House of Commons Hansard #96 of the 36th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was natural.


Income Tax Conventions Implementation Act, 1999
Government Orders

12:10 p.m.

Etobicoke North


Roy Cullen Parliamentary Secretary to Minister of Finance

Mr. Speaker, I appreciate the opportunity to speak today at second reading of Bill S-3, the 1999 conventions implementations bill.

This legislation puts into force seven new tax treaties that Canada has signed recently with Kyrgyzstan, Lebanon, Algeria, Bulgaria, Portugal, Uzbekistan and Jordan. It also replaces the existing convention with Luxembourg and amends Canada's treaty with Japan.

These nine tax treaties have been designed with two objectives in mind—the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income

Before discussing the specifics of this bill, there are a couple of points I want to make for the benefit of my hon. colleagues.

First, I want to make it clear to hon. members that Bill S-3 is standard, routine legislation.

Proof of this is the fact that all of these treaties, like their predecessors, are patterned, to a large extent, on the OECD Model Tax Convention, which is accepted by most countries around the world. The provisions in these particular treaties comply fully with the international norms that apply to such treaties.

Another point I want to make at the outset is that, should any conflicting matters arise, tax treaty rules take precedence over the Income Tax Act. This ensures that the objectives I just mentioned can be reached.

Let me take a moment to put this legislation into context. One of the goals of the 1971 review and overhaul of Canada's income tax system was the expansion of our network of tax treaties with other countries, a goal that the government has worked hard to achieve, and with great success I might add. At present Canada has tax treaties in place with 68 countries, a number that will increase to 75 when the treaties in this bill come into force.

It is interesting to note that Bill S-3 is the 24th tax treaty bill to be introduced in parliament since 1976. In the past two years alone Canada has signed treaties or protocols with 14 countries.

Tax treaties are particularly important to two ongoing government priorities: tax fairness and the promotion of trade and investments. I will deal first with tax fairness.

Since coming to office in 1993, the government has been guided by the following principles of tax policy—principles that the finance minister recently reaffirmed in the 2000 budget.

First, our approach to tax relief must be fair. While tax reduction must ultimately benefit all Canadians, it must be directed first to those who need it the most—middle- and low-income earners and especially families with children.

Second, broad-based tax relief should focus initially on personal income taxes where the burden is greatest and where Canadian taxes are most out of line with our history and with other countries.

Third, the business tax system must be internationally competitive. Fourth, broad based tax relief should not be financed with borrowed money.

As hon. members know, the government's fiscal improvements have enabled it to begin providing general tax relief, an integral element of our strategy for sustained economic growth and an improved standard of living and quality of life for all Canadians.

While tax reduction has begun, the government realizes that more needs to be done to lower the overall tax burden and to reform the structure of the tax system. Tax treaties are a part of this overall structure and tax fairness demands that no Canadian should ever find himself or herself caught in the midst of double taxation. As their full title implies, this is exactly what tax treaties work to eliminate.

Let me explain what I mean by double taxation. International double taxation arises as the result of the imposition of comparable taxes in two or more jurisdictions on the same taxable income in the hands of the same person and for the same period of time.

This overlap between source based taxation and residency based taxation can result in adverse and unfair consequences for taxpayers. These tax treaties like the ones included in the bill avoid double taxation by establishing rules for dividing taxing jurisdictions between the country of the taxpayer's residence and the country where the income arises.

Allocating taxing rights not only helps safeguard against double taxation but also reduces the burden of compliance to taxpayers resident in one country who have only limited contact in the other country. An example of this is the reduction of withholding taxes.

Withholding taxes are the taxes countries generally impose on income paid to non-residents. This is a subject I will discuss in more detail a bit later.

The other government priority that tax treaties address is the promotion of trade and investment. Tax treaties are directly related to international trade in goods and services and therefore directly impact on Canada's domestic economic performance.

Their impact is very significant. Over 40% of Canada's annual gross domestic product is tied to exports. Moreover Canada's economic wealth also depends on foreign direct investment as well as inflows of information, capital, technology, royalties, dividends and interest. It is obvious then that the tax treaties contained in Bill S-3 will benefit Canadian businesses and individuals with operations and investments in these nine countries.

Let me outline the additional benefits in addition to the avoidance of double taxation that I have already mentioned. Taxpayers will know that a treaty rate of tax cannot be increased without significant advance notice. The mere existence of these tax treaties will foster an atmosphere of certainty and stability for investors and traders that will only enhance Canada's economic relationship with each country.

Annoyance and complexity in the operation of the tax system will be reduced as the need to pay tax on certain business profits where there is no substantial contact with the other country will be eliminated and a mechanism to settle problems encountered by taxpayers will be provided. Reducing the burden of compliance will encourage more international activity which will have a favourable effect on the Canadian economy.

I referred to withholding taxes as being one of the solutions to the problem of double taxation. I also mentioned that countries usually impose such taxes on income paid to non-residents.

Canada's network of tax treaties provides for several reciprocal withholding tax rate reductions. Without a tax treaty or other legislated exemption, Canada taxes income paid to non-residents at the rate of 25%.

Reduced withholding taxes simplify the tax system and make it fairer. The country where the income is generated can withhold tax usually at a rate of 5%, 10% or 15% on dividends and 10% in the case of interest and royalties. In some instances royalties on copyrights, computer software, patents and know-how are exempt at source.

I will not go into the detailed changes in the tax treaties. They are fully outlined in the bill. They talk about the withholding taxes that will apply to these treaties with respect to dividends and other types of income. It is well laid out in the act. In the interest of time I will move to other provisions.

The treaties covered in Bill S-3 address other tax treaty issues such as capital gains, non-discrimination based on a taxpayer's nationality and pensions and annuities paid to non-residents. Time does not permit me to discuss all of these provisions in detail.

However, there is one issue in particular I must bring to the attention of the House, and that is the proposed rules relating to the taxation of emigrants' pre-departure gains. These rules were proposed by the finance minister and will be included in the 1999 technical amendments bill when it comes before parliament. The proposed rules are recognized in the conventions with Luxembourg, Portugal, Lebanon and Jordan as they address the potential for double taxation in such situations.

However, since the treaties with Uzbekistan, Bulgaria, Algeria and Kyrgyzstan were negotiated prior to these rules being announced, the proposed migration rules allow Canada to give a unilateral foreign tax credit to emigrants until the year 2007. This timeframe guarantees that there will be no double taxation of pre-departure gains before these treaties have been negotiated to take the new rules into account. Japan has asked to review taxpayer migration in future negotiations.

Before closing, I would be remiss if I failed to mention another benefit to double taxation treaties. The second objective in designing these treaties is the prevention of fiscal evasion.

Double taxation treaties encourage the exchange of information between revenue authorities to prevent tax evasion or avoidance. Sharing information helps revenue authorities identify cases of tax evasion or avoidance and act on them.

In summary, I urge my hon. colleagues to support the legislation. The benefits of Bill S-3 are clear.

The thrust of the treaties covered in Bill S-3 is to provide equitable solutions to the various taxation problems existing between Canada and these nine countries.

These treaties will help to secure Canada's position in the increasingly competitive world of international trade and investment while ensuring that Canadian tax policy remains consistent and Canadians are not subject to double taxation. Let us pass the bill in haste and put it into effect.

Income Tax Conventions Implementation Act, 1999
Government Orders

12:20 p.m.


John Duncan Vancouver Island North, BC

Mr. Speaker, Bill S-3, an act to implement an agreement, conventions and protocols between Canada and Kyrgyzstan, Lebanon, Algeria, Bulgaria, Portugal, Uzbekistan, Jordan, Japan and Luxembourg, is a good bill in many respects.

It leads to some of the things to which the parliamentary secretary made reference. I have a bit of a problem with the bill. Once again we have a bill before the House which originated in the Senate, that unelected, unaccountable body. I find that quite problematic.

The Canadian Alliance has always supported measures that might in some way lower the tax burden for Canadians. Avoidance of double taxation would be a very significant result in lowering taxes. The government needs to remove impediments that discourage trade and to foreigners coming to Canada for fear of double taxation. The legislation also has the benefit of reducing tax avoidance concerns.

One point is very clear. Canada is very good at collecting taxes. We have almost as many tax collectors, somewhere around 45,000, as members of our armed forces. Our armed forces are poorly equipped and overtasked. Our tax collectors can be assured that this deterioration will not be allowed to occur in their bailiwick.

The irony of the legislation is that we had a harmonization of taxes in Canada that was almost complete. The GST and PST were rolled into a harmonized sales tax in some jurisdictions but not in others. Other phenomena happened with respect to income tax. Quebec has had a separate collection of personal income tax for some time. Other provinces are now moving in that direction. A lot of this is occurring because we cannot lessen Liberal dependence on a high appetite for taxation.

We were not reassured when the Prime Minister said recently at a Liberal convention that the era of tax cuts was over. Most of us had not realized that it had started. Was he talking about Alberta or Ontario? He surely was not talking about the federal arena.

It is sad to say that total personal income tax revenues in Canada go toward paying the rough equivalent of interest payments on the debt. We have no schedule to pay down that debt and we need that discipline.

Another point I would like to make is that income tax treaties such as the one we are discussing today contain rules that are different from the Income Tax Act. As such, these treaties need enabling legislation. They need an act of parliament to give the treaty precedence over the legislation. That is ironic when most of the treaties our federal government signs require no ratification in this place whatsoever.

Some treaties are much more binding and much more consequential to the nation as a whole. The first example that comes to mind would be the commitments we made on greenhouse gas emissions at Kyoto. That treaty requires ratification in our neighbour's congress and that brings a different discipline to the exercise. We do not have that in Canada but we need it. That will bring a whole new discipline to our negotiators and their political masters. We can be sure that when it comes to tax collection, however, the Liberals will smooth the path in whatever way is required to ensure it happens.

Despite my comments, this bill has merit. The Canadian Alliance will be supporting the legislation.

Income Tax Conventions Implementation Act, 1999
Government Orders

12:30 p.m.


Gilles-A. Perron Saint-Eustache—Sainte-Thérèse, QC

Mr. Speaker, allow me to say a few words before I start my remarks on Bill S-3.

On Sunday, we will be celebrating Mother's Day across Canada. I would like to take this opportunity to wish a happy Mother's Day to my mother, my wife, all the mothers in my riding, in Quebec and in Canada. Mr. Speaker, I am sure you will join me in wishing a happy Mother's Day to your mother.

Let us now revert to less serious matters, namely Bill S-3. The Bloc Quebecois is not opposed to income tax treaties between Canada and other countries. Therefore, we will support this bill, inasmuch as such treaties are aimed at ensuring the just and fair tax treatment of persons—I stress this word, which includes private persons and corporate persons such as companies, trusts and any aggregate of individuals—to encourage trade and investment in those countries.

Although tax conventions avoid double taxation on corporate and personal income, in a number of cases they are a source of problems and tax evasion.

Indeed, although the most recent treaties, which are based the OECD model, are relatively standard, Canada does have some older ones with countries considered tax havens because their individual and corporate tax rates are low, or non-existent.

By signing tax treaties with these countries that are considered tax havens, Canada is turning a blind eye. It treats these profits as if they had been taxed at comparable rates abroad and does not tax them when they are brought back to Canada.

I should point out that, since 1992, the auditor general has raised this issue on several occasions. I want to give an example of these tax havens and what they allow Canadians to do.

Let us consider the case of Canada Steamship Lines. We know that, before 1981, that company operated solely in Canada and, therefore, paid its fair share of taxes. In 1981, our dear Minister of Finance bought CSL and opened subsidiaries in Bermuda, Liberia and Barbados. We know that those three countries have signed agreements with Canada and are considered tax havens.

For instance, Liberia is described by people involved in international trade as the safest tax haven, the best there is. That is nothing to be proud of. Apparently, a Liberian company can do anything as it pleases, and in total secrecy. Liberia has no tax on profits from shipping. The government of that country only requires shipping companies to pay an annual flat amount of $350 U.S. That means that profits made in Liberia are subject to $350 flat tax and nothing more.

CSL, Canada Steamship Lines, also has subsidiaries in Bermuda. Everyone knows that there is no income tax in Bermuda. A company can, through a contract, be exempted of any taxes until the year 2016.

In Barbados, companies are subject to a decreasing local tax, from 2.5% down to 1%. So, the higher the amount, the lower the tax rate.

This brings me back to the fact that the government opposite should continue to sign tax treaties with countries that are not considered to be tax havens. It should spend money and be serious, so as to be in a position to readjust or change the contracts or agreements already signed with tax haven countries, since these involve millions and even hundreds of millions of dollars in tax losses for Canada.

We know how much that government has cut in social transfers to the provinces. It could certainly recover these amounts and put them back in the transfers to the provinces.

Tax treaties establish what is called reciprocal treatment between countries with respect to income tax, provided that tax rates for Canadian businesses and those in the countries with which tax treaties are signed are equivalent or more or less comparable.

I will conclude by saying that the Bloc Quebecois will support Bill S-3, which seeks to ensure a fair and equitable tax treatment for residents and non-residents, and to promote trade and investments between the countries that are parties to these conventions.

Income Tax Conventions Implementation Act, 1999
Government Orders

12:35 p.m.

Progressive Conservative

Greg Thompson Charlotte, NB

Mr. Speaker, thank you for the opportunity to speak on Bill S-3. This bill lets Canada ratify income tax treaties with Kyrgyzstan, Lebanon, Algeria, Bulgaria, Portugal, Uzbekistan and Jordan. It also amends Canada's current treaty with Japan and replaces the longstanding treaty with Luxembourg.

At present Canada is involved in over 60 tax treaties. These treaties set out a framework for taxes on investment income flowing between Canada and other countries. They provide mechanisms to avoid double taxation and prevent tax evasion.

A tax convention is an agreement between two governments under which each government agrees to limit or modify the application of its domestic laws in order to avoid double taxation. Double taxation can occur when the same person or business pays comparable rates in two or more countries on the same taxable income for the same period of time. For example, double taxation would occur if a resident of Japan was taxed in both Canada and Japan on dividend income received from a Canadian company. Preventing this helps to facilitate investment which is something that the Progressive Conservative Party of Canada feels that the government should further encourage. Furthermore, limits on withholding taxes in the country where the income is earned are established. Exemption is provided for certain income that would otherwise be taxed in the country where it is earned.

Tax treaties also seek to minimize or prevent tax evasion. They deal with tax evasion by providing for the exchange of information between tax authorities in the signatory countries. In some cases they provide for assistance in collecting taxes.

Most treaties are based on the model double taxation convention prepared by the Organization for Economic Co-operation and Development, otherwise known as OECD countries.

In regard to Bill C-3, Canada did not previously have treaties with Kyrgyzstan, Lebanon, Bulgaria, Portugal, Uzbekistan and Jordan.

The amendment to the treaty with Japan addresses a specific issue pertaining to Japanese local enterprise taxes. Japan in turn will exempt Canadian enterprises operating ships or aircraft in international traffic provided that Canadian provinces do not subject similar Japanese enterprises to similar taxes. There is also a reduction in withholding taxes on inter-company dividends to 5%.

Changes to the tax treaty with Luxembourg are intended to clarify and modernize the convention's wording. Although the Progressive Conservative Party is supportive of new tax treaties which help to facilitate and encourage new investment, we do have some grave concerns with the human rights abuses committed by many of those countries.

What kind of message are we sending by ratifying such treaties with those countries? For example, Kyrgyzstan, a former Soviet republic that gained independence in 1991 when the U.S.S.R. collapsed, has been known for its rampant human rights abuses. It is located in central Asia and has a population of about 4.5 million people. The government has limited its citizens' ability to change the government.

There were serious irregularities in the October 1998 constitutional referendum. These included widespread cases of police abuse and brutality, including arbitrary arrest and detention before and after the referendum. Not a pretty sight.

I will quote from the Human Rights Watch. It said that:

...the government began with increasing vigour to obstruct the formation, registration, and activities of groups of citizens intending to organize support of opposition candidates or to participate in the upcoming votes as monitors. Authorities charged five prominent opposition leaders with administrative offences—the equivalent of misdemeanours—for forming their group called the Movement for Honest Elections.

Executive domination of the judiciary limited citizens' rights to due process, although the judiciary is undergoing reform. Furthermore, the government regularly infringes on freedom of speech and of the press. Authorities at times pressured journalists who criticized individual members of the government.

Lebanon is another example of a country with dismal human rights abuses. For example, members of the security forces continually use excessive force and torture. There have been hundreds of arbitrary arrests and detentions of people who opposed government policies. Lengthy pretrial detention and long delays in trials are problems and the courts are subjected to an enormous amount of political pressure.

The government also has limited press freedom by continuing to restrict radio and television broadcasting in a discriminatory manner. It has also banned the satellite broadcast of political programming. Discrimination against women and Palestinians and violence against women are also problems in Lebanon.

In Algeria, the security forces are responsible for hundreds of disappearances, routinely tortured or otherwise abused detainees, and arbitrarily arrested and detained many individuals suspected of involvement with armed Islamic groups.

Human Rights Watch reported that on numerous occasions over the last several years, security forces have failed to intervene to prevent or halt massacres of civilians by armed groups and terrorists. Armed Islamists continued their widespread campaign of insurgency, targeting government officials and families of security members, as well as persons whose lifestyles they considered to be in conflict with Islamic values.

Human Rights Watch summed up the situation nicely by saying that the government is involved in, and I quote:

...the gravest human rights abuses, including extrajudicial executions, torture, forced “disappearances”, arbitrary arrest and detention, failure to protect the right to life, and restrictions on the rights of freedom of expression, association, and assembly.

Finally, bombs left in cars, cafes and markets have killed and maimed civilians indiscriminately. It is estimated that over 7,000 civilians, terrorists and security forces have died during the last year of domestic turmoil. Close to 80,000 people have been killed during the last seven years alone.

In Uzbekistan the current government has not permitted the existence of an opposition party since 1993, something maybe this government would appreciate. Nonetheless in a serious sense citizens cannot exercise their right to change the government peacefully.

In a recent report Human Rights Watch stated:

—has independently documented a pattern of political arrest, detention and harassment of family members of political activists and religious dissidents during the past six months. There is also a wealth of credible evidence that police routinely plant small amounts of narcotics or ammunition on persons whom they arrest for their political or religious affiliation.

Furthermore the executive director of Human Rights Watch for Europe and Central Asia said:

The Government of Uzbekistan professes to be preparing for free and fair elections but at the same time is locking up the opposition's family members and throwing away the key. This is no way to achieve democracy.

Currently Canada has only minor commercial interests in Uzbekistan. Total trade in 1998 with this country was only $18 million and there are no major Canadian investments in the country. Why are we then pursuing a tax treaty with a country that has a dismal human rights record and a minimal amount of trade?

In conclusion, although the Progressive Conservative Party of Canada will be supporting the bill, it is important to highlight the many gross and inconsistent patterns of human rights violations in many of the countries Canada is entering into a tax treaty with.

New tax treaties both help and encourage new investment and should be looked at positively.

Income Tax Conventions Implementation Act, 1999
Government Orders

12:45 p.m.

The Acting Speaker (Mr. McClelland)

Is the House ready for the question?

Income Tax Conventions Implementation Act, 1999
Government Orders

12:45 p.m.

Some hon. members


Income Tax Conventions Implementation Act, 1999
Government Orders

12:45 p.m.

The Acting Speaker (Mr. McClelland)

The question is on the motion. Is it the pleasure of the House to adopt the motion?

Income Tax Conventions Implementation Act, 1999
Government Orders

12:45 p.m.

Some hon. members


Income Tax Conventions Implementation Act, 1999
Government Orders

12:45 p.m.

The Acting Speaker (Mr. McClelland)

I declare the motion carried. Accordingly the bill stands referred to the Standing Committee on Finance.

(Motion agreed to, bill read the second time and referred to a committee)

Income Tax Conventions Implementation Act, 1999
Government Orders

12:45 p.m.


Roy Cullen Etobicoke North, ON

Mr. Speaker, I rise on a point of order. I think you might find that there is unanimous consent to see the clock as being 1.30 p.m. to proceed to Private Members' Business.

Income Tax Conventions Implementation Act, 1999
Government Orders

12:45 p.m.

The Acting Speaker (Mr. McClelland)

Is there unanimous consent?

Income Tax Conventions Implementation Act, 1999
Government Orders

12:45 p.m.

Some hon. members


Income Tax Conventions Implementation Act, 1999
Government Orders

12:45 p.m.

The Acting Speaker (Mr. McClelland)

It being 1.30 p.m., the House will now proceed to Private Members' Business as listed on today's order paper.

The House resumed from April 3 consideration of the motion.

Natural Gas
Private Members' Business

May 12th, 2000 / 12:45 p.m.


Rey D. Pagtakhan Winnipeg North—St. Paul, MB

Mr. Speaker, I rise to address the House on Motion No. 298 put forward by the hon. member for Churchill River. I thank him for bringing this matter before the House.

Indeed his concern for the environment and for the high cost of energy in some Canadian communities is truly commendable. I would however like to point the hon. member in a new direction to achieve his worthy goals. Let me explain why I cannot support the motion.

First, I share our government's belief that market forces, not government subsidies, should determine energy prices and supply without undue government involvement or bothersome regulations. This approach has served Canada well over the past decade contributing to economic growth, new jobs, increased resource royalties for provincial governments, and certainty and stability for the energy industry.

The second point of my disagreement relates to the question of federal-provincial jurisdiction. Energy distribution systems, including natural gas lines, are the responsibility of provincially regulated utilities, not the Government of Canada. While it is true some provinces have seen fit to financially support the expansion of natural gas distribution systems, others have not, including notably the hon. member's home province of Saskatchewan.

Finally, I cannot support the motion because it implies that natural gas is the only alternative to higher prices and more environmentally harmful fossil fuels. This is simply not the case.

For the past decade communities across Canada have been exploring new ways to reduce their dependence on fossil fuels, either by using energy more efficiently or by displacing fossil fuels with local renewable resources. More and more they are looking to community energy systems, networks that link environmentally sound sources of energy to space heating loads to deliver on two imperatives: the need for affordable energy and the need to reduce greenhouse gas emissions that are contributing to the global problem of climate change.

Communities are being supported in this quest by Natural Resources Canada of the Government of Canada which for several years now has been working hand in hand with the Federation of Canadian Municipalities to increase awareness and use of community energy systems.

The results of this collaborative effort have been very positive. Interest in community energy systems is on the rise across Canada even in areas where natural gas is readily available. In many cases it just makes more sense economically and environmentally to develop a community energy system rather than to expand our dependence on fossil fuels.

Natural Resources Canada encourages efficiency and the use of renewable energy at all levels.

First, the individual can use current energy sources more efficiently by adopting the most efficient furnaces and keeping them well maintained and by making buildings more efficient by measures such as installing better insulation and more energy efficient windows. Individuals may also be able to use renewable energy technologies such as solar energy, wind energy or small hydro systems. The same principles can be applied at the community level where the opportunities are more diverse.

By adopting community energy systems, waste fuel from local industry or power plants can all be harnessed. By using these types of heat sources, not only are greenhouse gases reduced, but community pollution problems can also be reduced. Let me elaborate on some real examples.

Some municipalities like Charlottetown, the site of Canada's first community energy system, are burning waste wood to produce energy. This not only eliminates a waste disposal problem, it also takes advantage of a renewable energy resource. The first nations community of Grassy Narrows is using a similar approach, in this case burning wood chips harvested by band members. Other communities in the Northwest Territories and Yukon are capturing waste heat from diesel generators to provide space heating.

Another option is to use cogeneration technology to get more out of existing fossil fuel systems by combining both heat and power production.

The cities of Windsor and Sudbury have community energy systems that use this approach. Many more are jumping on the bandwagon because the systems offer benefits that are hard to ignore. They generate jobs through capital investments and keep money in the local economy by reducing the need to purchase outside energy. Moreover, they can greatly reduce or even eliminate greenhouse gas emissions, which is critically important in light of Canada's international climate change commitments.

There are many solutions to the climate change problem and all Canadians have a role to play. It is absolutely essential for governments to show leadership, including municipal governments, if Canada is to meet its Kyoto target of reducing greenhouse gas emissions to 6% below 1990 levels by the period between 2008 and 2012.

Hon. members will also be interested to know that community energy system projects are being supported through the technology early action measures initiative of the climate change action fund which was announced in the 1997 federal budget to move Canada forward in addressing climate change.

I confirm again that the federal government is very serious about meeting this target. This was made abundantly clear in the last federal budget which included more than $600 million to further our search for effective climate change solutions, including new funding of $125 million for two initiatives to help municipalities take action.

The green municipal enabling fund is a five year $25 million initiative to support cost shared energy audits and feasibility studies of projects that will reduce greenhouse gas emissions, improve air and water quality, and encourage the sustainable use of renewable and non-renewable resources.

The second initiative, the $100 million green municipal investment fund, will provide loans and loan guarantees for municipal energy efficiency measures, such as building retrofits that will reduce greenhouse gas emissions. Interest money that accumulates from the fund will be used to provide grants to eligible demonstration projects.

Together these funds will act as a catalyst for implementing new community energy system projects as well as other energy efficiency measures. They are expected to leverage concrete investments from municipal, provincial and territorial governments as well as the private sector.

The recent federal budget goes further by including measures to make it more attractive for the private sector to become involved in community energy systems. We have the manufacturing and processing tax rate reduction, thus lowering the tax rate on private businesses on the sale of steam. We have the capital cost allowance for district energy systems and we will be able to increase that from 4% to 8%, which means that private companies can write off their investment faster. These new budget provisions will add momentum to the growing interest in community energy systems.

In conclusion, many parts of the country do not have access to natural gas networks and the cost of bringing in distribution lines is prohibitive. Community energy systems can ensure more efficient and environmentally acceptable use of energy in these communities, while helping to keep energy dollars in the local economy.

In other areas, natural gas and electricity infrastructures are overloaded. They simply cannot keep up with the demand. Community energy systems can alleviate some of the pressure on these networks by producing electricity locally, making constructive use of rejected heat that might otherwise be wasted, or using local mill wastes to displace space heating from electricity, oil or gas.

I disagree with the motion but I commend the member for the goals and objectives of his motion. I hope he will discuss the initiative of the federal government with the leadership of his community and thereby we can go in a common direction.