Tony Valeri

[Special Import Measures Act, September 25th, 1998]

Madam Speaker, today it is certainly a privilege for me to begin debate on Bill C-35.

Essentially this bill contains amendments to Canada's anti-dumping and countervailing duty law, known as the Special Import Measures Act, or SIMA. It responds directly to the recommendations contained in a 1996 parliamentary report on Canada's trade remedy system.

These amendments will fine-tune the law by rationalizing the investigative process, increasing transparency and procedural fairness, and in fact enhancing the system's ability to consider representations from various segments of Canadian business.

The bill also includes certain technical changes that clarify existing provisions and practices under SIMA and the Canadian International Trade Tribunal Act.

SIMA is an important component of Canada's trade remedy legislation. It authorizes the federal government to impose anti-dumping and countervailing duties to offset injury to domestic firms caused by foreign dumping and subsidies. In this regard it implements Canada's rights and obligations under the World Trade Organization agreements on subsidies and anti-dumping.

Two federal government departments and one independent tribunal are directly involved under SIMA. As actions taken under SIMA result in the imposition of duties on imported goods, the Minister of Finance is responsible for the legislation.

Revenue Canada and the Canadian International Trade Tribunal share responsibility for investigations under the law and Revenue Canada enforces anti-dumping and countervailing duties at the border.

With respect to international implications and negotiations, it is foreign affairs and finance which work together on trade remedy policy to co-ordinate Canada's import and export interests and develop our international trade negotiating positions.

Before discussing the merits of Bill C-35, I would like to provide some background as to why these amendments are being proposed.

Canada has a long history in the use of trade remedies. In fact in 1904 Canada introduced the world's first anti-dumping legislation.

Since then our trade remedy system has undergone various refinements due to changing economic conditions and the evolution of international trade rules. These international rules are governed by the World Trade Organization, or the WTO, which sets out detailed rights and obligations of member countries in administering trade and remedy protection.

As the imposition of anti-dumping or countervailing duties represents an exception from a country's WTO commitments not to raise tariffs and not to discriminate in its treatment of imports, the right to impose these special duties is carefully circumscribed.

In general, the Canadian SIMA system is comparable to the systems of other major users such as the United States and the European Union. The WTO does, however, provide some latitude in the administration of trade remedy laws. As a result, there are some variations between systems, largely reflecting differing legal cultures and economic circumstances.

There are, of course, important domestic interests on both sides of the trade remedies equation.

One of the key challenges associated with the Special Import Measures Act was to strike the right balance between the interests of industries seeking trade remedy action and the interests of consumers and other manufacturers who may be negatively affected by the imposition of anti-dumping or countervailing duties on imported goods.

First and foremost, this law is intended to assist Canadian enterprises by offsetting the injurious economic effects resulting from dumping or underpricing practices of foreign exporters, or in the case of subsidies, to remedy the injurious effects of the subsidy practices of foreign governments. However, the downstream economic interests cannot be ignored.

As markets operate increasingly on a global basis, market openness becomes a critical factor in attracting investment and maintaining the competitiveness of our domestic firms.

Canadian manufacturers often have to rely on imported inputs, for example, to meet specific quality and technical needs of their customers.

According to the OECD, the operations of Canadian manufacturers rely more on imported inputs than their G-7 counterparts in the U.S., France, Germany, Japan and the U.K. This reflects the relatively smaller size of the Canadian economy, as well as its high level of integration with the United States.

Given this, SIMA must represent a balancing act. It must provide effective relief to Canadian firms injured by foreign dumping or subsidies while not imposing unnecessary or excessive burden on downstream producers or consumers. This was the key challenge for lawmakers when SIMA was first developed in 1984 and it certainly remains the challenge today.

When the Minister of Finance requested the House of Commons Standing Committees on Finance and Foreign Affairs and International Trade to jointly review SIMA in 1996, he noted that significant changes had taken place in the global trading environment since 1984 and that it was time to reassess whether the law continued to reflect the interests of Canadian producers.

Two subcommittees were asked to undertake this review. They heard from a broad range of interests, including domestic producers, importers, retailers, academics, trade practitioners and government officials. These parties gave evidence and submitted proposals for changes based on their experience with the SIMA system.

It was based on these submissions and their deliberations that the subcommittees concluded in their report that Canada's trade remedy system under SIMA continues to respond to the needs of Canadian producers that seek protection under the law, while affording downstream producers and consumers an opportunity to have their interests considered.

They also identified areas where improvements could be made to the system to make it more efficient and more responsive to Canada's economic needs.

Generally, the recommendations represented adjustments to the SIMA investigation process that allow the system to more adequately consider the views of various parties which have a stake in this law.

I want to be clear that it was for this reason that the government supported virtually all of the subcommittees' recommendations. What we have before us today is Bill C-35, which essentially reflects the subcommittees' recommendations and the requirement that the subcommittees put forward in asking the government to review these recommendations and build them into legislation.

There are key changes in Bill C-35, the first being the rationalization of investigative functions of Revenue Canada and the Canadian International Trade Tribunal to better reflect their respective areas of expertise.

The second would enhance procedural fairness and transparency by bringing Revenue Canada's treatment of confidential information more in line with the tribunal's practice respecting the disclosure of confidential information.

The third would ensure that the tribunal, in its fact finding, would benefit more fully from expert evidence by permitting expert witnesses to play a more effective role in tribunal inquiries.

The fourth would establish new penalty provisions to deter any unauthorized disclosure or misuse of confidential information by legal counsel or expert witnesses in the context of SIMA investigations.

The fifth would improve the provisions which allow the Deputy Minister of National Revenue to accept an undertaking from exporters to raise prices as an alternative to the imposition of anti-dumping duties and to ensure that all interested persons are afforded an opportunity to provide views when undertakings are being considered.

The sixth would require the tribunal to cumulate the injurious effects of dumping or subsidizing from more than one country consistent with the single price effect in the Canadian market of such practices.

The final change would clarify the conditions under which the tribunal can consider issues of broader public interest and the types of measures it may recommend in a public interest report.

The discussions that took place in the recent parliamentary review of SIMA reflected the changes that have taken place in the structure of the Canadian economy since the law was established in 1984. These changes will ensure that the Special Import Measures Act remains a strong trade instrument which truly protects Canadian producers injured by dumped or subsidized imports, while at the same time allowing an opportunity for other producers and consumers to have their interests considered.

It certainly introduces important changes to Canada's trade remedy system which take account of the interests of all stakeholders. It is for the reasons that I have outlined that I would urge all of my colleagues to support its passage.

[Income Tax Conventions Implementation Act, 1998, September 24th, 1998]

Mr. Speaker, I appreciate the opportunity to speak today at second reading of Bill S-16.

This legislation will implement the income tax conventions that Canada recently signed with Vietnam, Croatia and Chile. Bill S-16 is important as it is part of an ongoing effort to update Canada's network of income tax conventions.

Tax treaties are directly related to international trade and thus have a subsequent impact on Canada's domestic economic performance. Their benefits are therefore significant. Witness the almost 40% of Canada's annual economic wealth that depends on exports, commerce abroad and direct foreign investment.

Canada has been updating its network of tax treaties regularly since 1971 when our income tax system was overhauled. One of the outcomes of this overhaul was the expansion of our network of tax treaties. Canada now has income tax treaties with 64 countries.

Canada has two main objectives in mind when signing tax conventions with other countries. One is the avoidance of double taxation. The other is the prevention of income tax evasion. New tax treatments are, for the most part, similar to others already concluded by Canada. However, by necessity they do vary from one country to another.

Bill S-16 guarantees that our income tax rules are integrated to ensure that our agreements with Vietnam, Croatia and Chile have full force and effect.

Before I discuss some of the specifics in the bill I want to highlight three major benefits that will result from the bill.

First, taxpayers will know that a rate of tax limited under any of these agreements cannot be increased without substantial advance notice of any changes.

Second, Canadian taxpayers with business interests or investments in Vietnam, Croatia or Chile will operate under a reduced compliance burden as the rules of the game will become clearer.

Third, taxpayers involved in international transactions where double taxation occasionally occurs will see this problem largely eliminated.

In a world where people and capital are increasingly mobile, double taxation treaties are crucial because they ensure that returns will not be taxed twice. Canada has 64 treaties, including our conventions with Vietnam, Croatia and Chile, which eliminate double taxation in one of two ways.

They assign exclusive taxing rights to only the taxpayer's country of residence or the source country of the income. Or they require the country of residence to give credit for the tax paid to the source country if the income is taxable in both countries.

Double taxation treaties often encourage the exchange of information between revenue authorities to prevent tax evasion, the second objective in signing these treaties, and Bill S-16 is certainly no different.

Withholding taxes are another major issue addressed in this particular bill. A taxpayer's country of residence can usually withhold tax at a rate of 5%, 10% or 15% on dividends and branch profits, and 10% on interest and royalties. In some cases royalties on copyright, computer software, patent and know-how are exempt at source.

Under the agreement with Vietnam, there will be a reduced dividend rate of 5% for a Canadian company with at least 70% of the Vietnam company's voting power, 10% for a company controlling between 25% and 70% of voting power, and 15% in all other cases.

In addition, there will be a reduced branch tax rate of 5%, a reduced 10% rate on interest and royalties and a 7.5% on technical service fees.

For Vietnam there is no immediate exemption for royalties on copyright, computer software, patents and know-how. However, if Vietnam agrees to any future exemptions with other OECD countries, Canada and Canadians will automatically obtain the benefit of that same exemption.

Under the treaty with Croatia, the reduced dividend rate will be 5% for a company controlling at least 10% of the voting power, or holding at least 25% of the capital, and 15% in all other cases. The rates on branch taxes and interest and royalties will be 5% and 10% respectively. Again, there is no exemption for interest or royalties on copyright, computer software, patents and know-how.

In the convention with Chile, the reduced dividend rate will be 10% for a company owning at least 25% of the voting power and 15% in all other cases. A 10% branch tax rate will apply, and if Chile agrees to a 5% rate with another OECD country, this lower rate will automatically apply to Canada.

There will also be a 15% rate on interest and royalties, but no exemption for interest or royalties on copyright, computer software, patents and know-how.

Another measure I would like to discuss concerns non-resident pensions. Bill S-16 respects Canada's right to tax pensions and annuities paid to non-residents. Under the agreements with Vietnam and Croatia, pension payments can be taxed in both countries, with the source country collecting no more than 15% of the total payment. Social security benefits will be taxable only by the country that pays those benefits. With respect to Canada and Chile, pension and social security payments will be taxable by the country from which the payments are made.

Hon. members may be interested to know that capital gains on the sale of real property, business assets and shares in real estate companies, or interest in real estate partnerships or trusts will remain taxable by the country in which the property is situated.

In conclusion, there are some very real benefits for Canadians in this bill. With no tax treaty presently in force with Vietnam, Croatia or Chile, these agreements will definitely help Canadian corporations and individuals with operations and investments there. Along with promoting international trade and investment, and helping to secure Canada's position in the increasingly competitive world of trade and investment, their existence will also foster an atmosphere of certainty and stability for investors and traders that will only enhance Canada's economic relationship with each country. At the same time these agreements will help to ensure that Canadian tax policy remains consistent internationally.

I also point out that there will be no revenue losses to any of the countries affected by this bill.

Tax treaties are part of the normal apparatus of international relations for a modern economy and their expansion is part of the ongoing operations of a responsible government. This is important and non-controversial legislation and I encourage hon. members to grant its speedy passage.

[Dna Identification Act, September 21st, 1998]

Mr. Speaker, as we have stated over and over again, the central pillar of this government's mandate is employment growth. In the last four years, over one million full time jobs have been created in the private sector with more than 370,000 being created in 1997 alone. The unemployment rate is lower than it has been since 1991 and our commitment is not about to change now.

The transitional jobs fund was introduced in 1996 to help individuals and communities of high unemployment areas adjust to EI reform. Projects approved to date are expected to create over 31,000 sustainable jobs. However, a transitional program cannot be extended indefinitely, especially without a thorough evaluation which is currently underway.

In the meantime, through labour market development agreements with the provinces employment insurance continues to offer active measures to help the unemployed re-enter the workforce. Examples include targeted wage subsidies, earning supplements, employment assistance services as well as other benefits and support measures. The 1998 budget also sets aside money to promote employment for young Canadians as well as youth at risk through EI premium holidays and the youth services Canada program.

I take the hon. member's comment and I reiterate that this government is committed to employment growth. The transitional jobs fund is under review. After that review is completed a decision will surely be made.

Since the hon. member talked about the surplus in the EI account, I reiterate that back in 1986 the auditor general required the government of the time to consolidate the EI account into general revenues. So those moneys are going directly into consolidated revenues and are certainly being used for what are Canadian priorities.

[Contraband Tobacco, June 12th, 1998]

Mr. Speaker, as I said, the federal government is concerned about illegal activities. I said quite clearly that we will continue to work closely with the provinces and also with law enforcement agencies to control the sale of contraband products.

Quite clearly I stated earlier and I will restate that this government is not in favour of removing the GST on tobacco products. We will remove the GST on those products which we feel are essential to the well-being of Canadians. Again, tobacco does not fall into that category.

[Contraband Tobacco, June 12th, 1998]

Mr. Speaker, certainly the federal government is concerned about illegal activities and continues to work closely with the provinces and law enforcement agencies to control the sale of contraband goods.

However, we are not in favour of removing the GST on tobacco products. We feel that only goods essential to the well-being of Canadians should be exempt from sales tax such as basic food items, prescription drugs and medical devices. Clearly tobacco products do not fall into this category.

[The Economy, June 12th, 1998]

Mr. Speaker, there are a number of factors that have been impacting on the performance of the dollar recently, lower commodity prices and the uncertainty about economic developments in some Asian countries.

However, let us be clear that the underlying fundamentals are behind a Canadian economy that remains strong. The OECD, for example, estimates that Canada will have the best fiscal performance in the entire G-7. Output and employment growth have been robust and inflation continues to be low. We are on a track that will continue to see this country grow right into the next millennium because the fundamentals are right.

[Income Tax Act, June 11th, 1998]

Mr. Speaker, this private member's bill endeavours to extend the current one year tax deferral for income from forced destruction of livestock to other amounts paid to farmers with respect to natural disasters.

The hon. member for Athabasca in proposing this wishes to ease the financial burden on farmers whose property is damaged or lost through a capricious act of nature. I applaud my colleague for his initiative in this regard. It is important as we all witnessed during the recent ice storm that lives and livelihood disrupted by natural emergencies be quickly restored. I also agree that governments have a crucial role to play in the rebuilding process that follows devastation.

I would also like to point out, however, that while I support in principle the spirit of this proposed amendment, it is flawed in two very important respects. The proposal before us today is inconsistent with existing tax deferral provisions for farmers. In addition, the proposal fails from a technical perspective because it fully identifies neither the amounts to be deferred nor the circumstances whereby deferral would take place.

The Income Tax Act allows farmers to defer for tax purposes amounts received with respect to livestock in two important circumstances, forced destruction under statutory authority and in the case of widespread drought.

The proposed amendment attempts to build on the current one year tax deferral for income from the forced destruction of farm animals. The government from time to time orders the destruction of livestock known or suspected to carry various diseases in order to prevent the spread of illness to other animals or humans. Farmers may defer the inclusion in income of amounts paid by the government as compensation for the slaughter of diseased animals and need only report these amounts in the year following the year of animal loss.

This tax treatment is proper because the government recognizes that the disposal of livestock was involuntary on the farmer's part. In addition, depending on the timing of government action, farmers may not have sufficient time to replenish livestock before the end of the year. To maintain tax neutrality affected farmers are allowed to defer the proceeds to the next taxation year and offset it by deducting the cost of animal replacement as it takes place.

The phrase “under statutory authority” in this regard is both clear and necessary. For income deferral to occur the government must be responsible for the timing of animal destruction as well as for the associated compensation. Unless these conditions are satisfied no special tax treatment is allowed.

The proposed amendment, on the other hand, would extend this special tax treatment to amounts paid with respect to a natural disaster under statutory authority. The use of the phrase “under statutory authority” in this context is confusing and inappropriate. Unlike the case of diseased livestock, the government does not order property destroyed through a natural disaster and does not compensate farmers in this regard under statutory authority.

A tax deferral is also provided to farmers for livestock sales associated with a prolonged drought. However, for special treatment to take place affected farmers must carry on business in a prescribed drought region as determined jointly by the Minister of Finance and the Minister of Agriculture and Agri-Food.

In addition, relief is only extended to farmers whose herd is reduced by a specific magnitude throughout a taxation year and only a portion of income from the sale of livestock is eligible for deferral.

These conditions were put in place through consultations with affected farm groups and agriculture Canada to ensure that relief is granted for widespread drought and not for localized cases.

However, the proposed amendment includes no similar threshold even though droughts are also natural disasters. Thus the amendment is inconsistent with the current tax policy in this area.

Moreover, the current income deferral mechanisms are limited to livestock only where the proposed amendment is not. The proposal therefore represents a fundamental departure from previous policy and is not simply an extension of the current provisions.

I am also concerned that the intent of this amendment providing tax relief to farmers hit hard by nature is not fully realized by the proposed language. To begin, the proposal does not make clear which amounts are to benefit from special tax treatment. Amounts with respect to a natural disaster could include payments from numerous sources such as governments, insurance companies and other individuals.

Payments could also be made for a variety of purposes such as replacement of inventory, recovery of capital assets or even protective measures against future catastrophes. Some of these amounts should perhaps qualify for tax relief but others decidedly should not. Under the proposal all such payments could potentially qualify.

In addition, the meaning of natural disaster is not anywhere defined by this amendment. When we say disaster we normally refer to a sudden calamitous event resulting in great damage, loss or destruction. But for the purposes of tax law this does not suffice. In extending special tax treatment we must be very specific to ensure that relief is provided only where warranted.

It should also be noted that farmers already receive favourable tax treatment in Canada. For example, farmers may elect to report income and expenses on a cash basis rather than on an accrual basis as in most other businesses. Farmers are also eligible for the $500,000 lifetime capital gains exemption for farm property. They may be able to defer proceeds from the sale of a farm property through a 10 year capital gains reserve and are in fact exempt from making quarterly tax instalments.

I believe everyone present here today will agree that victims of natural disasters deserve the federal government's and the nation's full support and empathy in reconstructing their homes and businesses.

However, I also believe that all levels of government already play a significant and constructive part in the process of restoration. The proposed amendment despite its good intentions is not consistent with current tax policy and does not effectively address the difficulties faced by affected farmers.

I thank the hon. member for bringing this issue forward. As he mentioned in his opening remarks, perhaps the discussion will shed some additional light on how we may find some other type of vehicle to address the concerns that the hon. member has brought forward. I reiterate that the amendment is not consistent with current tax policy and does not effectively address the difficulties that may be faced by affected farmers.

I bring to the attention of the House that although I do once again thank the member for bringing forward this issue, I must suggest that this proposal not be adopted by the House.

[Pension Benefits Standards Act, 1985, June 8th, 1998]

Mr. Speaker, I would go back to the comments made by the member for St. Albert in terms of this aspect of the bill. He indicated that if at least two-thirds of the members approve they would deal with the surpluses. I am paraphrasing but what he said was that it was tough to argue with democracy. It sounds like a pretty democratic process to give individuals an opportunity to vote on an issue that directly affects them so the condition of two-thirds was put forward.

The bill was consulted upon. Individuals from the department and other individuals who were involved consulted on the bill with the sectors involved to gain input into how certain changes that were being contemplated would be dealt with. The proposal in committee was deemed to be quite a positive step. It provides means whereby employers and employees can decide outside amending pension agreements what entitlements to surpluses are.

As we have said the bill includes some conditions to ensure fairness, that at least two-thirds of the members have to approve. If the two-thirds is not obtained the parties have the opportunity to go to arbitration but it is up to them. It is up to the people directly involved.

I go back to the comment that it seems pretty democratic to me. The only thing I take exception to is the continual innuendo that the whole thing is being manipulated in some way. I only wish members could stick to the facts in front of them. I encourage whomever to go to one of these pension plans that are affected and ask a member of the plan if he or she feels that he or she should have the right within a process to decide what should be done.

I can only respond to the question by saying that the hon. member for St. Albert seems to feel it is quite democratic. I only wish the hon. member for Elk Island would also concur.

[Pension Benefits Standards Act, 1985, June 8th, 1998]

Mr. Speaker, it is misleading to say the minister sponsored the bill. This was deemed to have been finance moving the motion. Senator Graham sponsored the bill. The Minister of Finance did not sponsor the bill. It is deemed in the House that finance moved the bill. That is strictly procedure.

I go back to the point I made earlier with respect to perception, to use the hon. member's word. I read into the record that in a letter from the Minister of Finance on March 3, 1994 he asked that he not be involved in any discussion or the decision making process involving Passage Holdings Inc. It is very clear back in 1994 that request was made by the minister.

Back in October 1995 the then deputy minister in a memorandum to the minister essentially outlined the situation. He advised the ethics counsellor and the Clerk of the Privy Council so that they were aware of the situation. The department and OSFI officials have all be instructed to ensure that the Minister of Finance not be involved in this matter in any way.

The member can continue with the innuendo and all the rest of it. I guess that is the role of opposition. I am merely stating the facts very clearly and for the record. Hon. members asked for this and I am laying them on the table for everyone to scrutinize.

I tell the hon. member again that when he makes the point that the Minister of Finance sponsored this motion in the House I reiterate that the bill is sponsored by Senator Graham. It is deemed to have been finance moving the motion in the House. It is very clear. I restate that it is misleading to say that the minister sponsored this piece of legislation.

[Pension Benefits Standards Act, 1985, June 8th, 1998]

Mr. Speaker, during debate on this legislation on Friday of last week the member for Elk Island put forward a series of questions concerning Bill S-3 and the Minister of Finance which were similar to the statements made by the hon. member for St. Albert.

The member asked, so I will reply, and I would like to reply on the record.

First of all, at no stage of the process was the Minister of Finance involved in the preparation of Bill S-3, nor did he have discussions with officials with respect to its content, nor did he receive representations on its impact. Indeed, the Minister of Finance specifically requested that the department not involve him in any aspect of this legislation whatsoever.

I would like to quote directly from a memorandum prepared on October 4, 1995 by then deputy minister of finance David Dodge. The memorandum was addressed to the Minister of Finance and copied to the then secretary of state for international financial institutions and read as follows:

The purpose of this memorandum is to advise you that the Office of the Superintendent of Financial Institutions is dealing with a matter in which you are in a potential or apparent conflict of interest and therefore should not become involved.

In your letter of March 3, 1994, you asked that you not be involved in any discussion or decision making process involving Passage Holdings Ltd. This matter involves the pension plan for members of the Canadian Maritime Officers Union; beneficiaries of the pension plan include persons employed on ships owned and operated by the CSL Group, a subsidiary of Passage Holdings, and the CSL Group is a contributor to the pension plan. OSFI has not as yet forwarded any documents to you and, after discussion with the office of the Ethics Counsellor, Departmental and OSFI officials have been instructed to ensure that you are not to be involved in this matter in any way.

In this case this may not be sufficient, as the issues may become public, or the persons involved may seek your assistance. Mr. Peters (then secretary of state) is aware of this matter and has been briefed by OSFI officials as part of the responsibility you asked him to assume for the Pension Benefits Standards Act. Should you be asked any questions in the House, or receive any inquiries directly from the public, you should decline to become involved and allow Mr. Peters to respond on behalf of the government.

I am forwarding a copy of this memorandum to the Ethics Counsellor and the Clerk of the Privy Council so that they are aware of this situation.

In keeping with the spirit of openness and transparency the finance minister has adhered to, I would certainly make the document available to other members of the House.

Accordingly Bill S-3 was first introduced into the House in 1995 under the sponsorship of the Minister of Industry. Following the 1997 general election it was reintroduced directly in the other place by the Leader of the Government in the Senate.

Throughout the process the Secretary of State for International Financial Institutions has taken responsibility for the management of the legislation within the Department of Finance and with the Office of the Superintendent for Financial Institutions.

I would simply reiterate that there is no basis whatsoever for any suggestion of conflict. The minister has remained entirely uninvolved with the handling of Bill S-3 and has taken every step necessary to remove himself from any aspect of the bill.

I trust this puts this matter to rest.