Mr. Speaker, I am pleased to rise again on this bill. I would reiterate that the official opposition does not object in principle to the bill which seeks to modernize and make more efficient the operation and collection of the excise tax system, particularly for wine and spirits. Also, it would raise the amount of excise that will be collected from tobacco products.
In that respect, I would like to reiterate our concern that the government frequently uses these excise taxes as a means of increasing its overall general revenues when we believe that taxes are already too high in Canada. The government already collects too much and with a total tax burden 40% higher than that of our major economic competitor the United States, measured as a percentage of GDP, we ought to be reducing the overall tax take of the federal government and not increasing it. Therefore, we would seek to have the government reduce taxes in other areas such as income taxes, corporate taxes, capital taxes and capital gains taxes to offset the increased revenue anticipated from the measures included in this bill.
However the government is addicted to taxation and it looks at bills like this as an opportunity to bring more revenue into the general revenue fund which the finance minister can then use to further pad his surplus through which of course he uses creative accounting, as identified by the auditor general, to hide such financial instruments as these so-called arm's length foundations which are beyond the proper scrutiny of parliament and the auditor general.
Just to underline, I want to say that we seek a proportionate reduction in general tax rates to offset any increased revenues which come about as a result of this bill, including this $700 million increase in revenues from tobacco taxes.
Having said that, I want to turn my attention to the aspect of the bill which concerns me most and which has been emphasized at length by my colleagues in the third party. That namely is the failure of this bill to address the very dire circumstances of the microbrewery sector of the Canadian beer industry.
There are some 50 or 60 brewers in Canada. Only two or three companies are responsible for about 92% of the beer produced in Canada. However there are some 40 microbreweries that are responsible for a small fraction of the total beer produced in this country, and it is a very good product that they produce. I have sampled the odd microbrewed product from time to time, such as the excellent beers produced by the Unibroue company at Chambly, brasserie de Chambly. They are fantastic. Fin du Monde is my favourite there. Of course there is the Big Rock Brewery in my riding of Calgary Southeast, the best microbrewery in Canada bar none, which produces my favourites: McNally's special ale, traditional ale and grasshopper. This is a marvellous industry which produces a truly great product.
As members can tell from looking at me, I did a practicum in this policy area because I wanted to make sure that the products were good. I can assure the House that they are.
The problem is that the people who operate these small breweries are real entrepreneurs. They do not have huge overheads. They do not have access to enormous unlimited financing. They do not have a heck of a lot of equity. What they do have is an entrepreneurial drive and a desire to produce an excellent product. They also have a desire to export it to grow the Canadian economy and increase jobs in their local communities.
I have toured the facilities of Big Rock in Alberta which started as tiny microbrewery about 15 years ago employing a couple of dozen people. It now employs hundreds of people and has become a success story. However its success and the success of other microbreweries in Canada is seriously threatened by the burden of excise taxation imposed on them by the federal government. This is not properly addressed in the bill.
Small breweries in Canada are seeking essentially the same treatment given their competitors in the United States. In Canada we charge breweries 28 cents per litre or $28 per hectolitre of beer produced. That is a flat excise charge regardless of the size of the brewery or the amount of its production. In other words, Labatt or Molson which produce literally millions of hectolitres and have enormous overheads and financing are charged the same excise rate as tiny, virtual cottage breweries that service local markets or mid-size microbreweries like Big Rock which attempt to export to the United States.
This is hugely unfair, particularly given that the United States offers a preferential rate for small breweries which is much lower than the general rate. We are putting our Canadian firms at an enormous competitive disadvantage vis-à-vis their American counterparts. That is why over the past several years nearly a third of the microbreweries operating in Canada have gone bankrupt.
We all know small business is a high risk enterprise in that there is no guarantee of success in any small business. However in general in tax law we recognize the importance and the difficulty of operating small businesses. We recognize that small and medium sized enterprises are responsible for over 90% of the new jobs created in our economy. We also recognize that lack of access to capital and the difficulty of starting and maintaining new small businesses requires reflection in the tax code. For that reason we do not assess a single corporate tax rate on all companies regardless of size. We have a differential between large corporations and small businesses. There is a separate lower tax rate for small businesses up to a certain amount of revenue.
The Brewers Association of Canada and the Canadian Council of Regional Breweries are seeking a reflection of this principle in the application of excise tax law. They are seeking to have an excise tax rate of 40% of the normal tax rate imposed on microbreweries for their first 75,000 hectoliters of production. They define microbreweries as companies with a total production of less than 300,000 hectolitres a year. This would cover companies responsible for only 2% or 3% of beer production in Canada.
The measure has been endorsed by the Brewers Association of Canada which includes the large producers. The large producers do not feel threatened by it. They think seeing the microbrewery sector thrive and succeed would help the overall industry in Canada.
Furthermore, based on a static analysis it would cost the federal treasury only about $10 million in notional foregone revenues. That is a tiny ostensible revenue cost. I have every confidence finance officials would confirm this were they to run a dynamic econometric model on the impact of the policy change. It would result in higher revenues for the federal government. If more companies were able to survive, grow, reinvest retained earnings and employ more people the federal government would collect more in corporate, excise and employment taxes.
Once again, the government ought to adopt the recommendations we have moved in the form of amendments at committee. I hope we will soon come forward with legislation to save the microbrewery sector in Canada from the unfair competition it faces by accepting these sensible policy recommendations.