Doug Peters

[Customs Tariff, March 11th, 1994]

Mr. Chairman, those were very important questions. There was first the graduation of countries from the GPT. Some countries have been graduated and I am sure the hon. member means South Korea and Singapore. They have been graduated by the Americans for example and are no longer in that group of countries. Others such as Europe and Japan have not done that to these countries.

The question of whether these countries should be removed from this group which gets the advantage of the GPT is something we can look at at any time. If a member wishes to raise it for a particular country or if any standing committee of the

House decides it wants to examine any of these results that can be done at any time. It is not a closed situation at all.

The question of whether Canada should graduate the countries the hon. member mentioned is one which could be considered at any time. It is not difficult to make a change but we have to realize it has not been generally accepted to do that.

The other question was on the use of the GPT as a lever to human rights questions. That has been done on occasion. Where there is a general consensus usually through the United Nations or something similar that has happened. It is possible to do that.

With respect to China, I remind the hon. member that China is a major developing market and its record on human rights may have some questions. China is a major developing market for Canada. Canada has had a great interest in the opening up of China right from the very earliest times. We were one of the first western countries to recognize China and we have had very good relations.

It is extremely important that we retain our influence in China through the acceptance of the GPT to have the largest benefit from this. But there are a lot of other benefits on the other side as well in that Canadian companies have been opening up business there. The GPT helps Canadian companies in their general relations with China.

[Customs Tariff, March 11th, 1994]

The general system provides for consultations with the business community on any issue at any time.

No changes are made in the general preferential tariffs unless there is consultation with the business community. Any time we receive anything from a group of businessmen or an association that questions the level of the general preferential tariff it can be referred to finance officials and considered at that time.

It is more important that the business community which is affected by that be consulted than individual members of Parliament. Of course any member of Parliament can bring their concerns to the attention of the minister or the Department of Finance.

[Ways And Means, February 21st, 1994]

Mr. Speaker, pursuant to Standing Order 83(1) I wish to table a notice of a ways and means motion to amend the Excise Tax Act and I ask that an order of the day be designated for consideration of the motion.

(Questions answered orally are indicated by an asterisk.)

[Excise Tax Act, February 21st, 1994]

moved for leave to introduce Bill C-13, an act to amend the Excise Tax Act and a related act.

(Motions deemed adopted, bill read the first time and printed.)

1618

[The Budget, February 21st, 1994]

Mr. Speaker, the Minister of Finance will bring down the budget tomorrow at five o'clock, just 26 hours from now. Any comment on it will be reserved for that time.

[Customs Tariff, February 18th, 1994]

moved that Bill C-5, an act to amend the customs tariff, be read the second time and referred to a committee.

Mr. Speaker, I am pleased to introduce for consideration by the House Bill C-5, an act to amend the customs tariff.

The legislation I am introducing today seeks to extend the general preferential tariff, commonly referred to as the GPT, for another 10 years. The GPT is a tariff preference granted to developing countries for goods originating in those countries.

Let me give some of the history of this preferential tariff. In the mid-1960s there was widespread recognition that special and differential tariff treatment for developing countries was a means of fostering growth and well-being of those nations. Consequently in 1968 it was agreed at the United Nations conference on trade and development that a system of trade preferences should be implemented for developing countries.

In June 1971 this decision was accepted by Canada and other signatories to the General Agreement on Tariffs and Trade. Members of the GATT agreed that developing countries would be permitted to award more favourable treatment to products imported from developing countries than to similar products from developed countries. It was also agreed that the preferential tariff would be generalized, non-discriminatory and non-reciprocal.

Canada introduced its general preferential tariff scheme on July 1, 1974 for a 10-year period. The GPT was subsequently extended for another 10 years until June 30, 1994.

With this history in mind I would like to outline for the benefit of the House some of the essential features of the GPT. The GPT provides for a reduction in tariffs of up to one-third of the most favoured nation rates on certain types of goods from developing countries.

In the case of the least developed developing countries, that is the poorest countries known as the LDDCs, the tariff reduction is even larger. These countries are entitled to duty free treatment on all of their GPT eligible exports to Canada.

In all, more than 180 countries and territories are entitled to zero or low tariffs on a wide range of products, primarily manufactured and semi-manufactured goods.

In order for particular items to qualify for GPT they must comply with the rules of origin and other regulations. More particularly goods would only qualify for the GPT if at least 60 per cent of the factory price of the goods exported to Canada originated from one or more GPT countries. In the case of the LDDCs, the poorest countries, the content requirement is 40 per cent.

In order to ensure that GPT products do not have an adverse impact on Canadian producers, a safeguard system is authorized by the Minister of Finance to withdraw GPT treatment for particular goods.

The question before us is simple: Should the GPT be extended? It is the government's view that the GPT should be continued. The legislation I have tabled proposes to extend the GPT for another 10 years to the year 2004. The government's decision to extend the GPT is being made at a time when most developed nations have already extended their preferential tariff schemes. In other words we are in the mainstream.

The reasons which justified the introduction of the GPT 20 years ago still remain. While the GPT has supported growth in the export sectors of many developing countries, they still have a long way to go. Indeed many developing countries still need preferential access to the markets of the developed world in order to improve their economic status. By allowing developing countries preferential access we continue Canada's tradition of assisting the developing world. Moreover, the massive weight of evidence from 50 years of trade liberalization supports the principle that export expansion contributes to general economic growth.

The GPT does not only benefit developing countries. As a result of lower tariffs on goods from the developing world, Canadian consumers enjoy access to imported goods at competitive prices. Also Canadian producers who rely on goods from GPT countries as inputs also benefit from the reduced tariff. Accordingly the GPT contributed to the economic development

of the beneficiary countries while allowing Canadians to benefit as well.

At the same time, and as noted earlier, in order to ensure that goods from GPT countries do not injure domestic producers, there exist legislative and quasi-judicial mechanisms for withdrawing GPT status to goods that are injurious to domestic producers. I wish to assure the House that where a reduced tariff injures Canadian producers, the government can move to disqualify such goods from the lower tariff. For example, rubber footwear and rubber inner tubes have for a number of years been excluded from the GPT scheme under temporary safeguard measures recommended by the Canadian International Trade Tribunal. The government has now decided to remove these products permanently from the scheme.

Finally, in recent years we have seen considerable change in the international economic and trade situation. Many developing countries are now enjoying significant economic growth while others need more assistance because their economic situation has deteriorated over the past several years. We have recently ratified NAFTA and the Uruguay round of the GATT has just recently concluded. These trade arrangements will result in reduced tariffs on many products. These changes have significant implications for the GPT.

I also wish to tell the House that the government is studying the ramifications of these developments with a view of making changes to the GPT tariff structure in the next year or so. The objective is to make the GPT an even better tool to assist the developing world. During this year consultations will be held with interested parties on possible expansion of GPT product coverage and reduction of GPT rates, particularly for the least developed countries. In addition, we will be examining the desirability of maintaining the GPT for those countries that have already achieved the high level of economic development.

To conclude I call on all members of the House to support this bill. Such support will show Canada continues to contribute to economic growth within the developing world.

[Unemployment Insurance, February 15th, 1994]

Mr. Speaker, the unemployment insurance premium increase that came into effect in January was a minimum amount. At the same time it was announced by the minister that the premiums would be held at a flat level because of the job creation commitment this government has.

[The Budget, February 15th, 1994]

Mr. Speaker, as I said earlier the details of the budget will be given on February 22.

The tax changes the hon. member mentions have not been stated in this House. If there are such changes they will be stated in the budget itself and at that time the answer will be obvious.

[The Budget, February 15th, 1994]

Mr. Speaker, the hon. member's quotation is from a different government.

I would like to confirm that the Minister of Finance made a statement in the House last Friday saying that a budget would be coming down on Tuesday. Such measures as those tax changes that he mentioned will be in the budget, if indeed that is one of the changes.

[supply, February 11th, 1994]

Mr. Speaker, I am pleased to have the opportunity to participate in this debate. Today I will be addressing a technical issue relating to the income tax law which was mentioned by one of the earlier speakers.

This government is committed to the efficient and effective use of public funds. Our commitment extends to the timely clarification of the income tax law in situations in which the wording of a provision may not have given effect to the government's intent, thereby resulting in some revenue exposure.

Such a situation was recently described by the Auditor General with respect to tax allowances provided to resource companies. In order to appreciate the concerns expressed by the Auditor General's report it is important to understand a certain amount of background information. I would commend you, Mr. Speaker, on your ability to hold your joyous response to the Minister of Industry's speech. This one will require even more indulgence on your part.

For this reason I would like to take a moment to set out a few of the relevant facts. In 1974 the government of the day stopped resource companies from deducting provincial crown royalties. Instead, alternative tax relief was provided for such companies depending on the amount of their resource profits.

Since 1976 this alternative tax relief has been in the form of a resource allowance. Resource allowances are not a tax preference. They were introduced in order to compensate companies for the non-deductibility of provincial resource royalties. The resource allowance provision permits a deduction equal to 25 per cent of resource profits.

In 1979-80 Revenue Canada reassessed a resource corporation after it took the position that it was not required to deduct certain scientific research expenditures and capital cost allowances in computing its resource profits. The company's approach increased the amount of profits eligible for tax relief.

The resource corporation challenged the reassessment in the courts. Litigation proceeded and finally culminated in July 1992 when the Supreme Court of Canada denied the government leave to appeal a decision by the Federal Court of Appeal which had ruled in favour of the corporation.

That is the background of the Auditor General's comments regarding resource allowances.

In his report, the Auditor General expressed the view that the Department of Finance should have acted more quickly to clarify the policy intent of the resource allowance provisions. The government did not act while the issue was before the courts because it was advised that doing so would have prejudiced the ongoing litigation.

Moreover, until the decision of the Federal Court of Appeal on this matter in January, 1992, most of the resource industry had been filing its income tax returns in a manner consistent with the government's view of the law's intent.

In the same month of the Supreme Court of Canada ruling, the previous government issued a press release clarifying the policy intent of the resource allowance provisions. This press release included draft regulations which were effective immediately. The draft regulations of July, 1992 are currently being reviewed and finalized as expeditiously as possible. They will be included with regulations under Bill C-92 dealing with the abuse of the resource allowance through the use of partnerships. Bill C-92 was passed in June, 1993.

The period for reviewing, finalizing and processing these draft regulations is not excessive. It permits concerns regarding the text of the draft regulations to be fully considered before their enactment.

The amendments in question deal with a complex area of tax law. The law is complex because it deals with corporations which carry on many different types of business activities in the resource sector. Over the years it has been subject to many changes which addressed court decisions and closed various loopholes.

Following a review by the Department of Finance, the Department of Justice and Revenue Canada, the draft regulations will be sent to the appropriate cabinet committee for approval as quickly as possible.

Regardless of the time of their enactment, the amendments in the draft regulations relating to the calculation of resource profits will be effective from July, 1992.

With that very long preamble, I would also like to note that the revenue exposure estimates contained in the Auditor General's report require some clarification. The report estimates the amount of revenue lost, and the hon. member before mentioned it as well, at about $1.2 billion. However, nearly one-half of that amount relates to issues that were not covered in the court case.

Of the remainder at least 50 per cent represents interest on funds, and the government had use of those funds.

In conclusion, I would like to stress once again this government's commitment to timely introduction of income tax

legislation and regulations. At the same time, it is vital that the quality, effectiveness and fairness of such legislation or regulations not be compromised.