Debates of Feb. 22nd, 1994

Excise Act

[Herb Gray, Liberal, Windsor West, ON]

Mr. Speaker, with your permission I would like to make a brief response to the comments by the hon. member.

We should remind ourselves that this problem did not begin in the three months or so that this government has been in office. We are talking about a problem that built up for years without this kind of needed action by the previous Conservative government.

This government, along with its famous red book of plans for creating jobs and developing the economy, also has had to deal with problems that are surfacing that built up under the previous government. We should remember this in recognizing that this government has been willing to take action to deal with immediate needs and concerns like the smuggling problem.

Furthermore, we want to make sure that we do this in a balanced way. I am glad that the hon. member has pointed out for society the dangers of this problem we are dealing with. That is why our program has all these components. Yes, it has a tougher enforcement component. Yes, it has a taxation component but it also has a very important health related and anti-smoking component.

I look forward to the comments of the Minister of Health later in the debate to build on what this is all about. I also look forward to the committee study where we can provide further detailed information.

[Madeleine Dalphond-Guiral, Bloc, Laval Centre, QC]

Mr. Speaker, last February 10, the Minister of National Revenue tabled a bill to significantly amend three other acts of Parliament, namely: the Excise Act, the Customs Act and the Tobacco Sales to Young Persons Act.

The purpose of the bill is to more or less balance, through various pieces of legislation, the government strategy against smuggling, which was announced in this House by the Prime Minister, on February 8, 1994.

Several people working in the health field expressed concern regarding this national plan to fight smuggling, because of the adverse effects it could have on the health of Canadians and Quebecers. These people, including practitioners and health care specialists, fear an upsurge in tobacco use in general, but more important increased consumption among young people.

Even though the federal government's efforts to eliminate or at least better restrict access to tobacco products for young people may be commendable, the fact is that the situation is serious.

The government is proposing amendments which, it says, will reinforce some provisions contained in Bill C-113, which was passed on March 25, 1993. As you know, this legislation prohibits the sale of cigarettes to persons under 18 years of age.

Just what are those provisions? Part III of Bill C-11 contains three amendments to the Tobacco Sales to Young Persons Act. Under section 10 of the bill, the long title of the Tobacco Sales to Young Persons Act is replaced by the following: an act to restrict access to tobacco by young persons. According to the government, this new title implicitly expands the scope of the act and reflects much more accurately the new approach of restricting instead of prohibiting.

Clause 11 adds three new elements to Bill C-111. Clause 7.1 prohibits the sale of packages containing less than 20 cigarettes. As of May 1, 1994 producing or selling what are commonly called kiddie packages, that is packages containing 10 or 15 cigarettes, will be prohibited. Those packages, which are usually sold at a good price, are extremely appealing for young people. Their relatively low cost is also an important incentive. It is easy to start smoking. You never know, it could be fun.

Clause 7.3 prohibits the importation into Canada of any tobacco product by a person under the age of eighteen, whether for personal consumption or for someone else.

In recent weeks, we have looked at the legal and tax aspects of the question, and particularly at the thorny issue of cigarette smuggling. In the process, we also put the health and well-being of Canadians and Quebecers on the back burner.

According to Dr. Richard Lessard, who is the Director of Public Health for Health and Social Services, Montreal Centre branch, it would be a mistake to limit the debate to legal and tax considerations. A major issue takes precedence over tobacco smuggling, and that is the health of Canadians and Quebecers.

Dr. Lessard himself said that tobacco consumption is currently linked to 40 per cent of deaths due to cardiovascular complications-to 87 per cent of deaths due to lung cancer, and to 80 per cent of respiratory diseases. Low birth weight is twice as common among babies whose mothers smoke than among those whose mothers do not smoke. And currently, the increase in smoking is higher among young women.

Young Canadians start smoking between the age of 11 and 15. At fifteen years of age, 22 per cent of males and almost 30 per cent of females are smoking. Also, 65 per cent of these teenagers are paying for their cigarettes out of their own pockets. Any public policy, whether it is non inaction in fighting smuggling or lowering taxes on tobacco, if not linked to aggressive preventive measures, does encourage these vulnerable teenagers to start smoking.

According to Dr. Lessard, tobacco-related health problems cost $2.5 billion to Quebec and $9.5 billion to Canada, even though, before the current crisis, tobacco consumption had decreased by 40 per cent since

Several health officials have criticized the decrease in sale prices of cigarettes following the tax reduction announced by the government. They think it will only encourage the most vulnerable groups, teenagers and young women, to start smoking.

My colleague, the hon. member for Lévis, mentioned and rightly so the devastating effect of smoking among our young. We think educational measures must accompany the legislation which was announced. We must develop new programs and support the current ones by investing in mass advertising.

We must also make businesspeople aware of their social responsibility. Bill C-111 goes ahead by implementing measures concerning tobacco sales. For example, the stamp prohibiting the sale of tobacco products to minors is a step in the right direction.

We also need to make some long-term investments in an anti-smoking campaign. I am pleased to report that the Quebec government has undertaken a major anti-smoking campaign to urge young smokers to change attitudes. Several governments in Canada have decided to follow suit.

Bill C-11 includes provisions concerning the Excise Act and the Customs Act which confer new powers on the minister and various police forces in Canada and in Quebec responsible for enforcing the law throughout the country. According to the government, these provisions will provide the new legal tools which are needed to achieve better enforcement of the law and to continue the fight against smuggling.

One interesting provision of this bill is found in clause 9 which says that the minister may authorize an officer to sell or destroy the seized goods.

It goes without saying that the government will never proceed, I am convinced, with the sale of seized tobacco products. This is commonly done in some American States but it would be out of place in this country given the current situation. However, the equipment and facilities used to carry or stock these goods could, of course, be sold. This could become an interesting source of funds to be reinvested in anti-smuggling programs or in a public awareness campaign.

In order to be successful in its fight against the harmful effect of tobacco, the government must maintain the National Strategy to Reduce Tobacco Use. As its title says, the main objective of this action plan, developed in co-operation with the provincial governments, is to reduce tobacco use.

Every member of the House knows that this strategy has three objectives: to protect the health and rights of non-smokers, to prevent non-smokers from picking up the habit and to help smokers who want to quit smoking.

In this context, in order to effectively reduce tobacco use, there has to be a concerted effort by all levels of government and by non-governmental organizations.

We believe that the government must harmonize the various legislative measures in place to combat the use of tobacco and its effects. We believe that the measures proposed in Bill C-11 respecting the sale of tobacco to young people must be accompanied by a genuine desire to eradicate smoking.

The problem of tobacco use will not be solved simply by making it harder for young people to obtain tobacco products through more or less coercive measures aimed at merchants, producers and consumers.

The government must not shirk its responsibilities. As Dr. Lessard said, our governments have already made a commitment to health and have understood that making a long-term investment in our collective health will help us, as a society, solve our serious economic problems. During the present budget cutting period affecting health care in Quebec, and probably in other provinces, how can we explain the omission of health considerations in the debate since the major consequence of this crisis is sickness?

How can we fail to see that the only winners are tobacco companies? Should our society yield to an industry which takes our own health hostage and which economists say is steadily losing ground in our economy?

We understand the important economic and legal issues involved in the revolt of some elements of our population against taxes, and the general outrage over smuggling and its corrupting effects. Prompted by the rumblings of public discontent, our ministers of justice and finance laid out some very convincing arguments on that point.

It seems urgent and critical to ask the premiers to listen also to the arguments of their health ministers and to renew their commitment to the well-being of the population.

It is crucial to reintroduce social and human dimensions into the present debate. No government should be allowed to forget the health and well-being of its population for purely fiscal considerations.

[Diane Marleau, Liberal, Minister of Health]

Mr. Speaker, it is my pleasure to speak to the section of Bill C-11 which will amend the Tobacco Sales to Young Persons Act. Action on the proposed amendment is one more important step in our ongoing efforts to address the problem of tobacco consumption, particularly among Canadian youth.

The Tobacco Sales to Young Persons Act was proclaimed into law Tuesday, February 8, as a component of the government's anti-smuggling initiative. It raises the legal age of purchase from 16 to 18. It restricts the location of cigarette vending machines to bars, taverns and similar beverage rooms. It also increases the penalties for selling tobacco to minors.

A new range of fines has been established for any sale to persons under the age of 18 and includes sales through a vending machine. For a first offence the fine will be up to $1,000, for a second offence up to $2,000, up to $10,000 for a third offence, and for subsequent offences a fine of up to $50,000 can be levied.

The amendment now before us relates to kiddie packs of cigarettes, as they are commonly known. Kiddie packs are packages that contain fewer than 20 cigarettes and are usually available in packs of 15 and 5. I have seen these kiddie packs. They often look like a chocolate bar. It is very surprising to see these packages of cigarettes that could be any kind of a chocolate bar being sold to young people with no questions asked. It is very important we ban them.

Kiddie packs began to appear in Canadian stores in the late 1980s. Producers of tobacco products said at the time that they had taken that approach to please adult smokers but, like Canadian health organizations, I believe that their availability increases the risk that young people start smoking.

Those packages have a special appeal for young people because they look attractive and their price is lower than that of regular packages. They are more affordable for young people who do not have much money, and younger people find them easier to hide from parents and teachers. As I said, some

packages contain only five cigarettes, and look like a chocolate bar.

A poll taken in Nova Scotia in 1990 indicated that the majority of teenagers who smoke buy kiddie packs. Among sixth grade smokers, in the 11 to 13 age group, almost half of them buy kiddie packs. That research was done four years ago, but the situation is probably the same today.

Bill C-11 will prohibit the sale of packages containing fewer than 20 cigarettes. It will also prohibit tobacco manufacturers from producing packages that contain fewer than 20 cigarettes. For selling and for offering for sale kiddie packs, the legislation provides for a maximum sentence on summary conviction of a $2,000 fine or six months, or both. On conviction on indictment the maximum sentence is a fine of $100,000 or two years, or both. For producing kiddie packs the maximum sentence on a summary conviction is a $200,000 fine or six months, or both. On conviction on indictment the maximum sentence is a $500,000 fine or two years, or both.

The government recognized that the action plan to combat smuggling and the tax measures associated with it would pose health risks. Let me assure members that we are just as determined to deal with tobacco use as we are with the smuggling problem. This amendment is just one more step in our efforts to eliminate tobacco consumption.

The action plan included a very strong health component. One element of that was legislative. In this area we have taken immediate action through proclamation of the Tobacco Sales to Young Persons Act and introduction of the amendment concerning kiddie packs.

We are also moving to give more teeth to law enforcement. Some 300 Health Canada inspectors have already been designated under the law and, as an interim measure, they will be available to monitor law enforcement while carrying out other tasks. During the next two months, we will publish a training kit and new inspectors will be hired to take over and control the enforcement of the Tobacco Sales to Young Persons Act.

Other ongoing enforcement activities include sending to all retailers in Canada explanatory letters and signs. Those signs must be posted in a prominent position in all places where tobacco products are found or sold. Any retailer who refuses to post those signs indicating that it is prohibited selling tobacco products to persons less than 18 years old will be liable to a fine up to $250.

We will also put ads in newspapers to inform retailers of their obligations under the new act.

As well we are looking at what action might be taken in such areas as plain packaging and product standards. Plain packaging contains no distinctive colouring, although it would permit the use of trademarks. Many health advocates feel that plain packaging, making products less distinct and promotion much more difficult would be an effective deterrent.

In the area of products standards, we are looking forward to bringing new regulations requiring manufacturers to provide information on the packages about the chemical compounds contained in tobacco and tobacco smoke.

A comprehensive educational campaign is also being mounted. It will be aimed at the general public and at key groups, such as young people and women, and will be developed in consultation with the provincial and territorial governments and the non-government health organization.

Action has already begun on a number of promotional-educational activities. A national media campaign began last week directed primarily at young people through the radio and television stations they most often watch and listen to.

We will also be working closely with our health group and provincial government partners to develop a system for monitoring tobacco consumption, particularly by young people. The acquisition of consumption information on a regular basis will be essential in measuring the success of our initiatives and planning the development of even more effective action in the future.

Tobacco use among many groups which are hard to reach is alarming. Those groups do not usually respond to traditional anti-smoking ads. We will be making special efforts to reach them.

We will also make more efforts to reach families, new parents, health care people and other people who are important role models for children. We will support education programs and community activities.

A health surtax will be levied on profits of tobacco products makers for three years to finance special initiatives. We believe that tobacco companies are responsible and that they must pay the price.

We are looking over the next three years at one of the most concerted efforts ever undertaken in the health education field. This is the toughest program that any jurisdiction has taken against tobacco products. During the past several years our co-operative initiatives have been very successful in reducing consumption among the population over age 15. I am confident these new resources will permit us to build on those successes.

To do so will require continued co-operation and close collaboration.

I have had discussions during the past two weeks with representatives of health organizations and with provincial and territorial ministers of health. At my recent meeting with ministers of health I offered to work with them on the best way to use the resources provided in the new federal anti-smoking strategy.

My officials and I are committed to seeking the advice and assistance of these groups as together we strive to reduce the demands for tobacco, the number one cause of preventable death in Canada.

[Antoine Dubé, Bloc, Lévis, QC]

Mr. Speaker, I listened very carefully to the Minister of National Health and Welfare as I do every time she answers questions in the House about smoking.

Here again, the minister means well with these measures to prevent smoking, but as I said during my speech, the Official Opposition is somewhat apprehensive about the enforcement of these measures. You referred to the cost of so-called kiddie packs-packages containing fewer than 20 cigarettes-which will now be prohibited. I think we should remember that because taxes have been cut, in Quebec at least, the price has gone down considerably, so that today, a pack of fewer than 20 cigarettes is much cheaper. In fact, a pack of more than 20 cigarettes is now cheaper than a pack of 15 cigarettes used to be. In other words, cost is an important factor.

I would appreciate it if the minister could give us her thoughts about this and whether she thinks this aspect was properly evaluated, because there has been a drop in the cost of a pack of cigarettes. We know that people who smoke more than 20 cigarettes a day are considered to be heavy smokers, which is very dangerous to one's health.

The minister mentioned new inspectors. I wish she would specify, if she is in a position to do so today, the number of new inspectors to which she is committed and what this will cost. As for the fines, I do not think they are all that severe. It all depends on the offence and the extent of the offence. I would like to tell you a story about the legislation to prohibits smoking in government buildings.

At the CBC there was a massive operation to enforce the new legislation as soon as the rule came into effect. The amount that people were fined added up to a considerable amount of money, and when employees protested, it all ended without anyone paying fines.

My point is that when the government decides to enforce this legislation, I hope it will do so fairly and squarely across Canada and will have the requisite number of inspectors to do so. We also have to provide for cases where one will not be able to count on the co-operation of provincial or other police forces. We will need a lot of inspectors to cover the territory involved. I am not so sure they will be able to do that. There is also the risk of partial enforcement.

I mentioned what happened at the CBC, but it could happen in any other company or community, when all of a sudden individuals are fined and notice that meanwhile, people somewhere else can continue to smoke with impunity, and I am thinking of young people particularly. This may produce a sense of injustice, of being picked on while other people can go on breaking the law without being penalized.

I would appreciate the minister's views on the subject.

[Diane Marleau, Liberal, Sudbury, ON]

Mr. Speaker, I should explain that the fines are imposed in the case of sales of cigarettes to young people. It is true we now have inspectors, but we had them before. Their mandate is to ensure that retailers do not sell to young people.

However, the objective is to make all retailers be very careful about whom they are selling cigarettes to. As you know, some young people do not look very mature. They look more like 10-year-olds when they come to the convenience store to buy cigarettes.

Store owners should realize that these kids should not be buying cigarettes, that they should not have them, and that it is against the law. Of course we want the inspectors to do their job, but we are convinced that most retailers are or will be aware of the harmful effects of smoking. We want to ensure that young people do not have easy access to cigarettes. That is very important. So that is the other reason for removing kiddie packs.

As you know, when these kids come home with a package of cigarettes, their parents notice. These kiddie packs are much easier to hide. When you see a kiddie pack, you know it is intended for kids. That is the whole purpose.

Selling cigarettes to kids is the opposite of what we want to do. We are sure we will get the co-operation of most retailers because this is essential to the well-being of Canadian society.

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

Mr. Speaker, I commend the Minister of Health on her presentation. I appreciate what the government is trying to do in this area. It has taken a balanced approach and has tried to address all the issues involved in this very complex problem.

My constituents have raised another health problem young people experience which relates directly to this issue. Some experts I have heard addressing this problem indicate that alcohol could also be one of the great problems we will be faced with. After all these measures are taken on tobacco, society's criminal elements will be looking for new ways to profit. There

is a large market in alcohol and they would target young people. Smuggling could suddenly become very profitable.

In light of the fact that this is a big problem among young people and is a potential smuggling problem, would the minister be willing to commit to take similar initiatives in the area of alcohol abuse and the smuggling which will take place as tobacco becomes controlled? Would she be willing to comment on or address this problem?

Many constituents are wondering about the domino effect. Will the reduction of taxes on tobacco mean a reduction of taxes on alcohol and many other products that are susceptible to being smuggled?

[Diane Marleau, Liberal, Sudbury, ON]

Mr. Speaker, we are determined to end the smuggling network. That was the reason for bringing down the prices on cigarettes.

While we realize some alcohol is coming through the same network it is certainly not the same size of a problem, although it is a problem. We are convinced we will win against the networks in the law and order problem we are addressing.

When it comes to sales to young persons, liquor is not a product that can be sold to young people anywhere in the country. It is not legal now. In terms of sales of tobacco products to young people, we are trying to establish the same kind of limits. Then everyone knows it is just as illegal to sell tobacco to young people under the age of 18 as it is to sell alcohol to them. That is the basis of the changes we have brought forward. It is very important that all the people of Canada co-operate in this matter.

[Jan Brown, Reform, Calgary Southeast, AB]

Mr. Speaker, I too appreciate very much the remarks of the Minister of Health.

I wonder if the minister could respond to my question with respect to the briefing we had yesterday. This is not meant as a challenge in any way. It is for my clarification.

It is my understanding that the manufacture of kiddie packs will continue until May 1, 1994. That means there are still two months of production left for this particular kind of package and I understand it was for the transition for the manufacture of this product.

It seems somewhat unusual, almost to the point of ludicrous that we would have a package available in the marketplace for two months when we are looking to enforce a particular law.

Could the minister give her assurance that she will look into this and explain how she will ensure that the kiddie packs are not sold to minors from now until May 1, 1994?

[Diane Marleau, Liberal, Sudbury, ON]

Mr. Speaker, I share the hon. member's concerns.

One of the challenges we face is that we are now debating Bill C-11 and it is not yet law. The sooner this law can be passed the sooner we can end the sale of these kiddie packs. It is not unlawful to sell or to manufacture them until the law receives final approval. It is essential that the bill move on as quickly as possible.

The manufacturers are very much aware. The notice is out there that very quickly it will be unlawful to produce and sell them.

It would be well and wise if we could get this piece of legislation through all stages very quickly including the Senate and royal assent stages.

[Jan Brown, Reform, Calgary Southeast, AB]

Mr. Speaker, I rise today as the elected representative of the constituents of Calgary Southeast and as such I speak for and with them.

Having said that and anticipating this debate, I not only tracked the calls and letters that came to me, but I also conducted a poll in my riding. Of those polled, 58 per cent opposed the government's proposed tax rollback. I am pleased to bring their collective wisdom and opinions to the debate today.

The motion before us has three components. I will speak in particular to the amendments to the Tobacco Sales to Young Persons Act. I do have some personal thoughts and insights I would like to bring to bear as well. Before doing that, it is critical to consider what this legislation is intended to accomplish.

The government alleges it is concerned with the massive smuggling problem facing our country today. Therefore Bill C-11 has been put forward by the government as part of a national action plan to combat smuggling. This legislation and the accompanying plan to combat smuggling tell me four things.

First, the legislation shows that the Government of Canada cannot enforce its own laws. Second, it shows that the influence of the tobacco industry is highly sophisticated and tremendously powerful. Third, Bill C-11 shows us that the deficit is not a concern of the federal government. Fourth, the legislation clearly shows that the federal government has little appreciation for the health and welfare of Canada's youth.

I will deal with the first point, that the Government of Canada shows us it cannot enforce its own laws. The government admits there is a substantial problem with smuggling, that people are going outside the law to maximize their own personal profits. However instead of strictly enforcing the laws as they now exist, the government chooses to change them. This is a vain hope. This legislation may put an end to the high level of tobacco smuggling but it is a half measure and will not stop the smuggling.

I believe in a good challenge to any debate. My first challenge to the government is this: Why was the law so poorly enforced that new measures are now required? Will these make the new law any easier to enforce?

My next challenge questions the influence of the tobacco industry. This highly sophisticated and powerful lobby has finally succeeded in getting the government to backtrack on the largest contributing factor to the decrease in tobacco sales. That was high taxes on tobacco products. The people of Canada are already cynical and have lost faith in the credibility of the government. How will the government restore that faith given that it appears to have bowed to the pressure of the tobacco industry's lobby efforts?

The federal government in proposing Bill C-11 will forgo revenue in an attempt to stop smuggling. In so doing the federal government makes it clear that our deficit and our debt are not priorities.

The Prime Minister admitted that in 1994-95 alone the government expects to lose $300 million in revenue because of the reduction in tobacco taxes. The Prime Minister goes on to suggest the health promotion surtax on profits of tobacco manufacturers will generate some $200 million over three years. The government release on the action plan to combat smuggling suggests this $200 million will fund a range of health promotion activities, including measures to reduce smoking. This sounds fine and good, but who will pay for it?

The government estimates the tax revenue lost to be $300 million in the first year alone. It then asserts it will generate $200 million from taxes on the tobacco industry. These numbers are questionable to me. At best there will be a shortfall of $100 million, not including the further cost of the health promotion programs the government says are a priority. This immediate shortfall of $100 million is substantial but does not compare to the health costs to be incurred under the plan.

By reducing taxes we are encouraging existing smokers to smoke more and we are making it easier for new smokers to get hooked on the habit. Smokers will add further strain to our health care system. They do not require care today, but 10 to 15 years from now the government will regret the day of this decision.

Studies and experience over the past few decades have proven there is a direct correlation between smoking and heart disease and smoking and cancers of the lung, the oesophagus, the mouth, the tongue and the larynx. It has also been shown that smoking has a detrimental effect on unborn children.

What will be the eventual financial cost? The numbers just do not work for this program.

The third challenge to the government is to decide how best to address the problem of the deficit without complex tax alternatives. This is not a solution to cigarette smuggling; quite frankly it is just blowing smoke.

My fourth point is that Bill C-11 shows that the federal government really has very little concern for the health and welfare of the nation's youth. Taxes on cigarettes and tobacco products were high for a reason: they brought the government revenue. More than that statistics showed that high taxes directly correlated to a decrease in tobacco sales especially among our youth. Simply put, cigarettes became too expensive.

Health and Welfare Canada states that when the price of tobacco products rises by 10 per cent, sales to adults drop by 4 to 9 per cent. More significant, sales to teenagers drop by 10 per cent to 14 per cent.

This legislation has some very serious implications for the health of our nation, particularly our youth. Dr. Robert Allen is the Canadian professor of economics who contends that if the tax cut to the price of tobacco in Quebec is implemented in the rest of Canada it will result in 840,000 more smokers and 175,000 of them will be teenagers.

The government contends that it has a plan that will keep our youth from smoking. The idea, as I see it, is to keep cheap cigarettes out of the hands of our young people. The government, however, chooses to change a plan that was working well. Smoking was on the decline in Canada and young people including my daughter were being discouraged from smoking.

My daughter, despite objections and at first unknown to us, began smoking at the age of 12. She would smoke several packages a week and nothing we said or did made any difference. When we travelled in the United States she would buy cheap cartons of American cigarettes and smoke like a chimney until they were gone. However, back home again she was back to her usual habit of a couple of packs a week. She could not afford the high cost of cigarettes.

As these costs have increased, her usage has decreased. It saddens me to think that a government action will now further encourage my daughter's smoking addiction.

The government proposes another idea to reduce the number of young people smoking and that is banning the kiddie pack. I believe this idea to be ridiculous. As a young constituent working in a local gas station confided, mostly it is the older people who buy kiddie packs. The cool kids buy packs of 25 and not kiddie packs.

There will always be a part of our population that tries to beat the rules, and undoubtedly the moral hazard will take its toll on this legislation. If young people want cigarettes, and thanks to Bill C-11 they will be able to afford them, they will be able to get them. They will lie in bed at night thinking about how. This

government has only increased the age of prohibition and even that becomes irrelevant when there is no commensurate will to enforce it.

There has only been one measure that has worked in minimizing the access of our youth to tobacco products, high taxes. I challenge members opposite me and all my colleagues on this side of the House to recognize the wisdom of this measure. As a young adult recently said to me, the government should raise taxes on those things that are bad for us and lower taxes on those things that are good for us.

Governments must recognize their social responsibility to our youth. When this happens, parents like me can say thanks.

[Julian Reed, Liberal, Halton—Peel, ON]

Mr. Speaker, I have a couple of questions. I was listening to the hon. member and her obvious genuine concern about the fact that smoking is an addiction. I speak as former chain smoker. I ended that practice about 25 years ago.

There is a little mythology that has to be cleared up here. I wonder if the hon. member could tell us who she thinks is smoking the contraband cigarettes, who she thinks is smoking the cheap stuff.

If you go into schools you will find that counterfeit cigarettes are being sold out of the trunks of cars.

[The Acting Speaker (Mr. Kilger)]

Order, please. I remind members once again of the wisdom of directing questions through the Chair as opposed to what may seem a more personal way of "you in this", "you in that" and "un vous ici, un vous la". Put me to work or keep me in my chair but, please, through the Chair.

[Julian Reed, Liberal, Halton—Peel, ON]

Thank you, Mr. Speaker, for that correction. I will start again. Pardon the oversight.

It is the young people who unfortunately have been buying these lower priced contraband cigarettes. As a result, more and more young people are being exposed to tobacco because of the smuggling. Therefore attempts had to be made to correct the problem.

I advise the hon. member that the situation in which the tax has been dropped is considered a temporary situation and will be corrected as soon as the issue of tobacco smuggling is corrected.

[Jan Brown, Reform, Calgary Southeast, AB]

Mr. Speaker, I thank the hon. member for his comments.

I want the member to acknowledge that I was speaking from some personal experience and from the point that I wish to challenge the change to the law, why we are changing the way we have been performing our function and why the government feels that laws which were in place prior to this one were not good enough. I tried to make that point in my discussion.

I must say I did not realize this change was only a temporary one. That really astonishes me. I thought we were debating a change that was for the long term. I will just leave it at that.

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

Mr. Speaker, I inform the hon. member with regard to a few of her earlier comments that she was incorrect in saying the government was not concerned with law enforcement. We are very concerned with law enforcement. That is one of the main reasons behind the bill.

The RCMP commissioner has told the government that we needed to take action and that is what this plan is. It is action so that we can have law enforcement in the country.

I remind the hon. member that this problem started long ago. When we came upon the scene a short 100 days ago, this government was faced with a momentous problem. It was not a small problem and it was not something that just started. It is something that has been going on for years. We are taking action. We are addressing the problem.

Second, I also remind the hon. member that we are concerned with the deficit and that is why we are taking action. We are losing over a billion dollars because of smuggled cigarettes. There are 75 million cartons being smuggled back into Canada. That is a serious problem that needs to be addressed and that is what the government is doing.

Does the hon. member not believe that spending an additional $185 million in health is not a good idea, is not the idea behind education or is not an idea to promote the awareness of the problems with smoking? Is that not a concrete answer to some of the problems raised by the health groups? This government looked at the whole package.

We looked at the effect of lowering the tax. We looked at the concern from the health groups. We put together a whole package. I would like the hon. member's comments.

[Jan Brown, Reform, Calgary Southeast, AB]

Mr. Speaker, I have to ask clarification from the hon. member on a couple of things. I appreciate the comments from the other side. They very much enrich the kind of debate we are having here today.

I believe the Solicitor General earlier in the discussion this morning said tougher law enforcement would not have achieved the desired result to end smuggling. Therefore I have to ask why the hon. member suggested so strongly that my comments about law enforcement were not completely correct.

I believe in my statement I gave a challenge to this debate concerning why we are changing our laws at this point. Enforce-

ment is a very important element of any law structure. It seemed to me that those who are there to enforce the law have a responsibility to do that to the full extent. I was just asking the question about why we have to change the law. The Solicitor General said that tougher law enforcement would not have achieved the desired result. I am a little confused as to the point the member was trying to make.

I concur with the hon. member that education is a very important facet of what we are trying to accomplish. I believe, however, that by opening the door to increased smoking we are looking at a huge health problem further down the road.

[Rose-Marie Ur, Liberal, Lambton—Middlesex, ON]

Mr. Speaker, I address a few issues presented by my colleague. As a former producer of the product and a health care professional and now a politician, I can certainly look at this through many windows. Being a member representing tobacco growers in my riding, I felt I had to comment on some of the statements made earlier.

As to the fact of the government not being concerned with the deficit, with the amount of contraband cigarettes we are not collecting revenue the way it stands now. Therefore the option given to us to roll back the taxes was an option that would help alleviate this problem and perhaps down the road reintroduce the taxes so that revenue would be regenerated.

With regard to the government's lack of concern for health, I have always been a non-smoker. My husband was a smoker and I have two children who are non-smokers. It was their decision not to smoke. It was their choice. They were certainly exposed to the element. We all are and it is our choice to do so. The government has not legislated common sense.

Therefore I speak on the issue from the respect that it is a legal product and we have to address it in that manner.

[Jan Brown, Reform, Calgary Southeast, AB]

Mr. Speaker, I have nothing to say except that those comments are well received and well said. I thank the hon. member for them.

[The Acting Speaker (Mr. Kilger)]

Before recognizing the member for Scarborough-Rouge River, I wonder if he could indicate to the Chair if he will be sharing his time or using the full 20-minute complement.

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

Mr. Speaker, it is my understanding that members of the government side will be splitting their time from here into 10-minute segments.

I am very happy to be able to speak to the issue involving the government's initiative to address the very serious problem of tobacco smuggling. It is my view the problem is not just a smoking problem, not just a revenue problem.

In my remarks today I want to choose a perspective that would target organized crime as the problem. Those who are professional organized criminals would probably argue with me that they are not the problem but rather simply a manifestation or symptom of another part of the problem. I differ with them at this time given the size and volume of the smuggling. In other very obvious problems in our society, organized crime is very much a part of the problem and I believe it is integral to the solution to this program and integral to solutions to other criminal problems we have in our society, which I will refer to later in my speech.

Bill C-11 has been adequately described here by the ministers and members from both sides of the House who have discussed it. It will facilitate police enforcement of the anti-smuggling measures. It will also permit authorities to begin or to continue or to redouble their efforts against the incentive to smoke.

These are some new tools provided by Bill C-11 which I regard as relatively small in stature in dealing with the current problems of cigarette and other types of contraband smuggling. I think I agree with the previous speakers that enforcement is very much a part of the solution. However, it is not the only solution.

The measures announced by the Prime Minister on February 8 will hopefully permit us as a society in the short run and in the long run to deal with the problem of cigarette addiction. At the moment our initiative I believe deals with organized crime, revenue and interdiction, re-establishing an orderly Canadian market in the commodity of tobacco.

What is the background here? I sat in the last Parliament for five years. Relatively early in that Parliament it became apparent that cigarette smoking was going to be a very serious problem. It grew and grew to the point where 40 per cent of the existing $12.4 billion Canadian tobacco industry was being controlled by smugglers. It was putting approximately $5 billion per year into the pockets of smugglers.

I point out that 95 per cent of the smuggling operation was controlled by organized crime. That type of smuggling, the volume of it, and the existence of organized crime was causing very obvious social and economic distortions at least regionally in our country and perhaps arguably across the whole country.

If action had not been taken at this time, I suppose we would wish that action had been taken a year or two years ago. In any event, we are acting now. If action had not been taken, it is estimated that more than 50 per cent of the cigarette market would have been dominated by the so-called smugglers, organized crime, with a value to organized crime of $6.2 billion.

Illegal tobacco seizures by the RCMP increased from 303 in 1990 to 5,044 in 1993, but even at that the RCMP told us that they were only seizing about 1 per cent of the illegal tobacco market.

Trafficking in illegal tobacco products had become an extremely lucrative enterprise. The profits to be made were so high that individuals involved in the drug trafficking trade are now engaging in the smuggling of contraband tobacco products. Traditional organized crime groups are also very much involved.

I want to cite a remark by the President of Colombia, a country that certainly knows organized crime very well, as I understand it, and is very much involved in the very unfortunate sequences that have befallen it in the drug trafficking trade. The President of Colombia said that the only law drug traffickers have not broken is the law of supply and demand. That is essential to my perspective in this particular intervention.

With the profit potential from contraband cigarettes gone, the organized crime elements that cause cigarette smuggling to virtually explode in recent years in our view will likely withdraw from the activity of smuggling cigarettes. With this new initiative the problem of contraband cigarettes will be dealt an effective and decisive blow.

Cigarette smuggling is not the root of the problem. It is only a symptom, as I said before. The same applies to other problems of smuggling involving alcohol, firearms, pornography, prostitution, gun smuggling and gambling. The root of the problem is the opportunity for profit that each of these areas provides to organized crime.

When the Prime Minister responded, he responded by first listening to the experts. The experts, the police authorities in the country, told the Prime Minister that they, by using existing enforcement methods, could not control the volume of smuggling and illegal activity being fostered by organized crime. The government's response therefore is one that is based on the advice of the experts. We could see no other way to deal with this.

Our program is strategic and not based on a simple issue of profit or a simple issue of revenue or a simple issue of a person deciding or not deciding to smoke. We must look at the whole problem and I believe that is what we have done.

Organized crime has more monetary resources than many police agencies. Crime organizations typically use sophisticated equipment to identify intrusive devices and employ countersurveillance methods to elude detection while they are conducting their illegal transactions. They employ computers, legal and financial experts and others to assist in the day to day operations of their illegal enterprises. They use sophisticated money laundering techniques to divert substantial portions of their profits into legitimate businesses.

Organized criminals attracted by high income activities, and these are high income activities, seek out crimes which produce the highest profit with the lowest risk. Current illegal activities, I have mentioned some of them, include not just tobacco, but alcohol, guns, gambling, prostitution, alien smuggling and pornography.

We could I believe literally fill our jails to overflowing with drug addicts, drug dealers and smugglers. As long as there is money to be made in the black market for any of these commodities, organized crime will have an incentive to recruit other people, other consumers and find other ways to carry on their illegal activity.

Integral to our strategy is the need to disable organized crime, at least in this field of tobacco smuggling.

Some examples of expert opinion are from Thomas O'Grady, Commissioner of the Ontario Provincial Police. He states: "Law enforcement communities, the public and appropriate levels of government", that includes us, "must continue to work together in developing laws and enforcement programs to make it both undesirable and unprofitable to organized crime groups to gain inroads in areas of gaming operations". There are similar views from all around the world published in Canadian legislatures, the United States congressional records, the United Nations records, European records, all focusing on this serious problem of profit as an incentive to organized crime.

I believe, much in the way we dealt with this particular problem of tobacco, we must also deal with drug addiction. We must be strategic. I would like to think that this government will have the ability, the opportunity and the support of Canadians to be able to deal with that other great evil of drug addiction by looking at the entire picture of taxation, of interdiction, of distribution of supply and demand, of all the laws when we address this serious problem of drug addiction.

[Hedy Fry, Liberal, Parliamentary Secretary to Minister of Health]

Mr. Speaker, I rise to support Bill C-11.

As members know, part of this bill deals with the Customs Act and the Excise Act and it therefore deals with issues such as seizure, enforcement, identifying smuggled goods and in fact with a lot of the law and order issues that pertain to smuggling.

The other part of this bill deals with the effects on young people of the lowering of the tobacco prices. I want to say that as a physician, my expertise has always been in the matter of health. My expertise is also with regard to smoking and anti-smoking issues. I have been involved in this issue for many years.

When I came to this House I was only aware of my one perspective. The issue to me was solely the effect of smoking on health. That issue has been well related by everyone here in the

House today. It is no secret to anyone that smoking is the single most preventable cause of death and illness in the world.

It is no secret to anyone that the World Health Organization has said that from the year 1990 to the year 2000 if smoking continues at the rate that it is going, the number of people dying in the world from smoking will be over 40 million people which will be greater than all of the people who have died in all of the wars in the 20th century. That tells members that smoking is in fact a deadly disease and a deadly issue.

However, when I came to the House I was not aware of the other side of this issue, the issue of smuggling. It is well documented that in fact the increase in tobacco prices has had a significant effect and is perhaps the biggest gun in the whole strategy of anti-smoking legislation.

Increasing tobacco prices in fact decreases the access to tobacco for young people. We know that between the ages of 13 and 20 young people having access to tobacco have a great risk of addiction.

I was very concerned that one of the ways of dealing with the smuggling of tobacco had to do with the lowering of tobacco prices. However I am aware now of another group of experts in law enforcement and smuggling. I am not an expert in that. I am only an expert in health. Many people will say I am not but I suppose I am. They have said in their advice to the government that if one merely increases the export tax and uses enforcement measures it will not in itself have an effect on smuggling.

We have now reached a critical point in our increase in tobacco taxes. We had reached the point where we had almost come to the point where prohibition had reached with regard to alcohol when the United States had created a prohibition level. We have seen exactly what happened then begin to happen here with regard to tobacco smuggling.

Forty per cent of all tobacco sales was smuggled tobacco. Two million Canadians were buying contraband tobacco and many of those same Canadians were young people. The same young people who had no access to tobacco as a result of the increased prices were now having access to tobacco because of the cheap smuggled tobacco. The whole strategy of high prices had been undermined.

I support the bill because it deals with the issue of law and order on the one hand and with increasing the ability to seize, with increasing the ability to identify smuggled products and with increasing the enforcement of this smuggling activity of the RCMP and expanding this not only to RCMP and customs officials but I understand to local police.

I also want to support the second part of the bill which deals specifically with the government's understanding of the complexity of this issue. The government understands that lowering tobacco prices will affect the accessibility of tobacco to young Canadians. It has taken steps to mitigate the lowering of tobacco taxes via the Tobacco Sales to Young Persons Act. The amendments to this act, which increase the age from 16 to 18, which decrease the ability of young people under 18 to bring tobacco into this country, which remove vending machines from everywhere else but bars, and which increase the enforcement and the penalties to anyone selling tobacco to minors, have put tobacco very clearly where it belongs and that is as a controlled product alongside alcohol. I would like to see the time when tobacco is treated like alcohol and sold only in liquor stores.

The government has acted immediately and promptly to address a problem that has been allowed to sit for four years without any attention by the other government, so that it is now in the crisis position that we see it in. The government has dealt with a complex issue with sensitivity to both sides of the problem and with a clear commitment to the health of Canadians.

I hope that everyone here will see not only that this bill is worth supporting, but that it is urgent we support it so that we can get on with so many of the strategies that are necessary to improve the health of Canadians and to prevent us from having our young people have access to this lethal drug.

[Jake Hoeppner, Reform, Lisgar—Marquette, MB]

Mr. Speaker, today I am speaking as a representative of the Reform caucus regarding Bill C-11. The House has already heard speeches from Reform Party members on this important issue and I am pleased to add my comments to this discussion.

The measures contained in Bill C-11 are secondary when compared to those in the government's action plan to combat smuggling. They allow the government to sell or destroy seized property even when there is an unresolved claim, and allow the government to give police forces the same seizure power as the RCMP. The bill also requires cigarettes to be stamped properly if they are manufactured or imported into Canada, to make sure duties have been paid.

This bill makes it illegal to manufacture a package or sell cigarettes in packages containing less than 20 cigarettes, the so-called kiddie packs.

I agree with my Reform colleagues that the exchange of ideas regarding all of the government's anti-smuggling measures and not just those contained in Bill C-11 cannot be delayed. It is of utmost importance to Canadians that they are studied in their full scope immediately.

In the time I have been a member of Parliament this issue has far outweighed any other in terms of number of responses from my constituents, the vast majority of whom oppose the government's action. Such is the magnitude of the impact these changes promise to have on Canadians. These consequences will be felt in many areas; law enforcement, justice, interprovincial relations and of course health, particularly the health of young Canadians.

I would also make note of the fact that in Ontario tobacco production in 1993 was 173 million pounds. This was 5.5 million pounds over the tobacco marketing board's quota of 167.5 million pounds.

Is it not interesting that at the time when tobacco producers saw this large surplus, and this holds true also of the United States and some other foreign countries, the government introduced these measures which will undoubtedly increase tobacco sales? Indeed this is excellent news for tobacco companies.

As a farmer, I can tell the House that whenever there is an over abundance of product, the price has to go down to compete on the market. Here the tobacco companies are buying their inputs at a low cost and selling more of their product because of reduced taxes. They benefit first from low production costs and second from lower taxation. They are the clear winners with these measures and taxpayers are the losers because of the lost revenue and higher health care costs. Not of less concern in all of this is the financial implication of these measures.

On February 8, 1994 the leader of the Reform Party gave his initial response to the government's announcement. He pointed out that the root cause of all these serious issues was the problem of government overspending. This was what led to overtaxation in the first place and brought about these ramifications.

While I recognize that financial implications are only one of the serious aspects brought to light by the government's anti-smuggling measures, I would like to focus on them today along with the broader issue of the federal government's tax policy. I believe the issues serve as an excellent example of how the government's priorities should be reviewed.

Several questions have to be asked of the federal government regarding these measures. First, I am interested to know what will be the overall cost of these measures. I can see that they will change many aspects of federal finances. One of the most obvious questions that arises is: Where will the government make up for the lost revenues from the rollback of cigarette taxes? As we know there is no magic pot of money from which this will be regained. Any extra revenue that has to be made up will come in the form of new taxes. In fact, the tax burden promises to create new taxation problems.

Another thing tax reduction promises is a public health disaster. This makes it very hard for Canadian smokers to quit an addictive habit and introduces the harmful habit to a whole new generation of smokers. Aside from the human costs that cannot be measured, what about the cost to the health care system?

We have a situation where the federal government has decreased transfer payments to provinces for the past number of years. In some cases it is not enabling provinces to keep up with health care costs. Every Canadian knows that the health care system currently faces huge financial challenges. Health groups contend that extra health care costs associated with treating diseases in new smokers could be approximately $1.3 billion per year. I would like to know if the government has figured out exactly how it is to pay for these increased health care costs.

All indications point to new taxes for Canadians. I wondered how much thought went into this bill when I noticed that the government was doing away with the so-called kiddie packs in an effort to reduce smoking among our country's youth and at the same time drastically reduce pack prices overall.

Simply put, kids are not stupid. They will quickly realize that through the government's action they can buy a regular size package of cigarettes at a lower price than their kiddie packs cost. One statistic states that when the price of cigarettes goes up 10 per cent, tobacco sales to adults drop by 4 per cent to 9 per cent and sales to teenagers drop by 10 per cent to 14 per cent. These similar statistics were made available to the government by health groups before its decision to reduce cigarette taxes.

It should come as no surprise that smoking will increase just as dramatically when taxes are reduced. That the government was made aware of this and still chose to lower taxes makes me think that it either does not have an adequate grasp of the reality of the situation or it simply does not care. Eight out of ten provinces lobbied strongly for the government not to lower cigarette taxes.

While on the subject of health care, I note that in my home province of Manitoba, 25 per cent of kids go to school hungry. Thousands of adults are forced to depend on food banks. Now we have a government that has not addressed these problems saying: "We can afford to forgo a half billion dollars in revenue by reducing cigarette taxes". Would it not make sense for a government to write off these losses by providing for lower food costs so more hungry people could be fed as opposed to providing cheap cigarettes to Canadians?

It is a sad fact that governments in Canada have tried in vain to get their deficit problems under control by raising taxes instead of demanding better value from their spending. The notion that a deficit can be reduced from government revenue increases alone is a misguided one.

Higher taxes federally have failed to reduce the deficit and have in fact stalled the economy by cutting the spending power

of the consumer by dampening new investment and by diverting growth into a flourishing underground economy.

Granted government measures are intended in part to address an aspect of the black market, but would it not make more sense to instead reduce taxes in an area that would spur Canada's economic growth? For example, agricultural producers in my riding have seen, with the rest of Canadians, a reduction in the country's international competitiveness on agricultural markets. This is not the result of low efficiency on the part of Canadian farmers, but rather because of the high input costs farmers face. This is directly attributed to tax policy.

I can give the House an example. In Manitoba the taxes on clear gasoline that is not used in the agriculture industry are 11.5 cents provincially and 8.5 cents federally. For diesel it is 9.9 cents provincially and 4 cents federally. Fuel for farming use however has no provincial tax but still has the same federal taxes of 8.5 cents and 4 cents. There is no federal tax break at all. This is just one example of how taxes are driving up input costs. In the government's attempt to squeeze every dollar out of Canadians, it is squeezing the life out of our economy. Where we should see tax breaks, they appear and where we should tax breaks, there are none.

An article in the Financial Post states this very clearly:

Federal policies are forcing more than one in five firms polled by the Canadian Chamber of Commerce to move or consider moving business out of Canada.

I have been told many times by entrepreneurs: "Yes, I love Canada and I do not mind paying my personal income tax here, but my future and my profits, if government keeps on taxing them this way, are going to be somewhere else".

In the farming community many are forced to get 50 per cent of their income from off farm employment because the business of farming is no longer profitable. Farmers have to supplement their income just to get by. Think of the effect this has on unemployment levels. There is evidence across the country. University educated professionals leave Canada for nations where the income tax rate and the cost of living are lower, and this is after we have paid to educate them.

What the government should be looking at is a tax break that would help farmers, or for that matter any Canadian business or industry, become more competitive and that would provide incentive for professionals to stay and make their careers in Canada.

I was shocked to learn recently that since 1961 Canada's tax freedom day has advanced 73 days. It is of particular note that in 1961 the tax freedom day fell on May 3. Last year it fell on July 15. Very soon we will not have enough time to sit down and light up a cigarette if this trend continues.

We are rapidly approaching a point where we will be working for governments full time just to pay for their debt creating policies and bad spending decisions. In the face of such serious conditions, when the country is crying out for a large scale tax reform, this is what the government offers: lower taxes on cigarettes. Surely this cannot be what the government sees as most beneficial to Canadians at this time. Recently the revenue minister, vowing to kill the underground economy that costs the government billions of dollars, hired a shock troop of 500 additional tax auditors. This really displays what is wrong with the government's tax policy. Rather than give a tax break that would help kickstart the economy, it has decided to spend the money on hopeless efforts to regain revenue lost in the underground market.

In conclusion, I hope I have managed to show how this bill and all its associated measures display how the government's taxation policy should be seriously reviewed.

The problems caused by overspending cannot be solved by overtaxation. Overtaxation of cigarettes has created the underground market in the first place and this is just one example of how high tax levels are stifling the economy.

By reducing the tax on cigarettes the government is opening itself up to costs of about half a billion dollars per year just for implementation. To this you can add billions more in increased health care costs. How will this be paid for? I am afraid that it can only be paid through increased taxes.

The actions do nothing to break the damaging cycle of taxing to pay for spending. If we do not break the cycle soon and allow ourselves to implement useful carefully considered tax breaks, Canadians will see their income taxed out of existence.

[Paul Devillers, Liberal, Simcoe North, ON]

Mr. Speaker, the hon. member opposite indicated that he feels the reduction of taxes would lead to a windfall in effect for the cigarette manufacturers. He neglected to mention there are other parts of the action plan such as the $8 a carton export tax and also the surtax on profits to the cigarette manufacturers.

I would appreciate hearing the hon. member's comments on what effect those measures would have on the cigarette manufacturers.

[Jake Hoeppner, Reform, Lisgar—Marquette, MB]

Mr. Speaker, I appreciate that question. It is a well founded question.

What I was trying to point out is that after having 167 million pounds of production quota and another 5.5 million pounds over that, farmers are going to be forced to take a lower price for tobacco if it works the same as it does in other commodities.

With this increased sale of tobacco of 173 million pounds, that little bit of taxation that is going to be put on them by the federal government will not nearly compensate for the gains

they are going to make on the huge amount of sales in the tobacco industry.

[Glen McKinnon, Liberal, Brandon—Souris, MB]

Mr. Speaker, might I through you ask a question about the differential in price between the American commodity and the Canadian commodity before the imposition of this new bill.

Does the member opposite feel that is contributing to an excessive amount of contraband smuggling?