Debates of Oct. 4th, 1995

Mining Exploration And Development

[Alex Shepherd, Liberal, Durham, ON]

Mr. Speaker, it is a pleasure to enter the debate on Motion No. 292 in the name of the hon. member for Timiskaming-French River who from time to time is my seatmate. I am sure his constituents in mining communities such as Kirkland Lake, Cobalt and Haileybury are very proud of his initiatives in the House in support of the mining sector.

Over time as Canadians became more involved in the service sector they have forgotten some of their roots that go back in our history over the last 200 or 300 years. The mining sector was a very important part of it.

We all consume goods and products that come out of mining. We are either consumers or work directly in mining or do both. Invariably during the day we consume some products that actually started off in the mining sector.

I will refer to some of the statistics: 4.2 per cent of our GDP is accounted for by the mining sector and 14.6 per cent of Canada's entire export trade is related to the mining sector. It directly employs 327,000 people. These are some of the positive statistics and I will now refer to some negative ones.

From 1991 to 1992, 150 companies in Canada reduced their worldwide expenditures in our mining sector by 30 per cent. There were reductions of expenditures from $430 million to $302 million. In 1987 Canadian companies spent 81 per cent of their exploration budgets in Canada. By 1992 that had declined to only 61 per cent. As the previous member mentioned, ironically Canada and Canadian companies are now the biggest investors in Chile. Over 40 companies are involved.

What is happening to our mining sector? Our own companies are leaving. Why is that? In one word it is taxation in spite of interjections by members of the third party. It was surprising when I heard the hon. member from the third party talk about flow through shares. I have listened to that party constantly talk a flat tax or tax changes which would eliminate flow through shares. We can

see that Reform Party members are basically speaking out of both sides of their mouths at the same time.

Taxation has created confusion. When people are investing in industry, confusion is one thing that forces capital to leave the country. Capital likes certainty and taxation and administration in Canada have created tremendous confusion. With that an outflow of capital has been created.

Mining is a very significant capital intensive industry. Within the industry each job represents $100,000 of investment in capital. Many of the taxes the mining sector faces have nothing to do with income. Once again in spite of the intervention by the member from the third party, many of the taxes relate to provincial jurisdiction and not federal. A more mature attitude would be to realize that tax administration in the mining sector is outdated, outmoded and in dire need of change.

Let me explain some of the taxes so members will understand why the mining sector is having such difficulty. First there is a significant insidious tax, what I would call a capital tax. Many industries in Canada are subjected to it. Basically a capital tax is just that: a tax on the capital invested in a business.

Perhaps that sounds reasonable to some people, but when we take it to the next step we discover that a capital tax also involves a tax on employed capital like bank loans. For instance, the more debt one has, the more taxes one pays With a capital intensive industry like mining clearly this is a very retrogressive tax. The tax is administered by provincial jurisdictions.

I have had some discussions with my colleagues in the Bloc. The problem across the country is that there are all kinds of tax administrations in each province. It is very difficult for a multinational corporation to understand the best place to run a mine based on tax administration in an individual province.

Another aspect that has created great consternation and a great deal of uncertainty in the mining sector has been the whole concept of a resource allowance. Let me try to explain resource allowance in a very short period of time.

The provincial governments levy what are called royalty taxes. Royalty taxes are somewhat closer to a profit type tax because essentially they are oriented on production. There are royalty taxes in the oil and gas sector. There are royalty taxes in the mining sector, basically based on the amount of extraction that takes place.

What the federal government attempts to do is to try to make some kind of recognition that mining companies are subject to these royalty taxes. Some people might ask: Why not simply allow them as a tax deduction? Some people have suggested that as a way to amend the taxation of mining companies.

The problem we have, and getting back once again to the speaker from the Reform Party, is that each province calculates royalty taxes differently. There is a different administration in British Columbia, Alberta and Saskatchewan. There is a totally different one in Ontario and also in Quebec.

What the federal government attempts to do is to develop a formula which will allow some kind of methodology of calculating what would be a uniform royalty tax across all mining sectors. The problem is it has become so unbelievably complicated to calculate what a resource allowance is.

We have had the spectacle of the Gulf case. That company was able to argue effectively under the tax laws for a totally different interpretation of resource allowances than did the federal government. The federal government's bottom line was a loss of over $1 billion worth of tax revenue.

This has created further consternation within the tax administration system and it is continuing to be a problem. Mainly it is a problem because governments cannot sit down together and work things out in a reasonable and harmonious fashion.

That is not the end of the problems of the mining sector. There are all kinds of other non-profit taxes which take place within the mining sector. The hon. member has mentioned gasoline taxes because he basically likes to criticize the federal government, but we also have other forms of taxes, not the least of which is energy taxes.

The mining sector is a huge consumer of electricity. Most of these electrical utilities are administered by provincial administrations. Quite frankly, I believe they have been mismanaged over the years. At one time Canada had a very attractive energy rate making it a cheaper place to undertake mining in North America. That competitive advantage has been lost over the last 20 years through what I consider to be different types of practices and basically mismanaging that resource. As a consequence, our mining sector faces some of the highest energy rates of any mining operation in North America.

This reminds me of a story. I was once in the jungles of Peru, long before I started this job. Somebody asked me: "When I look at Canada, a big huge country, the third largest country in the world geologically, a small but well educated population, why is it that Canada cannot manage its resources effectively and be a world leader?"

I come back to this debate. We are seeing how people within governments, no matter what public administration is involved, whether it is federal or provincial, are basically out to kill the golden goose.

Another area that is a federal concern is payroll taxes. I do not have to tell most members that the increases in UI rates and

Canada pension plan rates have had a tremendous impact on the mining sector because it is capital intensive and also uses a lot of labour.

I believe the various governments sat down in November 1994 and signed an agreement, the Whitehorse Mining Initiative. I will read one section of that concerning the area of taxation: "to establish a tax regime that is seen to be simple, pragmatic, fair, including an overall greater reliance on profit-based taxes as opposed to non-profit-related taxes and charges". I think this is a great objective. And I note this agreement has been signed not only by our Minister of Natural Resources but most of the provincial natural resources ministers. Of course the problem is we have a lot of talk going on but we do not have much action.

In conclusion, I am very supportive of the motion by the member for Timiskaming-French River that has brought this to our attention. I could go on and on about how tax administration should perhaps be different in this country. I believe we must move forward quickly to address the concerns of the mining sector.

[The Deputy Speaker]

The hour provided for the consideration of Private Members' Business has now expired.

As colleagues know, the order is dropped to the bottom of the order of precedence on the Order Paper.

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

[Len Taylor, NDP, The Battlefords—Meadow Lake, SK]

Mr. Speaker, on September 27, just days after the standoffs concluded at Gustafsen Lake and Ipperwash, Ontario, I rose in this House to question the Minister of Indian Affairs about what should happen next. Obviously, the issues raised in grievance by those occupying land and the concerns expressed by many who had not been occupying land had not been addressed and the frustration of aboriginal people concerning land was still outstanding.

I continue to believe that the federal government's approach to land claims and self-government, an approach that is slow, confusing, and filled with uncertainties, is the first area of concern that needs to be dealt with if the frustrations and anxieties are ever to be reduced. Indian leaders throughout Canada and through the Assembly of First Nations have said for many years that the anger among the people of their communities had to be addressed quickly or it would boil over.

Earlier, during the second week of September, when I called on the minister to get involved in the specifics of Ipperwash and Gustafsen Lake, I said that the only way to deal with the slow and uncertain nature of how land claim disputes are currently settled was with the understanding and intervention of the federal Minister of Indian Affairs. Only he has the authority to make the necessary changes. Only he has the jurisdiction to address the issues in a way that will adequately address the problems outlined by so many. Obviously those closest to the issue are the ones who should be consulted first, and those who work in the field must be consulted as well.

It comes as no surprise then to learn that the latest annual report of the Indian claims commission published this summer calls for the development and implementation of a new land claims policy and process. Here is the group caught in the middle between the bands and the government, receiving the applications, hearing and judging the evidence, and presenting the recommendations. Here is a group that does the work saying that it should be replaced; saying that the workload is increasing dramatically and the ability of the existing commission to respond is limited; saying that it is wrong for the government to have a process in place that allows the federal government to be a judge in claims against itself.

To quote the commission, "Everything that we have learned as a commission to date indicates that it is imperative to commence the process of reform immediately. It is imperative that an independent claims body be established to perform at least the initial assessment of the validity of First Nations land claims in Canada."

Upon reading the commission's report the editors of the Montreal Gazette newspaper had this to say: ``It is important that aboriginal communities establish a solid land base. From it, economic development and self-government can follow. In its red book of campaign promises the Liberal Party said the current process is simply not working and promised to set up an independent claims commission. It should do so sooner rather than later.''

That was my sentiment when I first asked the minister if it was his intention to establish a new process in policy.

That was my intention when I said I did not believe it would be in Canada's best interest to have First Nation's people from all across the country who may have legitimate land claims occupying land and leaving the resolution of those disputes to the local police. Land issues are not police matters. They are matters of critical concern to all Canadians and only the minister can deal with them. Therefore I was disappointed when the minister said he had to consult further. I hope he has now had the time to talk to the chiefs.

I ask again, will the government take the first step to relieve the anxieties over the land claims process and establish the new, independent commission called for by the Indian Claims Commission in its 1994-95 annual report?

[John English, Liberal, Parliamentary Secretary to President of the Queen's Privy Council for Canada and Minister of Intergovernmental Affairs]

Mr. Speaker, I am pleased to respond to the question raised by the hon. member for The Battlefords-Meadow Lake on September 27 regarding the 1994-95 report of the Indian Claims Commission and its first recommendation which called for the establishment of a new, independent land claims policy and process.

First, I would like to say that the work the Indian Claims Commission is currently doing in the area of claims is commendable. The minister has the highest respect for this effort.

Second, the Liberal Party of Canada's election platform states:

A Liberal government will implement major changes to the current approach. A Liberal government will be prepared to create, in co-operation with aboriginal peoples, an independent claims commission to speed up and facilitate the resolution of all claims. The commission would not preclude direct negotiations.

Let me assure the House that the government is committed to building new partnerships with aboriginal peoples based on trust and mutual respect. The resolution of land claims is an important part of this initiative.

In fact, the federal government is committed to increasing the rate of land claim settlements. We are seeking innovative ways to resolve the impediments that slow this process. There has been, however, significant progress in resolving claims, including 44 specific claim settlements as well as five comprehensive claim settlements since the government took office.

The minister has invited substantive commentary from First Nations and First Nation organizations on concrete proposals for change and is awaiting further guidance from aboriginal people and others. The government, in co-operation with First Nations, needs to think through how the claims policies could be overhauled within the climate of restraint that affects us all. The recent report of Justice Hamilton will assist in this regard.

It is important all Canadians understand and respect this process as it benefits all Canadians.

[The Deputy Speaker]

The motion to adjourn the House is deemed to have been adopted. The House stands adjourned until 10 a.m. tomorrow.

(The House adjourned at 6.42 p.m.)