Mr. Speaker, I rise to speak to Bill C-232, an act to amend the Excise Act, 2001 (spirits).
This bill would amend the Excise Act, 2001, to provide a general reduction in the rate of excise duty on spirits and also to impose a larger reduction in the rate of duty on the first 100,000 litres of spirits produced by a Canadian distiller. Here are the details.
The first 100,000 litres of spirits produced in Canada by a spirits licensee in a fiscal year would be subject to a new rate of excise duty of $6 per litre of absolute ethyl alcohol, or AEA, which would represent a reduction of almost 50% in the rate in effect. For all Canadian production over and above 100,000 litres of AEA, and for all imported spirits, the general rate of duty would be reduced from $11.696 per litre to $11 per litre.
During my time today, I would like to share several important reasons why the House should not support this bill. As we have indicated many times since our budget was tabled on March 22, the government is determined to help Canada's middle class and those who are working hard to join it. We started working on these challenges in December, by lowering taxes for Canada's middle class and lowering the personal income tax rate from 22% to 20.5%.
On January 1, 2016, Canadians whose taxable income is between $45,282 and $90,563 saw a drop in their income tax rate. They will keep more of their paycheques so that they can save, invest, and help grow the economy.
In total, nearly nine million Canadians now benefit from this tax cut. Single Canadians who benefit from this measure will, on average, pay $330 less in taxes a year. Couples will see an average tax cut of $540 a year.
To help pay for this middle-class tax cut, the government increased taxes for the wealthiest Canadians by creating a new higher income tax rate of 33% for individual taxable incomes in excess of $200,000. Bill C-232 would implement measures that are not necessarily good for taxpayers.
Right now, the Canadian distillery industry exports over 70% of its annual domestic production. Since exported alcoholic products are completely exempt from federal excise duties, most of Canada's spirits production would not be affected by lowering excise duties. Instead, a reduction in the rates of duty would apply to the domestic consumption of Canadian spirits.
However, producers of spirits have indicated that they would use the proposed tax cut to increase their exports. As a result, Canadian consumers risk having to pay the price of the producers' move to charge lower prices on foreign markets.
The general reduction in excise duties proposed in Bill C-232 would also apply to imported spirits that are sold in Canada, which represent almost one-third of all sales in the country. There is no guarantee that those savings would be passed on to Canadian consumers.
If Bill C-232 is passed, it will cost an estimated $55 million a year in forgone tax revenues.
I will now move on to another shortcoming of Bill C-232, namely the problems it will cause for trade, both on the domestic and world markets.
As noted in Budget 2016, an open trade and investment environment allows firms to thrive and provides better jobs for the middle class. The competitiveness of Canadian businesses in the international marketplace will be enhanced by breaking down barriers to trade, both internal and abroad, and providing the appropriate tools and policy framework that allow Canadians to take advantage of new trade opportunities.
For instance, the government recently took the last steps to finalize the Canada-European Union comprehensive economic and trade agreement.
Canada and the European Union both intend to ratify the agreement as soon as possible, so that our citizens can reap the benefits of that excellent agreement.
The government is also determined to strengthen Canada's trade relations with large emerging markets.
Tax policy programs that exclusively target Canadian producers or products could be considered contrary to international trade rules, because they could be considered discriminatory against imported products.
Under Bill C-232, only spirits produced in Canada would be eligible for reduced excise duties at a preferential rate of $6 per litre of AEA for the first 100,000 litres produced.
Furthermore, if the reduced excise duties are meant to benefit Canadian products at the expense of imports, that could jeopardize Canada's exports, including the major component of exports from the spirits industry, if other countries were to take retaliatory measures.
I think it is quite clear that the provisions of Bill C-232 would seriously compromise Canada's position on global markets.