Debates of May 27th, 2003

Budget Implementation Act, 2003

[Judy Wasylycia-Leis, NDP, Winnipeg North Centre, MB]

Mr. Speaker, I am pleased to have another opportunity to speak as loudly and as clearly as possible against Bill C-28, the budget implementation act.

Let me begin by saying it has been about three months since the government brought down its budget. The initial flash of the cash has had some time to wear off and Canadians have had time to take a closer look at the significance of the budget in meeting the pressing needs of Canadians.

The closer scrutiny has not favoured the government. As the hoopla dies down, more and more Canadians have come to the same conclusion the New Democrats have, and that is the government has failed to invest adequately in Canadians and has failed to invest in building the society that we want and need for the future of this country and of our children.

The inadequacy of the budget becomes very clear when we compare what the government has budgeted with what Canadians actually need. When we look at what the government has done with the fraction of the surplus it has left, after its ongoing tax cuts and the billions it continues to spend on paying down the debt, we realize just what a low priority the social needs of Canadians are for the government.

The government could learn from the Alternative Federal Budget process. The AFB builds its budget from the ground up, developing a coherent fiscal strategy toward achieving the social goals of Canadians, and it does it all within a balanced budgetary framework. It does not fudge surplus estimates to accomplish hidden agendas. In fact it has been far more accurate than the government in estimating realistic economic performance and surpluses over the years.

In looking at the budget, every sector of our society has come to its own conclusions. Let me just take a look at the issues pertaining to the status of women as one example.

Shocking to us all, Canada has been recently criticized by the United Nations for not living up to the Convention on the Elimination of All Forms of Discrimination against Women. What a scathing commentary on a country so wealthy and prosperous as Canada.

The UN has issued a report suggesting Canada has failed to move forward on a long list of measures to improve gender equality. One of the chief areas of concern was the disproportionate impact on women caused by the government's earlier cuts to social programs, cuts that happened under this government 10 years ago, under the member for LaSalle—Émard, and continued on by other members, including the present leadership candidates who are in the race today. The UN report calls on Canada to re-establish national standards in social programming.

The real test of Liberal commitment on this issue is not what the leadership candidates are saying but whether it is in this budget. Does the budget do this? Is the government's $25 million baby step toward a national child care program a sufficient response?

There are 4.9 million children in Canada under the age of 13. Three thousand child care spaces divided across the entire country will obviously leave hundreds of thousands of women without the support they need to work out of the home. Child care advocates have told the government time and again that even to begin building a national child care program about $10 billion will be needed during the first four years; $1 billion in this year alone.

This budget does not cut it. It does not advance the status of women and take us closer on the path toward true equality between the sexes.

The United Nations also has called for improvements to employment and employment insurance to make it easier for women to enter the workforce and stay there at better paying jobs.

What do we have? We have a government that makes it harder to benefit and keeps inflated premiums to the tune of $43 billion in a surplus. Did the government introduce changes to the EI system to help low wage part time working women access that huge surplus by expanding those covered or by bringing in programs to improve their skills and marketability? No. Not only has it not taken those initiatives, but it is still, as we speak, using public money to finance court battles to keep working women, like Kelly Lesiuk in Winnipeg, from getting the EI support they deserve. I am sure that impresses the world community.

The recent census information released earlier this month by Statistics Canada confirms absolutely that we have to do more. After a decade predominant with the Liberal government at the controls, single parent families, headed mostly by women, continue to lag more than 50% behind the national income average.

Violence against women is a very important area if we are to really deal with the status of women agenda and pursue women's equality. It is an area with a devastating impact on the lives of Canadian women and another area where the United Nations has called for action. Yet despite its acknowledgement of the ongoing violence against women, and tragically evidenced again last week in Mission, B.C., it is not a priority in this budget. For example, more second stage housing is urgently needed to help women re-establish themselves after escaping intolerable, violent or abusive situations. Apparently it is not a priority for the government.

There are so many other areas to address in this budget. I know my colleague, the member for Winnipeg Centre who has led a heroic battle at committee dealing with Bill C-7's aboriginal self government legislation, will have lots to say about how the government and how the budget fails first nations communities, how it has failed to address third world conditions on reserves and how the money in this budget is a drop in the bucket when it comes to that shameful aspect of Canadian history and society.

There is a gap in this budget when it comes to the rich and the poor, when it comes to first nations communities and other Canadians and when it comes to men and women. There is a gap when it comes to a government providing adequate housing, health care, education and child care. There is a clear gap especially in the area of health care, an area that has been an issue before the House time and time again. One would have thought that this budget would have closed the gap, would have avoided what we now know to be the Romanow gap, a shortfall of some $5 billion in terms of meeting the basic requirements of sustaining a health care system for the future.

We had thought we would get some clearer answers about what the share of the federal government is with respect to transfer payments to provinces for health care. We had thought, in the final stages of the budget process, we would get some answers but still we cannot get a straight answer out of the government on health funding; old money, new money, cash and tax points. This is exactly the situation that the Romanow Commission foresaw and tried to avoid.

We have a lot more to say about this budget and why we oppose it. Health care is one of those critical areas where the budget falls far short of what is required. The government's patchwork approach, whether in health, housing, community infrastructure, the environment, may serve the Liberals' short term political interests but it is ineffectual in providing the social investments Canadians need so critically.

Throughout our examination of Bill C-28, New Democrats have presented constructive alternatives and tried to focus the government on investing in Canadians. We have failed to this point. The government has turned away from us, from Canadians needing housing, women needing better employment support and an end to violence, children still mired in poverty, first nations living in third world conditions, those trying to ensure our very survival on this planet, and the list goes on. It leaves us no alternative but to vote against this budget and this bill.

[Roger Gaudet, Bloc, Berthier—Montcalm, QC]

Mr. Speaker, I would like to come back to the amendment of clause 64 of Bill C-28. When the budget was brought down on February 18, the Minister of Finance proposed a retroactive amendment that goes farther than the December 21, 2001, proposal, in that it circumvents the judgments obtained in their favour by school boards in Quebec and Ontario.

In order to start at the beginning of this, I have a letter from Stikeman Elliott dated January 15, 2002, addressed to the hon. member for LaSalle—Émard, former minister of finance, which reads as follows:

Proposed amendment to the GST/HST affecting school boards.

Mr. Minister:

This letter is in reference to the news release issued by your department on the evening of December 21, 2002, regarding the aforementioned subject.

We represent Consultaxe Planification (1996) Ltée, a firm of tax consultants from Montreal, and through them, 111 of the 415 school boards in the provinces of Quebec, Ontario, British Columbia, Alberta, Saskatchewan, Manitoba and Nova Scotia.

We have been instructed to inform you and your colleagues that our clients are completely opposed to the proposal contained in your release. Furthermore, they intend to rigorously defend their interests and their rights on this matter, as they feel they have suffered a serious injustice.

On October 17, the Federal Court of Appeal ruled unanimously in favour of the appellant school boards, the Commission scolaire des Chênes being the test case. The court ruled that studenttransportation is a commercial activity that is eligible for 100% input tax credits, under provisions of the Excise Tax Act (GST/HST) affecting school boards and their provision of student transportationservices.

The appellants were 29 Quebec school boards, whose cases were the first to be appealed.

The first cases started being heard in 1996 and over the years, these same school boards or the corporate entities that have replaced them as a result of the numerous mergers that occurred in 1998, submitted new claims. Also party to these claims were many school boards in Ontario, Manitoba, Saskatchewan, Alberta, British Columbia and Nova Scotia. Most of these claims, at the time of the ruling, were pending before the courts while awaiting the judgment in the test case mentioned above.

At the time of the judgment, the amount of GST in question represented approximately $70,500,000.

On December 21, 2001, the Department of Finance proposed amending the act so that school boards could only claim a partial GST/HST rebate. This amendment,if adopted as proposed, will be made retroactive to January 1, 1991, the date the GST was introduced. The proposal mentions that “the proposed amendment will not affect any case that has already been decided by the Federal Court”.

This means that the initial claims of the 29 school boards in Quebec will be reimbursed because they were the first case to be heard by the Federal Court, but their subsequent claims, as well as those of other school boards whose appeal cases were before the Tax Court of Canada pending the aforementioned ruling, will not be reimbursed.

Amending the Excise Tax Act is one thing. However, our clients feel that amending it retroactively to eleven years prior to the date of the ruling, and affecting cases that are pending before the courts is an abuse of the law and power and constitutes flagrant discrimination against the school boards that have cases pending.

Given your considerable political experience, you can easily imagine the reactions from school boards that have been treated this way. These institutions with cases under appeal feel that they have been prejudiced and deprived of a fundamental right, that of having the government respect a ruling by a federal high court of justice. Your department will no doubt respond by saying that it is respecting the judgment because it did not set aside the ruling involving 29 Quebec school boards, insofar as concerns their initial claims. However, this disregards all of the other cases under appeal, which are based on the same fundamental point of law. In order to avoid incurring needless costs for all of the parties involved, including the federal government obviously, it was decided to suspend proceedings for these cases and proceed first with only the 29 school boards mentioned above. Once a final ruling was handed down by the courts, all of the other cases could have been resolved accordingly. However, the legislative amendment proposed by your department would have the effect of retroactively reversing this arrangement. Needless to say our clients feel that the Department of Finance is playing the role of the better who says: “Heads, I win; tails, you lose”.

Therefore, we urge you, Mr. Minister, to reconsider this proposed amendment in order to make it fair for all school boards in Canada who were involved in these claims. This amendment could be made retroactive only to the date of the judgment for all school boards in Canada with cases pending before the courts at that time.

Respectfully,

The Honourable Marc Lalonde

c.c.: Members of the federal cabinet

I do not know if all of the government members received a copy of this letter, but I am prepared to give them one.

[An hon. member]

It's all right, they already have them.

[Roger Gaudet, Bloc, Berthier—Montcalm, QC]

My colleague tells me it has been done. If anyone does not have a copy, I am prepared to provide one.

The bar associations of Quebec and Canada have spoken out against the federal government in connection with this bill. On April 30, 2003, the Trois-Rivières newspaper Le Nouvelliste ran an article reporting that “The Quebec and Canadian bar associations are opposed to a legislative amendment relating to the reimbursement of the GST for transportation services provided by Quebec and Ontario school boards”.

It went on to say:

The Barreau du Québec, and the Canadian Bar Association, have come out very strongly against Ottawa's intention to thumb its nose at a court decision and to legislate retroactively, somethingthey describe as a “dangerous attitude liable to undermine public confidence in the courts”.

The two associations have written the Minister of Finance... and the Minister of Justice to express their opposition to a legislative change outlined in the February budget.

This letter was sent on April 30, 2003. It goes on:

This measure, which involved the reimbursement of GST for transportation services provided by Quebec and Ontario school boards would have the effect of retroactively invalidating court decisions in favour of the school boards, not to mention reneging on certain previous commitments by the federal government.

With this attitude, the federal government “Is showing no respect whatsoever for these judgments and these commitments, which from our point of view represents a serious attack on the principle of the authority of a final judgment, and is contrary to the proper administration of justice. This is what the President of the Quebec bar association, Claude G. Leduc, wrote to the two ministers. Legislating in this way discredits the judiciary process and is liable to undermine the taxpayers' confidence in the courts”.

His Canadian Bar Association counterpart, Simon Potter, was equally critical. “We are convinced that the policy behind any retroactivity is totally unfounded and dangerous as well”, he wrote.

In October 2001, 29 Quebec school boards won their case in Federal Court, when it recognized that school transportation was a commercial activity and thus entitled them to full reimbursement of the GST paid. By virtue of the court decision, Ottawa was to reimburse GST overpayments totalling some $8 million.

After numerous technical wranglings, the case ended up before the Tax Court of Canada this past January. Here the federal government accepted a ruling that it would comply with the judgment at first instance, provided the school boards withdrew their appeal to the Federal Appeal Court. The federal government consented to apply the judgment to the Ontario school boards, whose case was still pending.

The budget presented a few weeks later totally altered this promise by the federal government . The amendment is currently being considered in committee, and school board representatives will present their points of view before the committee.

According to... the Bloc Quebecois MP, the government is going too far with this. We are entitled to expect the government to amend its legislation to reflect court judgments, in order to remedy shortcomings for the future. The retroactivity proposed by the federal government is problematic. “This may represent an extremely negative precedent... It will greatly weaken one of the pillars of democracy, which is the authority of a final judgment”, according to the Bloc Quebecois finance critic.

I wish to inform the House that I will be voting against the budget because of this clause concerning the school boards, clause 64 of Bill C-28.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I will take this opportunity to say a few words about Bill C-28, the budget implementation act.

I do not know if it is common knowledge but my riding of Winnipeg Centre is the third poorest riding in the country by whatever economic measurement we use, either by the incidence of poverty per the percentage of people living in poverty or by the average family income. By either of those measurements I am not proud to say that my riding of Winnipeg Centre, the core area of the inner city of Winnipeg, ranks third in the country. In fact, 47% of all the families in my riding live below the poverty line and 52% of all the children in the core area of Winnipeg live below the poverty line. It is even more severe in using that family income measurement.

I do not say this to complain or file a grievance of any sort but only to emphasize that we watch the introduction of new budgets with great interest. When so many of the people in my riding are marginalized or live close to the margin, government spending becomes key and paramount in their quality of life issues.

We looked forward to a return to social spending within the last budget with some optimism. As my colleague from Winnipeg North Centre, the riding next to mine, pointed out very capably and passionately, the budget was a great disappointment in many respects if we were looking for a return to social spending, but I am not going to dwell on that.

With the limited amount of time I have, I would like to point out two anomalies in the income tax system that could have been addressed and should have been addressed in the budget. Both are outrageous and both are unfair, especially to lower income, marginalized people such as those living in poverty in my riding.

First, surely Parliament never intended that breaking the law should be tax deductible when the Income Tax Act was crafted. Because of a 1999 Supreme Court ruling, businesses incredibly can deduct fines, penalties or levies from their taxes as a business expense provided the penalty was incurred in the course of earning income. Most Canadians would find that absurd. I find it outrageous. It is not only bad public policy to reward bad behaviour but it undermines the deterrent value of a fine, surely, if the guilty parties can have their fines automatically reduced by writing them off on their income taxes. It is crazy.

I have been badgering the government for years to plug that outrageous tax loophole. The whole issue could be resolved with a simple amendment to the Income Tax Act to make it clear that any fine or levy imposed by law on a taxpayer is not to be considered a tax deductible expense.

That is what the United States did 35 years ago and we have failed to do it. As a result, it is open season for anyone who incurs a fine, and that fine can be quite broad. In fact, chartered accountants across the country are advertising this on their web pages. Fully 36 chartered accountant firms we have found are advertising this on their websites. “Penalties, fines, we can help”, it says, “it should be noted that the Supreme Court is very clear that this case is not limited to the situation that it originally ruled on”. They say that other penalties incurred for the purpose of earning income, including GST penalties, provincial sales tax penalties, parking fines and it goes beyond that to workplace safety and health violations, environmental pollution, environmental degradation fines are tax deductible. They should not be.

I asked the revenue minister to address this issue back in 2002 as soon as I learned about it. It was actually the attorney general of Manitoba who wrote me and said “Can this be true? Can this be for real? Are you telling me that fines are tax deductible?”

I could not believe it, so I investigated it and sure enough, it was true. I asked a question of the revenue minister back in 2002. I cannot find the question now but I said that I could not deduct my parking tickets, so why could a business deduct its fines? At the time the revenue minister, to her credit, agreed and was reasonable about it. She virtually agreed with me that this had to be looked into because it did not sound right.

Six months passed and the government did nothing about it, so I asked her again. This time she hedged the question and said that it was really a matter for the Minister of Finance. I asked the Minister of Finance when he was going to correct this outrageous tax loophole. He said that we would be pleased with this year's budget, that the answer to my question would be found in this year's budget. Well, it was not there. The government decided not to plug that outrageous tax loophole.

Here is an example. Last November the courts penalized Canada Steamship Lines with the largest fine ever issued for ship source pollution, but the deterrence value of this fine clearly is undermined because our income tax laws allow CSL to write off the penalty as a business expense. We do not know if it will because that is private tax information and we do not have access to that information, but it could and many others do.

I can see why the former finance minister was loath to plug this outrageous tax loophole, but what about the current finance minister? What excuse does he have to not plug this outrageous loophole? That offends me and I raise it now and serve notice to members on the government side that I am not going to let this issue die.

I tried to introduce a private member's bill to this effect. The House leader blocked it, saying that to deny this tax loophole to criminal behaviour was tantamount to raising taxes and therefore it was a money matter, and therefore a ways and means motion was needed to precede the private member's bill. What an absurd argument, but it was upheld by the Speaker, I regret to say. That is the first issue that should have been addressed in the budget.

The second thing, with the little time I have left, is that many people would be surprised to learn that the highest taxed Canadians are not millionaires, nor are they people who make over $100,000 a year. People who make over $100,000 a year are in the highest category at 46%. We should know that, as that is the bracket in which MPs find themselves. The highest taxed Canadians are actually low income seniors whose earnings are so low that they qualify for the guaranteed income supplement.

Here is what happens to low income seniors. Anything they earn above the basic deduction is taxed at 26%, but dollar for dollar they lose their guaranteed income supplement at a rate of 50%. We are talking low, low income here. If seniors are lucky enough to enjoy some dividends from small investments they may have made during their lives which supplement their retirement incomes, but they are receiving some guaranteed income supplement, they are losing that at 50%, plus they are being taxed at 26%, for a total of a 76% tax bracket.

Low income seniors are in the highest tax bracket in the country and that is wrong. They are arguably the poorest people in society. Anybody who is poor enough to qualify for the guaranteed income supplement is very poor. However, because of an anomaly in the Income Tax Act, they are paying taxes at 76% on any dollars they make above the basic tax exemption. That is absurd. That is as outrageous as the tax write-off for business corporate fines.

Both of those things could have been and should have been addressed in the budget. We made the government aware of both of those issues and it consciously chose not to address them.

[Alexa McDonough, NDP, Halifax, NS]

Mr. Speaker, I am very happy this afternoon to have an opportunity to address at third reading stage Bill C-28, the budget implementation act.

I am particularly delighted to have an opportunity to follow my colleague from Winnipeg Centre in addressing Bill C-28. I do so for two reasons. One is that it allows me to pay tribute to the member for Winnipeg Centre for the Herculean, heartfelt effort he has put forward in standing together with first nations people to oppose the insulting, disrespectful, so-called first nations governance bill that is being rammed through by the government. It has several connections with the misplaced budget priorities we are here debating at this moment.

Second, I am very pleased to follow the member for Winnipeg Centre to simply echo my total support for the two issues he has yet again brought to the floor of the House of Commons. Let me just repeat them, because it bears repeating until the government finally addresses both of these anomalies, the first being the absolute obscenity of the lowest income seniors in this country finding themselves in the highest tax bracket, the 76% tax bracket, because of absurdities in the tax act. This is a form of tax unfairness that exceeds almost any other obscenity or absurdity that the government has sponsored in its 10 years in office. Surely it is time to remedy this obscenity.

Second, and equally absurd, is the reality that it continues to be available for corporations in some instances to write off as legitimate business expenses fines that have been imposed upon them for breaking the law. Whether it has to do with environmental issues, with environmental irresponsibility for which they have been convicted, or whether it has to do with labour practices that are completely unacceptable for which they are fined, such as violations of health and safety provisions, for example, or other forms of irresponsible, anti-social behaviour, it remains the law of the land, laws continuing to be supported by the government, that such offences can in some instances be written off by corporations.

Surely members of the Liberal government can understand the connection between the obscenity and the absurdity of those continuing practices of the federal Liberal government. The fact is that the member for Winnipeg Centre speaks from his heart about the high incidence of poverty in his riding and still in far too many communities throughout this country, because there is a connection. It is what budgets are about. We are here debating the budget implementation act.

What budgets are about are priorities. What budgets are about are what kinds of spending priorities a government adopts and what kinds of spending priorities the government ignores, priorities that ought to come to the fore. It cannot be an accident that we see juxtaposed here the kind of absurd tax unfairness and tax write-offs about which the member for Winnipeg Centre has spoken yet again. It is not just the continuing incidence of poverty in this country, but the growing gap. We have the growing gap between the rich and the poor in this country and the increasing squeeze on middle income Canadians.

I know that one of the things already addressed by my colleagues in the NDP caucus is the new provisions for the Canada social transfer. I do not want to use up my short amount of time to talk about the unhappy history of how we got to this point where now we have the government scrambling to try to repair the damage done when this government made a decision to effectively tear up or, perhaps a more appropriate image, smash the Canada assistance plan, toss the established program funding out the window and replace it with the Canada health and social transfer.

We know what has happened as a result of that. The increase in poverty, especially among the poorest Canadians, has been alarming, because the reality is that before the government tore up and threw away the Canada assistance plan, there was at least in place in the country a protection literally encoded in our laws which said that “as a citizen you will not go hungry and homeless”. That was the purpose of the Canada assistance plan.

Yes, the level of support under the Canada assistance plan often fell short of real needs, and yes, the adequacy of housing supplied often fell short, partly because the funds were inadequate from the federal government and also in many cases because the funds from provincial governments in the cost sharing of that were inadequate. But at least there was an assurance that people had a remedy in law if they were refused the basic subsistence requirements to put food on the table and to have a roof over their heads.

Has that been a priority of the government? No. We have seen the damage. Now the government brings in what is supposed to fix up the mess it created. The government has removed health so that we have a separate health transfer. That is some progress, because at least there was more accountability and it was clearer what dollars were going where for Canadians to see, to understand and to try to influence if they wanted to see change. But we still have in a kind of unaccountable lump together the remaining aspects of post-secondary education, income support and early childhood education and child care.

Again the government has not really learned its lessons and has not begun to address what is needed here. Let me say that I think this is an occasion on which we should be willing to recognize that one of the really important elements of the Romanow commission, the Commission on the Future of Health Care in Canada, was that there was a broad process of consultation around future health priorities. Although I think the government has fallen far short, and this is another criticism of the budget, of giving the resources recommended by the Romanow commission to repair the damage to our health care system and extend it as it needs to be extended to deal with unmet needs, at least there was a broad public consultation. There is no assurance whatsoever that the same kind of consultation is going to go on around the desperate problems created by the government's lumping together in an unaccountable way health, social welfare, post-secondary education and child care, and I think it is one of the flawed aspects of the legislation that it fails to do that.

Finally, I just want to say that it is very important for us to learn from our history. For that reason, I say and acknowledge that museums are important. It is also absolutely beyond the comprehension of most thinking Canadians how the government reached the decision to spend close to $100 million to create what I think we all fear is a history of political thought in the Liberal tradition in a political history museum here in Ottawa.

Instead of fictionalizing the flawed legacy of this Prime Minister's government, surely what it should be doing is fixing the misplaced priorities. That starts with adequate funding for existing museums struggling to keep the roofs from leaking and struggling to protect their exhibits, instead of creating what is surely going to become the ugliest part of the Prime Minister's legacy of all and will stand out there for all to see as a monument to the misplaced priorities of the Prime Minister's era in this political history museum, one hundred million dollars' worth.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Mr. Speaker, it is a pleasure for me to speak on Bill C-28, the Budget Implementation Act, 2003.

For the benefit of those listening, when we talk about adopting a budget, clearly, we expect to have a budget that contains measures to resolve obvious problems.

I am going to talk about one of these problems. I do not think there is a single Quebecker or Canadian who is unaware of the serious problem facing the Canadian airline industry. We all know that this situation is the result of the horrific events of September 11, 2001.

These events were in no way the fault of the airline industry, the men and women who are the brains behind this industry. It was the terrorists, who chose to use an airplane as a missile, who inevitably shook the airline industry worldwide.

Canada has suffered and is still suffering. Then came SARS, severe acute respiratory syndrome, which has been another blow to the airline industry.

All the industry stakeholders, not simply those in the aeronautics or aviation industry, but the entire travel and leisure industry has told the government, “Look, you are preparing a budget. You chose, in budget 2002, not to help the airline industry”. That is what happened. Despite requests at the time by Air Canada, which had immediately asked for $2 billion in assistance, the government chose to ignore this request and even withdrew the loan guarantees it had intended to announce, since Canada 3000 had declared bankruptcy. So, the government chose not to provide any assistance.

The only assistance the federal government provided was compensation to pay insurance premiums. Naturally, after September 11, the insurance premiums of airlines, particularly liability premiums, have practically quadrupled.

So, the government, like other governments around the world, decided to provide assistance as far as insurance was concerned. That is the only international initiative that the Canadian government decided to copy. The United States implemented an airline assistance program. The only thing Canada chose to copy was to compensate airlines for insurance rate increases.

Of course, the government thought that things would get back to normal. For those who are listening to us, this also gives us the opportunity to make a short analysis of the issue of Air Canada, which was asking for a $2 billion assistance right from the beginning. The federal government decided not to help it.

What the government realized was that Air Canada could dig into some cash flow, that is that the company decided to do some accounting, to sell its aircraft and to rent them, which allowed it to get more than $2 billion in cash flow.

Of course, once again, I believe this was the beginning of the end for the company. From the beginning, it had well targeted its $2 billion needs, considering the events of September 11 and the problems that it knew the industry would face during the following months. So it decided to dig into its own accounts. It sold its aircraft and rented them, getting some cash flow from the sales. In this way, it was able to survive for more than a year on its reserves.

Except that the airline industry did not recover. In the budget of 2002, which was adopted in December 2001, as members will remember, the government decided to impose an air security tax to be able, once again, to gain some revenues.

It did not help the industry, or not much; $180 million was set aside to compensate for higher insurance premiums; in addition, the industry was penalized with a supplementary tax of $24, which brought in nearly $400 million to the government.

When it was all added up, with the security tax, Canada's airline industry was paying nearly $280 million more after the events of September 11 than it was before. This problem is not limited to Canada. It is the worst disaster in any industry of any sort, across Canada. The result of the 2002 budget was that the government's revenues increased by nearly $280 million, leaving out the compensation paid to the airlines for insurance premiums. Thus, we are increasing our revenues on the backs of the airline industry. That is Canada.

In 2003, the entire airline sector, all the workers in it, this concentration of brain power that works to design the airline industry, expected that the 2003 budget would correct this error. The industry expected that the airport security tax would be withdrawn. What happened was a decision to cut the tax by half and thus collect about $200 million. That will just about cover the government's spending of $180 million to compensate the airlines for increased insurance premiums.

Two years later, with the industry as unhealthy as ever and affected by other crises such as SARS, the government is still getting the same level of revenue from this industry as before the events of September 11, 2001. Now I know why we are getting close to using extraordinary measures. It is because of such measures that a company such as Air Canada has had to resort to bankruptcy protection. We can blame Air Canada for many things, for making bad decisions in 1997-98, but it is not the fault of Air Canada employees or those of any other airline that terrorists decided to use their aircraft as missiles on September 11.

This is what makes this budget difficult to swallow, and this is why the Bloc Quebecois will vote against it. Why? Because we had a real problem. It is one example, but there are others, and my colleagues told the House about some of the other problems with the 2003 budget.

There is a serious problem, which has been affecting the airline industry as well as the tourism and recreation industry because of the events of September 11, 2001, and also because of the severe acute respiratory syndrome, also known as atypical pneumonia.

The airline industry is going through a crisis because of all these events, and this budget will provide no help. As I was explaining earlier, in 2002, the industry was hit with a $220 million tax. This budget reduces the tax by 50% and brings the revenues from the airline industry back to where they were before September 11, 2001, and the industry is still going though a crisis.

Men and women with various skills who are internationally known for their qualities as workers in the airline industry have lost their jobs in the last few weeks or will lose them in the next few weeks. Why? Because the federal government has simply decided to keep its money and not to help the airline industry. This is probably one of the most serious problems in this budget, the fact that the government will keep collecting a security tax of $12 per passenger that is harmful to the industry.

[The Deputy Speaker]

Is the House ready for the question?

[Some hon. members]

Question.

[The Deputy Speaker]

The question is on the motion that the question be now put. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Deputy Speaker]

All those in favour of the motion will please say yea.

[Some hon. members]

Yea.

[The Deputy Speaker]

All those opposed will please say nay.

[Some hon. members]

Nay.

[The Deputy Speaker]

In my opinion the yeas have it.

And more than five members having risen:

[The Deputy Speaker]

Call in the members.

And the bells having rung:

[The Deputy Speaker]

The recorded division is deferred until 3 p.m., after oral question period.

The House resumed from May 13 consideration of the motion that Bill C-36, an act to establish the Library and Archives of Canada, to amend the Copyright Act and to amend certain acts in consequence, be read the second time and referred to a committee.

Library and Archives of Canada Act

[Sarmite Bulte, Liberal, Parkdale—High Park, ON]

Mr. Speaker, I am delighted to speak to Bill C-36, and act to establish the library and archives of Canada and to amend the Copyright Act.

Bill C-36 would create a new institution to be known as the library and archives of Canada which would be the successor to the National Library of Canada and the National Archives of Canada. The new bill would continue the existing powers and responsibilities accorded to the National Archives of Canada and the National Library of Canada under their respective statutes and would combine them into one statute.

The National Library of Canada and National Archives of Canada would have the same legal status. What does that mean? It would be a departmental agency within the Department of Canadian Heritage. It would be under the direction of the Librarian and Archivist of Canada. It would also be accountable to the Minister of Canadian Heritage.

The bill would modernize the existing functions and powers of the two institutions. It uses neutral wording wherever possible and harmonizes activities that were previously conducted individually by both institutions. The bill introduces a new term, “documentary heritage”, to include both records and publications collected by the new institution. The more appropriate functional term, “publication”, has been used in place of the former term, “book”, and the definition of record has also been made functional rather than descriptive. A modernized legal deposit regime has been provided that would extend to electronic publications and a new power to preserve the documentary heritage of Canada as found on the Internet has also been introduced.

During the debate we have heard about the benefits that would be associated with the creation of this new library and archives of Canada. Generally we will find that there is consensus that indeed this is a good idea and it would certainly do an excellent job of protecting and monitoring Canada's documentary heritage. I do not think that we will find much disagreement about that here in the House.

I do not want to go over the same issues that have already been discussed. Instead, I would like to address a beneficial aspect of the bill that has been so far overlooked in the debate and that has to do with changes to the Copyright Act. I know that one of my colleagues has already addressed one element of the copyright issue, the one dealing with Internet sampling. However, Bill C-36 also contains other amendments to the Copyright Act that are absolutely necessary to the work of this brand new agency.

Copyright is an extremely complex and contentious issue. It has been so for a very long time. In fact, in the 19th century, Charles Dickens was angered by the fact that citizens of the United States were beyond the reach of British copyright law. They could copy and produce his work, and profit from his labour.

Today, ironically, the shoe is on the other foot. It is the giant American entertainment industry, among others, that is angered by pirated movies produced in Asia or music which is downloaded from the Internet. And it is not just music which is downloaded by 10, 13 or 14 year olds, it is also being downloaded by adults. I would like to add my voice to those who are angered by this pirating and downloading. I would even go so far as to say that what they are doing is tantamount to theft.

I believe it is trite law that one of the major concerns that is at the heart of any copyright debate is how the government balances the needs of the artist and those of the user. How do we ensure that an artist's work is protected and the artist is the only one who can profit from that work, while at the same time ensuring that those who want to use the work have reasonable access to it? We have heard of things like fair use and fair dealing.

This challenge is further complicated when there is a question of a deceased artist and we are into a grey area when we are dealing with unpublished works. Unfortunately for a library or an archive, this is exactly the kind of situation that can arise. For example, suppose a person receives a collection of documents from some notable Canadian. Can a researcher who discovers some overlooked short story use it in a novel or a non-fiction book or is such a jewel somehow the property of the author's estate or descendants? That is the kind of bedevilling question that this piece of legislation will attempt to address.

During the last review of the Copyright Act, which took place in 1997, the government put an end to perpetual protection of unpublished works and brought unpublished works into line with the general term of protection for copyright in Canada: life of the author plus 50 years. The Standing Committee on Canadian Heritage will also be undertaking a further review of the Copyright Act, a mandatory review that is provided by section 92.

Along with the amendment, a five year transitional period was introduced at that time as a matter of courtesy to the estates of authors so their works would not fall into the public domain immediately. These provisions came into force on December 31, 1998. Unpublished works of authors who died more than 50 years before that date, that is, before 1948, would fall into the public domain on January 1, 2004. However, while the descendants of certain writers expressed concern about protecting their copyrights, there were a number of people, including academic historians, archivists, genealogists and others, who looked forward to seeing unpublished works enter into the public domain.

Therefore, what indeed has occurred is that the parties negotiated and agreed to a reasonable compromise and presented it to the government for consideration in this bill. As a result, the proposed legislation we are debating would make the following changes. First, unpublished works by authors who died before January 1, 1930, would be copyright protected until December 31, 2003. Second, for authors who died after December 31, 1929, and prior to January 1, 1949, their unpublished works would have copyright protection until December 31, 2017.

In both cases, any unpublished works that were published before their protection expires would be protected for an additional 20 years from the date of publication. The changes I have just described extend the term of protection for unpublished works, but we are also doing something to aid academic historians, archivists, genealogists and others.

Bill C-36 would amend section 30.21 of the Copyright Act to remove certain conditions that archival institutions must meet in order to make single copies of unpublished works. Such copies are used for the purposes of research and private study all the time. Section 30.21 currently states that a copy of an unpublished work which has been deposited before September 1, 1999, can only be made if the archive is unable to locate the copyright owner. It states that records must be kept of all copies made under this section. As members can imagine, this adds quite a burden to our archival facilities.

What would this bill do? The amendments contained in the library and archives of Canada Act would repeal both of these conditions. I am pleased to say that this change was agreed to by all stakeholders involved in the negotiations around the issue. As we can see, sometimes consultations do work and work extremely well. These changes are yet another tangible example of how the new library and archives of Canada would be given the tools, the mandate and the powers that are relevant to achieving its goal.

Our country's documentary heritage belongs to all of us and it must be made more accessible to Canadians. With these changes and the others discussed by my colleagues here in the House, we are putting in place an institution that I am sure all Canadians will cherish and be proud of.

[Jim Abbott, Canadian Alliance, Kootenay—Columbia, BC]

Mr. Speaker, I wish to speak specifically to a couple of clauses in Bill C-36 and in particular how they relate to the Copyright Act. I refer specifically to clauses 26 and 27 on which we have to do a quick review.

As the member just mentioned, we have shared some time together on the Standing Committee of Canadian Heritage which is presently wrestling with a number of issues relating to copyright.

It is my position, and it was expressed recently by somebody who knows well, that Bill C-32, when it went through the process of becoming legislation in 1996 and enacted in 1997, basically exacerbated the complexities of what was already an overly complex bill.

The concern of the bureaucracy at this point, as I understand it, is that they not get into amending the Copyright Act too quickly and that in fact they do a proper job.

What we are dealing with in committee is the World Intellectual Property Organization treaty, otherwise known as WIPO, which Canada signed but has not ratified. At this particular point the world copyright treaty and the world performances and phonograms treaty, otherwise known as the WCT and the WPPT, are both in limbo as far as Canada is concerned.

The best advice that we have at this particular point from the people involved in the heritage and the industry ministries, the bureaucrats, is that we have to amend domestic legislation before we can get into actual ratification legislation for us to be part of the WIPO treaties.

The reason I mention this as a background is that it adds to the fact that the Minister of Canadian Heritage has said that she could not envision making any changes to the Copyright Act as presently legislated without those changes being taken in their entirety. We have had a stiff arm from the minister and from her bureaucracy to any changes that are absolutely essential to the Copyright Act.

Problems are currently being created by the Copyright Act, problems that in fact have an awful lot to do with employment, particularly in the broadcast industry. These problems, which were created and built into Bill C-32 at the time that it was enacted, were built into it in such a way that people in the broadcasting industry are presently being laid off. Therefore we are talking about something urgent.

The difficulty to this point has been that the minister has refused to consider any idea at all of making amendments to the Copyright Act. The position of the Canadian Alliance and myself has been that this is bogus. There is no reason in the world why she could not have made those changes.

I draw to the attention of the House that the minister has indicated support, for example, for Bill S-20, presently going through the other place, with respect to photographic works. This is a bill that would amend the Copyright Act.

Therefore, apart from Bill C-36, out of one side of her mouth she has said that she will have nothing to do with changing the copyright bill but out of the other side of her mouth she has said that Bill S-20 is fine, in spite of the fact that it would alter the Copyright Act.

Now we come clauses 26 and 27 in Bill C-36 which both call for changes to the Copyright Act. Effectively what I am doing today is challenging the minister. Seeing as she must be prepared to go further, not only by her support of Bill S-20 but also by her support and the tabling of this legislation to change the Copyright Act as contained in Bill C-36, I challenge her to do so.

It is interesting that the clauses, which are so vexatious and create the problems, particularly for small market broadcasters, are contained in section 30 of the Copyright Act. However the minister is prepared to change section 30.5 of the Copyright Act but I want to deal with section 30.8. It is interesting that she is changing the Copyright Act to allow for this legislation in subsection 30.8(7). Well section 30.8, which is built into the Copyright Act, is the one that is the problem. My thesis of course is that if she is prepared to change subsection 30.8(7) for the purposes of this act, surely as an amendment in committee she and the government must be prepared to accept an amendment to section 30.8.

Sections 30.8 and 30.9 of the Copyright Act have to do with the right of broadcasters to do electronic transfer, a transfer of medium. It is referred to as ephemeral rights. Ephemeral simply means an electronic transfer that does not create any value. It simply takes place. If we look at section 30.8 of the Copyright Act it says:

It is not an infringement of copyright for a programming undertaking to fix or reproduce in accordance with this section a performer's performance or work, other than....

And it goes through that. I draw members' attention to the fact that it says “It is not an infringement of copyright for programming”. It then goes through paragraphs (a), (b), (c) and (d) and then subsections (2) to (11) inclusive and gives all of the reasons why it is not an infringement of copyright.

However a flaw was built into not only section 30.8 but also section 30.9, which have to do with a different way of fixing the music, that is electronically creating a record of the music, and in spite of the length of these sections in the Copyright Act, they would be annihilated or wiped out.

The minister is prepared to change subsection (7). I am simply asking her to delete subsection (8) which reads:

This section does not apply where a licence is available from a collective society to make the fixation or reproduction of the performer's performance, work or sound recording.

We would also delete subsection 30.9(6) of the Copyright Act which reads:

This section does not apply if a licence is available from a collective society to reproduce the sound recording, performer's performance or work.

If I have not been clear to this point I want to point out that sections 30.8 and 30.9 are about exceptions. A the time the copyright bill was enacted there were no collectives in place. Therefore it was the clear intention of the government and of the minister, who was the minister at the time, that these exceptions would exist for the broadcast industry.

What basically happened was that there were side negotiations quite literally out in the hallway, which I saw with my own eyes, between the Bloc Quebecois, which, as we will recall, was the official opposition in the 1993 Parliament, and the parliamentary secretary to the minister to get the bill approved by an artificial deadline that the Minister of Canadian Heritage put into place. During the dickering and the give and take that took place what the Bloc member got from the parliamentary secretary was these clauses that annihilate the exemptions.

A colleague of mine was just telling me about a small radio station in Fort McMurray, Alberta. We can imagine that the Fort McMurray radio station does not have a giant marketplace and does not have a tremendous amount of revenue. My colleague was shown a cheque by that radio station manager payable to the collective of over $20,000. In my constituency, in Cranbrook, British Columbia, we are looking at a radio station that must lay off an individual from the radio station which is already bare bones because its cheque is $57,000 which is more than a year's salary for a nominal worker at a radio station. We are talking about legislation, which was ill-conceived, done in haste, done in compromise and done in give and take, that is costing jobs in the Canadian broadcasting industry.

What is it about? When a radio station purchases a piece of music from a publisher a royalty is paid. The royalty is paid to the company which then goes through to the artist and so on and so forth. That is fine. They are receiving value.

Let us say that it is fixed on CD. They then would take the CD and historically they put the CD into a CD player, one of a bank of CD players. They would program that CD player: number one would play track 6, number two would play track 2 and number three would play track 5 or whatever the numbers were. Then the disc jockeys, when they were talking on the radio and the next song was up, they would simply push the button and then the CD would turn, track 4 would play and away it would go.

Now there is value there because when the radio station plays the music it has the opportunity to collect money from the advertisers who advertise for the people listening to the radio station that is playing the music.

Everything is fine up to that point except that technology has caught up to the point that rather than the disc jockeys having to put those individual CDs into the players, select the tracks and press the buttons, now a programmer simply takes those cuts and puts them on to a hard drive. The disc jockeys now only have to press a button and away it goes.

However what have we done? We have moved the digital image from the CD, or whatever the recorded medium was, which creates the audio that we hear on our car radios, into the hard drive. That is all. There is no value there. It is simply an easier way for the radio station to perform this task. In addition, there is now the transfer sometimes of that digital imagery by satellite or by broadband.

It is the difference between physically putting a CD into a FedEx package and shipping it across the country and then someone playing track 4 off there or by pressing a button and instantly, by broadband or satellite, that digital image goes from this computer to that computer. That is all it is. There is nothing more to it than that.

What has happened is that the industry has been smacked with a $7 million bill retroactive three years because it has been using new technology and receiving absolutely no value for it. This is the amazing thing about this particular exemption that was intended to be an exemption. It clearly and specifically states in sections 30.8 and 30.9 of the Copyright Act that the broadcasters have the right to do this.

The only reason they are being whacked with these millions of dollars very simply is that there was some dickering going on in the back hallway in Parliament during the committee process.

I come back to the bill we are talking about. Bill C-36 very clearly and specifically refers to the Copyright Act, subsection 30.8(7). I am very simply challenging the minister to do what is right for the broadcasters, to do what is right for the people in the broadcast industry and to simply extend the amendment to the Copyright Act to delete the next paragraph, that this section does not apply where a licence is available from a collective society to make the fixation or reproduction of the performer's performance, work or sound recording.

Somebody asked if it was not just a little too smart, with a bill dealing with the archives and the library, to try to extend this through to legislation that absolutely must be done. Was it not just a little too smart to make that connection? I say no, not at all. There is a principle here. The Copyright Act as it presently exists is wrong, absolutely wrong. It creates a penalty on broadcasters, on their business and on their employees. It creates a penalty that currently is costing jobs. It creates a penalty that is without principle a transfer of wealth from an industry which, although it is not on its backside, is an industry that does not have a lot of latitude on the profit side.

I would like the minister to realize that profit is not necessarily a dirty word. I would like the minister to realize that her backbenchers have been contacted by people from the Canadian Association of Broadcasters, from the local radio stations, explaining this to them, that there is support for this change.

Seeing as Bill C-36 will very likely pass, and certainly my caucus joins me in supporting the bill in principle so the bill can move to committee, we could have these necessary changes done in just a matter of a few days. This is long overdue because as we speak, people are receiving pink slips for absolutely no reason.

[Christiane Gagnon, Bloc, Québec, QC]

Mr. Speaker, I have a question for my colleague from the Canadian Alliance, the hon. member for Kootenay—Columbia. This is something which I am extremely concerned about and which has to do with transparency. I am sure that my colleague will be very sensitive to my question. Perhaps he raised it in his speech. I am referring to transparency with respect to the appointment of the branch's head and to the council that will be established to run the Library and Archives of Canada, which will report to the Minister of Canadian Heritage.

I would like to raise his awareness and let him know that in Quebec, the Quebec National Library Act provides for a different type of appointments, while these still require the approval of the Quebec communications minister.

For example, five people, including the chairperson, are appointed by the government on the recommendation of the minister of culture and communications, but only after consultations with the library community, the publishing community, writers' associations and the universities. Three of these members have to be librarians. One of them has to be a conservation expert and another an exhibitions expert. Two other members are appointed by the City of Montreal, and two are library users, one of whom must be a Montreal resident because the library is located in Montreal. Finally, they must be elected by their peers, in accordance with the library's regulations.

Quebec used legislation to ensure that appointments also included people from the community. Everyone knows that the skills required on such a board belong to people from the community, and these are not partisan appointments. I could give a few examples of partisan appointments on certain boards of directors, and the member for Kootenay—Columbia knows what I am talking about.

There could also have been provisions regarding potential conflicts of interest within these boards of directors. Again, the legislation to establish the Bibliothèque nationale du Québec contains a very specific provision on potential conflicts of interest between members of the board of directors who have an interest in a business and their employees or those of the library.

So there is a whole process that is provided for in the Quebec legislation.

I would like to ask my colleague from Kootenay—Columbia what he thinks of this flaw in the bill before us. Should amendments be made so that the bill better reflects the interests of the public?

[Jim Abbott, Canadian Alliance, Kootenay—Columbia, BC]

Mr. Speaker, I appreciate the comments of my colleague from the Bloc Québécois.

Clearly, with any legislation there are always ways to improve it. In this particular instance I think the bill itself is sound in its principle, but clearly there are going to have to be a lot of improvements. I look forward to her perhaps distributing to the members of the Standing Committee on Canadian Heritage some of these suggestions. I have found that the heritage committee has generally been a very cooperative committee and certainly typically does work to make legislation better. I look forward to working with her on her suggestions.

[Wendy Lill, NDP, Dartmouth, NS]

Mr. Speaker, I am interested in the comments of my fellow committee member around the issue of the potential merger of the National Library and the National Archives. As he will know, the 1990s saw enormous cuts to these two institutions which are the pillars of our cultural heritage.

A couple of years ago, Roch Carrier, the head of the National Library, came before us and spoke powerfully about the impact the cuts were having on the storage of our heritage. Our committee at that time recommended that the national librarian, the national archivist and the Department of Canadian Heritage initiate a planning process to examine the long term space and preservation needs of the National Archives and the National Library.

What we need along with a recommendation, is a financial commitment to make that kind of planning process worth its salt. I guess I would say the same of this bill. If a bill is going to be enacted, we have to make sure that the political will is also there to give the bill some meaning.

I would like to know how the member feels about that.