Madam Speaker, I rise on a point of order. I was listening to the hon. member talk about the home heating oil rebate. I fail to see the relevance to the equalization formula in the bill before the House today.
House of Commons photoWon his last election, in 2006, with 62% of the vote.
Federal-Provincial Fiscal Arrangements Act May 3rd, 2001
Madam Speaker, I rise on a point of order. I was listening to the hon. member talk about the home heating oil rebate. I fail to see the relevance to the equalization formula in the bill before the House today.
Federal-Provincial Fiscal Arrangements Act May 3rd, 2001
Madam Speaker, I welcome the opportunity to address the House at third reading of Bill C-18, an act to amend the Federal-Provincial Fiscal Arrangements Act with respect to the equalization program. The bill fulfils the government's commitment made by the Prime Minister at last September's first ministers meeting to lift the ceiling for the equalization program for the 1999-2000 fiscal year.
In addition to this commitment, the Prime Minister asked the Minister of Finance to consult his counterparts in the provinces and territories as to how best to ensure follow up. The Minister of Finance concluded his consultations before the bill was introduced on March 15.
At the first ministers meeting, landmark agreements were reached on a plan to renew health care, improve support for early childhood development and strengthen social programs. These agreements resulted, through Bill C-45, passed in the last parliament, in the largest federal contribution ever made for health, post-secondary education, early childhood development and other social programs.
Over the next five years, federal spending in these areas will total $23.4 billion, $21.1 billion of it under the Canada health and social transfer.
As hon. members know, the CHST is one of the three transfer programs through which the federal government provides support to the provinces for health care and other social programs. The other two programs are territorial formula financing and equalization. Equalization is the subject of today's debate. Today the federal government transfers approximately $40 billion to the provinces and territories through these three programs.
The purpose of the equalization program is to ensure that less prosperous provinces can provide reasonably comparable public programs and services to their residents without their taxes being out of line with those of more affluent provinces. Equalization has played an important role in defining the Canadian federation since it was established in 1957. In many ways it expresses the generous spirit of Canadians.
The program is unique among federal transfers in that its objective was enshrined in the Canadian constitution in 1982.
The constitution states as follows:
Parliament and the Government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.
Equalization is also unique in that it was one of the very few programs not touched during the period when the government was struggling to bring order to the nation's finances. This reaffirmed the importance the government attaches to the program as part of the essential fabric of the country.
Equalization payments are unconditional and provinces can spend the money as they see fit. In 2000-01 the seven receiving provinces, Newfoundland, Prince Edward Island, Nova Scotia, New Brunswick, Quebec, Manitoba and Saskatchewan, received payments totalling $10.8 billion.
Since 1993 the program has grown by 33% or $2.7 billion. This rate of growth of the program demonstrates clearly that the government understands what equalization means to receiving provinces.
According to the estimates, which are updated twice a year, the program is now at its highest level ever. Over the same period, other non-transfer program spending has grown by 2.6%. The latest estimates released in February by the finance minister show that payments to receiving provinces will be about $1.8 billion higher than estimated last October. These higher figures are due in large part to the exceptionally strong growth over the last two years in Ontario, one of the non-receiving provinces, not to the poor economic performance of receiving provinces. Those economies have been improving each year.
On February 27, 2001, the Minister of Finance announced that there would be an immediate increase in equalization payments of approximately one billion dollars. Of this amount, $52 million is for 1999-2000 and $955 million is for 2000-01. The other $800 million is the additional funding that will be provided to receiving provinces through passage of the bill.
I would like to stress also, as I did during the second reading debate, that the equalization program is reviewed on an ongoing basis by federal and provincial officials to ensure that differences in the abilities of provinces to raise revenues are measured as accurately as possible. Those discussions are under way as we speak. In addition, the program is renewed legislatively every five years, most recently in 1999.
A province's capacity to provide public services obviously depends on how its economy is performing. Equalization payments therefore are based on a formula that measures the relative performance of provincial economies. The formula applies in the same way to all provinces and adjusts automatically in response to economic developments in the provinces.
When a province's economy is booming relative to other provinces, its equalization payments automatically decline under the formula. Conversely, when a province's economy and therefore its fiscal capacity, or ability to generate revenues, decline relative to other provinces, its equalization payments automatically increase. In this way the program acts as an automatic stabilizer of provincial government revenues.
I would urge hon. members to keep in mind that individual provinces do not receive the same amount of equalization because they do not have the same economic circumstances. This year, for example, Saskatchewan needs $230 per person to be brought up to the equalization standard, while Newfoundland requires $2,000 per person. Equalization payments are also subject to ceiling and floor provisions.
The capping provision, which has been applied in only 5 of the last 20 years, enables the program to grow at a rate that the federal government can sustain. By setting a maximum payment level, this provision ensures that the program does not grow at an abnormally fast rate.
The floor provision is the flip side of this coin. It provides the provinces with protection against large and sudden decreases in equalization payments that would otherwise be warranted by the straightforward application of the formula.
The equalization ceiling does not cut entitlements, as some have suggested. Rather, the ceiling allows the program's growth to mirror the rate of growth in the economy and to grow at a sustainable rate. Based on the forecast for GDP growth in last October's economic statement and budget update, the ceiling will rise to $12.5 billion in the year 2003-04.
I would now like to turn to the specific bill we are debating today, which lifts the equalization ceiling for the 1999-2000 fiscal year and only for that year. As I explained earlier, lifting the ceiling fulfils the commitment made by the Prime Minister last September at the first ministers meeting. The final communiqué released at the end of the meeting states that:
The Prime Minister agreed to take the necessary steps to ensure that no ceiling will apply to the 1999-2000 fiscal year. Thereafter, the established equalization formula will apply, which allows the program to grow up to the rate of growth of GDP.
While the final cost of lifting the ceiling will not be known until the fall of 2002 when the final estimates for 1999-2000 become available, it is currently estimated to be $792 million.
That amount will be allocated among the seven eligible provinces on a per capita basis. In order to determine the payment that will go to each, the per capita amount is multiplied by the total population of each receiving province.
Each eligible province will receive an additional $67 per person. Viewed another way, here is the total breakdown per province. Newfoundland will receive $36 million. Prince Edward Island will be eligible for $10 million. Nova Scotia will qualify for $62 million. New Brunswick will receive $50 million. Quebec will receive $489 million. Manitoba's payment will be $76 million. Saskatchewan will receive $69 million.
In conclusion, the government realizes that not all parts of the country can generate the same revenues to finance public services. Federal transfers therefore help ensure two things: first, that important programs are adequately funded, and second, that all Canadians receive reasonably comparable levels of public services regardless of where they live. Bill C-18 contributes to achieving these goals.
It underscores the priority the government places on equalization and helps ensure that the receiving provinces continue to have resources to provide the services their people need and want.
Further, it fulfils the Prime Minister's commitment to lift the equalization ceiling for the year 1999-2000, which means more money for receiving provinces.
Bill C-18 continues the tradition of fairness through which equalization has been delivered for over 40 years. I encourage all members to support the bill and pass it without delay.
Income Tax Act May 2nd, 2001
It is an all party committee.
Income Tax Act May 2nd, 2001
Madam Speaker, the private member's bill proposed by the member for Prince George—Peace River proposes to allow taxpayers to deduct expenses related to the adoption of a child, to a maximum of $7,000.
Let me first explain that a basic principle of our income tax system is that tax relief is not generally provided for personal expenses such as adoption costs.
The government is aware that parents adopting a child incur relatively high costs, but these and other personal expenses do not qualify for tax assistance because they are incurred at an individual's discretion in widely varying amounts and types depending on the individual's tastes, lifestyle and economic status.
In fact, the better a taxpayer's socioeconomic situation, the more likely he is to incur greater and more varied personal expenses. If these expenses were deductible, a fraction of the personal expenses incurred by certain taxpayers would be paid for by all taxpayers.
Where tax relief is provided for personal expenses, it applies either to expenses incurred to earn income, such as child care expenses, union dues and moving expenses incurred to take employment at a new location, or to largely non-discretionary expenses such as above average medical expenses.
Let us take the example of child care expenses. As hon. members know, eligible child care expenses are deductible in computing income. The purpose of the child care expense deduction is to recognize that taxpayers who need to incur child care expenses to earn employment or business income, to attend a recognized educational institution or to take an eligible vocational training course have a lower ability to pay taxes than taxpayers with the same income who do not need to incur such expenses.
Up to $7,000 annually can be deducted for expenses incurred for the care of a child under the age of seven, and $4,000 for a child between the ages of seven and fifteen. The ceiling for children who qualify for the disability deduction is $10,000.
Because it would be very difficult to separate the personal and non-discretionary elements of the costs associated to children, tax assistance is provided to families with children through a predetermined benefit rather than through tax credits or deductions for specific expenses.
The government provides considerable financial support to families with children through the Canada child tax benefit, the CCTB. More specifically, the Canada child tax benefit has two components: the base benefit for low and middle income families and a national child benefit supplement for low income families.
As of July 1, 2001, families will receive up to $1,117 per child under the base benefit. In addition, supplements of $221 for each child under the age of seven where no child care expenses are claimed and of $78 for the third and each subsequent child are added to the base benefit.
The maximum national child benefit supplement as of July 2001 will be $1,255 for the first child, $1,055 for the second and $980 for the third and each subsequent child. Therefore, the maximum Canada child tax benefit will be $2,372 for the first child, $2,172 for the second child and $2,097 for each subsequent child.
Our government has proven that it is committed to investing in the future of our children. In fact, even before the budget was balanced the government committed $850 million to the Canada child tax benefit to start building the NCB in 1997. In the 1998 budget, the federal government enriched the national child benefit by an additional $850 million. The design of this enrichment was set out in the 1999 budget, which also proposed an additional investment of $300 million to extend benefit enhancements to modest and middle income families. The 2000 budget and the 2000 economic statement and budget update enriched benefits by an additional $2.6 billion.
As a result of these actions, maximum Canada child tax benefits will rise to more than $2,500 for the first child by the year 2004. By 2004 this will bring the federal government's commitment to the Canada child tax benefit to $9 billion per year.
As members know, improvements to the CCTB were an important part of the general tax cuts for individuals proposed in the 2000 budget and in the economic statement and budget update for 2000.
Families will also benefit from the following measures: the reduction in tax rates for all income levels; the elimination of the deficit reduction surtax; the increases in the amount they can earn tax free and the amounts at which higher tax rates apply; the restoration of the full indexation of the personal income tax system, which will protect families against automatic tax increases and the erosion of benefits, including the Canada child tax benefit, caused by inflation.
In total the 2000 budget and the 2000 economic statement and budget update will provide $100 billion in cumulative tax relief for Canadians by the year 2004-05.
I would like to emphasize that these cuts were especially beneficial to families with children. By the year 2004-05 these measures will translate into a 27% reduction in the tax burden for families with children, compared to 21% on average for all taxpayers.
Before concluding, I would like to add that measures were announced in the 2000 budget to improve the parental leave provisions under the EI plan.
The budget proposed to increase the number of weeks of parental leave from 10 to 35. It also proposed changes to make benefits more flexible and accessible. These improved benefits are also available to parents who adopt a child effective December 31, 2000.
In conclusion, the government recognizes that parents should receive financial assistance to help ensure that their children's needs are met. I believe I have clearly demonstrated that the government places a very high priority on investing in children and is providing the assistance they need.
However, it would not be appropriate to ask taxpayers at large to subsidize adoption expenses through the tax system because of the largely discretionary nature of these personal expenses.
For these reasons I would ask hon. members not to support the bill.
Questions On The Order Paper May 1st, 2001
It would be a breach of the confidentiality provisions of the Income Tax Act to reveal information about an individual taxpayer.
However, the Department of Finance has developed a model to calculate the value of the tax incentives available to all new oil sands projects in Canada. The model results are described in a working paper that will be released soon. A draft version of the report estimated that on average a new oil sands project in Canada will receive federal income tax incentives worth 4.6% of the total capital investment of the project.
Taxation April 30th, 2001
Mr. Speaker, last fall the government introduced the home energy rebate to help Canadians with the costs of energy that were increasing.
The opposition party asked us to cut the excise tax. We want to do anything we can for Canadians, but we want to make sure it benefits Canadians and not oil producers.
A cent and a half in the excise tax at the pump could change in an afternoon by a similar amount. We have no assurance that decrease would go to Canadians, which is where we want the benefit to go.
Taxation April 30th, 2001
Mr. Speaker, Canadians know that the increase in the pump price of gasoline is attributable to the substantial rise in the world price of crude oil. The price of crude has more than doubled since 1998.
In fact if we look at the GST, the GST in terms of the increased price at the pumps comprises only 1.5 cents per litre.
Canadians asked us to cut taxes. Last October we introduced the largest tax cut in Canadian history with $100 billion in income tax cuts that is going through the economy now. It is about 2% of GDP. Let us give it a chance to work.
Canadian Environmental Assessment Act April 27th, 2001
Madam Speaker, I rise with pleasure to take part in the debate on Bill C-305, which proposes to establish a national registry of contaminated sites through amendments to the Canadian Environmental Protection Act.
First, I commend the hon. member for Hamilton West on his ultimate goal to rejuvenate contaminated sites. I share his goal. I have a number of contaminated or brownfield sites in my riding of Etobicoke North. In 1999 I worked with a graduate student from the University of Toronto who developed a report entitled “Rexdale Brownfield Sites: A Framework for Understanding”. It dealt with a number of policy issues and alternatives. I submitted the report to city councillors, the provincial government, the Minister of the Environment and other stakeholder groups.
Ensuring that Canadians have a clean and healthy environment is an important goal for our government. For example, the recent Speech from the Throne notes that for Canadians, protecting the environment is not an option. It is something we must do.
In his reply to the Speech from the Throne, the Prime Minister stated that a safe, healthy environment is essential to the health of Canadians and to the future of our children. We will accelerate our efforts at home and internationally to foster a clean environment.
These contaminated sites or brownfields are a legacy of poor environmental practices in the past. Because of this terrible legacy we have shifted our thinking and our efforts toward preventing environmental damage before it occurs.
Our government strengthened the Canadian Environmental Protection Act so that it focused on pollution prevention. The Minister of the Environment recently introduced Bill C-19 to strengthen the Canadian Environmental Assessment Act so that future development projects do not cause environmental harm. In this context, it is necessary to look at Bill C-305 to determine if it would help us better achieve our environmental goals.
The bill proposes to do two things. First, it suggests that the current registry system in the Canadian Environmental Assessment Act be altered so that any individual could report and therefore register contaminated sites in municipalities.
Second, Bill C-305 would enable the federal government to provide financial assistance for the environmental assessment of projects to remediate contaminated lands.
I would like to bring the House up to date on recent developments relevant to the hon. member's proposal.
The Minister of the Environment just completed an exhaustive and comprehensive review of the Canadian Environmental Assessment Act. This review included the release of a discussion paper in December 1999 with options for improving the current law.
The public consultation phase of this review comprised 38 sessions in 19 cities across Canada. One day workshops were held in six major centres. The Internet was put to good use as a means to distribute information and solicit the views of Canadians. Over 200 written submissions were received. All told, the Minister of the Environment heard from a broad cross section of Canadians: environmental assessment practitioners, provincial governments, industry, environmental groups, communities, aboriginal people and individual Canadians.
One of the findings of the review was that the goal of facilitating public participation in environmental assessment has not been fully achieved. In particular, the current system of establishing a separate paper based registry for projects that undergo an environmental assessment has not worked.
I note that Bill C-305 is based on the same registry system concept.
On March 20 the Minister of the Environment tabled his report to parliament on the outcome of his review, entitled Strengthening Environmental Assessment for Canadians, and Bill C-19 proposes specific Amendments for Improving the current act.
Bill C-19 proposes to create a new Internet based government-wide registry of information about the environmental assessment of specific projects. As a result, Canadians will have easy access to information about projects in their communities and across the country.
Because it is based on the current act, the proposal in Bill C-305 does not really mesh with the amendments in Bill C-19, the amendments that require the establishment of a new modern registry that takes advantage of the Internet.
Moreover, the proposal in Bill C-305 would mix the objective of ensuring that Canadians have access to information about the wide range of projects that undergo a federal environmental assessment, such as proposed mines, dams, roads and pipelines, with the important task of identifying and registering contaminated sites.
For those reasons, Bill C-305 would not help us better achieve our environmental goals.
The second related point I would like to make is that the discretionary authority to provide financial assistance for the environmental assessment of projects to remediate contaminated sites, as proposed in Bill C-305, is not necessary.
In fact, the Canadian Environmental Assessment Act already goes much further by requiring environmental assessments of remediation projects where there is federal involvement as a proponent, as a provider of financial assistance or land, or as a regulator. For example, remediation projects with federal financial assistance have triggered requirements for an assessment under the Canadian Environmental Assessment Act.
We must also be mindful of provincial jurisdiction. Many of the contaminated sites that are the target of Bill C-305 would fall within provincial areas of responsibility.
This does not mean that the federal government does not work with its provincial partners on this issue. Quite the opposite. Through the Canadian Council of Ministers of the Environment, Environment Canada has provided the scientific expertise necessary for the development of a national classification system for contaminated sites, as well as a comprehensive set of guidance manuals promoting the consistent assessment and remediation of contaminated sites across Canada.
The Government of Canada is also taking measures to get its own House in order.
With over 25,000 owned and leased properties, it is essential that we identify and clean up contaminated sites in our control. Work is under way in this regard. Under the federal contaminated sites and solid waste landfills inventory policy a database of federal sites is being compiled. The database will soon be accessible to Canadians through the Internet.
In their sustainable development strategies tabled in February departments with large land holdings such as National Defence, Transport Canada and Indian and Northern Affairs Canada committed to continue with the identification, assessment and remediation of their contaminated sites.
Environment Canada also continues to be a global leader in the development of technologies to clean up contaminated sites.
For example, field experiments near Trail, British Columbia, and Île-aux-Corbeaux in the St. Lawrence River have demonstrated how certain plants can successfully remove toxic substances from soil, sediment and ground and surface water.
Sunflowers, ragweed, cabbage, geranium and Jack pine show considerable promise. Further field trials are being conducted on this innovative method for removing contamination from our lands and water.
In closing, Bill C-305 is a very forwarding looking and thoughtful project, but in the view of the government it is not appropriate because of more wide ranging proposals in Bill C-19 which will significantly strengthen the Canadian Environmental Assessment Act.
Bill C-19 will help safeguard our environment through an environmental assessment process that is more predictable, certain and timely. Bill C-19 will improve the quality of assessments through measures to improve compliance and ensure more follow up. Bill C-19 will increase opportunities for Canadians to have a meaningful say about projects in their communities.
I applaud the hon. member for Hamilton West. I encourage him to keep his initiative alive and to keep a light on this issue. In light of the efforts of the government on many fronts to deal with contaminated sites, Bill C-305 is not necessary at this time.
Tobacco Tax Amendments Act, 2001 April 27th, 2001
Did the hon. member inhale?
Tobacco Tax Amendments Act, 2001 April 27th, 2001
Mr. Speaker, I am very pleased to speak in the House today to present Bill C-26. In fact my heart soars with enthusiasm.
Bill C-26, the tobacco tax amendments act, 2001, implements the tax elements of the government's comprehensive new tobacco strategy which was announced on April 5 by the Ministers of Finance and Health and the Solicitor General.
The new strategy is designed to improve the health of Canadians by reducing tobacco consumption, particularly among young Canadians. Briefly, it consists of increasing spending on tobacco control programs, tobacco tax increases to discourage smoking, and a new tobacco tax structure to reduce the incentive to smuggle.
The package has received positive support from health groups, such as the Canadian Cancer Society, the Heart and Stroke Foundation of Canada and the Alberta Tobacco Reduction Alliance.
My remarks today will focus on the new tax structure and tax measures which are contained in amendments to the Customs Act, the Customs Tariff, the Excise Act, the Excise Tax Act and the Income Tax Act. Before I discuss the individual measures in the bill, I would like to take a moment to put the legislation in perspective.
All tobacco products manufactured and sold in Canada have federal and provincial taxes and duties levied on them. Prior to 1994, tobacco products for export were sold on a tax free and duty free basis.
In the early 1990s exports of Canadian cigarettes grew substantially. There was strong evidence to suggest that most Canadian tobacco products that were illegally exported on a tax free and duty free basis to the United States were being smuggled back into the country and sold illegally without the payment of federal and provincial taxes. Two serious problems developed. Organized criminal activities were increasing and the market in Canada for fully tax paid tobacco products was being undermined by the availability of illegal lower cost products. This undermined the government's health objective of using higher prices to reduce smoking.
This is why the government implemented the national action plan to combat smuggling in 1994. That plan included increased enforcement measures, a surtax on the profits of Canadian tobacco manufacturers, a tax on certain exports of tobacco products and reduced tobacco taxes.
It has proven to be very effective in reducing the level of contraband activity and restoring the legitimate market for tobacco sales. As a result, the government has been able to increase excise taxes on tobacco products five times since 1994.
The measures in the bill before us today include a new tobacco tax structure to further reduce the incentive to smuggle tobacco products back into Canada and tobacco tax increases to advance the government's health objectives.
As hon. members know, one of the government's national health objectives is to reduce smoking. Our new tobacco strategy is specifically designed to help reach this objective, particularly reducing smoking by youth.
Allow me to quote from the Minister of Finance when the new strategy was announced. He stated:
The Government's anti-tobacco strategy will help improve the health of Canadians by discouraging smoking. By increasing taxes sharply and introducing a new tax structure for tobacco, we are taking important steps now and positioning ourselves to take further steps as need be.
Canada needs this comprehensive strategy to deal with the broad range of factors that contribute to smoking. The measures in the bill are part of that strategy.
I will now discuss these measures in detail and begin with the new tax structure.
As I mentioned, the new tobacco tax structure is designed to reduce the incentive to smuggle Canadian-produced tobacco products back into Canada from export markets, the main source of contraband in the past.
The key element of this new structure is the replacement of the current tax on exports of tobacco products, effective April 6, 2001, with a new two tiered excise tax on exports of Canadian manufactured tobacco products. Before discussing the measure further, let me provide some background.
As we know, the Canadian smuggling problem of the early 1990s was primarily caused by Canadian exports to the U.S. that were illegally re-entered into Canada. In the 1994 national action plan to combat smuggling, which I discussed earlier, the government imposed an excise tax on Canadian tobacco products. To ensure that Canadian tobacco manufacturers were not denied access to legitimate export markets, several exemptions from the export tax were allowed, including one for exports up to 3% of a manufacturer's annual production. That was reduced to 2.5% of production in April 1999.
Bill C-26 implements the budget 2000 proposal to further reduce the exemption threshold under the tax on exports of tobacco products before April 6, 2001, to 1.5% of a manufacturer's production in the previous calendar year. This 1.5% threshold represents the approximate level of exports required to meet the legitimate demand for Canadian tobacco products abroad, principally in the United States.
Under the new export tax structure, all exports of Canadian tobacco products will be taxed, thereby reducing the incentive to smuggle exported products back into Canada. This new tax will be two tiered. For exports up to the 1.5% threshold, a tax will be imposed at the rate of $10 per carton of cigarettes. To avoid double taxation when these products enter legitimate foreign markets, the tax will be refunded upon proof of payment of foreign taxes.
Imposing a refundable tax on exports of tobacco products allows for a seamless transfer of tax-paid products from Canada to other countries. This reduces the threat of these products being diverted and used for contraband, while allowing Canadian exporters to meet legitimate demand for their products abroad.
Exports over the 1.5% threshold will be subject to both the current excise duty on tobacco products and a new excise tax that together amount to $22 per carton of cigarettes. Imposing a tax at this rate will remove any incentive to illegally bring these products back into Canada. Further, there will be no rebate on this tax. This measure will reduce the potential for smuggling and help set the stage for future tobacco tax increases.
Before moving on, I should mention that discussions are ongoing between Canada and the United States to help achieve the objectives of our tobacco products not being available tax free, while avoiding double taxation of exported products and helping reduce compliance burdens for U.S. importers.
The next element of the new tax structure concerns tobacco products sold at duty free shops and as ships' stores.
As hon. members know, duty-free shops are located at border crossings and international airports across the country. These shops are authorized to sell certain goods, including tobacco products, tax-free and duty-free, to people leaving Canada.
Tobacco products supplied as ships' stores have traditionally been provided for use by crew and passengers and are sold to passengers through on board duty free shops on ships and aircraft with international destinations. Under the new structure, Canadian tobacco products delivered to duty free shops and as ships' stores both at home and abroad will now be taxed at a rate of $10 per carton of cigarettes. In addition, imported tobacco products delivered to Canadian duty free shops will also be taxed. However, this tax will be refunded on the first carton sold to an individual who is not a resident of Canada. Both measures take effect as of April 6, 2001.
Imposing a tax on tobacco products for sale in duty free shops or as ships' stores is an integral part of the government's strategy to reduce tobacco consumption. It demonstrates just how serious the government is about this issue.
Allowing Canadians who travel to continue to have access to low cost, tax free tobacco through duty free shops would be inconsistent with our strategy of raising tobacco taxes domestically to achieve the government's health objective to reduce smoking.
This measure would also reduce the risk that smugglers might seek to access Canadian tobacco products in duty free markets as other sources of untaxed, low cost tobacco products are eliminated. We want all Canadian tobacco products to be taxed, no matter where they are sold, to ensure that they are not smuggled back into Canada.
Another measure in the bill would ensure that tax is paid on tobacco products imported by returning residents. Currently Canadian residents returning to Canada after an absence of more than 48 hours may bring back one carton of cigarettes tax free and duty free as part of a traveller's allowance. Effective October 1, 2001, a new duty of $10 per carton of cigarettes would be imposed on these products when they are imported by returning residents.
To ensure that Canadian residents are not subject to double taxation upon returning to Canada with Canadian tobacco products on which tax has already been paid, neither this duty nor regular excise duties and taxes would apply to tobacco products that bear a Canadian stamp signifying that excise duties and taxes have already been paid. Non-residents would not be affected by the change to the traveller's exemption.
Tobacco tax increases are another key element of the government's strategy to reduce tobacco consumption, particularly among youth. Since the implementation of the national action plan to combat smuggling in 1994, the federal government has worked with the five provinces that implemented matching tobacco tax reductions at that time, namely Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island, to assess the feasibility of regular joint increases in tobacco taxes.
As of April 6, 2001, the federal government has raised tobacco tax rates jointly with these five low tax provinces.
The combined federal-provincial tax increases are $4 per carton of cigarettes sold in New Brunswick, Prince Edward Island, Nova Scotia, Ontario and Quebec.
Bill C-26 would implement the increases in federal excise tax rates on tobacco products. These increases would restore federal excise tax rates to a uniform level of $5.35 per carton on cigarettes for sale in Nova Scotia, New Brunswick and P.E.I. This is equal to the federal tax rate that now applies in the provinces and territories that did not reduce taxes jointly with the federal government in 1994. After this tax increase only Ontario and Quebec would have cigarette excise tax rates below the national excise tax rate.
Taxes on fine cut tobacco and tobacco sticks would also be increased in all provinces and territories. In addition, Bill C-26 would eliminate the reduced rate of federal excise tax on fine cut tobacco for sale in Ontario.
As I indicated earlier, this is the fifth increase in tobacco taxes since 1994. In total, federal and provincial taxes on cigarettes will have increased from $7.40 to $9.80 per carton in these five provinces since 1994.
I am confident that a successful new tobacco tax structure would enable the government to hike tobacco taxes even further in the future. The bill would also increase the surtax on the profits of tobacco manufacturers to 50% from the current rate of 40% effective April 6, 2001.
To help ensure that these measures are effective, we are giving more resources to federal departments and agencies so that they could better monitor and assess the effectiveness of these measures in reducing smuggling.
These resources would be targeted specifically to the RCMP, the Canada Customs and Revenue Agency, the Department of Justice and the Solicitor General of Canada at a cost of $15 million in the first year and $10 million each year after that.
In conclusion, all the proposals in the bill reaffirm the government's commitment to reduce tobacco consumption in Canada while maintaining vigilance in combating the level of contraband.
A new tobacco tax structure will help reduce the incentive to smuggle Canadian produced tobacco products back into Canada and the tobacco tax increases will help advance the government's health objectives.
In addition, the tax measures would increase federal revenues from tobacco products by $215 million per year. I believe that this new strategy demonstrates the depth of the government's commitment to reducing tobacco use.
We know the stakes are high in the campaign against tobacco use. Through the tax measures contained in the bill, we now have the means to conduct the campaign effectively. Tobacco taxation is about health. Health is our priority, especially protecting the health of our young people. These new measures reflect our commitment to reduce smoking.
We have an endorsement from the Canadian Cancer Society. With an endorsement like that, I believe the government is definitely on the right track toward reducing smoking by Canadians, particularly young Canadians. I encourage all members in the House to give their full support to the bill.