Mr. Speaker, I welcome the opportunity to speak today at third reading of Bill C-13, the Sales Tax and Excise Tax Amendments Act, 2001.
The bill would reaffirm the government's commitment to making our tax system simpler and fairer for individuals and for Canadian business. The principal purpose of the bill is to implement measures relating to the goods and services tax and harmonized sales tax that were announced in the 2000 budget, as well as the additional sales tax measures proposed in the notice of ways and means motion tabled in parliament on October 4, 2000.
The measures were aimed at improving the operation of the GST-HST in the affected areas and ensuring that the legislation accords with the policy intent. The bill would also implement two amendments to the Excise Tax Act relating to excise taxes on specific products.
I would like to begin by outlining the measures contained in the bill that were proposed in budget 2000.
First, the GST-HST is designed to ensure that Canadian businesses and products are competitive in the export markets. A number of measures in Bill C-13 are aimed at achieving that specific objective. Specifically, these measures relate to the GST-HST treatment of export distribution activities.
The bill would implement an initiative referred to as the export distribution centre program. It is an initiative that addresses a cashflow issue faced by limited value added export oriented businesses. It would also help ensure that the GST-HST does not present an impediment to the establishment of North American distribution centres in Canada.
I will speak to the opportunities provided by the establishment of EDCs in a moment.
Bill C-13 contains a measure that would ensure that the GST-HST does not make Canadian suppliers of warranty repair or replacement services less competitive relative to foreign suppliers when in fact these services are provided to non-residents. It also expands on an existing program known as the exporters of processing services program. Refinements to the program would ensure that the GST-HST does not impose prohibitive cashflow costs for businesses that provide storage or distribution services for non-residents in respect of goods that are for export.
Another proposal in the bill relates to the cross-border transactions, in particular the sale of railway rolling stock to non-resident businesses. Bill C-13 proposes an amendment to ensure that the use of railway rolling stock to ship goods out of the country in the course of the exportation of the rolling stock itself would not disqualify it from tax-free treatment.
Bill C-13 introduces the new residential rental property rebate, another important sales tax initiative. The measure stems from the 2000 budget and would be of significant benefit to builders and purchasers of new residential rental accommodation. It would reduce the effective GST rate on newly constructed rental property by 2.5% which is the same federal tax rate reduction that applies to purchasers of new, owner occupied homes under the existing new housing rebate program.
Bill C-13 builds on the government's commitment to continue to work on improving health care and education in Canada. In the area of health care, the bill proposes an amendment to continue in force an existing GST-HST exemption for speech therapy services that are billed by individual practitioners but are not covered by applicable provincial health care plans.
With respect to education, Bill C-13 contains a measure which would ensure that vocational training provided in different provinces receives the same GST-HST treatment regardless of the regulatory regime that exists in each province with respect to vocational schools.
The government recognizes, as do all members of the House, the important role that charities play in helping Canadians and in enriching our communities. The bill proposes amendments to ensure that the GST-HST legislation properly reflects the government's intended policy of generally exempting from sales tax the rental of real property and related goods by charities.
The legislation proposes a number of clarifying amendments to ensure that there could be no doubt as to the application of these provisions for both future and past transactions, for example the issue of excise tax on automobile air conditioners.
Bill C-13 reflects a number of improvements to the administration of the tax system, which is in keeping with the spirit of the government online initiative recently announced by the Prime Minister. There is a movement within government and in the public to ensure that it meets its target of getting on line in the very near future.
I would like to spend a few moments on a part of the bill which has not received the attention it should have received to date. I would like to raise the awareness of the creation of export distribution centres by explaining what they mean and their potential.
The creation of export distribution centres enhances Canada's ability to conduct export distribution activity. The program does not create any artificial advantages for any Canadian community. Instead, it unleashes their inherent geographic advantage. If the 49th parallel did not exist, in other words if the entire continent was Canada, our communities would be host to a significantly greater number of distribution centres for goods produced abroad because of our geographic advantage. That this is not the case today is due to legislative and regulatory barriers.
When we look at the U.S. foreign trade zone program, we find that an overwhelming number of such zones are located in the northern tier along the Canadian border. That is because the northern part of our continent provides the natural entry point gateways to the NAFTA economy.
The EDC program which would be created as a result of Bill C-13 would allow communities in every part of Canada to participate in the fast growing distribution and logistics industry. It is also important to note that the program is not zone specific; it would be market driven. Unlike the United States, which geographically decides where a trade zone is to locate, the Canadian export distribution centres would be market driven.
It is a program that is universal. Any location in Canada and any business could seek to participate. Unlike programs in the U.S. and elsewhere, it does not create any unique privileges for specific locations. I am already aware, as are many close to this issue, of groups in Hamilton, Montreal, Vancouver, Gander and Regina that are pursuing the EDC opportunity. It is truly a coast to coast opportunity.
Many members of these groups have told us that the opportunity to engage in this kind of activity has been there for some time but it has been hindered by existing regulations. Bill C-13 removes this impediment for local community development.
In my riding of Stoney Creek the legislation would allow us to make full use of the John C. Munro Hamilton International Airport as an economic development engine. The airport is well placed and well prepared to attract logistics and distribution companies.
Tony Battaglia, president of TradePort International, the firm entrusted with managing the Hamilton airport, commented that the airport would be able to compete with similar facilities in the United States. The proposed changes in Bill C-13 would provide the necessary tools for Canadian facilities that move goods by air, road, water and rail. These tools would allow such Canadian firms to compete and attract global commerce.
What does that mean in terms of job creation? Professor Michael Tretheway of the University of British Columbia's transportation and logistics program has estimated that within 10 years Canada will be able to create up to 50,000 jobs in the distribution sector. Job creation can only be enabled if we can offer distribution firms in Canada the same advantages that locations in the United States offer to their distributors.
For example, existing programs in Canada allow the storage and re-export of goods in a duty and tax free environment. However they do not allow the addition of Canadian value to the goods being re-exported. The situation is paradoxical. On the one hand, the current program encourages distribution centre locations in Canada but, on the other hand, it discourages the adding of value and the job growth that results from it.
The legislation seeks to redress the imbalance by providing a program that allows the creation of distribution centres in Canada in a duty and tax free environment where value could be added when goods are intended for distribution into the broader NAFTA marketplace.
During the consultation period a concern was brought forward by a number of individuals that the legislation would enable growth in the distribution sector at the expense of Canada's domestic manufacturers. The program has strict limits so that it cannot be used for full manufacturing. Furthermore, 90% of the goods must be re-exported. The program is intended to attract distribution centres for goods already being manufactured overseas and exported to the U.S. and broader NAFTA markets. There is no displacement of domestic manufacturers.
The proposed legislation is strongly supported by Canada's airports. The Canadian Airports Council has been a very strong supporter of the EDC program. It sees an opportunity to develop its airport lands for the benefit of its communities.
The EDC program would allow the airports council to lever its air service and ground transportation networks and build the flow of goods and jobs between Asia and Europe on the one hand and the U.S. and NAFTA economies on the other. Companies in Europe and Asia that wanted access to NAFTA markets were not looking to Canada for foreign trade zone possibilities. However, because of Bill C-13, they now can.
The measures in Bill C-13 that I have outlined today propose to refine, streamline and clarify the application of our tax system. The bill would provide an opportunity for economic development specifically through the creation of export distribution centres. At the same time, Bill C-13 reflects the government's commitment to ensure our tax system is fair. I urge all hon. members to pass the measures quickly.