Debates of June 7th, 2005

Supply

[Yvon Godin, NDP, Acadie—Bathurst, NB]

Mr. Speaker, I rise on a point of order. The question that was just put was on the amendment moved by the NDP. It is customary for the members of the party moving the amendment to rise first.

I merely wanted to point this out for the record.

[The Speaker]

I must say I shared the hon. member's surprise. I have checked and since this was an opposition motion, the voting would normally start with the opposition party even though the amendment was moved by someone else. Accordingly, while I thought at the time the practice was unusual, I am told it is in accordance with our practice on opposition days.

Had it been an NDP opposition day and some other amendment, the voting would have started there. Of course, one never knows how the voting may turn out.

[Karen Redman, Liberal, Kitchener Centre, ON]

Mr. Speaker, if the House would agree, I would propose that you seek unanimous consent that members who voted on the previous motion be recorded as having voted on the motion now before the House with Liberal members voting in favour, except for those members who would like to be registered as having voted otherwise.

[The Speaker]

Is there unanimous consent to apply the vote just taken to the motion now before the House?

[Some hon. members]

Agreed.

(The House divided on the motion, which was agreed to on the following division:)

[The Speaker]

I declare the motion carried.

The House resumed from June 2 consideration of the motion.

[The Speaker]

Pursuant to order made on Thursday, June 2, the House will now proceed to the taking of the deferred recorded division on the motion of the hon. member for Acadie--Bathurst relating to the business of supply.

(The House divided on the motion, which was negatived on the following division:)

[The Speaker]

I declare the motion lost.

[Bill Casey, Conservative, North Nova, NS]

Mr. Speaker, I want to make that sure my vote is recorded as supporting the motion.

[The Speaker]

My recollection was that it did, but the hon. member will be able to check it in the blues tomorrow.

The House resumed from June 3 consideration of the motion.

[The Speaker]

Pursuant to order made on Friday, June 3, the House will now proceed to the taking of the deferred recorded division on the motion of the member for Charlesbourg—Haute-Saint-Charles.

(The House divided on the motion, which was agreed to on the following division:)

[The Speaker]

I declare the motion carried.

The House resumed from June 6, consideration of the motion.

Foreign Credential Recognition Program

[The Acting Speaker (Hon. Jean Augustine)]

Pursuant to order made on Monday, June 6, the House will now proceed to the taking of the deferred recorded division on Motion No. 195 under private members' business.

The question is on the motion.

(The House divided on the motion, which was agreed to on the following division:)

[The Acting Speaker (Hon. Jean Augustine)]

I declare the motion carried.

It being 6:29 p.m. the House will now proceed to the consideration of private members' business as listed on today's order paper.

The House proceeded to the consideration of Bill C-259, an act to amend the Excise Tax Act (elimination of excise tax on jewellery), as reported (with amendment) from the committee.

Excise Tax Act

[John Duncan, Conservative, Vancouver Island North, BC]

moved that the bill, as amended, be concurred in.

(Motion agreed to)

[The Acting Speaker (Hon. Jean Augustine)]

When shall the bill be read a third time. By leave, now?

[Some hon. members]

Agreed.

[John Duncan, Conservative, Vancouver Island North, BC]

moved that the bill be read the third time and passed.

Madam Speaker, it has taken a long time for the bill to get to this stage, but I want to thank members of this place for collapsing report stage and moving it on to third reading.

The bill was first introduced last year on November 3 and debated for the first time on November 26. The bill was then scheduled for a second hour of debate just before Christmas, but because the Christmas break was early, it was not until January that the bill was sent to the finance committee.

It might be worth noting that what we are dealing with here is section 5 of the Excise Tax Act, which under the current regulations is a three part clause giving effect to impose a hidden 10% tax on watches and clocks, on semi-precious metals and stones and on jewellery.

This has been a very controversial tax, which has been around as one of a suite of luxury taxes since 1918. It was a consequence of World War I, known as the great war at that time. This very tax was the impetus for the creation of the Canadian Jewellers Association which has been fighting this tax for decades. In fact, I talked to one jeweller who had his first meeting with the federal finance minister on this tax in 1947. This is a very heartfelt measure to finally try to end the last vestige of these so-called luxury taxes dating back to 1918.

Consequent to the fact that the bill was sent to the finance committee in January, the federal budget was announced. Support by members of all parties for Bill C-259 was quite strong.

The government put a provision in the budget in February that this tax would be phased out over four years at 2% per year. This in a sense was welcomed, but in another sense there was further division because a bad tax was a bad idea so why not get rid of it in its entirety. Therefore, my sponsored bill continued in the process.

We are here today, still with industry solidarity and just a few months after the budget document, with a real chance to terminate this terrible tax.

Because the committee had already studied the issue several times, I was hopeful the bill would proceed rather quickly to a vote. Unfortunately, it took nearly the maximum allowable time period before the bill was approved. There were several unexplained cancellations and delays before I was able to appear before committee and during that time the February budget was announced.

I believe it was the strong support for Bill C-259 here in Parliament and among the public that prompted the government to include a provision in the budget to phase out the tax over four years. While I was pleased by that, my opinion then and my opinion today is that a counterproductive tax is a counterproductive tax, and so I have continued with the bill.

When I finally appeared before the committee on March 24, the Parliamentary Secretary to the Finance Minister suggested that the jewellery industry did not support my bill and he moved to dismiss it. There have been continuous attempts to undermine the bill at every stage since.

I am pleased to say that the parliamentary secretary was unsuccessful in doing so. I am also pleased to report that the industry is solidly behind the bill as it was ruled in order today by the Speaker in a very straightforward ruling consistent with all of the legal or legislative advice that I have received on the bill since it started its torturous travel through the committee process.

I was not pleased that the bill continued to be delayed. Despite only one outstanding request to appear before the committee, which was quickly withdrawn in an attempt to see the bill move through the committee without delay, the chair initiated a study which further delayed passage of the bill.

In May the Canadian Jewellers Association and the Quebec Jewellers' Corporation appeared as witnesses and strongly supported the bill and the immediate repeal of the excise tax on jewellery if they could be assured that watches and jewellery were both subject to the provisions of the bill.

Mr. André Marchand, president of the Quebec Jewellers' Corporation, testified at the committee that action was needed immediately rather than four years from now. He said:

If no positive action is taken, this may lead to the industry's imminent demise. The situation is critical and we, as retailers, manufacturers, importers and wholesalers are urging you to address this problem in order to once and for all put an end to this flagrant injustice which has gone on too long.

An immediate and complete scrapping of this provision [meaning the taxation] is therefore fully warranted. We would ask you to review your position, thereby enabling our industry to take back its rightful place despite increasingly tough competition.

The Canadian Jewellery Association also called for the immediate elimination of the tax. The president of the CJA, Carmen Rivet, said:

We have always asked for its immediate and total elimination. This is what we fought for and that is what we have always hoped for.

The testimony of the jewellery industry representatives prompted the committee to pass an amendment to the bill. Bill C-259 was amended to include watches, which I am told made up a significant part of a jeweller's business. I think this greatly strengthened the bill. There was some argument whether the amendment was within the scope of the bill but it was ruled, both at committee and again earlier today by the Speaker, that it certainly was in order.

The bill was passed as amended at the committee on May 19 bringing the bill where it is today before the House.

I believe the time has come to scrap this tax and I urge members of the House to pass Bill C-259.

At this time I would like to share with the House some of the numerous letters I have received in support of the bill and I will read some of the ones I received following the introduction of the federal budget as well.

This is from a jewellery retailer employee who said:

I can't emphasize enough how important it is to eliminate the Excise Tax all at once (instead of phasing it out). The administrative and logistics costs are enormous, and the thought of having to deal with the paperwork and meetings over and over for the next four to five years makes my head hurt.

Please do what you can to let your peers know how much time, effort, and money would be saved by taking care of this once and for all!

I have a letter from the Quebec Jewellers' Corporation dated April 6 of this year. It goes on to explain that:

A clause in this law exempted artisans from the excise tax if they manufactured a maximum of $50,000 per year.

It then became easy and practical to shut down a company as soon as this amount was reached and open new ones as often as needed.

This is another way a bad tax has contributed to tax avoidance behaviour that has been very destructive and undermining of the industry.

Speaking on behalf of the corporation, the president went to say:

Reluctantly, we accepted to spread out the removal of this tax over a period of four years while being convinced that it would have been better to fully abolish this tax as soon as the budget was presented.

We would like to understand why the jewellery industry was dealt with in this fashion, when all other “luxury” industries that were subjected to this same tax benefited from the total repeal of the tax as soon as it was accepted.

In the name of all retail jewellers, manufacturers, importers and wholesalers that we represent, we enjoin you to correct the current situation and terminate once and for all this blatant injustice that has already lasted too long.

For those reasons, we fully support Bill C-259 and the immediate elimination of the excise tax on jewellery.

An immediate, total and complete repeal is fully justified and will allow our industry to reclaim its place despite an increasingly more constraining competition.

This will open the door to healthy competition and place us in a position to respond to a tax originating from emerging countries and the local industry.

I have another letter from Idar Bergseth Designs Inc. which reads:

It is very important for us, not due as much to the cost of the tax, as it is the punitive nature of administering it as craftspeople. It takes us several hours a month just to calculate the tax properly, tracking every piece of inventory, every stone, every finding, and knowing at what stage excise was paid on it.... It's an administrative nightmare.

One other thing that should be pointed out is that much of the slave made jewellery from Asia comes into the country with invoices that are not completely in agreement with the actual cost to the importer. As the goods are taxed at 10% of the value as stated on the invoice, this puts the honest Canadian manufacturers and craftspeople at a further disadvantage.

I have another letter from Pearls Katsuyama, a division of Paramount Trading Co. It states:

As a current member of the Canadian Jewellers Association in good standing, we fully support Bill C-259, in eliminating the unfair Excise Tax immediately.

We have been in the jewellery business for forty years and have supported the efforts of the Canadian Jewellery industry to repeal the tax for many years. It should have been eliminated when the GST legislation was put into place more than ten years ago. At that time, excise tax on all other luxury goods such as fur coats and high priced pleasure boats was eliminated. Only the jewellery industry was burdened with the tax. This affected the growth of our industry and encouraged unlawful import and sale of jewellery and watches. Even a fifty dollar jewellery item or a watch was and is still subject to the excise tax. A huge majority of all the jewellery business owners and those in control, including the presidents of two of the largest retail jewellery chains in Canada are in favour of the full repeal of the excise tax immediately. Eliminating the discriminatory tax on jewellery, watches and clocks will ensure a healthy and growing jewellery industry in Canada, producing new jobs and earning more taxes for our country.

I will finish with a small paragraph from another letter writer. It states:

Thank you for your support on abolishing the truly unfair tax on our industry. You have taken a great direction in terms of reducing smuggling/black-marketing and organized crime and real tax evasion which have festered under this ridiculous cash grab. This tax has caused me grief for thirty-three years [and has] prevented me from competing with smugglers who buy sell for cash.

[Merv Tweed, Conservative, Brandon—Souris, MB]

Mr. Speaker, I noticed in the member's comments that he talked about when this tax was imposed upon Canadians.

I am not exactly sure of the dates and the reasons and I was wondering if the member would be kind enough to give us a little more detail on why it was implemented and why it seems to have taken so long to be removed.

[John Duncan, Conservative, Vancouver Island North, BC]

Mr. Speaker, there is a lot of speculation on that very front. We know the tax was imposed in 1918. We know that the Canadian Jewellers Association never existed prior to the imposition of the tax and that this became the motivator for jewellers to form themselves. Their mandate was to get rid of this tax which they saw as being unfair for at least the last 50 years.

Why has this tax been the last one to be removed or contemplated to be removed? It has been suggested that because the constituency is fairly small they did not have a lot of political clout.

It also has been suggested that by promising the jewellers that it would be eliminated but then not doing so, it would keep them on the hook as a potential political funding source, for lack of a better word.

If we were to resolve the problem then the jewellers would go back and be happy with doing business. We do not need political friends in the same way as we do when we are trying to get rid of a very discriminatory tax.

Every time I think I understand this whole file and this tax and deal with a few more people, I find out a few more things. That has sort of bubbled up to the surface as maybe being the rationale why this tax has hung in there for such a long time.

[Robert Thibault, Liberal, Parliamentary Secretary to the Minister of Health]

Mr. Speaker, I am pleased to have the opportunity to deliver comments on private member's bill, Bill C-259, which asks hon. members to repeal the excise tax on jewellery upon royal assent.

I note that the preamble to Bill C-259 makes specific references to diamonds mined in Canada and I think that is a very good place to start.

I would like to discuss Canada's role as a diamond producer.

The rise of this industry in Canada is a very remarkable story. Thanks to more than $1.5 billion in exploration expenditures over the last 10 year and the development of two world class mines in the Northwest Territories, Canada now accounts for about 15% of world diamond production and is in third place by value among the producing countries, after Russia and Botswana.

Canada has a long history in mining exploration and operations. Much important federal legislation has been crafted to recognize the unique way in which this industry operates.

These provisions include the write-off of capital costs and carry-over of resource deductions. Another important feature of the tax system as it applies to mines is the ability of exploration companies to make expenses eligible that investors could not otherwise deduct in the form of flow-through shares.

The government has also taken action to improve the taxation of the resource sector, including measures reducing the corporate tax rate on resource income, phasing in a new 10% tax credit for exploration and production expenses related 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, it is important to note that the excise tax on jewellery that is the subject of Bill C-259 proposes no competitive disadvantage to the Canadian mining industry in domestic or international markets. The tax is neutral as between domestic and imported jewellery and gems, being imposed at the same rate on the sale price of domestic goods and the duty paid value of imports. Moreover, exports are not subject and do not suffer any competitive disadvantage on global markets. In sum, the mining taxation regime, including the excise tax on jewellery, provides a very 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 some 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. These include: $90 million over five years to support the northern economic development strategy, aimed at ensuring that economic opportunities are developed in partnership with northern Canadians; $3.5 billion over 10 years to clean up contaminated sites, over 60% of which is expected to occur in the north, leading to jobs and economic development opportunities in the region; and $50 million over 10 years to conduct seabed mapping of the Arctic continental shelf to help secure Canada's sovereignty in the high Arctic under the United Nations convention on the law of the sea.

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 and to improve access to telehealth, e-business and distance learning services.

Finally, budget 2003 also included other measures that will benefit the north, including $25 million over two years for the aboriginal skills and employment partnership program, $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 and diamond industries.

The next 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 the parliamentary process. Where private members' bills affect the taxation system, as in the case of 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. The repeal of this tax has also been presented as a means of providing relief for the jewellery industry in Canada.

Make no mistake, this government supports business in Canada, including both small and large businesses, and continues to review measures to improve the environment for business to succeed. Indeed the suggestions from entrepreneurs and business representatives have formed an important part of the budget consultation process over recent years.

In order to assist the government in identifying the best options for future considerations 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 businesses.

In October 2004 the finance committee delivered its report recommending that the 10% excise tax on jewellery be phased out over a five year period. I would like to quote to the House the recommendation of this report. It stated:

The federal government implement one of the following options: phase out of the federal excise tax on jewellery over five years; or increase, in increments over a five-year period, the thresholds at which the tax begins to be paid, eliminating the tax at the end of the period.

The finance committee then went on to make the following statement in its report:

As well, the Committee is mindful that the number of worthy proposals exceeds the ability of the federal government to finance them in a fiscally responsible manner. From this perspective, and reflecting on the current priorities of the Committee, we urge the federal government to take immediate action on the recommendation regarding the federal excise tax on jewellery--

As noted by the committee, there are a great range and breadth of requests for tax relief in Canada. It is incumbent on the government and all members of the House that addressing these requests be managed in the context of a comprehensive approach to tax policy and fiscal planning. That is, individual proposals must be evaluated through a process that carefully assesses them in terms of other competing priorities and with a view to preserving the fundamental principle of fiscal responsibility.

Indeed this is what the government understood the process of asking the finance committee to help it assess tax relief priorities was supposed to accomplish. Private member's Bill C-259 represents but one of many proposals for tax relief.

No matter how well intentioned these bills are, the government and members of the House must nevertheless be mindful of the cumulative fiscal impact of these measures and the inherent difficulties of considering these proposals on an ad hoc basis that does not provide an effective mechanism for assessing and evaluating competing fiscal priorities.

Over the last 10 years, the government has maintained an unflagging commitment to balanced budgets and fiscal prudence within an integrated financial policy and framework. This approach has resulted in impressive social and economic progress.

The government will keep its commitments to social and economic progress and will continue to assess all requests for tax relief with a view to preserving the integrity of the tax system and financial framework. All proposals must be evaluated in a comprehensive way to ensure that the most pressing priorities of Canadians are taken into account and receive all due regard.

In fact, the appropriate prioritizing exercise has already been carried out by the government in the lead-up to budget 2005 and the announcement of the proposal to phase out the excise tax on jewellery over four years, consistent with the recommendation of the finance committee itself that was tabled in the House. For that reason and many others, I urge other members of the House not to support Bill C-259.