Mr. Speaker, it seems odd to be discussing a bill proposing a reduction in tobacco taxes and to find in it a completely unrelated measure on air transportation. The latter is certainly the measure we oppose the most in this bill. I am going to the bill in perspective a bit and speak about what led up to it, and then about what we support and what we do not.
First of all, we have to remember that there was a serious problem with cigarette smuggling, especially in Quebec but also very serious in Ontario and getting worse in the other provinces. It was a problem that was spreading from east to west. Of course smuggling was not bad yet in the western provinces, or at any rate had not assumed the same proportions.
To alleviate the problem, given that the situation had dragged on for several years, it was almost impossible to come up with a solution that did not involve reducing taxes, that is, using price-related incentives to bring buyers back to the legal market.
The price of cigarettes had gone up considerably over the last six or seven years and tobacco users were getting increasingly annoyed by the increasing tax burden, especially in conjunction with higher taxes of all kinds. Their annoyance pushed them toward the black market, the underground economy, where they bought with a clear conscience. It became a very common practice.
Various measures were tried to correct the situation, but nothing worked, for as we know there was very little real control in the field, even with all the resources of the RCMP, the Sûreté du Québec and everybody else. It would have been very difficult to solve the problem, because it was so wide-spread. It took so long to react that a contraband network had time to spring up, take over the market and provide excellent service, up to and including home deliveries.
That is why at the start of this session we strongly urged the government to take action, to move rapidly after all the pressure and especially after the "MATRAC" movement in Quebec, where merchants themselves decided to defy the law. The problem had clearly got out of hand and at that point the government decided to act. So as far as reducing the tax as such is concerned, there is no major problem.
There are plenty of people who would say we should be cautious. We all know the negative effects of tobacco use, and it is certainly not our intention to encourage consumption. However, bringing people back to the legal market is one of our concerns, as is encouraging people to respect the law and the system that our society has set up.
Except that at the same time as these measures were introduced, the government said it would be bringing in a battle plan, a plan to encourage people not to consume tobacco products. There is supposed to be a vast education campaign on the harmful effects of tobacco use, focussing especially on young people.
So one of the measures in the bill, a surtax on tobacco manufacturing profits, is going to make the tobacco manufacturers finance the plan themselves. But here a first reservation must be voiced. The anti-smoking campaign is supposed to last three years, while the surtax apparently will last longer than that or be permanent.
So at the end of the three years, the revenue that is supposed to go toward discouraging tobacco use will be clearly reduced because the surtax will no longer be used for the campaign. It should have been stipulated that the money be used for this purpose. Besides, the surtax revenues are higher than the amount required for the plan announced by the Minister of Health, which involves spending $185 million over the next three years, while it is projected that the surtax revenues will be at least $210 million. So there is one thing to query, the fact that this money will not be allocated directly when that was what we were told would happen when the anti-smuggling campaign was announced.
There are measures, there is the surtax, which is also designed to penalize to a certain extent people who really collaborated with the smugglers-to punish the producers, in fact, when we know that they can easily get it back by raising the price to the consumer. So this may simply raise prices again somewhat.
Obviously there are people who think that lower prices will stimulate consumption, except that you have to bear in mind that the black-market price was extremely low, even ridiculously low. So the data that should be considered, the prices that should be compared, are the new price now with the black-market price, and not the price now with the old price, since in any event it may have been as little as one-third of the sales that were made on the legal market, mainly in Quebec and Ontario.
Mr. Speaker, these are measures that do not strike us as so bad overall, but the government has done something really crazy with respect to inventories. All the little vendors who suffered the harmful effects of smuggling over the past three or four years, who already have had to shoulder significant losses in most cases, will only get a partial rebate on the stocks they had at the time the announcement was made or the tax reduced.
Since those merchants paid the full amount of the tax, the government should logically reimburse them in full.
The government has said it will refund only $5 a carton, while in Quebec, for example, the reduced federal tax is equivalent to $10 a carton; so this is only a 50 per cent rebate.
Why only $5? Why make those merchants, who have already absorbed costs over the past few years, pay for a portion of the anti-smuggling campaign? And these are small vendors, convenience store owners, small shopkeepers, who are affected. Some would be spared; the ones with at least 5,000 cartons in stock would get a full rebate. Where is the logic in setting a limit of 5,000 cartons?
I will give you an example. In my riding there is a wholesaler with an inventory of 3,000 cartons. He paid $10 in tax on each of them, but he will get back only $5. This is an instant $15,000 loss. People like hin do not make astronomical profits. And it is a serious matter for him, $15,000. It may ultimately mean laying someone off. It might be argued that the market is recovering and this will enable them to get their money back, but that certainly will not be true in the short term.
When departmental officials appeared before the committee, they said that when the opposite occurred, when taxes were increased, retailers then had an advantage, because they had paid the old tax. So when they sold their products, they profited, if you will, from the difference. It is true, but never had tax increases been so drastic, and now the tax has been reduced.
We are strongly opposed to this. And for the same reasons as those mentioned by the hon. member from the Reform Party who spoke just before me-only the minister can table an amendment involving a tax increase. We tried to make many people aware of this point. Representatives of small businesses tried to bring pressure to bear on the minister, but without success.
This is very discouraging, and it is one reason why we cannot support this entire component, because this measure alone will be very harmful to small business.
I would now like to address another feature of the bill. One might ask why a measure concerning air transportation was included in a bill to reduce cigarette taxes.
When we take a closer look at this measure, the whys and wherefores become a little clearer. They wanted to hide it, so that no one would notice that it was going through. They knew there was good support for reducing cigarette taxes, so they put in a controversial measure involving air transportation that affects primarily the regions and the remote areas. A good way to avoid a more heated and more public debate on this particular point was to bury it in a bill whose primary objective has nothing to do with transportation.
The repercussions of this measure will be very serious in most outlying regions, which are already hard hit by the deregulation of air transportation. In the past few years, the price of tickets has gone up considerably. It costs more to travel from some regions in Quebec to Montreal than it does to travel from Montreal to Paris. That situation runs counter to all logic. We should help regions develop and take charge of their future. While, on the one hand, we are trying to do that, on the other hand, measures that will affect those regions are being imposed. I live in one of those regions; I represent the riding of Témiscamingue, which has Rouyn-Noranda as its major airport. We are very much affected.
What is really going to happen with the structure? The former tax structure had a flat rate tax, and then a graduated rate and a $40 maximum. That means that when we bought a $500 air ticket, we paid the maximum $40 tax.
Now we are told that the flat rate is going to be a little lower and is going to go up gradually, but that the maximum tax will now be $50 on all regional flights. And those are not necessarily long-haul flights. They are flights to the major urban centres. The amount of the tax will increase, because it is not often that a ticket costs less than $500, not often at all for a return ticket.
When you get into prices a little over $600, you reach the new $60 maximum. All air tickets costing $450 or more will be negatively affected; and that is true for all regions. I am not talking about Quebec, or the Maritimes, or the west, as a region in itself; I am talking about regions within Quebec, what we call regions here. The same thing will be true in northern Ontario. The ridings adjoining mine will be affected in the same way, and I am sure that when some Liberal MPs hear from the people in their ridings, they will see that this is certainly not a popular measure. But, since it is going pretty well unnoticed, people will not know exactly who to blame. Did the provincial government
or the federal government increase this tax? It will be hard to tell. People must be told.
The overall consequence of this restructuring of the tax on air transportation will bring in extra revenues of $24 million this year and $44 million next year. Mind you, the tax on short-haul flights, from Ottawa to Toronto or from Montreal to Toronto, for example, will go down. The tax on air tickets costing less than $450 will go down.
The regional flights will bear the brunt of that $24 million or $44 million and even more, since the tax on short-haul flights will generate less revenue. What we are talking about here is the 80 per cent of flights that are short-haul flights which will benefit, and the 20 per cent of flights that are regional flights which will be penalized. It is the 20 per cent of flights to outlying regions that will have to bear the brunt of the $24 million this year and $44 million next year. That is not acceptable, not at all.
A one dollar increase in the price of an air ticket in a region where the price is already exorbitant is completely unacceptable. A $10 tax increase is even less acceptable; it contradicts the logic of all those promises of more air transportation tax relief for the regions, and it contradicts other policies to support regional development and help the regions take charge of their future.
What we have to understand here is that many of those flights are used by people from federal or provincial government departments, travelling to the major urban centres and thus simply passing on higher expenses to the other level of government or within their own government, while penalizing consumers.
It would have been possible to look at international flights, as was recommended to the Finance Committee by the Baie-Comeau chamber of commerce, for example-which, by the way, has worked closely with the chambers of commerce in several regions of Quebec, including those in Val-d'Or and Rouyn-Noranda in my region. Would it not be possible, without necessarily losing any revenue, to look at taxation on those flights?
Through the transport committee and the finance committee, the government is being asked to look at why efforts at deregulation and competition are not bringing prices down. The frequency of flights has gone up in certain regions, but the cost of tickets has gone up, while it was anticipated that it would go down. Perhaps it would be appropriate to take a good hard look at the situation and see what could be done to support regional development.
Because of the fact that small merchants who had stocks of cartons of cigarettes will not be reimbursed and because, in a rather underhanded way, a tax is being introduced that will penalize the regions, we cannot support this bill, even though we find some aspects, such as reducing taxes to fight cigarette smuggling, quite positive.
Overall, the fact that some measures, especially the measure concerning transportation, are quite negative-although the measure concerning small businesses is very negative as well-, means that we shall vote against this bill.
I hope however that some of our colleagues from the Liberal Party-particularly those from northern Ontario-will wake up and pressure their government into eventually restructuring air transportation, allowing for regional development and giving regional authorities a better opportunity to plan their economic development than the present contradictory initiatives taken by different departments. These initiatives have left the regions extremely skeptical as to the federal government's capacity to manage economic development in more remote areas.