Mr. Speaker, I am pleased to have the opportunity to deliver comments to private member's Bill C-259, which asks hon. members to repeal the excise tax on jewellery.
The first point I would like to make concerns the importance of private members' bills. The proposals that are put forward by individual members represent an important link between Canadians, their elected representatives and our parliamentary process.
Where private members' bills affect the taxation system, as is the case with Bill C-259, it is especially important that the government take careful note of the intentions that are being expressed.
In the present case, the idea is to repeal the excise tax on jewellery, a long standing federal tax that raises in the order of $85 million per year. Repeal of this tax is being put forward as a means of providing relief for the jewellery industry. Private member's Bill C-259 also makes special note of Canada's status as a diamond producing nation.
I would like to address each of these points in turn, starting with the excise tax on jewellery as a tax that affects small business in Canada.
The government supports small business in Canada and continues to review measures to improve the environment for small businesses to succeed. Indeed, the suggestions from entrepreneurs and small businesses have formed an important part of the budget consultation process over the past recent years.
In order to assist the government in identifying the best options for future consideration from among the many competing priorities, the government requested in budget 2004 that the Standing Committee on Finance undertake the important role of assessing the merits of a number of measures proposed to support small business.
Recently, in October 2004, the finance committee delivered its second report highlighting the role of excise duties and taxes as they affect Canadian winemakers, small brewers and jewellers. The committee recommended that tax relief should be provided to each of these industries including a recommendation that the 10% excise tax on jewellery be phased out over a five year period.
At the same time, the finance committee noted that there are many other instances where small businesses would benefit from appropriate tax changes and that the number of worthy proposals far exceeds the capacity of the government to fund these changes in a fiscally responsible manner.
In this context, it is interesting to note that there are currently 15 private members' bills affecting the taxation system that have been tabled in the current session. The estimated fiscal cost of these proposals is as much as $2.5 billion per year. I understand that additional bills are in line to be tabled.
Clearly, with such a great range and breadth of requests for relief, it is incumbent on the government that these proposals be managed in the context of a comprehensive approach to tax policy and fiscal planning. Individual proposals must be evaluated through a process that carefully assesses competing priorities with a view to preserving the fundamental principle of fiscal responsibility.
Against this backdrop, the report from the finance committee will receive very careful consideration, as will other proposals for tax relief that are received during the budget consultation cycle.
I would like to now address Canada's role as a diamond producing nation. The emergence of this industry in Canada has been nothing short of remarkable. With exploration expenditures of more than $1.5 billion over the last 10 years and the establishment of two worldclass mines in the Northwest Territories, Canada now accounts for about 15% of world diamond production and is the third largest producer by value after Russia and Botswana.
Canada has a long tradition of mining and exploration, along with a number of important tax provisions that are designed to recognize the unique operating characteristics of the industry.
These provisions include writeoff for capital costs and the carry forward of resource deductions. Another important feature of the mining taxation regime is the ability of exploration companies to flow expenses that would not otherwise be claimable through to investors in flow-through shares.
The government has recently taken action to improve the taxation of the resource sector, including a number of measures that were announced in budget 2003: reducing the corporate tax rate on resource income; phasing in a new 10% tax credit for exploration and pre-production expenses relating to diamonds and other qualifying minerals; and phasing out the federal capital tax, an important measure for capital intensive industries such as mining.
For its part, the excise tax on jewellery poses no competitive disadvantage to the Canadian mining industry as exports are not subject to the tax. In sum, the mining taxation regime including the excise tax on jewellery, provides a strong base for mining and exploration in Canada, including diamonds.
It is worth noting that the Ekati and Diavik diamond mines are the largest private employers in the Northwest Territories with a total of 1,300 direct employees. This is clearly a great boost for the north, an area where the government continues to make strategic investments to facilitate economic and social growth.
In addition to the provision of roughly $2 billion per year in transfer payments, the federal government also provides funding initiatives that are tailored to meet specific needs in the north. Budget 2004 for instance announced the following measures: $90 million over five years to support a northern economic development strategy; $3.5 billion over 10 years to clean up contaminated sites, over 60% of which is expected to occur in the north; and $51 million over 10 years to conduct seabed mapping of the Arctic continental shelf.
As well, in the fall of 2003 the Government of Canada announced $190 million for northern infrastructure investments and $155 million for a national satellite initiative to provide high speed broadband Internet access services to improve access to telehealth, e-business and distance learning services.
Budget 2003 included other measures which will benefit the north, including $25 million over two years for the aboriginal skills and employment partnership, $20 million for aboriginal business Canada and $16 million for northern science.
All of these measures will greatly facilitate economic and social progress in the north, including the development of skills and infrastructure that will support the mining industry and diamond industry.
Finally, I would be remiss if I did not return briefly to expand on the fundamental issue of fiscal responsibility. I have already commented that private member's Bill C-259 is but one of many bills seeking relief from taxation in specific circumstances. No matter how well intentioned these bills are, the government must nevertheless be mindful of the cumulative fiscal impact, as much as $2.5 billion, and also the inherent difficulties of considering these proposals on an ad hoc or piecemeal basis that does not provide an effective mechanism for assessing and evaluating competing fiscal priorities.
Over the last 10 years the government has pursued an unwavering commitment to budget balance and fiscal prudence within the context of an integrated policy and fiscal framework. The net result has been an impressive record of economic and social progress.
The government has put forward seven consecutive surplus budgets, achieved a $61 billion reduction in the federal debt and an annual saving of $3 billion on debt servicing costs. Cumulative tax reductions of more than $100 billion have been delivered since 1996, with a primary focus on middle and low income families.
The government is not convinced that the repeal of the excise tax on jewellery should be undertaken, at least not on the basis of private member's Bill C-259. Repeal of the tax is one of many competing priorities, particularly as among measures to support small business.