Debates of Oct. 20th, 1994

Tobacco Taxes

[Keith Martin, Reform, Esquimalt—Juan de Fuca, BC]

moved:

That this House urge the government to introduce legislation to restore the tax on tobacco to the level existing at January 1, 1994, and to apply the revenue from the tax on tobacco to health care.

Madam Speaker, I rise today with varying emotions. On one hand it saddens me to have to present this motion, but on the other hand, it infuriates me.

The motion I am bringing to the House today, a motion to restore tobacco taxes back to the level they were in January 1994 and apply this revenue to health care is something we should not need to be discussing here at all. Unfortunately, I have been pushed to do this, given the tax rollback that occurred on February 8, 1994.

The reason for my sadness is that this reduction enacted by the government poses the single greatest threat to the health care of Canadians in the last 50 years. No legislation will have a more

detrimental effect on the health of Canadians than anything that has gone on in recent history. This is particularly germane to the youth of the country.

This rollback will cause hundreds of thousands of people to take up smoking, half of whom will die of cigarette related illnesses such as pancreatic cancer, lung cancer and suffer from illnesses such as chronic obstructive lung disease, a disease that tears away at the very fibres of somebody's lungs so that if they were to walk from where I am to where you are, Madam Speaker, they would be severely short of breath and exhausted.

We are not even talking about the pain and suffering that is endured by the hidden victims of this, the families of the patients.

Already in the six months after the rollback the sales of cigarettes are up 41 per cent. The number of people smoking has also increased, especially among youth, going from 23 per cent to 27 per cent now. This trend is completely opposite to what was going on since 1982 when the tobacco taxes were raised and the cost increased.

I am chagrined that the standing committee of management has decided not to make this motion votable. This issue was highly contentious back in February. The vast majority of the public opposed it, virtually every health care professional vehemently opposed it, and yet the government brought it forward.

If this motion had been made votable it would have enabled members to truly represent the wishes of their constituents and vote for this motion which would have such a significant impact on the health and welfare of Canadians.

Before we look at the reasons for my motion and the constructive solutions that I pose, it is wise for us to look at the situation that existed in February 1994. Up until that time Canada was a leader in the fight against tobacco consumption. Interestingly enough, in 1979 virtually half of all 15 to 19 year olds smoked. However, because of the increase in taxes on cigarettes and the cost, by 1991 this percentage had fallen to 16 per cent, something of which Canada was justifiably very proud.

This rate of reduction was unparalleled in the world. The cause of this was cost.

It is estimated that had the proportion of tobacco users in Canada remained at 1979 levels, there would currently be three million more smokers in this country today. All statistics show this powerful relationship between price and consumption.

As a result of these tax increases, a price differential existed between Canada and the United States in the order of $48 a carton in Canada to $25 a carton in the United States. This was a double-edged sword and the smuggling of contraband cigarettes became rampant. Cigarettes were exported legally into the United States but were illegally brought back into Canada, primarily through the reserves in Quebec. Some contraband was brought in through other conduits, private cars and through the mail routes, but they were minimal compared to what was occurring on the three reserves in Quebec.

When analysing the smuggling, it is wise to divide up the situation between Quebec and the rest of the country. The smuggling that was occurring in Quebec had a profound effect on the lives of the people living there. Quebec represents 30 per cent of cigarette consumption, 70 per cent in the rest of the country. In Quebec one-third of the cigarettes that were purchased were purchased legally and two-thirds were purchased illegally, a complete reversal to what was occurring in the rest of the country.

Also at this time a tragedy was occurring. The smuggling was occurring right before the noses of our judiciary and our police forces. They were directed to look the other way. Why? To avoid confrontation, to avoid an Oka situation that nobody wanted. It is completely unfair to have a legal situation that looks at the law and enforces the law in one area and in another area does not.

The smuggling not only occurs in contraband cigarettes but also involves drugs, liquor and illegal weapons, all of which are occurring right now. Getting rid of the smuggling of tobacco does not get rid of the smuggling of other contraband.

Outside of Quebec and parts of southern Ontario the smuggling was minimal. This was the dilemma that we were in. How the government reacted was appalling and incurred the anguish of many Canadians and every health care professional in the country. The reaction had the primary effect of increasing legal consumption of cigarettes and decreasing illegal consumption of cigarettes, which was worthy, and eliminating the smuggling of contraband cigarettes which is to be applauded. However there is another way of doing this.

They also brought in to eliminate these channels the export tax of $8, a pledge to increase enforcement and education against smoking, all of which I applaud.

Now that we have analysed the situation, let us look at the impact that this tobacco rollback had on the financial cost and the human cost of Canadians.

Let us look at the financial cost first. The loss of revenue to the provincial governments is massive. Tax revenues on cigarettes are estimated to decrease from $5.5 billion to $2.3 billion per year, a loss of $3 billion outside of Quebec. In Quebec tax revenues will decrease from $774 million to $559 million per year, roughly a $210 million decrease. The total loss in revenue to the public purse is $3.2 billion. The loss to gross national product is very difficult to quantify but in my province of

British Columbia it is estimated that if the decreases go ahead that it will cost $150 million per year.

Let us look at the human cost, something impossible for us to quantify. For every 10 per cent decrease in cost the overall cost in consumption is between 4 and 9 per cent for the general public. In youth and teenagers the major factor in determining consumption is cost. It results in a 14 per cent increase in consumption for every 10 per cent decrease in cost.

Thus we can see that the tax rollback has had a devastating effect on the health of Canadians, particularly in that group which is most vulnerable, the youth.

As I said in my opening statement, this has already been borne out. By the most conservative of estimates a 50 per cent decrease in price will result in a national increase of 14 per cent in consumption but in teenagers this increase is 35 per cent which translates into 840,000 smokers, 175,000 of which are teenagers.

Let us look at a more realistic view. It is a more chilling view. A 50 per cent decrease in cost will result in a 45 per cent increase in consumption which is close to the 41 per cent I originally mentioned. This is going to add 1.8 million more smokers to the list, of which 250,000 are teenagers. This great effect of consumption will not be in the areas where smuggling was maximal but in areas where it will be minimal. Tragically for the people who live in Quebec and for those in southern Ontario, the effect has already been felt because they have been consuming cheap cigarettes for a while.

The World Health Organization recently estimated, after long study, that 50 per cent of all smokers will die as a result of tobacco consumption. It kills in at least 24 ways. Each smoker will get 20 years knocked off their life expectancy.

To put it in more graphic terms, it will result in many times more deaths than all the people who died in World War I and World War II combined.

The increase in health costs are staggering. Smokers currently cost the health care system approximately $9.5 billion a year. The increase in consumption will result in an increase in health care costs of between $1.3 and $3 billion every year. Our health care system does not need this at all, it is in desperate need of funding currently.

The combined increase in health care costs and loss of revenue is between $4 and $6 billion per year to the Canadian taxpayer. This does not include the costs we are going to suffer in our loss of gross national product.

The Minister of Health stated that she wants Canada to exchange and share her expertise with other countries in an effort to decrease smoking. Madam Speaker, I hope not. I hope we do not do this. What she wishes to share is an increase in human suffering, an increase in death, an increase in deficits. I hope no country in the world learns those lessons.

The minister also stated that she would do anything to save even one life from the results of tobacco consumption, and in particular the youth. If this is true, then I have some constructive solutions.

First, continue with the $8 export tax. It was a very worthy move. It has proven it works. We have an example. In February 1992 the then government instituted an export tax of $8 per carton, the same as was instituted by this government. In four weeks it decreased the smuggling of contraband cigarettes by 60 per cent. It is important to remember this figure.

Second, enforce the law. Do not allow the law to be applied differently in different areas. We have one law in this country. To apply it differently in different areas is a travesty of the law. We must all bear in mind that the smuggling conduits that exist involve other contraband, not only cigarettes. The only way to address the smuggling is to enforce the law. This is imperative.

Also, nobody speaks about the law-abiding citizens who live on the reserves. What about the effects the illegal activities through the smuggling of contraband has on their lives? Why should we apply the law any differently for them than we apply it to people outside the reserves?

These two efforts by themselves will have a dramatic impact on smuggling. As I said before, the export tax alone had a dramatic effect. There is no need to produce these tax rollbacks that are going to have such a devastating effect on the health of Canadians.

In order to decrease consumption, particularly among teenagers, it is imperative that we bring the cost of cigarettes back up to where it was. As I have said before, this is the number one factor in consumption. If we do what I said before, then we would be honestly imparting knowledge to other countries of which we can truly be proud.

The current rollback in taxes is a large blight on the country's health care system. The other aspect of my motion is to utilize the funds from the taxes to apply to a health care system, a system that is in critical shape and needs emergency care.

Our current health care system is caught between a rock and a hard place. On the one hand we have an increasing demand from an aging population and more expensive technologies, on the other hand we have a system of decreasing funding and squeezing an increasing deficit. If we manage to go ahead and apply this money to our health care system we would be able to give it

an injection of capital that the health care of the people of this country desperately need. Right now the provinces are forced to engage in the deplorable concept of rationing. They are rationing essential health care services-bypass surgery, hip operations, the closure of hospital beds. All these things are occurring and are compromising the health care of Canadians. This past week the head of the Heart Institute here in Ottawa said that the waiting time for bypass surgery is now five months.

If one needs a new hip in this country and are in severe pain, that category of people who are in severe pain, 40 per cent of those individuals will wait at least 13 months to get their hip operation after spending that time in severe pain, a travesty in a country that is as affluent as ours.

Another benefit of raising the taxes on cigarettes is that the moneys can be applied to a public anti-smoking campaign. I advise this government that the greatest impact that it will have on youth is between applying those moneys to an anti-smoking campaign for them between the ages of eight and seventeen, the age at which 90 per cent of the individuals who smoke take up this habit, a habit that is the second most addictive one that we know, more addictive than heroine.

To that end I would like to briefly give members a testimonial from a 13-year old girl who wrote a letter that was actually published in Newsweek :

Right now I am 13 and I am going into ninth grade and started smoking in the sixth. The first cigarette that I ever had was in fifth grade.

I have tried to quit, but it is very hard when all my friends smoke, too.

Some people think that Joe Camel is directed towards teenagers.

She is referring to advertisements.

I do not think so. If they are trying to get it directed towards teenagers, they are doing a pretty bad job. I am sorry, but a goofy looking camel who smokes his brains out does not quite turn me on. Actually, I have never seen an ad that made me want to smoke a particular brand. All those cigarette ads are practically the same.

She is 13. On health she says:

Since I have started smoking I can hardly run around the block without getting out of breath. A lot of my friends have gotten asthma. My mom and dad quit smoking about 14 years ago, and my mom now has cancer and my dad has had three heart attacks. My grandma quit eight years ago, and she has emphysema. Not only that-my two grandfathers died from the results of smoking. After all these problems, you would think I would know better than to smoke. But I guess I do not.

I cannot tell that I smell when I smoke, but my parents and other can. I remember one time, before I smoked, I left my jacket at my friend Brynn's House. Her whole family smoked. I got the jacket back around five months later, and I had to throw it away because it smelled like an ashtray.

It is funny, but I think it is easier to give up drugs than cigarettes.

I really hate the thought of quitting. But yet, I do not want to do anything that might make cigarettes more expensive to buy. You see, I am really hooked on cigarettes.

I would suggest that the government does not emphasize its advertisements on showing a group of yuppy Rosedale teenagers playing basketball and turning into cigarettes. Rather, we have to face the facts that teenagers believe they are immortal. There is another way of dealing with this. It will not work to tell them that they are going to die of lung cancer or mouth cancer 40 years from now because they believe they are immortal.

I feel it would be far more potent to threaten their sense of narcissism. Tell them that their breath smells foul. Tell them that their hair smells foul and tell them that their skin will become pallid.

In conclusion, I hope that this government which promised to bring back the taxes to where they were and has not made any efforts whatsoever to do this will take it in its heart to look at the facts.

Smuggling is under control. It can continue to be under control with the export tax and enforcement. It needs to apply those taxes to the health care and welfare of Canadians. One does not need to keep a tax rollback and compromise the health and welfare of the people of this country and sacrifice smuggling as a result. One can do both without sacrificing the health care of Canadians.

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

Madam Speaker, considering the success of the government's anti-smuggling policy, I would never have expected to hear comments like those the hon. member made today. I admit-in fact, I am proud of it-that I was one of those who pushed for lower tobacco taxes.

As you know, I have the honour and the privilege of representing the riding of Glengarry-Prescott-Russell and the Akwesasne Native community. It is indeed an honour and a privilege as I have great respect for my constituents living on the reserve.

I am arguing today against raising the taxes on tobacco, and not because I want cheap cigarettes for myself or my family. Three years ago, I lost my father to a type of cancer believed to be caused by smoking. I do not smoke and smoking is prohibited in my offices. Smoking was prohibited in my offices before it was banned elsewhere on Parliament Hill. That is not the point.

Here in the House of Commons, I raised questions on numerous occasions about the cigarette smuggling problem. I remember that, in June 1993, I asked then Solicitor General Doug

Lewis-I think it was the last question raised in the House before it adjourned prior to the election-to do something about this problem which was almost out of control in our region. The problem was going from bad to worse.

This is the question that I raised, which I will repeat for you and for all my colleagues: "Almost every night machine gun fire is heard and speedboats are running the rivers at full speed in the dark with their lights turned off pursuing criminal activity. I am not describing life in Sarajevo or Mogadishu. I am describing the practice of tobacco smuggling on the St. Lawrence River near Glengarry in my riding. I want to ask a question to the Solicitor General on the last day of this Parliament. What precisely does the government intend to do to stop this illegal activity which endangers the lives and safety of my constituents?"

That was the last question raised, not the first one. For years I had been asking the government to take action to put a stop to this illegal activity. Nothing was done at the time. The government of the day let the situation deteriorate to the point where in Quebec and in eastern Ontario-the problem did not only exist in Quebec; in fact, most of the Akwesasne reserve is located in Ontario-70 to 75 per cent of cigarettes on the market were smuggled. The level of illegal activity was such that it endangered the lives of my constituents. In fact, some of them were killed. The member opposite talks about saving lives.

I would like to read a little story written by Claude McIntosh, the associate editor of the Standard-Freeholder of Cornwall, from Saturday, July 3, 1993. He was describing what he referred to as the dark side of cigarette smuggling. He recalls a few incidents. Here are a few I would like to share:

A Cornwall welfare recipient switched to a supplier selling cartons $1 cheaper than his previous supplier. His old supplier fearful of losing other accounts paid him a visit. During the conversation he had his arm broken in an accident. He went back to the previous supplier. Welfare recipients are sought out because they are one, more willing to take the chance and two, available day and night.

Here is another incident. A teacher ordered a disruptive student out of the classroom. On his way out the student reached into his pocket, pulled out a wad of bills and sneered: "I do not need your education". The student works as a runner in one of the cigarette smuggling cartels with potential to earn more in six months than the teacher earns in one year. He earns bonuses for recruiting other students.

[Darrel Stinson, Reform, Okanagan—Shuswap, BC]

Did you report him?

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

If the member had been listening, paying a bit of attention, I was reading from a newspaper article.

[Hugh Hanrahan, Reform, Edmonton Strathcona, AB]

Why did anybody not report him?

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

The member across who just made this remark should know this is no laughing matter. We had all the police officers we could round up trying to enforce the law on the St. Lawrence River in a forested area at night.

This business got so lucrative during one period that they were actually crossing shipments into Canada by helicopter. It got to be that bad. We have a border between Canada and the United States four thousand miles long. One day I was raising this problem with members across who asked why the military was not brought in. Is it the position of the Reform Party, or was it at that time, to have a militarized border four thousand miles long between Canada and the United States?

I am told by people in the know that drug smugglers and others have got out of that business. There was a lot more money to be made in cigarettes. That is where the real money was. That is the situation we had.

I have a report prepared by a forensic and investigative accounting firm known as Lindquist Avey Macdonald Baskerville. That accounting firm had on its staff none other than Rod Stamler, former deputy commissioner of the RCMP, no fool by anyone's account. He described to us how severe this problem was. We had the commissioner of the RCMP give a letter to the Prime Minister which was tabled in this House that said the way to control the crime was reduced to that and only that solution.

I had been saying it to the previous government for years. The previous government would not listen. This Prime Minister, within weeks of seeing the danger to the lives of Canadians and the damage it was doing to Canadian society to see this kind of disrespect for law, took action. I congratulate him.

[Ted White, Reform, North Vancouver, BC]

Now it is going to kill teenagers.

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

If I get nothing else from my riding in all the years I will be an MP, and I hope that is another long time, I will be happy because at least I was able to do this. At least I was able to do the right thing.

[Ted White, Reform, North Vancouver, BC]

You transferred the problem to teenagers.

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

I did not transfer anything or pass off anything to anyone else.

The members across say they stand for law and order yet they know and the police have told us that was the only possible action we could have taken, and it was the right action.

They say they are against increasing taxes. The leader of the Reform Party stood here yesterday and asked for a commitment not to increase taxes. Today in the dark hours of the day when few reporters are listening we have a private member's bill from a member of the same caucus advocating an increase in taxes.

[Herb Grubel, Reform, Capilano—Howe Sound, BC]

That is a cheap shot.

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

It is not a cheap shot.

[Garry Breitkreuz, Reform, Yorkton—Melville, SK]

It is a cheap shot.

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

I do not care if the members think it is cheap or not, this is an important issue. It affects the lives and safety of many Canadians, including my constituents.

I want to say one final thing in the moment or two that is left about respect for law. If it is cheap cigarettes that we wanted to keep off the market, cheap cigarettes were there. They were there and they were sold in schools. It was easier to get illegal cigarettes than legal ones with the contraband that we had. That was the reality.

Finally, what kind of message were we giving to young people in Canada when we were tolerating in society a situation in which the smuggler in the school drove the Corvette while the kids who were obeying the law were walking? That was the situation we had. That was the kind of crime we had and $2 billion a year was made by the underworld in this country. That is what this government was able to stop by its action. I am proud of what it did. Consumption of cigarettes has not increased. On August 18, 1994 the Minister of Health tabled a report. It said quite clearly that smoking had remained flat overall and had not increased. That is the truth. That is the reality. The action taken was the right and proper one.

[André Caron, Bloc, Jonquière, QC]

Madam Speaker, I listened with interest to the hon. member for Esquimalt-Juan de Fuca, who argued his case so eloquently. I must say that the question of restoring the tax on tobacco to the level that existed on January 1, 1994 is a difficult subject. I will consider two aspects of this question.

First of all, I would like to recall, as did the hon. member for Glengarry-Prescott-Russell, the situation that existed when the tax was abolished. The hon. member for Esquimalt-Juan de Fuca mentioned the fact that the price of a carton of cigarettes in Canada was up to $48, twenty dollars more than in the United States. The result was a brisk trade in contraband cigarettes. The hon. member for Glengarry-Prescott-Russell referred to the impact of cigarette smuggling in Eastern Ontario and the Montreal region.

However, its impact was also felt in regions assumed to be safe, including my own region, Saguenay-Lac-Saint-Jean, which is 300 kilometres from the U.S. border. We had never had a problem with cigarette smuggling.

During the last six months or year the tax was in effect, we started seeing contraband cigarettes in the region. At meetings I saw honest people take out packs of cigarettes marked with the insignia of the U.S. surgeon general, which meant they were contraband U.S. cigarettes. I saw this at meetings of normally law-abiding citizens who do not deal with smuggling rings of any kind.

These people took out their packs of cigarettes without a care in the world and thought nothing of it. It had reached the point where honest citizens did not realize they were breaking the law, because as I see it, that is what they were doing. There are taxes which are levied to provide services. At the time we had a situation where honest citizens felt they could break the law. It was a very bad situation.

In fact, a cigarette smuggler in my region was interviewed. Of course, it was all anonymous. You only saw his profile, and you could hardly recognize him. This guy boasted that he made one million dollars in eight months by hauling truck-load after truck-load of cigarettes into an area 300 kilometres from the border. The situation was truly disgraceful.

But even worse, while this cigarette smuggling network was spreading to my own riding, alcohol smuggling networks, clothes smuggling networks, even jewellery smuggling networks were sprouting. In other words, a number of products which, in the past, had never been smuggled, were becoming fair game for smugglers, and this, in an area like mine which is considered too far from the borders and where smuggling is rather unusual.

I think it was time that Canada took steps to curb this smuggling.

Of course my colleague from Glengarry-Prescott-Russell was instrumental in this, but you will recall that, for weeks, the Bloc Quebecois had been asking the government to roll back taxes on cigarettes because we believed that it was the only way to go. We had tried to bring this plague under control. My colleague described very accurately all the efforts which were made. We had reached the point where we were thinking of bringing in the army. When you find yourself in this kind of situation, you must realize that you have made a mistake, that taxes are too high, that it is too enticing, too tempting for everybody.

As was normal under these circumstances, we lowered taxes on tobacco. And in so doing, we removed much of the cancer that smuggling is.

At the same time, we perhaps avoided another cancer, the one that occurs when citizens start to think that they do not have to follow the rules and to abide by the tax laws. If one can stop paying taxes on tobacco and get away with it, why would one pay taxes on clothing, gas or anything else? Measures had to be taken, I think. And the measures that were taken were adequate.

Of course, this did not solve the tobacco problem. As my colleague for Esquimalt-Juan de Fuca rightly said, this is a huge problem in our society. To me, tobacco is a hard drug. I have friends who have tried to quit smoking but without success.

It probably is as difficult as getting rid of other drugs that are illegal in Canada.

Nevertheless, we came to a point where we had to choose between two evils. I think that, under the circumstances, we temporarily chose the lesser of the two. It does not mean that taxes on cigarettes will be abolished forever. It does not mean that they will not be raised some time in the future-and I think that the Minister of Finance will keep an eye on the situation. I believe that taxes will be raised again, but they will be kept within reasonable limits so that the high price of cigarettes does not become, for some people, an illegal means of making a quick buck.

That does not prevent us, however, from paying particular attention to the growing problem of cigarette smoking.

Like the hon. member, I have also seen young men and women of 15, 16 or 17-I taught in high schools for years and I was stunned to see young 16-and 17-year olds develop a smoking habit. In spite of all the information campaigns and all the pressing requests made, these young people started or continued to smoke. Why? Is it simply a matter of being informed? Let us just say that I am less affirmative than the hon. member; I do not know what the solution is. I do not know exactly what to do to keep our young people from smoking.

I know the situation is very serious and the description made by the member was truly frightening. He may be right in a sense, but then should we prohibit cigarette smoking the same as cannabis, marijuana, cocaine and all these other drugs? I do not think this is possible in a society like ours. I think we will have to compromise; we will have to pursue our efforts to create an awareness and convince young people not to develop this habit. It is important to do so.

I regret to say that I will not support this motion. I believe it is motivated by good intentions. However, under the circumstances and given the situation that prevailed in recent years, it was necessary to greatly reduce taxes on tobacco.

[Garry Breitkreuz, Reform, Yorkton—Melville, SK]

Madam Speaker, it gives me great pleasure to speak in favour of this motion tonight, a motion that was brought forward by my hon. friend and colleague from Esquimalt-Juan de Fuca.

Members of this House will remember our debates on Bill C-11 and Bill C-32 when we warned the government of the serious health consequences and the human suffering this tax reduction on cigarettes would cost. This motion would correct the government's major mistake and would restore that tax on tobacco to the level existing as of January 1 of this year.

Our concerns about the government's tax reduction on cigarettes were confirmed when the Parliamentary Secretary to the Minister of Health appeared before the Standing Committee on Finance on June 7 and advised that the government's goal was "to reduce the demand for tobacco, the number one cause of preventable death in Canada". She went on to say: "The government fully recognized that the action plan to combat smuggling and the tax measures associated with it would pose health risks". That is from a government member, despite what I hear from across the floor today.

It is inconceivable to me and most Reformers how government can rationalize its goal of preventing death with its actions which will increase smoking and cause many hundreds of deaths.

This government does not seem to have the courage or the intestinal fortitude to do what is right. We were opposed to the tax reduction on cigarettes and tobacco products because it will increase smoking and that cannot be denied, particularly among young people. As a result it will increase health costs.

Reformers find it amazing that the government caved in to the criminal element of society so quickly. It sends the wrong signal to those who would break the law. In effect the Liberal government said: "If you defy the law we will change the law rather than enforce it".

Reformers find it hard to believe that the government did not take a more reasonable approach and impose an effective export tax and increase enforcement in the areas where the majority of smuggling was occurring.

Even the commissioner of the RCMP confirmed in February that 70 per cent of the contraband tobacco was coming through the three Mohawk reserves between Cornwall and Montreal. Therefore all this we hear about big borders is simply a smoke-screen. If that was where the problem was, why not have the courage to enforce the laws of Canada? What are we doing now when the criminal element redirects its smuggling activities to alcohol, drugs and guns? Are we going to simply change the law on that as well? One bad decision leads to more problems and not solutions. The government has not solved a thing by what it has done.

The main point I would like to make today is in regard to the government's disregard for the health of the Canadian people, particularly young people. When the government first introduced its national action campaign to combat smuggling in February, we asked the government to tell us what the increased health costs would be. How many people will start smoking as a result of the tax reduction? How many Canadians will become addicted? How many people will get lung cancer and emphysema, heart disease and strokes? How many people will suffer or

die as a result of the government's tax reduction? How much will it cost the Canadian taxpayer? The government implemented Bill C-32 despite not having the answers to these very important questions.

While the Parliamentary Secretary to the Minister of Health has made it clear that the tax reduction would pose increased health risks, these risks, the costs and the implications for government and the human suffering have not been quantified. Months have gone by with no action by the Liberals.

The Canadian Cancer Society asked the Standing Committee on Finance to complete a thorough evaluation of the health costs and implications of smoking in Canada because such an evaluation has not been done since 1986. Reformers find this appalling.

During debate on Bill C-32 the members of the finance committee listened politely to witness after witness warning them of the serious health consequences. The committee ignored the dozens of excellent recommendations and passed the clause by clause study of Bill C-32 in less than 15 seconds. The clause by clause review of a 62 page bill was done in less than 15 seconds. This is democracy? Is it any wonder that Reformers are pushing for a triple E Senate where we can give some serious and thoughtful sober second thought to the reasoned amendments that we proposed and debated very intelligently?

What will the increased health costs be? The Canadian Cancer Society provided the Standing Committee on Finance with some of the estimates prepared by Professor Robert Allen from the department of economics at Harvard University.

Using Professor Allen's most conservative estimates, he predicted that national cigarette consumption would rise by 14 per cent among adults and 35 per cent among young people. Now we find those estimates were very conservative. Actual increases have been 41 per cent, as has been mentioned by my colleague. The tax reduction implemented by the Liberals will increase the total number of tobacco users in Canada by 840,000. Of this number 175,000 would be teenagers. At this rate Professor Allen predicted health costs would rise in the long term by $1.33 billion per year. That was the most conservative estimate.

Every piece of literature that comes out on this shows there is an increase. How can the government close its eyes and be blind to what is happening? These are Professor Allen's most conservative estimates, as I have said. It could be even higher. It could be as high as 1.89 million new smokers and of these 245,000 would be young people. That would mean $3 billion in increased health care costs, $3 billion, three thousand millions.

Still the government fails to even tell Canadians what the impact will be. It refuses to even conduct its own evaluation of health costs and implications, ignoring the health of Canadians. Liberals love to do studies; they love to have commissions. They like to have all of these consultants tell them things, but when it comes to this issue they close their ears.

During our debate on Bill C-32 we asked the government for a timetable showing when tobacco taxes will start to go up again. None was given. The government acknowledged the dramatic effect that high taxes have on tobacco consumption. It acknowledged that the health promotion surtax will end in three years, but it still has not told Canadians what it plans to do at the end of three years.

During the previous debate we asked the government to make a commitment to raise prices to their level prior to February 8, 1994 at the end of the three years when the health promotion surtax is renewed. Reformers proposed such an amendment, but we were told that only the minister could make such an amendment. The minister chose to ignore this reasonable proposal.

If the government will not support my hon. friend's motion, Reformers respectfully request that the minister introduce a new bill clearly telling Canadians when tobacco taxes will be increased. For the sake of the health of all Canadians, for the sake of all those young people who will take up smoking as a direct result of government's actions, will the government tell Canadians today this is not a permanent tax reduction? Will the government tell Canadians that their health is of more concern to it than the interests of a few smugglers in the tobacco industry?

Government ministers are always accusing us of never telling them what to do. They yell and they shout at us like we do not have a plan, but our blue book has been around a lot longer than their red book.

[The Acting Speaker (Mrs. Maheu)]

The hon. member's time has expired. The hon. member for Essex-Windsor and Parliamentary Secretary to the Minister of National Revenue.

[Susan Whelan, Liberal, Parliamentary Secretary to Minister of National Revenue]

Madam Speaker, I must rise today to oppose Motion No. 288 before us. While I appreciate the concern for Canadian health that motivates the hon. member, I cannot agree this is the time for the backward steps he is proposing. It is quite the opposite.

I feel there are very good reasons why the federal government should maintain the current level of federal tobacco taxes. Just as important, the government should also adhere to the general practice of avoiding earmarked taxes. Let me explain why I believe this to be true.

Hon. members will recall that just nine months ago we were besieged by the black market sale of tax free exports of Canadian cigarettes which were being smuggled back into Canada. Indeed, contraband tobacco products which often sold for less than half the price of legal sales were accounting for an estimated 40 per cent share of Canada's $12.4 billion tobacco

market. The country was confronted with a very serious problem.

Tobacco smuggling was fostering disrespect for our laws and creating serious law enforcement problems. Organized crime networks controlled 95 per cent of the tobacco smuggling. Their tobacco profits helped to fund other illegal activities, including drugs, alcohol and firearms smuggling. Cheap contraband cigarettes were readily available to young Canadians and the problems of smuggling and the attitude of too many Canadians that avoiding tobacco taxes was a sort of game may well have added to the tobacco's appeal to impressionable youngsters.

The consequences were serious. It was undermining the government's health policy objective to reduce tobacco consumption, particularly among youth. As well, many law-abiding merchants were being pushed out of business by the underground sales.

I want to inform the House that the federal and provincial governments were also being deprived of the tobacco tax revenues, $1 billion for each level of government in 1993, that helped to pay for government services and programs that Canadians expect.

To combat this illegal activity, on February 8, 1994 the Prime Minister introduced the action plan on smuggling. That plan includes an enforcement crackdown, reduced taxes on tobacco products, measures affecting tobacco manufacturers and a health promotion surtax on tobacco manufacturers' profits to provide significant funding for health related anti-smoking initiatives.

The enforcement crackdown entails increased RCMP and customs personnel and equipment dedicated to fighting smuggling. Their efforts are particularly aimed at stopping the flow of contraband at key spots along the Canada-U.S. border.

Federal excise taxes have also been reduced by $5 per carton. Up to a maximum federal reduction of $10 we offered to match on a dollar for dollar basis provincial reductions above $5. Most provinces east of Manitoba have reduced their tobacco taxes.

The action plan also imposed an export tax of $8 per carton on Canadian tobacco exports. This reflected the fact that 80 per cent of the cigarettes sold on the black market were Canadian cigarettes manufactured for export.

In addition, the federal tax rate on corporate profits for manufacturing and processing tobacco products was increased by 40 per cent. The revenue generated by this surtax will fund Canada's largest ever anti-smoking campaign.

The government has also undertaken to ban the manufacture of kiddie packs which were targeted at young buyers. It also moved to increase the legal age for purchasing cigarettes, increased fines for selling tobacco to minors, restricted vending machine locations and made health warnings on tobacco packaging more effective.

A majority of Canadians believe the action plan is the right approach to address tobacco smuggling. Their belief is well-founded. Our integrated approach is definitely working.

By seriously reducing profit margins it is eradicating both the supply of and demand for contraband tobacco products. It has particularly caused serious disruption to the operation of organized smuggling networks. It has substantially restored the domestic tax paid market for tobacco products.

However, I want the House to know that this initial success does not provide unconditional support for a tax increase that will bring back previous levels. The fact is some amount of tobacco smuggling continues in central and eastern Canada. Moreover the RCMP reports that smugglers have developed new supply and distribution lines to the western provinces where governments have not reduced tobacco taxes.

I too would like to see tobacco taxes increased but first we must win the battle against smuggling. To that end, tax measures support enforcement efforts and enforcement efforts take time to achieve maximum effectiveness. That is why this government remains committed to strong action to address smuggling on a comprehensive national basis, strong action which includes maintaining federal tobacco taxes at current levels.

Motion No. 288 also calls for the redirection of tax revenues to specifically fund health care costs. The government is not in favour of such action. All members will know that tobacco tax revenues are an important part of government tax collections. In keeping with our general practice of avoiding earmarked taxes, these revenues are used to fund programs and services across many areas of responsibility. This ensures that the government's flexibility to respond to changing needs and conditions is not constrained. It also protects over or underfunding of the selected area.

I should note however that the use of proceeds from the health promotion surtax is an exception to this general rule. In particular this targeted approach was undertaken on the basis of the measure's temporary nature and specific intent to ensure that manufacturers do not derive any benefit from the tobacco tax reductions.

I share the concerns of all members with respect to low tobacco taxes. I know our government has no interest or intent in encouraging tobacco use. Nevertheless, this is not the appropri-

ate time to reintroduce higher tobacco taxes, nor should tobacco taxes be directed solely to health care. Hence, I urge this House to dismiss Motion No. 288.

[The Acting Speaker (Mrs. Maheu)]

There are two minutes left.

[Margaret Bridgman, Reform, Surrey North, BC]

Madam Speaker, in two minutes I will have to pick something out of my 10 minute speech. I want to thank my colleague from Esquimalt-Juan de Fuca for bringing this topic back to the House for debate.

I want to reiterate what one of my colleagues said previously in relation to the fact that the main issue to address is that we are dancing to someone else's tune. This is the Government of Canada. We make the laws here and because we have some difficulty in enforcing those laws it seems the best way to resolve that issue is to change the laws instead of going out and enforcing the issue.

I would also like to comment on the cost. We all know that if you cannot afford to participate or you cannot afford to buy something, then you do not. That is what the majority of people do. However, what we have done here is we have actually enabled more people to buy and consume cigarettes. It does not matter whether they are young, old or middle aged, the consumption of cigarettes will indeed go up.

We may not feel that effect today from the point of view of how it relates or translates into other services, but we certainly will reap its benefits shall we say from the point of view of taxing our health care services in the future. Here we are debating our social programs and their survival because of our debt and we are implementing an opportunity for people to go out and abuse their health which we will have to address at some time in the future.

[The Acting Speaker (Mrs. Maheu)]

I am sorry, the time provided for the consideration of Private Members' Business has now expired. Pursuant to Standing Order 96(1), the order is dropped from the Order Paper.

A motion to adjourn the House under Standing Order 38 deemed to have been moved.

[Jim Gouk, Reform, Kootenay West—Revelstoke, BC]

Madam Speaker, my question to the Minister of Transport was a result of a proposal I sent to the minister on October 7.

In that proposal I pointed out that Bill C-22 does not protect Canadians as the minister would have everyone believe. What it does do is strip all Canadians of the right of due process by pronouncing a group of Canadians guilty until proven innocent and then proceeds to remove their right to prove their own innocence.

In his response to my question the minister suggests I want this to go to court to protect my friends. I point out to the minister as I did in my proposal to him that of the group of companies that make up the Pearson Development Corporation only 18.5 per cent have close known ties to the former Tory government.

In actual fact there are far more Liberals than Tories involved in the deal and I have never heard him accuse me of being in this to help the Liberals.

My interest in this matter goes far beyond the subject of the Pearson contract. It goes to a matter of basic justice. If the government can cancel any contract without regard for due process, no one is safe.

The Pearson Development Corporation had a contract with the government. The minister quotes me as stating that I see nothing wrong with the deal. Frankly, I have not found anything wrong. If there is something wrong with the deal, I do not know what it is.

Interestingly enough, according to a secret government document supplied to Robert Nixon, the government also thinks that it is a good deal. Quoting from that secret document, airline rents are in line with other airports undertaking major capital investments. Crown return is considerably better than the crown construction option. The Pearson Development Corporation return on investment is endorsed as a reasonable rate of return by both the Department of Finance and an independent financial consultant.

The parliamentary secretary to the minister stated on October 17 that the government was waiting to get the national airport's program all set up so that it could go ahead and start spending the $740 million that the Pearson investors were going to spend.

Maybe he should consult with the Minister of Finance to find out where their cash strapped government is going to get another three-quarters of a billion dollars. He should also read his own government's secret document that says that this is not a good idea.

If the government chooses to cancel it, that is its prerogative. However, when a contract is cancelled there are rules to govern this. The government chose to ignore those rules.

To put this in an analogy of a ball game, imagine a game, top of the ninth. Canadian taxpayers are ahead four-nothing against the government. The government says it is pulling the ump and putting in a person of its own. It extends the game until it

announces it is over, changes the rules so it can get ahead and then announces that the game is finished.

The Minister of Transport has tried this group of Canadian investors on the basis of accusation alone. He has been the judge, jury and financial executioner. If there is any evidence of illegal activity then and only then are the contractors the ones who have broken the rules.

So far the government has not brought forth any such evidence. A judicial inquiry would help clear the air and assure that justice is done. That was my proposal to the minister.

My question was will the minister agree that the Pearson problem is not going to go away and that the proposal I sent him is the only fair and logical way to bring this matter to a just conclusion. The minister did not answer that question. Therefore I ask it again and I await a response.

[Dennis Mills, Liberal, Parliamentary Secretary to Minister of Industry]

Madam Speaker, I am very surprised but not unhappy that the member for Kootenay West-Revelstoke keeps giving us the opportunity to explain how far from reality the member's proposals are.

Let us talk about his October 7 letter to the Minister of Transport. In his opening paragraph, he states that all Canadians will be stripped of their rights to due process by this statute.

The Ministers of Transport and Justice have been scrupulous in ensuring that this legislation is specific to one particular deal, the Pearson international deal.

It has only been one year since the people of the Toronto region expressed their opinion on this deal quite vocally and ultimately quite democratically. They do not want to be tied to this deal. I believe they know very well that their rights are being protected by the government.

While we are truly looking to limit access to the courts by the developers, in case the member has not noticed the consortium is now in court. Even the majority in the other place agreed that members of the consortium could go to court after passage of Bill C-22 if they refused to believe we have the constitutional right to take back Pearson airport in the public interest of Canadians.

I cannot let the hon. member get away with saying they are not asking for any money in their present court case. They are asking for third party indemnity. That means they want to be covered for a lot of money. It is that simple.

The Minister of Transport has most ably presented the costs that the members of the consortium want by way of compensation. They have already submitted claims for lost profits for over $400 million. Those were the claims they submitted when we only asked them to provide their actual expenses. I cannot wait to see what they submit when they want to present their final bills.

I am absolutely amazed that the Reform Party member continues to persist in making this his issue when he knows that the people of Canada support the government on it.

[The Acting Speaker (Mrs. Maheu)]

Pursuant to Standing Order 38(5) the motion to adjourn the House is now deemed to have been adopted. Accordingly the House stands adjourned until tomorrow at 10 a.m. pursuant to Standing Order 24(1).

(The House adjourned at 6.37 p.m.)