Mr. Speaker, I rise today to speak in favour of Bill C-32. Some of my colleagues today will be expressing many of the negative aspects surrounding this bill and a lot will be speaking against it.
This bill covers three areas, changes for meal allowance and also the air transportation tax and the tobacco tax. This bill is the last stage in the government action plan to combat smuggling. The first stage was Bill C-11 which was mainly concerned with enforcement. This bill brings into effect the proposed tax changes.
With respect to the changes to the meal allowance, the eligible business meals and entertainment expenses are reduced from 80 per cent to 50 per cent in accordance with the provisions outlined in the budget. We supported these changes when the budget came out on the basis that they amounted to business subsidy.
While I recognize that these expenses are legitimate business expenses for some, the reality of the tax break was that it was being used to escape tax and subsidize the recreation activity of business. In addition, some tax relief is still available, albeit at a reduced rate. My colleagues and I are in favour of this aspect of this bill.
With respect to the air transportation tax, this bill reduces the tax burden on short haul, domestic and transporter flights by decreasing the flat charge per ticket and increasing the maximum fee. The flat fee is decreased to $6 and the maximum is increased to $50. The changes will bring additional revenue to the government of $24 million projected in 1994 and $41 million in 1995.
I support this change as it makes the air transportation tax move toward a full cost recovery basis. I believe the majority of my caucus colleagues also favour that.
The most important issue is the tobacco tax. Although the majority of our caucus is opposed to the reduction of the excise tax on tobacco products, I disagree with it. Our caucus, though, has some legitimate reasons for being opposed to the reduction. It feels it will encourage more people to smoke, particularly young people. Long term health costs for Canadians have not been calculated. Aggressive enforcement should have been tried first and the new export taxes on tobacco should have been tried first.
I agree with all of those but nevertheless the government failed to approach the problem with that attitude and now we are left with this particular bill in its present form.
My riding is basically split 50:50 on this issue. Fifty per cent are against this bill only because of the impact upon the increase in health costs. Therefore I am looking at this issue not only as a representative of Calgary Centre. I am looking at it as a representative of all of Canada, from the country's point of view.
In order to solve a problem we must first of all identify what that problem is, decide on what courses of action are available that will help solve that problem, pick the one that will solve the problem the best and the fastest, implement the decision and examine the results. If it is working, stick with it and if it is not go back to some of the other options.
The main problem we are addressing today is one of organized crime, the underground economy and in particular the problem of cigarette smuggling into Canada. I sympathize with the Prime Minister and the problem that he had with this issue in trying to come up with a solution. It is not an easy one.
With his four point plan he looked at all the factors involved and made a tough decision. It is one of the few he has made. Although we are critical of him it is meant to be constructive and in that area where I feel we can support him I would like to do that.
This issue certainly has cost the government a lot of money and has driven a lot of legal people into the illegal underground economy. Because this addresses that and solves that problem I feel it certainly deserves my support and so I will be talking about that.
The truth of the matter is some people want to smoke. Some people want to drink alcoholic beverages. All people need to eat. Our health care costs are directly linked to our diet and our exercise or lack thereof and not just to cigarettes and booze. To specifically target one item, although undoubtedly a killer-there is no question that one in three to one in four people dies of cancer because of cigarette smoking-do these same people who advocate raising a tax on cigarettes advocate raising a tax on all food that is bad for us? No, they do not. They allow us to have a choice as it should be with cigarettes and booze.
No matter how high we drive sin taxes, no matter how much we try to discourage the public from doing something through legislation, through the Income Tax Act, if people want to do it and if it is still legal they will do it.
I find it somewhat hypocritical that we say it is legal to smoke and it is legal to drink after a certain age, but then we try to price it out of the market because it is bad for our health. Either this government wants to allow people to do freely what they like to do or it does not, instead of trying to mix the two together.
With respect to the health issue, there have been many concerns expressed by health organizations and individual Canadians who believe that by reducing the cost of cigarettes more people, especially young people, children, will begin to smoke. In my opinion by raising the legal age to smoke, eliminating kiddie packs, limiting vending machines to bars, the government has taken a step in the right direction toward the reduction of smoking in young people.
This fact combined with the increased fines for retailers who sell to minors will help mitigate the problem. I also have a further suggestion in this area and it was well received in the finance committee by the Parliamentary Secretary to the Minister of Health. Patrol the high schools and when the police catch the under age people smoking, they could issue them a summons that also gets mailed to the home. The parents then would be made aware of the fact that their children are smoking. The summons would say basically the next time we catch your child you will also get a summons but that one will cost you $50 and each and every time we catch your child smoking it will cost you $50. This perhaps is a way of curtailing young people from smoking.
That is a separate issue from what this bill is trying to resolve. It is trying to resolve the issue of smuggling, not the issue of encouraging young people to smoke.
The federal government is currently losing a guestimate of $60 billion to $80 billion per year to the underground economy. This loss of revenue has a direct negative effect on the ability of small, law-abiding businesses to compete in the private sector. In the end it is the Canadian taxpayers who pay for the loss of revenue and the increased costs associated with the lucrative practice of smuggling.
I ask non-smoking Canadians who do not feel that the problem of smuggling affects them to think again. The number of people who have been charged by RCMP Customs and Excise has increased from 414 in 1990 to 3,389 to date. The number of seizures within this same time frame has increased from 303 in 1990 to 5,044 to date. Increased enforcement and prosecution
combined with the loss of government revenues costs the government over a billion dollars a year.
In the end it is every Canadian taxpayer, not just those who drink and smoke, who ends up paying these costs in the form of higher taxes.
The only way to truly eliminate the problem is to reduce the profitability to smugglers, take the profit out of smuggling. In order to do that we have to reduce the cost and the taxes. By reducing the cost differential between smuggled and retailed cigarettes, ordinary cigarette smokers will have less incentive to seek out and purchase illegal cigarettes and, on a larger scale, organized crime will be no longer able to profit from it.
Only when the profit is removed will smuggling be reduced. Law enforcement alone without the removal of profit margin will not be enough to solve this major problem.
We must not lose sight of the fact that this bill is primarily targeted at the multi-billion dollar smuggling market. Federal and provincial governments tax cigarettes and liquor not just to reduce consumption but to generate extra revenue for other programs. These so-called sin taxes combined with health awareness campaigns will not eliminate in its entirety the use and abuse of these substances.
If we go back to before this act, what were the facts? The facts were that people were smoking and people were drinking, except that the purchase of cigarettes went into an underground economy. This is an attempt to bring it to the surface. It is up to all Canadians to deal with this problem at home, in schools and in their communities. If further measures are needed to be taken by the government, then we should vigorously examine all of our options. The bill addresses organized crime, the tobacco companies and respect for the law.
The critics of the bill, including some of my caucus members, have focused on health care costs, more young people smoking and the loss of revenue at a time when government can least afford it.
There are other means available to deter smokers without relying on taxation only. For instance, we could have variable insurance premiums for smokers and non-smokers. The same with alcohol and non-alcohol drinkers, like we do with automobiles. We do it somewhat with physicals but we could even make it more onerous, more specific and more related to being able to identify potential costs to health care by a person who has certain habits, although they are legal, which may cost the taxpayers more money. Therefore their premiums should be higher.
Furthermore, the advertising and education programs about the effects of smoking should be recognized as an influencing factor, although not an end in itself. Despite the many lectures of parents to their children, despite the many TV commercials, despite the many educational programs that are out there for children and people of all ages, people still smoke.
I personally would cancel the TV commercials because they are ineffective. The young people of this society just laugh at them. They think it is a joke. The government should concentrate on a direct communications piece with each taxpayer to create awareness of the dangers of smoking. That money spent that way would be much more effective. It is a direct message to families and to individuals, done in a professional manner and intended to make people aware of the problems of drinking and smoking. That message would be received by everybody, not just on a hit or miss affair by television where only the TV companies benefit with the extra revenue for their commercials.
There are a few other things I would like to address on this bill. There is an organization called action on smoking and health. Where my colleagues have talked about the impact and effects of this bill on more people smoking and the cost to health care, I suggest they are co-mingling. To argue that lower priced cigarettes will increase smoking, I do not buy that. As my colleague said, 97 per cent of the cigarettes that were manufactured and exported to the United States were coming back into this country in the underground economy. Whatever percentage that was of the manufactured cigarettes, that is exactly the percentage of how much smoking will increase by any survey that is released today or tomorrow or next year because it is now out in the public, it is out on the surface and it is out in the open.
To use that statistic and say that cigarette smoking is increasing because of the lower price is not entirely accurate. I realize that people are smoking. I realize the lower the price is of something then people can afford it and they will buy it but we have to solve the underground economy problem. We have to lower taxes. We have to encourage the government to recognize the benefits of lower taxes.
As my colleague asked, if we lower taxes on cigarettes should we lower it on alcohol? The answer is yes. Should we lower it on jewellery and clothing imported from the United States? The answer is yes. Should we lower overall taxes? Should we lower the GST? The answer is yes. How do we pay for it all? We eliminate the dumb wasteful spending of this government that has increased spending by $3 billion this year.
It will not look at the programs of each of the ministries and reduce spending. It will not go through it line by line. It gave a billion dollars to companies that do not want it. It gives grants and subsidies to people who abuse it, misuse it, and come out with ridiculous reports. That is where we could save a lot. With lower taxes and more money in the hands of ordinary Canadian
taxpayers, it would then increase disposable income and the economy would start to generate and work.
It is economy No. 1. I took it in university in 1968. I have not forgotten it. It seems like the members in this House and the ministers especially will not even go back to economy No. 1 and implement some of the basics of that.
I got off on a slight tangent, let me get back on track.
This is also to show that the two issues are separate. If you want to cure problems in health care then solve the health care problems. If you want to cure the smuggling problem then we have to support bills and issues and ways and means to do that. I believe this does.
However, my colleagues are concerned about the health aspect of smoking and interprovincial smuggling because now that has created a problem. Some westerners are writing letters and saying they feel like second class citizens because of what Ontario and the eastern provinces have done by accepting the lower tax. That is a provincial decision. If the western premiers do not wish to do that that is their decision.
There is a group called action on smoking and health which has made a representation to the finance minister. I would like to touch on some of this and get it into the record because I believe it is important.
Action on smoking and health is western Canada's leading tobacco control agency. It is very concerned with the federal tax differentials contained within Bill C-32. It fully supports the recommendations of western finance ministers to restore a uniform federal tax regime on tobacco products. It believes that the proposed fines for interprovincial smuggling are inadequate and need to be adjusted. I concur.
Based on its calculations, a proposed tax penalty of three times the excise tax avoided barely accounts for the potential profit margin earned by smugglers who ship Quebec and Ontario cigarettes to western Canada.
While there is a $1,000 additional penalty in Bill C-32 for smuggling violations, a Quebec smuggler would only have to ship two cases of cigarettes to Alberta to cover this loss based on current profit margin. It recommends a more meaningful penalty similar to the new Alberta legislation, and once again that great province is a leader, which provides for fines up to $10,000 and a six month prison sentence for first time violations.
That is called punishment. That is what our law should be designed to do in the criminal justice system, not rehabilitation all the time. Maybe the two combined, but punishment first.
In its presentation to the finance committee it also pointed out that the current federal duty strip obstructs the health warning on cigarette packages. If the Minister of Health does not get her plain packaging on cigarettes then perhaps the recommendation that duty strips be positioned horizontally along the package so as not to interfere with the health warning might be a useful recommendation.
I found a quotation in a book written by some intelligent economists which reads: "In summation, what we need is an immediate tax cut for low and middle income groups in order to increase demand and purchasing power". That is the lesson of economics that I wish to pass along to this government, the vice-chairman of the Standing Committee on Finance, the Minister of Finance, the Minister of Industry and the Minister of National Revenue and taxation. What this country needs is an immediate tax cut for low and middle income groups in order to increase demand and purchasing power. What we have in this country is a spending problem, not a revenue problem.
