Madam Speaker, I will be sharing my time with the hon. member for Abitibi—Baie-James—Nunavik.
I am delighted to enter into this debate. Listening to the member for Windsor—St. Clair, the points that he put forward are about as enlightened as a tunnel in a coal mine. I look forward to the day when our former Liberal colleague will again represent the riding of Windsor—St. Clair in the House of Commons and will bring forward some good ideas.
Canada's economy is in transition. The part of the economy that is dominated by the natural resources economy is shrinking significantly. We have many other industries that are blossoming and that is an excellent sign that our government is properly encouraging the development of these industries: high tech sectors, telecommunications, the transportation sector, and information technology. These are all great developments, but we need to understand that our natural resource sector is still the bedrock of our economy, employing thousands and thousands of Canadians.
In fact, if we look at the mining industry, one in eight of our export dollars comes from metals and ores. This is employing people across Canada. We have Diavik Diamond Mines in Yellowknife that are developing now and employing 500 people. We have the Voisey's Bay development that will employ a significant number of people.
These mining companies are acting in a responsible way. They go through the process of due diligence with aboriginal peoples and the environmental issues. This is creating a huge amount of jobs and economic activity in Canada. In fact, our reserves are really under-exploited, so there will be a need to continue to support our mining sector.
This bill would equalize the tax treatment for the oil and gas and the mining sectors compared to the other segments of our economy. In budget 2000 the government reduced the corporate tax rate from 28% to 21% and it left out the mining and oil and gas industries because they had some special provisions. The government consulted and has brought back this bill to create the level playing field.
The intent, as I understood it, was to make it revenue neutral for the oil and gas and the mining sector or perhaps give it somewhat of a lift. The bill does that. It is good for the oil and gas industry. It is good for the potash industry in Saskatchewan. It is good for the junior mining companies, but there is a significant part of the mining industry that is not going to benefit from these provisions. In fact, they are going to be negatively impacted. The reason for that is twofold.
In reaching this accommodation to move the statutory rate from 28% to 21%, the government is phasing out the resource allowance and allowing for the deductibility of mining and oil and gas royalties. In the base metal sector of the mining economy, some of these resource allowances were in excess of the amounts that it was paying in royalties.
To compensate partly for that, the government introduced the 10% exploration mining tax credit. That, by the way, will create more exploration in Canada. That will create exploration jobs in Canada and ultimately that exploration will discover more commercial reserves which will generate even more future employment in Canada.
Even with the 10% mining tax credit, that does not do enough for the base metal sector of the mining industry. We had representations at the House of Commons finance committee from the Mining Association of Canada. It argued that there are eight or nine large companies across Canada that are not going to reap the benefit of these measures. In fact, they are going to be negatively impacted. There were amendments introduced to increase the exploration tax credit from 10% to 20%. Those amendments were defeated and so we are here at third reading.
I will certainly be supporting the bill in general because it is a much needed bill, but as a government we need to deal with this anomaly that has arisen for the base metal sector of the mining industry.
I am sure our government will be reviewing its particular circumstances over the next many months and, hopefully, there will be a way to deal with this unfair anomaly in the next budget. I certainly hope we can do that because this industry is very important to Canada.
We can talk about high tech, we can talk about information technology and all the sectors that are growing and taking a larger share of our economic pie, but we are still natural resource economy in transition and we need to ensure that our mining industry is healthy and that it can compete internationally. In fact at this precise moment the prices of ores and minerals are at a 15 year low. That is complicating those competitive factors for our mining industry.
There is a huge lead time with the mining industry from the time an exploration is started, to the time some discoveries or potential discoveries located, to time the mine is dug, the infrastructure is put in place and the metals are finally extracted. We need to understand that is a unique circumstance in which the mining industry finds itself. By increasing the exploration tax credit we will provide additional incentive for these companies to seek out new reserves and ultimately create more jobs for Canadians.
There is another challenge that I should point out. There is concern that by eliminating the resource allowance this will create some windfall gain situations for a number of provinces. I am sure the Minister of Finance will make his view known to the other provinces that they should reduce their tax burden accordingly. In other words, they should allocate that windfall gain back to the mining sector so it is on an even footing or it is revenue neutral in that sense.
However, we do not have any guarantees of that. If we look at the province of Ontario, we have a new premier who is on the record as saying that there will be no corporate tax reductions. We could end up in a situation where there is a windfall for the province of Ontario because a significant number of mining companies operate in northern Ontario predominantly. They would end up with an increased tax burden because provinces like Ontario would not deal with the windfall in the way it was intended.
The member for Windsor—St. Clair comes from an urban riding. I do not imagine there are many mines in operation in Windsor. There are not many in operation either in Etobicoke North, in my riding. However, we need to remember that this economic activity in our natural resource economy creates jobs in our urban centres as well. We sometimes easily forget that.
If we look at the city of Toronto, Bay Street does a lot of the financing. A lot goes on in Toronto, Montreal and Vancouver. There is a huge amount of economic activity in job creation in our urban centres. I should remind members of the House it is economic activity that is done in a responsible way. This work is being done in our rural parts of Canada in our natural resource sector.
In summary, I would encourage members to support the bill. We tried to get an amendment at committee, which did not pass. However, I hope the government takes it under advisement, meets with the members of the base metal industry, which will be negatively impacted, and comes forward with something in the budget.
I would also encourage our government, through the Minister of Finance, to get the message through to the provinces that any windfall gain experienced by them as a result of this bill, they should introduce measures to allocate that windfall gain to the mining sector so at least this part of the package is revenue neutral.