Debates of June 21st, 1994

Excise Tax Act

[Leon Benoit, Reform, Vegreville, AB]

Mr. Speaker, before the break I was debating Bill C-32 and I was talking about the fact that this bill will encourage young people to smoke by making tobacco products more affordable to them.

I discussed my own experience in that regard, but I will also quote Professor Robert C. Allen, a visiting professor from Harvard University. It was noted how the decrease in tobacco taxes will directly impact on increasing the number of people, including young people, who take up smoking. He stated that tobacco consumption would increase by 14 per cent. Teens, being about two and a half times as price sensitive on this issue, would increase their consumption of cigarettes by about 35 per cent. All of this is because of the reduction in tobacco taxes. Even the money being used from the surtax will do little to discourage 175,000 young people from smoking. The use of tobacco and the hazards of second hand smoke are well known and documented.

One main concern I have, like many of my constituents, is the effect this legislation will have on our health care system. Another major consideration is the toll the legislation will have on human lives as increased consumption leads to further health complications.

I am not going to talk at any length about the personal tragedies caused by increased disease due to smoking. We all understand that so I will not discuss it today. However I would like to talk about the less direct human toll which will be brought about as a result of this tax.

Reformers support decreasing overall taxes, but we have to question whether this bill will do that at all. Does this bill decrease tax? I say it does not. A select group may be paying lower taxes to start off with, but all Canadian taxpayers will end up paying more money in the future because of the increased health care costs associated with smoking. It will require increased taxes to pay this additional cost brought about by increased smoking and the increased health hazards that result.

Professor Robert C. Allen notes that further proposed reductions in tobacco taxation will have a devastating impact on the health of Canadians since they will significantly expand tobacco consumption. He also states that lowering cigarette taxes would lead to large increases in cigarette consumption with significantly higher levels of death from tobacco related diseases. Professor Allen is backing up what I said and what many have said before me. Therefore the health expenditure would rise sharply and tax receipts would drop.

Have the long term costs of our health care system been considered properly by the government in this legislation? I say the answer is no.

Extra costs to health care resulting from increased smoking and related disease have not been properly considered, as I discussed earlier and reductions in the much needed health services, including elective surgery, will be put under further stress as a result of this further spending on this group who need additional services because of smoking related health problems.

I am saying that because of these increased smoking related health problems and costs there will be less money available for elective surgery. I am sure all of us know already the problems that we have in receiving elective surgery on time. This will further complicate that problem.

Even if the government does down the road, as I hope it will, decide to bring increased efficiency into our health care system, thus reducing the cost of delivering our system as it is today, we also need to bring the cost of health care to a reasonable level. We must, in any way we can, reduce unnecessary disease such as that brought about by cigarette smoking.

The next point I would like to discuss is the timing of reducing tobacco taxes. I think it is impeccably bad. I believe I will put this point off until a little bit later and if I do not have time to come back to the point I am sure my colleagues will question me on the issue of timing.

For the past four months my constituents have told me, in no uncertain terms, that they do not support the government in reducing this tobacco tax. This Liberal government told us during the campaign and has told us since that it is determined to listen to the will of Canadians. The Liberals said they would be more democratic, they would be more responsive to the wishes of Canadians. We have heard that again and again. The action the government has taken on this issue indicates that it is just talk. It is just hot air. The government is not willing to listen to Canadians. I have heard from MPs across the country that their constituents do not support the government on this issue of lowering tobacco taxes. The government may pay lip service to consulting with Canadians, but once again the action does not match the lip service.

I would like to present what has become a Reform tradition; that is, when Reformers criticize the views or legislation presented before the House, they present constructive alternatives. Today I will do that in regard to the tobacco tax issue.

It is important to examine whether there are other ways to combat this problem of smuggling other than reduction of tobacco taxes. Unfortunately Bill C-32 is just another example of the government avoiding the real problem and refusing to face it head on.

Real solutions can come only if the problem has been clearly identified and then dealt with in a straightforward manner. I believe that by caving in on the issue of cigarette smuggling and the problem it has caused and will continue to cause, the

government has taken the easy way out. The government did not have any difficulty identifying the fact that smuggling was the problem, and I give it credit for that. It seems to have difficulty coming up with a common sense solution.

A more rigorous attempt at enforcing our laws should have been the first action undertaken by the government. Smuggling is a crime and those involved must be dealt with accordingly. Criminals should be treated like criminals regardless of race, colour, gender, religion or geographic location. If rigorous law enforcement meant going on the reserves where over 70 per cent of the smuggling took place, according to RCMP figures, this action should have been taken.

Was the government so intimidated by past events such as the Oka crisis-I admit a very scary, undesirable situation-that it backed down on enforcing the law? It is a question I would like the members opposite to ask and answer of themselves. If this is true it sets a very dangerous precedent on how we deal with crime. We have seen a similar process of dealing with crime in regard to the Young Offenders Act and gun control.

On the Young Offenders Act, was direct straightforward open action taken to help solve the problem? From the legislation we have just seen presented to the House, direct action was not taken.

On gun control, the Minister of Justice has shown again and again that the approach he will take is not the direct common sense approach, but rather is a roundabout approach, that of restricting guns and the use of guns, to no avail. No direct action is taken which really deals with the problem.

A further effect of this legislation is that it creates inequity from province to province. The prices for tobacco are now vastly different from province to province. I recognize there are other tax provisions that combat interprovincial smuggling. What if it gets out of hand, as did the cross-border smuggling between Canada and the U.S.?

I believe that will happen, and I have heard members of the House comment, hopefully in jest, that they should take a box of cigarettes back to Alberta or Saskatchewan or B.C. with them because there is good money to be made in smuggling between the provinces now. It is absurd way to deal with the problem. What happened to the direct common sense approach?

My home province of Alberta has never before experienced a smuggling problem, at least until now, but I do believe that is what will happen with this bill. Reducing the tobacco taxes in some provinces but not in others will lead to smuggling between provinces at an ever increasing rate. It certainly will lead to substantial smuggling into Alberta.

In defending Bill C-32 this morning the hon. Secretary of State for International Financial Institutions stated that the smuggling problem was undermining the government's health plan. Let us look at the logic of that statement. Let us follow the path of logic through.

Smuggling led to a lower price per package of cigarettes and therefore people were buying more. Because people were buying more, this increased the costs incurred by Canadian health care because of the health risks associated with smoking. What was the government's solution? It lowered the tax on cigarettes.

This resulted in a lower price for cigarettes making them more affordable for everyone, not just those who were buying smuggled cigarettes. Does any member in this House buy that as a path of logic? I think not. This further undermines the government's own health plan in Canada. The government has legalized the demise of its own health plan. Nothing is accomplished by this legislation.

In conclusion, this keep the peace style of government has not worked in the past and will not work in the future. It is time for the government to stop shirking its responsibility in dealing with this problem and to show some leadership. That is what Canadians want. If the government is not prepared to do that then I want to assure members in this House that Reformers certainly are prepared to do so and we will if government does not.

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

Mr. Speaker, in listening to the debate and some of the concerns which have been expressed, I am now aware that there are at least three states which have higher taxes on cigarettes than the neighbouring provinces in Canada.

Could the member comment a little bit on the taxes in the United States, the direction they are heading and whether we could co-operate with them in that respect. It is a key issue. I do not know if we can solve this problem by ourselves. We are looking at it in this light and is something which needs to be discussed. We need to co-operate with the authorities and attack the problem in this way.

[Leon Benoit, Reform, Vegreville, AB]

Mr. Speaker, I do agree the timing of this bill could not be worse. Just to back this up I would like to read a very short piece from yesterday's Financial Post . The title is: ``The Sky is the Limit for Tobacco Tax in the U.S.''. The article lays out very briefly that in the U.S. some experts believe that tobacco taxes will increase substantially and they will be used to fund the new health care plan which is being talked about in the U.S.

I will read this very short article: "Canada may have learned a lesson about the dangers of overtaxing cigarettes, but it has not filtered through to the U.S.". No pun intended. "As Congress and the White House crank up the campaign for a national health care program, tobacco taxes have emerged as everyone's favourite way to pay for it. The only dispute is over how high to raise them. Sam Gibbons, who took over as chairman of the

House Ways and Means committee when Dan Rostenkowski was hit with 17 corruption counts, has proposed a 45 cent U.S. increase, raising the total price to $1.69 U.S. a pack. President Bill Clinton suggested 75 cents U.S. while Senator Edward Kennedy, who chairs the Senate Labour and Human Resources Committee, wants a $1.50 U.S. increase per pack of cigarettes".

There it is. At a time when we are reducing our price per package of cigarettes the Americans are talking about increasing the cost and the sky is the limit, as the article said. This article was in the Washington Notebook column by Kelly McParland. It is a very interesting little section and I encourage members to read it.

[Ken Epp, Reform, Elk Island, AB]

Mr. Speaker, I listened with interest to my colleague's presentation.

My question is with respect to the statistics on the increase in cigarette smoking due to the reduction in the price which in turn was due to the reduction in the taxes. There are some who hold that this merely reflects the increase in the number of people who are now buying cigarettes legally who before were buying them on the black market.

Does the member have any statistics on that and if so, how were they derived?

[Leon Benoit, Reform, Vegreville, AB]

Mr. Speaker, the exact statistics have escaped me. I did read statistics and they were presented in the House earlier. There is no doubt that statistics have shown very clearly that the consumption of cigarettes has increased due to this reduction in cost which was brought about by the lowering of the tax on cigarettes. I cannot quote the exact figure but I am sure one of my hon. colleagues will use it in a presentation later. However, there is no doubt about the impact.

[Grant Hill, Reform, Macleod, AB]

Mr. Speaker, I heard some comment about division in various caucuses on this bill. I wonder if there was a vote taken in this caucus and one member voted against the caucus. Can the hon. member comment about what would happen to that member? Also, if there were dissenting votes from the other side and a vote came of dissent, what would happen to members if they voted against their caucus on such an issue?

[Leon Benoit, Reform, Vegreville, AB]

Mr. Speaker, of course the hon. member knows there was a vote cast against caucus. That is not unusual in our caucus. Members are free to vote and are expected to vote for what their constituents want. That happens commonly. It is extremely common to have people voting differently on various pieces of legislation. It is probably as common in other caucuses as it is in ours.

Of course in our caucus we do propose free votes when it comes to voting in the House on certain issues. Certainly we propose always and it is the requirement and responsibility of all members of the Reform caucus to vote according to their constituents wishes. Even if the caucus takes a position and members have gone to their constituents through formal mechanisms and not just talking about them and have clearly ascertained that their constituents want them to vote a different way than caucus votes in general, then it is the obligation and not just the right of that member to vote in that way.

[Jim Abbott, Reform, Kootenay East, BC]

Mr. Speaker, this bill is very interesting as has been discussed previously. It actually combines or marries three different things the House has been working on.

As a new parliamentarian I find an omnibus bill, which is the description of this kind of bill, to be quite interesting. It begs the question does the government really expect there to be some debate, some pros and some cons? This bill covers the area of a second section of tobacco taxes. It also covers the Air Transportation Act and the reduction of the GST for business meal exemption.

How does the government actually expect a party or even an individual member to be able to intelligently vote yea or nay when such totally unrelated fragments are pulled together in one bill? Or does the government actually have the idea that because it has 177 members it is going to get its own way anyway? Has the government pulled it all into one bill with the expectation that the people in its caucus, once the Prime Minister or the Deputy Prime Minister has risen to lead the way, will follow like sheep? It really begs the question as to why these would have been put together in one bill.

I intend to spend most of my time speaking on the air transportation tax changes, but I would like to address the issue of tobacco taxes. The majority of our caucus is opposed to the reduction of the excise tax on tobacco products. The majority believes it encourages more people, particularly young people, to smoke.

Having been in the field of sales and marketing for an extended period of my life, I appreciate there is always the law of supply and demand that is intervened with by the actual price point of a given commodity. If the situation is that prices for cigarettes are going to be lowered, it goes without saying that consumption will undoubtedly increase. Furthermore, my understanding is that studies have shown that young people are most sensitive to this price point.

The second factor is that the long term health costs for Canadians have not been calculated. With the tremendous amount of legislation which is currently coming before the House, this statement could be applied to probably the vast

majority of the legislation. In fact, there is no costing before the legislation comes before the House.

What will the cost be to the Canadian people? This is a very real part of the reason that when the federal, provincial and municipal debts are combined, we in Canada are in debt at a rate of over $1 trillion. It is because governments simply do not do the costing.

What will the health care costs be for Canada and for Canadians if there is an increase in consumption?

There has been a lot of debate today about the issue of more aggressive enforcement. Looking at the situation as it was prior to the decision of the government to lower the taxes, it is clear that the government was shying away from certain areas of our country and not addressing the issue.

If the government was attempting to address the issue, how hard did it try particularly when one area of our country was identified as having a 70 per cent hold? Of all of the product coming into Canada, 70 per cent was coming in through one very small geographic area, yet the government would not address the smuggling in that area.

Another reason the majority of our caucus is opposed to the reduction of the excise tax is it is believed there should have been new export taxes on tobacco products. I believe it was during the debate on Bill C-11 when I brought to this House two clearly marked Export A cigarette packages.

Both packages had been purchased in Manitoba. One package had been purchased immediately prior to the imminent imposition of the export tax. It was identified as having been made in Canada. It was the green package with white lettering that said "Export A" and "made in Canada" and very proud of the whole issue. That was fine. The second package was purchased a week later from the same illegal vendor. It was clearly marked as having been manufactured in Winston Salem under licence by RJR MacDonald.

The point of export taxes with respect to this product is that they will not work. Clearly that particular company's product was going through Buffalo and back into Canada. It had decided that if there was to be an export tax put on it would simply go to a licensing arrangement whereby it would have its product manufactured in Winston Salem and still be in the marketplace. I seriously question whether export taxes or even the imposition of export taxes as they presently sit really make any difference.

The final point is that constituents in the west are opposed to the tax reduction. Some feel they are being treated as second class citizens because their provinces oppose the reduction of taxes. Obviously what we have done is change the situation so that instead of north-south smuggling now we have east-west smuggling.

It begs the question that I raised earlier when the member for Esquimalt-Juan de Fuca was speaking. Does it really make sense? Is it really proper if we walk away from principles when it comes to laws, if we walk away from the foundation stone of how laws are brought in, the background to the laws? Is that really right and proper?

In other words taxes on cigarettes have basically happened. Over a period of time they simply have happened in exactly the same way as taxes on alcohol and other commodities people want and will pay for. Successively over the last 25 or perhaps even 50 years governments have said that people want or are addicted to cigarettes, that people want or demand their alcohol or whatever the case may be, and that therefore they are a source of taxation.

Over a period of many years-some 25, 30 or 50 years-taxes have happened. They have been added on and on until we suddenly reached the point with a slightly higher degree of sophistication of taking a look and saying that prices were so high on this particular commodity we had dampened enthusiasm, particularly of young people, for the product. Now we get into the whole issue we described earlier: If we reduce taxes will we actually end up increasing consumption?

The following question must be raised: If we are enacting good law and if as a member of Parliament I am expected to vote on various laws, am I actually voting on a matter of principle or a matter of expediency? To this extent, as I have expressed in a previous intervention, I find myself somewhat ambivalent about this specific question, fully recognizing that we have two doctors in our caucus who are very emotionally attached to the particular issue and the reality that if we end up lowering taxes we end up increasing consumption, particularly among young people, and recognizing that these people are faced with the reality that this is what will end up happening.

On the other side of the coin what about the principle that is involved? By saying that the taxes should stay up are we actually attempting to legislate behaviour or influence behaviour in a way that is not correct and not based on the basis of principle?

As I mentioned our data indicates that 40 per cent of total production of Canadian companies was being exported before the changes. Only 3 per cent was being consumed abroad. This shows the extent of the smuggling and this law allows an exemption for the 3 per cent.

The question I have is about the moral responsibility of tobacco companies. I am not speaking about tobacco farmers here because I recognize they are people who planted a crop in the ground, who have equipment and who have capital invested in various aspects of their business of growing tobacco. They are

caught in a real bind on the particular issue. However I would like to talk particularly about the multinational companies and again reflect on what I was speaking about a few moments ago.

These companies suspected an export tax was coming. With abject cynicism they turned around and took a package-and until one looked at it very closely one would not realize it-that had been manufactured in the U.S. I submit for the consideration of the House that it had been manufactured in the U.S. with the full knowledge of people in the tobacco companies that the package would end up being smuggled back into Canada. It would not only be smuggled back into Canada but smuggled in a way that was dangerous to life and limb.

I appreciated the interjection of the member for Glengarry-Prescott-Russell this morning. If his constituents were literally being shot at as a result of the smuggling effort, if there was absolute lawlessness as a result of the smuggling effort, I can appreciate the emotion the member brought to the debate this morning. How much culpability or how much responsibility should there be on behalf of international corporations? I suggest a tremendous amount.

The measure to ensure that unmarked tobacco products sold on reserves in Ontario and Nova Scotia are taxed at the same rate as marked products is a very touchy issue. I acknowledge that. When a commodity will be consumed by people, no matter what their distinction may be, when we have a two-tier tax system and when we have this situation, the difficulty is that it feeds the whole issue of illegal activity. That is really unfortunate.

We also recognize that until the particular legislation is passed and enacted wholesalers and retailers will have difficulty in looking for $150 million in tobacco taxes that have previously been extracted in inventories when the changes were announced. We look forward to the legislation being able to go forward. It is just unfortunate that it was not prepared at the time Bill C-11 was before the House. It would have saved the whole problem. The difficulty is that the government bunched together the tobacco tax question with the other two questions: the air transportation tax and the GST rebate.

We are looking at the fact that there will be a health promotion surtax, an increase of 40 per cent on taxes paid on the profits of tobacco manufacturers. Surely we recognize in the same way as price is a factor in the consumption of tobacco products that advertising must be both a positive and negative factor with respect to the consumption of tobacco products.

The main topic I would like to address is that of the air transportation tax. There has been very little discussion about it as I have listened to the debate today. Perhaps I could give a little background and description about the air transportation tax.

Currently there is a flat fee of $10 plus 7 per cent to a maximum of $40 on all airline tickets purchased in Canada. These fees are part of the Excise Tax Act even though they appear to be closer in function to user fees than actual taxes. This is the positive part. All revenues from the tax are directed toward the Department of Transport which routes the funds to the aviation component of its expenditures.

The reason I pause to mention that I consider this to be positive is that frequently taxes extracted from businesses and individuals do not ever end up where they are supposed to go. They just end up in consolidated revenue. I encourage the government to take a look at this as a model. There is also a new model within the Department of Canadian Heritage under National Parks. The specific revenues it is taking in for campgrounds, for pools and for specific functions are paying for the functions from which the funds were originally extracted. Surely that is the way it should be.

Going back to the air transportation tax, it makes up most of the funding for aviation services provided to all Canadian airports whether public or private. These services include air traffic controllers, aviation control for takeoff and landing, and air navigation costs. It is important to note that the current revenues from this tax of nearly $600 million do not cover the full government cost of aviation which runs at about $870 million.

Whether we are talking about airlines, aeroplane fees or the cost of running airports; whether we are talking about VIA rail and the cost of running trains down the track; or whether we are talking about transportation such as trucking where there are diesel fees and taxes on the fuel actually going into the trucks, historically in Canada we have shied away from making sure the revenue derived from the users of a particular transportation system ends up benefiting that transportation system.

The trucks pay the diesel road tax. Interestingly, CP rail also pays for its diesel locomotives which, the last time I looked, are not using our highways. The CP Rail corporation has to pay for the maintenance of its track, its roadbed and all other infrastructure with respect to locomotives in spite of the fact that a component of the fuel tax pays for roads for its competitors, truckers. It is a bit of an anachronism and probably points out as well as anything the component I am speaking about, that users should pay for the service they are receiving.

The air transportation tax will reduce the tax burden on short haul domestic and transborder flights by decreasing the flat charge per ticket and increasing the maximum fee. Living in Cranbrook I can appreciate many people take a look at whether they want to be going back and forth to Calgary by aeroplane or by road. Coming back to the factor we were just talking about, the costs of gasoline, fuel taxes, road maintenance and upkeep plus the time, I believe this will ultimately be of benefit. It will get more people off the road, through Kootenay National Park

and through the Crowsnest. Probably this will be duplicated in many areas throughout Canada.

The flat fee is decreased to $6 and the maximum increased to $50.

The changes will bring in an additional $24 million in 1994 and $41 million in 1995. While this is an improvement for the reason that I just set out where one has short haul being more competitive price wise because the taxes on the short haul are going down, on the other side of the coin I submit to the government the fact that the changes are only going to be $24 million and $41 million still leaves a significant shortfall in the concept of user pay.

I believe this levy should not be part of our complicated tax system. It is beneficial that the funds do not go into general revenue and that they are spent specifically on aviation. I would encourage the government as it goes through more bills and motions and as it takes a look at the practices within the Department of Transport to take a look at the concept of changing the user fee to full cost recovery basis.

I would suggest that in addition to air transportation tax, there are probably other areas in the cost of running airport terminals and being able to provide services to private pilots. We would be able to take a look at moving forward and getting closer to a user pay principle.

The final section of this act has to do with GST changes for meal allowance. Having been a commercial traveller for a number of years, I recognize the chagrin that was faced by the small commercial traveller who suddenly was faced with the cost of being able to expense his meals and being able to get, for example, shop owners and people he was selling to out of their place of business into a neutral location and being able to talk to them. This was a tax increase to someone who earns their income by travelling, by working and selling with people.

The Reform Party supported the changes when the budget came out on the basis that they amounted to a business subsidy. While we recognize that these expenses are legitimate business expenses for some, the reality is in the overall picture there was a tax break for a select few.

As I just indicated with a tremendous amount of sympathy, to the people who are commercial travellers and business people who use the business expense deduction for meals, it was exceptionally unfortunate for them that they ended up caught in the squeeze between these two factors. However, overall we support that.

On balance and in summary, I consider it exceptionally unfortunate that the government has chosen to cluster these three totally different and unrelated parts of our taxation system together. It is really unfortunate and I hope that in future the government will look with more favour to in this case bringing forward three separate bills so that we can vote on them separately.

[Leon Benoit, Reform, Vegreville, AB]

Mr. Speaker, I have a question. I was going to ask it a little later, however I appreciate the opportunity.

I would like to ask the hon. member who has just spoken to elaborate on how, had he been in government, rather than putting this bill forth as an omnibus bill, he would have broken it down.

[Jim Abbott, Reform, Kootenay East, BC]

Mr. Speaker, as I mentioned at the outset, the difficulty is that when one combines the issue of tobacco taxes with airport tax, air transportation taxes and GST changes for meal allowance, it clearly is unworkable.

The simple answer would be to have brought them forward as three totally separate bills so that they could have been handled and discussed with more intelligence.

The other factor I question is why the government would have chosen to pull C-32 with the tobacco taxes together with these at this time and why it would not have brought it forward at the same time when Bill C-11 was brought forward. Again, as memory serves, from Bill C-11 there were some aspects that were totally supportable but on the other side of the coin there were some serious problems and there was a balance. Had we the opportunity for the section on tobacco taxes of Bill C-32 being combined with Bill C-11, I believe this House would have been able to have much more intelligent deliberation.

[Jay Hill, Reform, Prince George—Peace River, BC]

Mr. Speaker, I listened with great interest to my colleague's remarks. One area he could perhaps provide a bit more insight into is the moral responsibility of the tobacco companies and of the international companies that are going to reap the rewards of an increased level of smoking in our population.

I wonder if he has given any thought to how perhaps we could make the tobacco companies more accountable for the huge increases in our health care costs that are bound to come somewhere down the road so that they could pay their fair share since they are the ones reaping the rewards caused by this lowering of tobacco costs with the increase in the smoking population.

[Jim Abbott, Reform, Kootenay East, BC]

Mr. Speaker, in this instance we have spoken about the connection or the user pay principle. I am wondering if there is not something that we could be taking a look at with respect to a direct connection between their cost of doing business. In the same way that we have no deposit, no return, in other words a deposit system on bottles, cans or glasses, in the same way that we have been talking about user pay for air transportation tax, I am wondering if we could not be seriously taking a look at the connection between the taxes that we should

be levying on tobacco and see them as a specific piece of revenue that would be going toward health care costs.

Additionally, one of the interesting things coming out around the world in all commodities, for example the forest product companies in Canada, is that there has been a glare of light in some of their practices that historically have been unacceptable and have actually been poor for our ecology. In the same way that there has been this glare of light suddenly these companies have taken on the responsibility of responsible sustainable forest practices. They are very proud to be able to show people in their communities and to put on demonstrations of how they are being responsible at this point.

In addition to the actual financial suasion of a tax connection, such as I have just spoken about together with the moral suasion, that is, making them have more of a feeling and an acknowledgement of responsibility for what their product is doing within our community, that is part of the answer.

[John Duncan, Reform, North Island—Powell River, BC]

Mr. Speaker, I have a brief comment. I could speak to illicit some comment here as a proponent of the bill. Does my hon. colleague here really believe that our borders are such that we can keep a profitable small package such as cigarettes out of circulation?

Further to that, without dropping taxes, would we not be using our policing resources to maintain an artificially high price in order to sustain smuggler profits?

[Jim Abbott, Reform, Kootenay East, BC]

Mr. Speaker, that is part of the question that I posed at the outset and why I have clearly stated that I have no position, that I am ambivalent. There is a principle involved, the secondary principle that I did not speak to earlier which is the fact that we effectively were rewarding people for being involved. I am talking about ordinary citizens who were going out and purchasing the illegal cigarettes. We actually rewarded those people by taking taxes off. It seems to me that the principle is all wrong.

Principle is one thing, but when I speak to doctors, nurses and medical practitioners and they tell me of the difficulties that this is going to create by not lowering the taxes I fully recognize that there is a physical reality here. I stand to be convinced but nonetheless I am taking a look at the fact that again we have combined the tobacco taxes with the air tax, with the GST rebate and we will be voting as best we can on what is a poorly cobbled piece of legislation.

[Peter Milliken, Liberal, Kingston and the Islands, ON]

Mr. Speaker, on a point of order, I wonder if there would be unanimous consent to revert to the presentation of reports by committees. I have a report from the procedure and House affairs committee concerning the membership in committees. I consulted earlier and there would be consent to proceed with that now.

[Elwin Hermanson, Reform, Kindersley—Lloydminster, SK]

Mr. Speaker, is that the procedure and House affairs report that we are looking at here? Is that the only one?

[Peter Milliken, Liberal, Kingston and the Islands, ON]

Yes.

[The Deputy Speaker]

Is there unanimous consent?

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Deputy Speaker]

Resuming debate, the hon. member for Calgary North.

[Diane Ablonczy, Reform, Calgary North, AB]

Mr. Speaker, before I begin my discussion of Bill C-32 I would like to comment on the operation of our democratic system, the authority of Parliament to fully discuss legislation and the way that this bill is being moved so quickly through the House.

The first reading of Bill C-32 occurred on May 27, a short time ago. As everyone in this House knows, this is a very complex bill of 62 pages, filled with highly technical information.

The government should show respect for the role of opposition parties to study, analyse and prepare constructive criticism on such bills by allowing sufficient time for comprehensive review.

This is particularly true when a great deal of new legislation, again much of it very lengthy and complex, is being introduced all at the same time toward the end of this session. I believe it does a disservice to our country, to this House and the members' roles in it to be dealing so quickly with some very important legislation and this is one example of that.

By pushing debate ahead so quickly on this and other last minute legislation the government is disrepecting the spirit and purpose of our democratic institutions. Canadians deserve better than this. Canadians do not want to sacrifice principles, respect for democratic process and due process for the sake of expediency.

Unfortunately this expediency has a severe cost in the case of Bill C-32. While Reform supports certain elements of this bill, such as some of the anti-smuggling initiatives, the air transportation tax changes and the meal allowance changes, there is much that is questionable about Bill C-32. It is a flawed piece of

legislation because it deals with the health of Canadians and in the view of many caves into the pressure of the tobacco lobby, discriminates against western provinces and can well contribute to interprovincial smuggling. These elements make it a bad bill, pure and simple.

The first issue which I would like to speak to is the government's unfortunate provision in this bill which removes one deterrent to the threat to the health of Canadians. This is the lowering of the tax on tobacco products. Nothing is more important to Canadians than their health and the health of their loved ones. This concern of Canadians is an especially strong case for young people when it applies to our future generations.

Unfortunately it is this age group that tobacco manufacturers have been targeting for many years with their advertising campaigns. The government, however, seems to have lost the will to combat this problem directly. It decided to lower tobacco taxes without making a proper evaluation of the impact of its actions on health care costs and on possible increased addiction among the nation's young.

As we were reminded last week by the hon. Reform member for Yorkton-Melville, the Parliamentary Secretary to the Minister of Health clearly stated in one of her speeches that the government fully recognizes that the action plan to combat smuggling and the tax measures associated with it would pose health risks. How can the government pursue such measures in good conscience when it knows that one serious result of this legislation before us today may lead to greater addiction and result in heart disease, cancer, and death?

Where is the logic here? Where are our priorities? How are we to believe the government's professed statements about concern for the health of Canadians, indeed statements made today in this House by the Minister of Health showing great concern and great sympathy for a very unfortunate case?. These actions do not square with that professed concern.

I do not doubt that there are some in our country, mainly the tobacco lobby, who are pleased with this legislation but it should not be the concern of this House to cater to special interests, especially interests which put their own profit margins over the health concerns of the nation. This House is here to provide good government to all Canadians and this is the goal of the Reform Party.

Even if we were to consider the idea of tobacco tax reductions as legitimate, this bill does not even handle the tax decrease fairly. The provinces of western Canada which wanted no part of the tax decrease and desperately needed the revenues, mostly to pay for health costs, a good portion of which are incurred by smoking, have been bullied by this government. They have been given no choice. They have lost a great deal of revenue and received no compensation whatever. This is clearly discriminatory in our federal system.

Worse still, western provinces which never had a tobacco smuggling problem before now are having to cope with a large inflow of cigarettes from the eastern provinces that have lower tobacco taxes than they do. This is unfair and it must stop.

We recognize that you cannot beat a plan with no plan so the Reform Party would like to suggest an alternative route to the hasty and misguided path upon which the government has now embarked.

We recommend a plan for restoring tobacco taxes to previous levels should be considered. It is true that tax levels need to be lowered in this country but lowering them in this one instance in this one narrow area without regard for all the consequences is not the proper way to go. The government may complain that increased taxes will again lead to increased smuggling. However that is not wholly true.

As has been mentioned in this House before the majority of cigarettes being smuggled into Canada, in the region of about 70 per cent, were coming from reserves located on Ontario and Quebec borders with New York State. However, due to a U.S. court decision on Monday New York will now be limiting the supply of duty free cigarettes to these reserves based on a per person quota. All cigarettes in excess of this quota will be fully taxed. This means that cigarettes coming through those reserves will already cost about 35 cents more per pack than those legally purchased in Canada.

Furthermore, if the proposed American health tax on cigarettes is added later this year as anticipated, Canadian cigarettes will be cheaper by around $1.50 a pack than their U.S. equivalent. This opens the door for the return to previous taxation levels with no increased risk of smuggling.

The Reform Party would therefore ask the government to act on this development as soon as the House resumes sitting in the fall. If the government still finds that there is a smuggling problem then it should consider the reinstatement of an export tax on those cigarettes sold to neighbouring jurisdictions which are above and beyond our historic levels of cigarette exports, which are about 3 per cent of Canadian cigarette production.

The Reform Party also suggests that the health promotion surtax imposed earlier this year on the profits of cigarette manufacturers be extended from three years to six years.

I would ask the government to introduce a complete ban on all advertising for tobacco products. It is high time that government put the health concerns of Canadians first on its list of priorities. The more time we lose, the more health care resources and lives of our citizens are going to be lost. Now is the time for more considered action.

The Reform Party believes that this is an important debate of concern to all Canadians and we believe that the government should now re-examine this matter of lowering tobacco taxes. A vote against this bill now could be a vote for a better approach to this problem in the future and indeed a vote for a better future for the health of our Canadian citizens.

I would urge members of this House to vote to suspend the implementation of Bill C-32 at this time so that with the resuming of sittings in the fall we can all work together to get it right.

[Jay Hill, Reform, Prince George—Peace River, BC]

Mr. Speaker, once again I listened to my colleague's comments with great interest. I noted that she is advocating the re-examination of this legislation in order to take another fresh look at just where the country is going with this reduction in cigarette taxation.

Could she give us some indication of what she would come up with for a better enforcement strategy. If we are not going to have the reduction in the cigarette taxes and the reduction in the cost of cigarettes in order to combat the cigarette smuggling, what other avenue is open and what would she advocate? Would it be in the form of a higher export tax? Would it be in more money spent on law enforcement? Would it be more patrols of our borders? Would it be those types of things? I just wonder what she would advocate.

[Diane Ablonczy, Reform, Calgary North, AB]

I thank my colleague for his question. It is clear that we need to examine this matter of putting some inhibitions on the use of cigarettes by citizens in our country. There are a number of ways that this can be done, some of which I mentioned when I spoke earlier in the debate. I think this matter of an export tax would take a lot of the economic incentive out of smuggling activity. That is a very important consideration.

I think there can be better enforcement through higher penalties for this type of activity. There has to be a cost benefit analysis for people engaged in cigarette smuggling. If the costs start to outweigh the benefits then we will find fewer people finding it attractive to engage in cigarette smuggling.

We also need to start educating citizens about the cost to them of the use of cigarettes. A lot of us as citizens are under the impression that somehow things are free, particularly health care costs associated with the use of cigarettes and that this is paid for by government or by the health care system. In fact, these costs are paid by Canadians who work very, very hard for their money and who then turn it over to government to administer programs that protect us from the consequences of certain actions.

Canadians need to have some cost benefit analysis for themselves as well, realizing that the buck does not stop anywhere but with us and it does not come from anyone but us. Then I believe our choices will be a little more realistic when it comes to cost benefit.

When we talk about diminishing the use of cigarettes, diminishing the demand for smuggled cigarettes there are all of these aspects of enforcement and deterrence that are tied in together. That is why I recommended to the House a need to just back up a little bit and re-examine what we are doing here. I think we moved ahead too quickly when this legislation was first considered, promised and introduced. I think it can work better if we bring the pieces together in a more thoughtful manner. I think giving it a few more months and re-examining and redrafting some of its provisions would serve our country better than the bill before us.

[Elwin Hermanson, Reform, Kindersley—Lloydminster, SK]

Mr. Speaker, I enjoyed listening to the comments of my colleague from Calgary North. I have two comments I would like her to respond to.

She related in her speech the importance she places on this issue. Knowing her personally I know she would not make those statements lightly. I wonder what her reflections are with regard to how serious the government is taking Bill C-32. I know my eyesight is failing me, but I do not even see a minister in the House during the debate of this very important issue.