Mr. Speaker, I was looking forward to the questions and comments.
We will have a special audience outside after.
Mr. Speaker, thank you very much for the opportunity to participate in this debate. As you know, Bill C-32 represents a very important part of the budget which was first presented on February 22, 1994.
I would like to spend part of my time going over the major features of this legislation, but I would also like to take some time to respond to some comments made by members during yesterday's debate. In the haste of debate we often do not take time to seriously read each other's material and to think about the consequences of what other members might be saying.
The first issue I would like to address is on page 5626 of yesterday's Hansard . A member raises the question: Why does the present Liberal government always seem to be in a hurry to table bills without having the appropriate committee reports prepared?
I would like to leave Canadians assured that the government does not rush through important legislation. We began this debate openly, not in February but back in December, and continued it through January and February, ending up with the presentation by the Minister of Finance.
The measures in this legislation were clearly explained in the original budget documents and enable the government on a technical basis to carry out these measures which are important to the success of the budget.
We gave the opposition parties an opportunity to call witnesses, and of course our own members too, and some witnesses did appear to discuss Bill C-32. The fact is the coalition made not one but two presentations concerning the tobacco tax portions of this legislation.
It is important, therefore, that members of the opposition do not play too loosely with the activities of the government and leave Canadians with the impression that we have been in a hurry and that they have not had an opportunity to speak. I would like to assure the House that anybody who approached the House of Commons finance committee to speak on this legislation was given an opportunity and that in future cases we would give the opposition parties and our own members every opportunity to invite people to speak about legislation that was presented.
As an extension of that, members of the opposition are invited to present amendments both in committee and at report stage so that we can consider ways of improving the legislation.
This legislation deals primarily with tobacco smuggling. As members have discussed in the last few days and previously, there has been a rapid growth in tobacco smuggling in Canada. The contraband tobacco trade has had serious consequences for government, business and citizens of our country. The increasing market penetration of contraband tobacco products has caused a serious decline in government revenues. These revenues are an important part of the government's tax collection and are used to provide funding for programs and services across many areas of responsibility.
Based on these concerns, the government announced a comprehensive anti-smuggling initiative on February 8, 1994 designed to eliminate smuggling as a significant national problem. Leading this national action plan was an increase in enforcement, with greater resources assigned to both the RCMP and Canada Customs to intensify their efforts along the Canada-U.S. border and to target organized criminal networks dealing in contraband tobacco and other products.
In addition to specific excise and income tax changes, Bill C-32 also contains a number of measures that are important to the long-term success of a national action plan on smuggling. This legislation contains provisions for full inventory rebates to be provided in respect of the national $5 excise tax reduction.
All wholesalers and retailers are eligible for complete reimbursement for tax paid inventories of cigarettes, tobacco sticks and fine cut tobacco held as of midnight, February 8, 1994.
Administration of the inventory rebate program is the responsibility of Revenue Canada. This bill will provide the Minister of National Revenue with the authority to pay out inventory rebate amounts once it receives royal assent.
There have been a number of questions raised and I would like to assure the House that we have been listening very carefully to these. Dealing with the question of the reductions, the question
that we hear most often is why does the national action plan on smuggling include tobacco tax reductions?
In 1992 the government announced a wide range of enforcement measures to respond to the substantial rise in tobacco smuggling triggered by federal and provincial tobacco tax increases.
These measures included much tighter controls on the distribution and sale of tax free tobacco products, significantly higher penalties for persons caught smuggling, new proceeds of criminal provisions and the allocation of substantial new resources to customs and the RCMP to strengthen their enforcement efforts and the border and within Canada.
While these measures assisted the government in its fight against tobacco smuggling, they were not sufficient to bring the problem under control. The price differential between Canadian tax paid tobacco products and contraband products were such that the profits from smuggling far outweighed the associated risk. As a result, despite these measures, smuggling continued to grow, representing about 15 per cent in about 1991, 25 per cent in 1992 and 40 per cent in 1993 of the total Canadian market for tobacco products.
The government's national action plan on smuggling is a comprehensive plan that includes new enforcement initiatives, tobacco tax reductions, measures affecting tobacco manufacturers and measures to reduce smoking. There is also an export tax. The tax on exported tobacco products is designed to more closely control export shipments and to prevent any recurrence of the level of shipments that would effectively supply the contraband trade.
At the same time Bill C-32 makes provision for certain limited exemptions to allow tobacco manufacturers to satisfy demand for legitimate exports for bona fide consumption outside Canada. These exemptions apply in respect of the historical level of exports which was in the range of 2 to 4 per cent of total domestic production during the period before tobacco smuggling became a problem. As well exports where the manufacturer provides satisfactory evidence that the national taxes of the country of destination have been paid are also exempt on the grounds that tax paid tobacco products are not used to supply the contraband tobacco market.
The tax is only imposed on manufacturers of tobacco products because only manufacturers can export tobacco products free of domestic taxes and duties.
There is also a health promotion surtax which applies for a three-year period and this has raised the question; why not make it permanent? The health promotion surtax is one part of the government's national action plan on smuggling. It was designed to respond to the potential for increased consumption associated with tobacco tax reductions, providing the funds necessary to undertake an extensive anti-smoking campaign to help prevent any increase in smoking. The government does not expect that tobacco taxes will remain at the reduced levels indefinitely. As such it was not considered appropriate to make the surtax a permanent feature of the income tax system.
Yesterday a member from one of the opposition parties quite accurately pointed out that I raised this point in testimony before the finance committee and it is part of their record that we are very concerned, as is every member of the House, about the levels of smoking and that the actions of the government do not contribute to increased consumption.
To assist the federal enforcement agencies and provinces to control the potential for interprovincial diversion of tobacco products, Bill C-32 contains new liability and offence provisions. An additional federal excise tax will be imposed on a wholesaler or retailer in respect of any sale of marked tobacco products to a person in another province. The legislation also makes the offence subject to a fine for any person to sell or offer for sale tobacco products marked for consumption in one province to a consumer located in another province.
I can assure the House that the people in Manitoba are very concerned about this issue. This particular provision was to address the western provinces.
As I started my speech I wanted to bring to the attention of the Chair that sometimes members react perhaps too strongly to particular measures. I want to quote one member yesterday who said, and I quote from page 5649 of Hansard :
This reduction in taxes to cigarettes is the single most disastrous act of sabotage to the health of Canadian people which has ever been enacted by any government in the history of this country.
That is a pretty strong statement. A representative from the same party on page 5629 said:
This party supports the immediate payment of tax rebates owing to retailers and distributors throughout Canada.