Mr. Speaker, today I am speaking as a representative of the Reform caucus regarding Bill C-11. The House has already heard speeches from Reform Party members on this important issue and I am pleased to add my comments to this discussion.
The measures contained in Bill C-11 are secondary when compared to those in the government's action plan to combat smuggling. They allow the government to sell or destroy seized property even when there is an unresolved claim, and allow the government to give police forces the same seizure power as the RCMP. The bill also requires cigarettes to be stamped properly if they are manufactured or imported into Canada, to make sure duties have been paid.
This bill makes it illegal to manufacture a package or sell cigarettes in packages containing less than 20 cigarettes, the so-called kiddie packs.
I agree with my Reform colleagues that the exchange of ideas regarding all of the government's anti-smuggling measures and not just those contained in Bill C-11 cannot be delayed. It is of utmost importance to Canadians that they are studied in their full scope immediately.
In the time I have been a member of Parliament this issue has far outweighed any other in terms of number of responses from my constituents, the vast majority of whom oppose the government's action. Such is the magnitude of the impact these changes promise to have on Canadians. These consequences will be felt in many areas; law enforcement, justice, interprovincial relations and of course health, particularly the health of young Canadians.
I would also make note of the fact that in Ontario tobacco production in 1993 was 173 million pounds. This was 5.5 million pounds over the tobacco marketing board's quota of 167.5 million pounds.
Is it not interesting that at the time when tobacco producers saw this large surplus, and this holds true also of the United States and some other foreign countries, the government introduced these measures which will undoubtedly increase tobacco sales? Indeed this is excellent news for tobacco companies.
As a farmer, I can tell the House that whenever there is an over abundance of product, the price has to go down to compete on the market. Here the tobacco companies are buying their inputs at a low cost and selling more of their product because of reduced taxes. They benefit first from low production costs and second from lower taxation. They are the clear winners with these measures and taxpayers are the losers because of the lost revenue and higher health care costs. Not of less concern in all of this is the financial implication of these measures.
On February 8, 1994 the leader of the Reform Party gave his initial response to the government's announcement. He pointed out that the root cause of all these serious issues was the problem of government overspending. This was what led to overtaxation in the first place and brought about these ramifications.
While I recognize that financial implications are only one of the serious aspects brought to light by the government's anti-smuggling measures, I would like to focus on them today along with the broader issue of the federal government's tax policy. I believe the issues serve as an excellent example of how the government's priorities should be reviewed.
Several questions have to be asked of the federal government regarding these measures. First, I am interested to know what will be the overall cost of these measures. I can see that they will change many aspects of federal finances. One of the most obvious questions that arises is: Where will the government make up for the lost revenues from the rollback of cigarette taxes? As we know there is no magic pot of money from which this will be regained. Any extra revenue that has to be made up will come in the form of new taxes. In fact, the tax burden promises to create new taxation problems.
Another thing tax reduction promises is a public health disaster. This makes it very hard for Canadian smokers to quit an addictive habit and introduces the harmful habit to a whole new generation of smokers. Aside from the human costs that cannot be measured, what about the cost to the health care system?
We have a situation where the federal government has decreased transfer payments to provinces for the past number of years. In some cases it is not enabling provinces to keep up with health care costs. Every Canadian knows that the health care system currently faces huge financial challenges. Health groups contend that extra health care costs associated with treating diseases in new smokers could be approximately $1.3 billion per year. I would like to know if the government has figured out exactly how it is to pay for these increased health care costs.
All indications point to new taxes for Canadians. I wondered how much thought went into this bill when I noticed that the government was doing away with the so-called kiddie packs in an effort to reduce smoking among our country's youth and at the same time drastically reduce pack prices overall.
Simply put, kids are not stupid. They will quickly realize that through the government's action they can buy a regular size package of cigarettes at a lower price than their kiddie packs cost. One statistic states that when the price of cigarettes goes up 10 per cent, tobacco sales to adults drop by 4 per cent to 9 per cent and sales to teenagers drop by 10 per cent to 14 per cent. These similar statistics were made available to the government by health groups before its decision to reduce cigarette taxes.
It should come as no surprise that smoking will increase just as dramatically when taxes are reduced. That the government was made aware of this and still chose to lower taxes makes me think that it either does not have an adequate grasp of the reality of the situation or it simply does not care. Eight out of ten provinces lobbied strongly for the government not to lower cigarette taxes.
While on the subject of health care, I note that in my home province of Manitoba, 25 per cent of kids go to school hungry. Thousands of adults are forced to depend on food banks. Now we have a government that has not addressed these problems saying: "We can afford to forgo a half billion dollars in revenue by reducing cigarette taxes". Would it not make sense for a government to write off these losses by providing for lower food costs so more hungry people could be fed as opposed to providing cheap cigarettes to Canadians?
It is a sad fact that governments in Canada have tried in vain to get their deficit problems under control by raising taxes instead of demanding better value from their spending. The notion that a deficit can be reduced from government revenue increases alone is a misguided one.
Higher taxes federally have failed to reduce the deficit and have in fact stalled the economy by cutting the spending power
of the consumer by dampening new investment and by diverting growth into a flourishing underground economy.
Granted government measures are intended in part to address an aspect of the black market, but would it not make more sense to instead reduce taxes in an area that would spur Canada's economic growth? For example, agricultural producers in my riding have seen, with the rest of Canadians, a reduction in the country's international competitiveness on agricultural markets. This is not the result of low efficiency on the part of Canadian farmers, but rather because of the high input costs farmers face. This is directly attributed to tax policy.
I can give the House an example. In Manitoba the taxes on clear gasoline that is not used in the agriculture industry are 11.5 cents provincially and 8.5 cents federally. For diesel it is 9.9 cents provincially and 4 cents federally. Fuel for farming use however has no provincial tax but still has the same federal taxes of 8.5 cents and 4 cents. There is no federal tax break at all. This is just one example of how taxes are driving up input costs. In the government's attempt to squeeze every dollar out of Canadians, it is squeezing the life out of our economy. Where we should see tax breaks, they appear and where we should tax breaks, there are none.
An article in the Financial Post states this very clearly:
Federal policies are forcing more than one in five firms polled by the Canadian Chamber of Commerce to move or consider moving business out of Canada.
I have been told many times by entrepreneurs: "Yes, I love Canada and I do not mind paying my personal income tax here, but my future and my profits, if government keeps on taxing them this way, are going to be somewhere else".
In the farming community many are forced to get 50 per cent of their income from off farm employment because the business of farming is no longer profitable. Farmers have to supplement their income just to get by. Think of the effect this has on unemployment levels. There is evidence across the country. University educated professionals leave Canada for nations where the income tax rate and the cost of living are lower, and this is after we have paid to educate them.
What the government should be looking at is a tax break that would help farmers, or for that matter any Canadian business or industry, become more competitive and that would provide incentive for professionals to stay and make their careers in Canada.
I was shocked to learn recently that since 1961 Canada's tax freedom day has advanced 73 days. It is of particular note that in 1961 the tax freedom day fell on May 3. Last year it fell on July 15. Very soon we will not have enough time to sit down and light up a cigarette if this trend continues.
We are rapidly approaching a point where we will be working for governments full time just to pay for their debt creating policies and bad spending decisions. In the face of such serious conditions, when the country is crying out for a large scale tax reform, this is what the government offers: lower taxes on cigarettes. Surely this cannot be what the government sees as most beneficial to Canadians at this time. Recently the revenue minister, vowing to kill the underground economy that costs the government billions of dollars, hired a shock troop of 500 additional tax auditors. This really displays what is wrong with the government's tax policy. Rather than give a tax break that would help kickstart the economy, it has decided to spend the money on hopeless efforts to regain revenue lost in the underground market.
In conclusion, I hope I have managed to show how this bill and all its associated measures display how the government's taxation policy should be seriously reviewed.
The problems caused by overspending cannot be solved by overtaxation. Overtaxation of cigarettes has created the underground market in the first place and this is just one example of how high tax levels are stifling the economy.
By reducing the tax on cigarettes the government is opening itself up to costs of about half a billion dollars per year just for implementation. To this you can add billions more in increased health care costs. How will this be paid for? I am afraid that it can only be paid through increased taxes.
The actions do nothing to break the damaging cycle of taxing to pay for spending. If we do not break the cycle soon and allow ourselves to implement useful carefully considered tax breaks, Canadians will see their income taxed out of existence.
