Mr. Speaker, I am pleased to speak today in favour of Bill C-259, an act that seeks the immediate elimination of the excise tax on jewellery and watches.
It is clear from the overwhelming evidence in support for the legislation that the time has come to immediately do away with this punitive and unfair tax.
Before I proceed, I would like to take this opportunity to thank my colleague, the hon. member for Vancouver Island North, for his very hard work and dedication to doing away with this excise tax. The member's perseverance in this regard should be commended.
Increased economic development in my riding of Haldimand—Norfolk is my top priority. Conversely, anything that negatively impacts on economic development is something that worries me. This excise tax has had the effect of unfairly stifling economic development, not only for many businesses in my riding, but right across the country.
As the federal representative for these business owners who are in both retailing and manufacturing sectors, I feel that it is my duty to stand against this tax and stand in favour of this much needed and long overdue legislation. I say this because for far too long constituents in my riding and in many other rural ridings like it have felt either ignored, unfairly treated or even betrayed by the Liberal government.
The government's continued talk about the need to support cities and their increasingly crumbling infrastructure, while necessary and important, often leaves the people in my riding and other residents in rural Canada feeling like second class citizens or an afterthought of the government.
The government's recent budget and its NDP amended version are prime examples of how low a priority the government places on small town rural Canada.
The Liberal budget and the Liberal-NDP budget have nothing in them for struggling agricultural producers, not a cent for desperately needed economic development funding for Haldimand—Norfolk and not one cent of tax relief for hard-working families or for families who choose to take care of their children at home.
The budget did, however, have billions of dollars for state run day care and gas tax rebates for cities. While these may be high priorities for people in urban areas, I must say that it leaves rural residents asking what is in it for them.
The reasons that Bill C-259 merits immediate passage have been mentioned many times before but I feel that it is important to reiterate why it is so important to finally do away with this tax once and for all.
The tax was first introduced in 1918 near the end of World War I. Its main purpose was to act as a luxury tax in order to raise desperately needed funds for the government of the day. Needless to say, the tax has served its purpose and is no longer appropriate in our current context.
To quote a 2004 report by the House of Commons Standing Committee on Finance, this excise tax:
--is an anachronism that no longer serves any social-policy objectives, nor does it fulfill the qualities that should be sought in a tax: equity, efficiency, ease of administration and transparency.
Quite simply, the tax is destroying Canadian jobs.
The 2004 report of the House of Commons Standing Committee on Finance stated:
--this tax is resulting in negative consequences for employment and the viability of Canada’s jewellery industry.
Currently, manufacturers pay an excise tax of 10% on the sale price of jewellery manufactured in Canada and importers pay an excise tax of 10% on the duty paid value of imported jewellery. To highlight how unfair this tax is, if we have an item that is manufactured outside Canada and imported into Canada and it is identical to an item manufactured in Canada, we tax the made in Canada item and do not tax the item coming from beyond our borders.
Put simply, this tax imposes a tariff on Canadian made goods, ensuring that goods made right here at home cost more than goods that we import. This approach is not the way to build a strong economy for our country.
The negative consequences of this tax are numerous. Business bottom lines are negatively impacted, stifling growth and employment and discouraging investment. This excise tax increases the cost of financing inventory for retailers and wholesalers. It also encourages Canadians to purchase their jewellery in the United States or other countries at a much cheaper price. In addition, the advent of e-business transactions is encouraging greater numbers of Canadians to order jewellery on line from other countries because of the savings they get.
While many believe that this tax is justified because it is a luxury tax on the rich, the truth is that a large part of the tax is being collected from low value jewellery purchased by ordinary Canadians. According to Ernst & Young, lower and middle income households account for over 50% of jewellery and watch purchases.
In fact, Canadians are paying this luxury tax on real and imitation jewellery that costs more than three dollars. This hidden luxury tax on items that are of very little value is grossly unfair. As my hon. colleague from Vancouver Island North noted, about one-half of all the jewellery sold by value in Canada contains diamonds.
The province of Saskatchewan is poised to join the Northwest Territories as a world class diamond producer. The premiers who are involved in jurisdictions where diamond production is either present or contemplated are calling for the removal of this tax.
This punitive tax has had the effect of pre-empting local jewellery manufacturing. Furthermore, this tax is discouraging tourists from buying jewellery made in Canada because they know that they can get it cheaper at home.
It is important to note that the Mining Association of Canada said in May of 2004:
In less than a decade, Canada has emerged as a diamond powerhouse...By providing the right mix of fiscal and regulatory policies, governments have the opportunity to maximize the contribution of Canada's diamond industry to the benefit of all Canadians.
Eliminating the federal excise tax on jewellery will help Canada become one of the world's leaders in diamond manufacturing.
I recognize that the government has announced a planned phase-out of this tax in the recent budget. While I am happy that the Liberals have finally come to realize the importance of doing away with this punitive tax, I find it unfortunate that they wish to further stifle job creation, economic development and increased investment by allowing this punitive tax to continue for the next four years.
I know that old habits die hard, but I would encourage the government to give up its tax collection addiction and consider disposing of this tax immediately.
Reducing taxes encourages jobs, investment and a vibrant economy. According to a 2003 study, the jewellery industry has relatively high job creation potential. Jewellery manufacturing creates 40% more jobs per dollar than home electronics or the auto parts industry. The jewellery industry has the potential to create cottage industry jobs in remote areas and in rural areas like mine in Haldimand--Norfolk.
Bill C-259 has had widespread support from all parties in this House. It has widespread support from the jewellery and mining industries. The bill follows up on recommendations made by the House of Commons finance committee and reports by the Auditor General of Canada.
The time for this tax to be completely eliminated is now. That is why I am encouraging all members of this House to support Bill C-259.