first, taxpayers should ask themselves as citizens whether that last tax cut really improved life in any noticeable way, put any extra money in their pockets or allowed parents to give their kids a little extra money for what they need. These are the priorities for Canadians.

The next time we start talking about the second round, we intend in the NDP to ensure that we talk about not just how much it costs for this GST tax cut that is supposed to be coming but to also put beside that the alternative of what could be done with $4 billion to $5 billion a year at a time when so many Canadians are facing so many challenges. That money could be much better spent, much more along the lines of the NDP budget that we brought in a year and a half ago where we diverted money from profit-making corporations into investments in housing, education and in terms of environmental cleanup. Those are the priorities.

When we talk about this innocuous bill, it is important to talk about what is not in it that is both good and bad unless and until we get into committee and somebody points out to us a huge problem that we have not yet identified. And that could be, I say that very openly. Unless that happens for the most part, we have a bill that need not tie up this minority government and keep us away from the priorities that we have all identified, not the least of which is cleaning up the environment in Canada and ensuring that we have a national agenda that addresses properly greenhouse gas emissions.

Those are the priorities. The government has our support in principle at this point. However, on the notion of another GST cut, if there is $4 billion or $5 billion available in the budget, that money can go to more important priorities than just making sure that the very well off in the country get yet another tax cut.

That is not what is needed. What is needed is investment in the areas that we have responsibility for that can actually improve the lives of Canadians from coast to coast to coast. That should be the priority of the House. To that degree, we intend to move forward with that understanding on Bill C-40, unless of course things should change. As we all know, in a minority Parliament they could.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Mr. Speaker, given that this is my first opportunity to address the House since the holidays, I would like to start by wishing you a happy 2007.

I would also like to wish my honourable colleagues and the citizens of my riding a happy and profitable new year.

I would now like to give an overview of Bill C-40, which is now before this House. I will first summarize the main reasons why the Bloc Québécois supports Bill C-40.

This bill addresses shortcomings associated with the GST and the excise tax. Bill C-40 removes taxes from certain medical services, which facilitates access to these services. The bill reduces the burden of taxation on charities. It also contains measures that help small wine producers. It tightens legislative provisions surrounding the sale and production of tobacco in an effort to counter smuggling. Bill C-40 reduces the air travellers security charge and will reflect the Quebec situation. That was required. For all these reasons, we will support this bill.

To briefly put things into context, this bill is divided into three large parts. It is aimed, first, at instituting corrective steps to improve and specify certain measures having to do with the collection of the GST. It also 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. Finally, it amends the rules on the air travellers security charge.

In the first part or the GST-HST-related measures, we find five categories or broadly distinct measures. The bill amends the rules on health, charities, business arrangements, and governments and contains certain provisions changing the way in which the GST is applied.

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 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 that enable them to continue living in dignity.

In this same measure, the government also exempts health-related services provided in the practice of the profession of social work. This too will make it easier to access private social work services and permit people who have the means or have insurance not to pay taxes any more when they purchase the services of social workers.

Then the government zero-rates sales and importations of a product that can be used to some extent as a blood-substitute. Plasma expander makes it possible, for example, to inject a blood substitute during treatment for severe hemorrhaging, very serious burns or open fractures. Although it does not contain any red blood cells or the anticoagulants found in bagged blood, it provides an alternative during crucial treatments for seriously injured patients.

The government is also going to restore the zero-rated status of a group of drugs collectively known as benzodiazepines. These include medications such as Valium, Ativan and other similar drugs. They are used primarily to treat anxiety, for alcohol withdrawal or as a preanaesthetic medication.

Lastly, the government will offer a GST rebate on motor vehicles that have been used after being specially equipped for use by individuals with disabilities.

The second principal measure, which forms part of the same group, concerns charities. Some amendments will ensure that the exemption of supplies by charities of real property under short-term leases and licences extends to any goods supplied with such real property. This will mean less financial pressure on charities as they carry out their social mission.

The third measure concerns business arrangements. The amendment to the GST legislation provides transitional GST/HST relief on the initial asset transfer by a foreign bank that restructures its Canadian subsidiary into a Canadian branch. This measure will act as an incentive to foreign banks in Canada to restructure their subsidiaries as Canadian branches, which will promote more competition in the Canadian banking sector.

The bill removes technical impediments that hinder the use of existing group relief provisions under the GST/HST. This amendment simply clarifies the rules of application of the legislation that are already in effect. In addition, the bill simplifies compliance by excluding beverage container deposits that are refundable to the consumer from the GST/HST base. This will make it easier for businesses to manage collection and will lighten the regulatory burden associated with deposits, with a view to promoting more recycling and environmental protection.

This is not a very impressive measure from the current government, but it is a step in the right direction for the environment. We hope that this government will go a bit further and take a more serious approach to the environment. On the whole, this seems promising.

On a more technical level, the bill 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.

Another measure extends the existing agent rules under the GST/HST legislation to persons acting only as billing agents for vendors.

Another measure will better accommodate special import arrangements between businesses in certain situations where goods are supplied outside Canada to a Canadian customer. We will also ensure 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.

The measure also 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. Finally, it 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.

The fourth measure relates to governments. First, it will exempt a supply of a right to file or retrieve a document or information stored in an electronic official registry. That will thus allow municipalities and government agencies to supply information to citizens at a better cost, which in turn will increase access to information.

The new legislation will also ensure that a small supplier division of a municipality is treated in the same manner as a municipality that is a small supplier. Thus, the fairness of treatment will be respected.

The fifth measure, always in the same group, deals with the change in the implementation processes of the legislation. First, the bill will provide the Minister of National Revenue with the discretionary power 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 application from meeting the normal filing deadline. Second, the Minister of National Revenue will have the discretionary power 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.

As for the exchange of information, the bill authorizes 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. Thus, the government will be better able to fight tax evasion.

Finally, the bill gives the Chief Statistician of Canada the discretionary power to provide statistical information concerning business activities to the provinces similar to an existing provision in the Income Tax Act. This new power will give provinces a better access to income statistics, which will allow them to better focus their public policies. This is the first group, which is quite technical, as is the bill as a whole.

Part two of the bill contains a series of measures dealing with excise taxes. Those measures 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.

Since it is very technical and we do not have a lot of time, I will not go into detail. The first of the principal measures deals with tobacco and seeks to give greater precision to certain provisions contained in the Excise Tax Act in order to better defend against the smuggling of tobacco products and facilitate collection of taxes on tobacco. The bill includes measures to extend the requirement to identify the origin of tobacco products to all products, including those sold at duty-free shops or for export, consistent with the Framework Convention on Tobacco Control, an international agreement. It also specifies 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.

The second measure concerns alcohol. The bill has two main objectives. First, it authorizes provincial liquor boards and vintners to possess a still or similar equipment, for the purpose of analyzing substances containing ethyl alcohol without holding a spirits licence. This measure aims to avoid the administrative burden and cost of requiring provincial liquor boards and vintners to obtain a permit. In addition, to encourage the growth of the wine industry in Canada, the government will defer payment of duty by small vintners who sell wine on consignment in retail stores operated by an association of vintners until the wine is sold. As a result, when small producers offer their products in a store operated by a producers’ association, they will not have to pay GST until the product is sold. This measure encourages our home-grown industry and the Bloc Québécois is very happy about that.

I would like to make a small aside concerning the wine industry in Quebec. That industry is represented by the Association des Vignerons du Québec. In 2006, the association was made up of 42 wine growers operating in the regions of Québec, de Lanaudière, the Eastern Townships, Montérégie and the Basses-Laurentides.

Unfortunately, as you can well imagine, no Quebec wine is produced in Montreal, in the region where I live and where my riding is located. To make up for it, we enjoy these Quebec wines that keep on getting better year after year. In any event, I try to do my part.

More than 100 hectares of vines are harvested annually. Nearly 300,000 bottles of wine are produced every year. The main products are white wine, ice wine and fortified wine.

As far as the application of the bill is concerned, as in the previous section, the new legislation permits the Minister of National Revenue to exchange excise tax information 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.

Finally, the third part includes measures on the air travellers security charge. These were implemented a few years ago after the unfortunate events of September 11. These measures have to do with the air travellers security charge and are in part 3 of the bill. They include the announced relief measures and minor changes to the Air Travellers Security Charge Act.

There are two main measures. The first is tax relief. The bill relieves, in particular circumstances, the air travellers security charge in respect of air travel sold by resellers or donated by air carriers. From an administrative point of view, the bill provides authority for the Governor in Council to add, delete or vary by regulation the schedule of listed airports. Thus, the bill will change the status of three of Quebec's airports in order to ensure that standards meet market demand.

So the bill is going to remove La Grande-3 and La Grande-4, in Northern Quebec, from the list of airports subject to the surtax arising from the Air Travellers Security Charge Act. This measure reflects the very special nature of these airports. However, the amazing increase in air traffic at the Mont-Tremblant airport has meant that the minister has decided to include it in the list of airports now subject to the Air Travellers Security Charge.

This is a very technical bill and the Bloc Québécois supports its principles because of the various measures it contains. We are also glad that some measures concerning the GST act have not been included. These are some of the measures announced by the government concerning its intention to abolish GST refunds for foreign visitors. I have to say that we are very pleased that this is not included in this bill because we think that it is a bad measure and that it would punish the tourism industry in Quebec unduly. We hope that the government will have the wisdom to forget this measure entirely and that we never have to debate it in this House. It would be a huge problem.

I would like to end simply by saying that we are going to support this bill because it is designed to correct the technical shortcomings and differences pertaining to other laws, including the GST act and the one on Excise Tax. The tax is going to be removed from certain medial services so as to facilitate access to them and lighten the tax burden for charitable organizations.

There will be measures to support small wine producers; to tighten up legislation on the sale of tobacco products with a view to counteracting smuggling; and to adjust the Air Travellers Security Charge to the situation in Quebec.

[Alan Tonks, Liberal, York South—Weston, ON]

Mr. Speaker, I am pleased to speak today to 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 the title suggests, this probably is not the most exciting or gripping topics that we have discussed in this place but it is, nonetheless, an extremely important one, as my colleague on the other side of the House has already indicated.

Much of the bill has to do with bringing previous legislation in line with the original policy intent of the government. Much of the bill has to do with implementing previously proposed legislation that, as has been indicated, required further study. This has been done in consultation with affected individuals and industries which, as I understand, was the procedure followed in this instance and most appropriately.

Bill C-40 has three main components which I will deal with separately. The first includes new measures related to the goods and services tax and the harmonized sales tax. The second part contains amendments to the Excise Act, 2001 and other acts with respect to the taxation of tobacco, spirits and wine, a subject matter that will be of interest to more than just those in the House. Finally, the bill contains measures that affect the Air Travellers Security Charge Act.

I will begin with the first part. The bill would confirm the GST-HST exemption for speech language pathology services. Speech language pathologists can include occupational therapists, physical therapists, therapist assistants, public health nurses, child psychologists and others. Typically, they provide services to young children with communication disorders and adults in rehabilitation centres.

We on this side are glad to see that this has been done. We are also glad that the Liberals' draft GST exemption for these services will be implemented. Clearly, speech language pathology services should fall under the act of GST-HST exempt health care services.

The bill also says that the sale and importation of a blood substitute, known as plasma expander, will be zero rated for GST purposes. As my colleague from the other side has pointed out, plasma expander is a blood substitute product that is used primarily to maintain circulatory blood volume during surgical procedures or trauma care. As we all know, Canadians are very generous when it comes to our health care system and donating their blood but there is also always a pressing need for more, and that is why the Liberals proposed this change in a previous budget and began consulting with affected industries.

Bill C-40 would also broaden the specially equipped vehicle GST-HST rebate so that the rebate applies to motor vehicles that have been used subsequent to being specifically equipped for use by individuals with disabilities. This would broaden the previous government's initiative which ensured that individuals and organizations, such as municipalities, non-profit or charitable organizations and school authorities, would qualify for the rebate on purchases when payment becomes due after today or when the vehicle is imported.

The bill also affects the harmonized sales tax in Nova Scotia where the government has called for the provincial tax portion of the home buyer's rebate to be limited to $1,500. It is good to see that this bill that the government has brought forward finally acknowledges the fact that a GST-HST rebate on new housing does in fact exist.

Last spring, when the Prime Minister was touring the country lauding the savings that a 1% GST reduction would provide for a new homeowner, he conveniently happened to forget that the existence of this value program already was there. As a result, I think he somewhat inflated the amount of savings a new homeowner could expect.

In Newfoundland, I believe the Prime Minister pulled out of his hat a savings figure of $2,000 on a $200,000 home. In reality, of course, the savings are some $650 less due to the GST rebate on new housing, but facts and correct figures tend to be lost on the government when it wants people to think it is lowering their income taxes when in reality it is doing just the opposite.

It would be our position that adjustment to income taxes is perhaps a more progressive way that would remove the inequities, in particular for the working poor and those on fixed incomes, other than treating the GST this way, but we also support the reductions to the GST that have been suggested.

The final Liberal budget in 2005 announced new funding over five years to enhance federal tax compliance and enforcement in the tobacco industry. We set aside new money for enhanced markings of tobacco. I am glad to see that this bill extends requirements to identify the origin of tobacco products to all products, including those for sale at duty-free shops or for export.

I can tell members that, from comments made by those who have discussed this issue with me, tobacco contraband needs to be addressed in a serious fashion. That is why we allocated $8 million to fight tobacco contraband two years ago. I certainly hope that the current government will take up that very cause.

The final part of the bill also focuses on an initiative announced by the previous Liberal government and confirmed in this bill. It will ensure that certain air travel donated to charities through air carriers is not subject to the air travellers security charge. I think it is worthwhile to repeat what has been said previously in explanation of this by my colleague.

In the months following 9/11, the previous Liberal government jumped into action with a series of measures to improve public safety, secure our borders and ensure that the lives of Canadians and Canadian businesses could go on with as little disruption to daily life as possible. As a result, the government of that day strengthened Canada's borders dramatically. We increased security at Canadian airports with as little disruption to passengers as possible.

The air travellers security charge was levied to help pay for these upgrades. While no one particularly enjoys a new tax, I think most Canadians would agree that in February 2002 we did the right thing by instituting the air travellers security charge in order to protect Canadians.

As a side note, the current government, which at the time was comprised mostly of the Canadian Alliance Party, voted against the security charge and in fact against the creation of the Canadian Air Transport Security Authority. Liberals, however, did believe that Canadians would be willing to pay a little more to ensure that air travel in Canada was as safe as possible. As a result, I am proud to say that Canadians are in fact safer.

Furthermore, as new technology was installed at airports across Canada and new security procedures created, the cost of the program diminished as time went on. Accordingly, the Liberals used their last three budgets to lower the air travellers security charge three times so that Canadians would need to pay only what was necessary to ensure their safety on flights.

As was mentioned, this was another initiative that was started by the previous government. Lowering barriers such as the travellers security charge on donated seats, then, is an excellent way to ensure that businesses such as airlines can help charities carry out their excellent work. In Canada, there are currently over 80,000 registered charities, the vast majority of which are honest and hard-working organizations that provide valuable services for Canadians.

I am sure that Canadians were dismayed this fall when the current government chose to eliminate the charities advisory committee. The committee was comprised of members of the charitable community as well as Canada Revenue Agency employees. Together they worked to ensure that charities were aware of their obligations under the Income Tax Act. They worked to ensure that Canadians could be confident that when they donate their hard-earned money to a charitable cause, the bulk of that donation actually goes toward the cause.

Furthermore, the charities advisory committee proposed new and interesting changes to Canada's tax laws, such as eliminating the air travellers security charge when an airline donates a seat to a registered charity. I cannot recall if this proposal came from that committee, but I do know that committee members had many proposals such as this one before them and made recommendations to that effect. I do not believe that the saving of a few thousand dollars by the government in eliminating the committee is in the best interests of our charitable sector or Canadians at large.

As I said at the beginning of my remarks, this may not be the most exciting or glamorous fare that the House has had to discuss, but as we can see from what has been said thus far, these measures are all very vital and important. The vast majority of these initiatives are either a result of the consultation process set up by the previous government or a direct result of funding provided by us.

Accordingly, I am happy to support the bill, as my party will be, at second reading and further study it when it arrives at the finance committee.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Mr. Speaker, I would like to thank my government colleague for his presentation on Bill C-40. Given my interest in transportation, and since I am a member of the Standing Committee on Transport, I would like him to clarify for me the air travellers security charge. How will this bill truly guarantee adequate security for air transportation? Will it actually improve security or simply provide tax breaks?

[James Bezan, Conservative, Selkirk—Interlake, MB]

Mr. Speaker, I welcome this opportunity to begin the debate at second reading of Bill C-40. This bill contains a number of amendments to update the operation of our tax system, some of which have been previously made public either by news release or by way of a notice of ways and means motion.

Before I outline the measures contained in the bill, I would first point out that the consultative process that led up to the introduction of the bill is an excellent example of successful cooperation between government and the tax and business communities toward achieving our common aim of improving our tax system. Adjustments have been made to the legislation as it was originally proposed in response to representations from both tax and business communities.

On behalf of Canada's new government, I take this opportunity to thank those interested parties who brought forward their views on the many issues addressed in the legislation. Bill C-40 reaffirms this government's commitment to making our tax system simpler and fairer not only for individual Canadians but for Canadian businesses as well.

I would like to take a moment to comment more broadly on how the legislation proposed in Bill C-40 links to this government's goal to ensure that Canada has a fair and competitive tax system.

Canada has long been recognized internationally as a country that treats its citizens fairly, which is one of the reasons that many people from all over the world come here to fulfill a dream of a better life for themselves and their families. Canada's new government believes in helping those dreams come true by creating new opportunities for Canadians wherever they live. That is why in our first budget we took action to help families and individuals as well as businesses by lowering taxes, rewarding effort and making Canada a better place in which to live and work.

One of our core priorities was to reduce taxes. We did that first by reducing the GST. We also provided other significant personal and corporate tax relief on the investments that will create jobs and boost Canada's economy by improving incentives to work, save and invest, and we are doing more.

The Minister of Finance recently announced a tax fairness plan for all Canadians. This plan will help restore balance and fairness in Canada's tax system to ensure our economy continues to grow and prosper and to bring Canada in line with our trading partners.

Families and businesses still pay too much tax in this country and our government will continue to reduce taxes for all Canadians. This new government firmly believes that a fair, efficient and competitive tax system plays a key role in creating a stronger, more productive economy. The measures contained in this bill reflect that belief. I will outline the initiatives contained in the legislation and in doing so illustrate how they support this government's goal of ensuring that we have a fair tax system.

The bill is divided into three parts. Part one mainly implements proposed measures relating to the goods and services tax and the harmonized sales tax. These measures are aimed at improving the operation of the GST-HST in the affected areas and ensuring that the legislation accords with the policy intent. Part two contains measures relating to the taxation of wine, spirits and tobacco. Part three of the bill is related to the air travel security charge.

Starting with part one, the GST-HST measures, a number of these initiatives have been previously announced by way of press release or by notice of ways and means motions. The proposed GST-HST measures in the bill fall into a number of main areas. The first is health.

An important priority for Canadians and Canada's new government is our health care system. The Government of Canada is committed to providing support to provinces and territories to help ensure that all Canadians have access to timely, quality health care. To make sure that happens, transfers from the federal government to the provinces and territories in support of health are at their highest levels ever, approximately $21.3 billion for the Canada health transfer and wait times reduction transfer.

This will ensure stable, predictable and increasing support for Canada's health care system. In addition to transfers, the Government of Canada provides some $6 billion annually in its own areas of responsibility, including first nations and veterans health, health protection, disease prevention, health related research, and medical and caregiver tax credits. The legislation contained in the bill complements these investments by helping to ensure that Canadians receive the health services they need.

For example, Bill C-40 proposes to continue indefinitely the GST-HST exemption for speech language pathology services. It also exempts health related services rendered in the practise of the profession of social work. These amendments are consistent with the government's policy criteria for inclusion of a particular health care service on the list for those that are GST-HST exempt. That is to say, if a service is rendered in the practise of a profession that is regulated as a health care profession by the governments of at least five provinces, the service is exempt in all provinces.

In addition, the bill proposes a tax free status to the sales and importations of blood substitutes known as plasma expander.

Under the current GST-HST legislation, the supply of blood and blood derivatives is tax free, whereas synthetic blood products, such as plasma expander, are not tax free as they are not of organic origin. To maintain consistency in our tax system, the proposed amendments will also ensure that blood products, such as plasma expander, receive the same GST-HST treatment as that of blood derivatives.

The bill would also restore the tax free status of a group of drugs that are commonly used to treat a variety of conditions such as seizure control, anxiety and alcohol withdrawal.

Once again, the proposed amendment in Bill C-40 would ensure consistency with the government's policy criteria of ensuring that no sales tax applies throughout the production-distribution chain in a case of federally regulated drugs that can only be sold to a consumer under a prescription.

Another GST-HST area dealt with in the bill is agriculture. The Government of Canada recognizes the vital role that farmers play in our economy. To help those hard-working Canadians, the government has established a number of tax measures and other programs that support our farmers. For example, farmers do not need to pay the GST on a list of selected major items used exclusively by farmers. This includes pesticides, feed, all fertilizer and certain farm machinery and equipment. This so-called zero related list is intended to relieve farmers of possible cash flow problems that might arise between the terms of payment of tax on high price items and the receipt of an input tax credit.

The amendments in Bill C-40 would help ensure consistency between the GST-HST treatment of different farm products that can be purchased, imported and sold by farmers on a tax free basis.

Bill C-40 also deals with GST-HST as it relates to business arrangements. Canada's new government recognizes the important role played by small businesses in our economy. After all, they are the main job creators in Canada. Accordingly, we are committed to ensuring a favourable environment that allows these businesses to prosper and expand.

I mentioned at the outset that measures in the bill result from consultations with the tax and business community.

Time does not permit me to go into all the details but suffice it to say that Bill C-40 contains a number of provisions mostly intended to simplify or clarify the GST-HST administrative requirements for businesses in Canada.

Ensuring the efficient operation of our sales tax system is important to the government. To that end, Bill C-40 contains miscellaneous housekeeping changes to sales tax legislation that update provisions, correct ambiguities or ensure consistency. As well, the bill contains GST-HST administrative amendments concerning the discretionary power under the act for the Minister of National Revenue.

Finally, three Atlantic provinces have harmonized their sales tax system with that of the federal system. Bill C-40 contains rules related to the operation of the harmonized sales tax. One such example proposes to modify the existing new housing rebate for the provincial portion of the HST in the province of Nova Scotia. As announced by the Government of Nova Scotia, this rebate will be targeted to first time homebuyers and capped at a maximum of $1,500.

As I mentioned at the outset, Bill C-40 is comprised of three parts. I will now outline the details of the second part. This section contains measures relating to the taxation of wines, spirits and tobacco.

By way of first providing some background, a comprehensive review of the federal framework for the taxation of alcohol and tobacco products culminated in new excise tax legislation. This new framework modernizes the legislative provisions governing the taxation of spirits, wine and tobacco products and introduced an updated administrative and enforcement framework that reflects current industry practices.

The proposals contained in Bill C-40 implement a number of technical amendments to the excise framework. The amendments constitute refinements that would improve operation of the legislation and more accurately reflect industry and administrative practices.

The excise legislation has also been amended to implement a minor change to bring it into compliance with the specifications of the Framework Convention on Tobacco Control, an international treaty on tobacco control sponsored by the World Health Organization.

This brings me to part three of Bill C-40 which deals with proposed amendments to the air travellers security charge.

While time does not permit me to outline all of the proposed amendments, it is important to point out that the majority of these amendments come as a result of the consultation process with interested parties. I would, however, like to describe in more detail one of the proposed amendments. This is the one that deals with an exception for the air travellers security charge for charitable flights.

Immediately after the security charge was introduced, it was brought to the attention of the previous government that certain charities arrange free air transportation services for persons who otherwise cannot afford the cost of flights for medical care, as well as “flights of a lifetime” for physically, mentally or socially challenged children.

Canada's new government has responded to these concerns with this proposed legislation. Specifically, Bill C-40 proposes that the air travellers security charge will not be payable for air travel that is donated by an air carrier at no cost to a registered charity as long as the charity donates the air travel to an individual, also at no cost, in pursuit of the charitable purpose. This measure would help charities, like the Children's Wish Foundation of Canada which is dedicated to fulfilling a favourite wish for children afflicted with a high risk, life-threatening illness.

The measures contained in Bill C-40 that I have outlined today propose to refine, streamline and clarify the application of our sales tax system. At the same time, the bill reflects this new government's commitment to ensure that our tax system is efficient and, above all, fair.

I, therefore, urge hon. members to support the bill.