Mr. Speaker, this is just getting good. I hate to spoil the party by speaking in support of Bill C-11, an act to amend the Customs Act and the Excise Act and the Tobacco Sales to Young Persons Act.
In my riding of Calgary Centre this issue has attracted some concern and some comment. It is basically split 50:50. The government's four point action plan on smuggling comes under criticism where it lowers the price of cigarettes and that it impacts upon the increase in health costs and such. That is a concern and I have expressed it. Nevertheless in evaluating this bill and the steps taken by the government I feel it is worth going forward with it.
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 end up paying for the loss of revenue and the increased cost associated with the lucrative practice of smuggling.
This problem is rooted in the fact that Canadians pay too much tax and have lost faith in government's ability to manage money, manage resources and live within its means. We will find out this afternoon at five o'clock how much better the government is going to do in managing resources and doing something with the economy.
Canadians are finding it more and more acceptable to purchase smuggled goods because of the taxes and surtaxes they have had to pay legally on items. This problem is not limited to just cigarettes. It is a problem related to clothing, alcohol, groceries, jewellery, guns and the list goes on.
According to government statistics the average price of a carton of cigarettes was around $45 to $48. The same carton could be purchased in the United States for $15. This differential made the cigarette trade appealing to many Canadian smokers and to a large degree organized crime.
A single case of cigarettes containing 50 cartons can produce at least $500 profit. A thousand cases per week could therefore mean a profit of half a million dollars for suppliers. With this kind of profit motive it is no wonder smuggling has become so desirable.
Canadian cigarette companies were well aware of this new market and as a result increased exports of cigarettes at an incredible rate. In 1985, 3.5 million cartons were exported to the United States. The figure now is over 62.8 million cartons per year. This increase of over 1900 per cent in eight years is not due to the fact that Americans have begun to love our cigarettes. Having gone to California quite often I know most of them hate them.
Cigarette companies knew there was a market for the product and they were using it as a means to sell more cigarettes here in Canada. It is estimated that between 85 per cent to 90 per cent of the tobacco products destined for exports find their way back here.
For non-smoking Canadians who do not feel that the problem of smuggling affects them I ask them to think again. The number of people charged by RCMP customs and excise has increased from 414 in 1990 to 3,389 to date. The number of seizures within this same timeframe has increased from 303 in 1990 to 5,044 to date.
Increased enforcement and prosecution combined with the loss of government revenues cost the government over a billion dollars a year. In the end it is every Canadian taxpayer, not just those who drink or smoke, who end up paying these costs in the form of higher taxes.
My party strongly believes that the federal government has a spending problem and not a revenue problem. Spending cuts alone will not make the problem of smuggling go away. The only way to truly eliminate the problem is to reduce the profitability to smugglers. 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 no longer be able to profit from it.
Only when the profit is removed will smuggling be reduced. Law enforcement alone, without the removal of the profit margin, would not be enough to solve this major problem. Bill C-11 is the first of many necessary steps toward the elimination of the problem.
It is estimated that over 70 per cent of smuggled cigarettes come through native reserves in Ontario and Quebec. As we know, this has become a major political issue over the past few weeks in the House, in question period and in the country.
The fact is, however, that people of all colours and walks of life are involved in the illegal cigarette trade. Also there has been a smuggling stigma created by a small group of native Indians who are breaking the law that is having a negative effect on the majority of native Indians who obey the law.
As some of my colleagues have said earlier, law enforcement on or off native reserves should be adhered to and should be adhered to quickly.
There have been many concerns expressed by health organizations and individual Canadians who believe that by reducing the
cost of cigarettes more people, especially younger people, children, will begin to smoke. In my opinion by raising the legal age to smoke, eliminating kiddie packs and limiting vending machines to bars the government has taken a step in the right direction toward the reduction of smoking for young people. This fact in combination with increased fines for retailers who sell to minors and fines for minors who are caught smoking will help mitigate the problem.
We must not lose sight of the fact that this bill is primarily targeted at the multibillion 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 that 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 need 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 rising, more young people smoking and the loss of revenues 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 drinkers and non-alcohol drinkers, the same with automobiles in that the more accidents one has or the more risk one is the higher the premium.
The issue with respect to children is being addressed because to combat the lower price it is prudent and wise of the government to raise the legal age, introduce fines, enforce them on the school yards and restrict the use of vending machines to those venues that must check the age of the customer. Also, as I mentioned earlier, by eliminating mini-packs and labelling cigarettes for export this will restrict the flow of illegal and legal cigarettes to the youth of the country.
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, people still smoke.
We must remember that at the end of the day, try as government might, it really cannot legislate through taxation totally a country's social behaviour. It can only have an influence.
Through this bill organized crime will be neutralized by the removal of profit and greater law enforcement. The two go hand in hand. My colleague, my seatmate, has indicated that law enforcement is the cure and I agree with her. I also believe that we have to lower the price to take the profit out of it.
The tobacco companies are also being addressed and in a way punished for their past behaviour by the introduction of an export tax of 8 per cent.
The increase in their corporate tax rate from 21 per cent to 30 per cent and a 3 per cent surtax on the tax paid portion, which according to the Department of National Revenue will generate $200 million more revenue to the government, are indications that the tobacco companies are not getting away scot-free on this.
In conclusion, law enforcement and respect for the law are very imperative, despite what the hon. member from the Liberal Party said earlier that they are doing it. They are not doing it. We have not seen any evidence of it being done but the RCMP must move swiftly to those known major areas of smuggling activities to eliminate the perception of two sets of laws in Canada.
If this is not done and not done swiftly then all the critics of this bill will prove to be right and the government will be totally embarrassed. I do not smoke but I might go out and have one.
