House of Commons Hansard #33 of the 38th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was seniors.


Excise Tax ActPrivate Members' Business

November 26th, 2004 / 2:10 p.m.


Ed Broadbent NDP Ottawa Centre, ON

Mr. Speaker, all the arguments in favour of the bill, notably by the mover himself, have already been made and I will be brief in reasserting a number of those to explain why my party gives its support, as it did at the committee stage, for the bill.

As has been pointed out, this tax was first introduced in 1918 and, as my colleague from the Bloc has just said, it remains an anomaly. With the tax system now it is the only luxury tax left in the country. As a result of this tax, diamonds mined in Canada cost more here in our country than anywhere else in the world, which is ridiculous. We have become recently the world's third largest supplier in value of rough gem quality diamonds.

In the Northwest Territories a boom is going on. Currently some 47 different mining exploration projects are going on in that part of the country alone. It is an important basic industry for us.

Our jewellery industry employs some 40,000 people in over 5,000 businesses, many of which are small businesses and a number of which are cottage industries in small communities that are disadvantaged by this tax.

In short, we support the bill because removing the tax simply makes sense for Canadians, Canadians who mine diamonds, small businesses that sell jewellery and Canadian consumers wherever they may live.

Excise Tax ActPrivate Members' Business

2:10 p.m.


Lloyd St. Amand Liberal Brant, ON

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.

Excise Tax ActPrivate Members' Business

2:20 p.m.


Gerald Keddy Conservative South Shore—St. Margaret's, NS

Mr. Speaker, it is certainly a pleasure for me to speak to private member's Bill C-259 put forward by the member for Vancouver Island North. When he spoke earlier, I had the opportunity to ask a couple of quick questions. I said that he had done an absolutely stellar job in presenting this bill. I wanted to put that on the record one more time.

This is an important bill. It is important not just to a burgeoning diamond industry in Canada's north, but it is important to our resource sector. It is important to the gold mining industry, the silver mining industry, the gemstone industry across this country, and specifically and probably most important right now, to the diamond industry.

In 1918 a tax was brought in, which obviously was to pay for some of the reparations of World War I and the cost of sending Canadian troops abroad. At that time, just as the Income Tax Act which was brought in after World War II, it seemed to be a good and important idea, but today, times have changed.

I am a bit apprehensive and concerned. In his speech the government member who just spoke used all kinds of flowery words about fiscal responsibility and whether the government must look at this in a piecemeal fashion or use a bigger umbrella. I have some real concerns that the government will try to find a way not to support this piece of legislation.

It is one thing to talk about the importance of private members' bills and it is another thing to support them. This is a good bill. The industry has been requesting it for years. It is important and the government needs to support it without any ifs, ands or buts.

I want to speak about the Department of Finance for a minute. There was a study done by the Department of Finance about removing the excise tax. Remember that jewellery is the only luxury item that still has excise tax on it. People can buy a $50 million yacht in this country and not pay excise tax because it is not a luxury item. People can buy caviar, champagne or a mink coat and none of those are luxury items. Those are necessities of life. Yet a person cannot buy a piece of jewellery worth over $3 because that is a luxury. It is just wrong-headed.

The study done by the department concluded that removing the tax would not have a significant impact on contraband activity and therefore, would not offset lost revenue. I would like to speak to that for a second. How did it come up with the conclusion that it would not have a significant impact on contraband activity?

Even though the Canadian dollar has increased in value, it is still worth less than the American dollar. However, our jewellery costs more because there is a 10% tax on it. We are going to pay 17¢ on the American dollar to go to the United States to save 10% on a piece of jewellery, which we are going to smuggle back into the country. And this would not stop that? It would absolutely stop it in a heartbeat. People would not even consider it.

Why would a person buy a $5,000 diamond ring in Canada and pay $500 more than he or she would have to pay south of the border? The person could put it on his or her finger and wear it home. Everybody would do that. Everybody is doing that. This bill is only common sense.

Any money lost, or any thought of losing money, would be more than compensated by the increase in jewellery sales and the collection of the GST, which is 7%, on those sales. This is not rocket science. Even Liberals should be able to figure this out. This is common sense, straightforward, financially sound legislation and it is long overdue.

Let us look at a couple of numbers. In 2003 11.2 million carats of diamonds were mined in Canada for a total of $1.7 billion. That is out of two mines, the Ekati and Diavik mines. There are another three or four mines ready to come on stream. There is another diamond mine in Nunavut ready to come on stream. A half carat diamond has been found in northern Alberta. Diamonds have been found in northern Saskatchewan.

We have finally signed, through the United Nations, an accord to reduce the blood diamond industry of the world. We have the best source of quality gemstones in the world. We are continuing to punish the industry by saying it has to pay 10% more, ship them abroad. If people want nice diamonds, they can go to Antwerp or Boston. Perhaps there is a secret message, and the Liberals want us all to go somewhere else. I am not sure. We really have to deal with this. Tongue in cheek aside, it is an extremely important industry.

Along with that $1.7 billion diamond industry, Canada is the seventh largest gold producing nation in the world. Canada mined 152 tonnes or $2.7 billion worth of gold, with no value added. Keep Canadians, and northerners in particular, as hewers of wood and drawers of water. The government does not want them to think for themselves or to set up an industry that would allow them to become financially secure, independent and produce for themselves. Even the rest of Canada cannot not take advantage of that. It exports it and then considers giving it back.

Silver would be another idea. Canada produced 1,254,712 kilos or 1,229 tonnes of silver last year.

We have a golden opportunity here. All we have to do is get rid of this punishing excise tax.

Excise Tax ActPrivate Members' Business

2:30 p.m.

The Acting Speaker (Mr. Marcel Proulx)

The time provided for the consideration of private members' business has now expired and the order is dropped to the bottom of the order of precedence on the order paper.

It being 2:30 p.m., this House stands adjourned until Monday, at 11 a.m., pursuant to Standing Order 24(1).

(The House adjourned at 2:30 p.m.)