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.