Ben Lobb

[Excise Act, 2001, April 22nd, 2016]

Mr. Speaker, trade associations and industry experts have taken a look at this very carefully. This bill is very different from the excise tax changes that took place in the beer and wine sectors. Those are coming up at the WTO. This is completely different. It applies to all distilleries, not just specific ones. It does not leave preference to Canadian versus non-Canadian products or inputs to go into it, so it is covered there.

I would be happy to have any trade lawyer give his or her interpretation of it as well. It should get full scrutiny as well because the intention of the bill is not to get into WTO issues, and we take that very seriously on this side of the House.

I appreciate the question. I knew it would come up. I want to assure the House that this is not the first time we have thought about this. Industry trade associations feel very confident that this will pass the test.

[Excise Act, 2001, April 22nd, 2016]

moved that Bill C-232, An Act to amend the Excise Act, 2001 (spirits), be read the second time and referred to a committee.

Mr. Speaker, it is a pleasure to rise today on private member's Bill C-232, an act to amend the Excise Act, 2001, regarding spirits.

I though it would be appropriate to start my speech by declaring that I have no pecuniary interests. I do not own a distillery. I have no plans to own a distillery. I own no common shares in any distillery stocks, so I just do this purely for the sector, for the industry, and for the spinoff benefits it would have for Canadian businesses.

The current lay of the land for excise taxes on spirits in this country is $11.696 per litre of 100% ethyl alcohol. This rate has been in place for many years without any consideration having been given by government to reduce it. I propose at this time that it is time to reduce it in two different ways.

There are many categories, and it depends on which interpretation we take of a small or medium-size distiller, but regardless of that, this measure would apply to all distilleries that operate in this country. It would reduce the excise tax to $6 per litre of 100% ethyl alcohol, and on over 100,000 litres we would reduce it by nearly 79¢ to bring it to an even $11. This is a good move, I believe, and would be beneficial to the sector.

To put it in perspective and to give an idea of what taxes are involved in just a glass of wine, a glass of beer, or a glass of alcohol, in Ontario, for example, with regard to wine, 80% goes back to the distiller or the chain, 4.3% is federal tax, and 15% is provincial tax. For beer, 46% goes back to the industry or the supplier, 11% goes to the federal government in the form of taxes, and nearly 30% goes to the provincial government. Anyone who knows Ontario knows the Beer Store, and its cut is a little over 12%.

However, the difference is significant in the case of distilleries. The issue is that almost 60% goes to the provincial government, over 17% goes to the federal government, and just a little over 23% is returned back to the industry. If we compare the 80% for wine with the 23% for the spirits and distilling sector, we see a big difference. The bill will not close the gap 100%, but it will make a small step forward in trying to level the field and allow more profitability into the sector.

I know all members want to see businesses grow, whether they are small or large. The one thing we do not want to do as legislators is have a tax regime in place that dissuades businesses from setting up and making investments in this country. With the excise tax where it is currently, we have really not seen much growth at all in the sector in regard to new starts. We are hoping that this measure will be a first step.

One question I think everyone in the House should ask regarding the bill is whether it will be WTO compliant and whether there is a chance that a different country or a different jurisdiction will provide a challenge. We feel quite secure and confident that this will not be challengeable at the WTO, because it applies to all distillers. That is very important. It benefits the entire sector, so that is very good.

The other question I would think all members of Parliament would have is the cost. How much is it going to cost? I mentioned how much we are going to reduce the excise taxes, and the example I can give is an example from the U.K. It reduced the excise tax last year, in 2015, by 2%. In January of this year, the Scotch Whisky Association said that it had nearly £100 million to the positive for government revenues.

The idea that a tax reduction can only cost government I think in this case is incorrect. We have good, solid evidence, recent examples that would indicate that a modest excise tax reduction would actually increase revenues to the government.

I would also like to point out that, just in volume increases and other increases that go along with business, from 2006 to 2015, the excise tax collected on spirits actually increased $200 million. We have seen volume increase, and that is great, but there are huge opportunities for this sector.

If we compare the U.S. to Canada and the taxation involved, 54% of the price in the United States goes to federal, state, and local taxes, and it is nearly 80% of the price here in Canada. We need to continue to be more competitive to compete in America and around the globe.

Another unique difference between bourbon in the United States and Canadian whisky is that bourbon needs to be aged for only a year and Canadian whisky needs to be aged for three years. I would think that around the world, Canadian whisky is viewed as a premium product, but there is a premium amount needed and required to be warehoused, so we also need to be mindful of that.

If we look at the broader market, this is a very significant market worldwide. This is an $8-billion a year market worldwide. Canada has a pretty good chunk of that market. We are in at around $700 million, but we have huge potential and opportunity to actually reach about $2 billion of that market. We could potentially play around 20% to 25% of the market. One of the big reasons is that so many of our brands that we know here are really recognized around the world.

Spirits in this country represent $5.8 billion to Canada's GDP, and represent over 1,200 jobs directly, almost 9,000 in total. It is a huge employer. We can just imagine from the crop in the field to the bottle on the shelf all the different hands and businesses that would be involved to get to that number in this country.

I would also like to mention about the market, just to put in another comparable, that there are 60 to 70 distilleries in this country. There are about five or six significantly large distilleries and a few micro or small distilleries. However, looking at one small sector, there are over 800 small craft distilleries in the United States. In my speech later on, I will reference the opportunity of niche markets with those as well.

The other thing I want to talk about is the large distilleries such as Gimli Distillery in Manitoba and there is a few in Ontario as well. They need to reinvest in their plant and machinery, and a 6% reduction in the excise tax would be very significant for them. It would allow them to invest in green technologies. Many of the plants have some form of green technologies already, closed water loops and many other pieces of their plant, but that would allow them to continue reinvesting in green technologies in the plants. In addition to that, there is bottling and packaging. It would allow them to be competitive on the world market to make sure we do not lose packaging and bottling contracts to the United States. We want to make sure that plants are able to do that.

In addition, I mentioned that Canadian whisky needs to be stored for three years. Therefore, we need storage and additional warehousing. If we are to grow the industry to $2 billion a year, we will need some significant investment in warehousing. We need the large companies in this country to be able to afford to make those investments here and to grow.

I would also like to mention that in addition to the plant and machinery, there is a significant amount of marketing that needs to take place, not only here domestically but around the world.

We have significant markets in China, Japan, obviously in the United States, the U.K., and many other countries around the world. We are competing in a global market which becomes more global each and every day. We need to continue to allow those large companies to make investments in their marketing.

Up until 2010, Canada had the number one whisky in the United States. We need to make sure that we do our very best to get back into that and become competitive.

I come from a rural riding. Farmers are going to benefit from this as well. There are 320,000 tonnes of rye, corn, etc., and in some cases even wheat that go into this industry. Ontario, Quebec, Manitoba, Saskatchewan, and Alberta are huge suppliers of grains. With rye, for example, distilleries are the number one consumer and purchaser of rye and a huge purchaser of Ontario corn as well.

One thing some people in the House may not know is that when a commodity such as rye or corn goes into a distillery, that is not the end of its life. After it has been fermented and distilled, it becomes distillers grains. At that point, they are in huge demand by beef farmers, dairy farmers, and pork producers. They use it in their feed ration. That is another green example of what the industry is and it also leads to some niche opportunities like the United States has.

There is a distillery in Florida. I have not visited it but I have read about it. They have a ranch and on the ranch they obviously feed their cattle. The grains that go into the distillery are kept and fed to the cattle right on the ranch.

There are huge opportunities down the road in the agriculture sector and for farmers to be able to grow the crops on their farms, to be able to potentially afford to have a distillery on their farms, similar to what many wineries and breweries do. It could increase tourism around the rest of the country as well.

It would also allow agriculture, science and technology, and industry to partner together to create new and innovative varieties of crops, specific ryes, different wheats, that would cater to their niche market. One example, which is on a much larger scale, is rye grown in Saskatchewan that Crown Royal used for its world award-winning Northern Harvest Rye. These are the kinds of partnerships and initiatives that can really spur growth and really help farmers and the industry.

In the few minutes that are left, I would like to thank my staff and the opposition leader's office for their help. I would like to thank the Library of Parliament for its help guiding us along the way, Jan Westcott at Spirits Canada, and of course Still Waters Distillery in Concord. Barry Stein and Barry Bernstein have been a tremendous help in providing information and input about the benefits to this industry.

The last thing I will say is about small craft distillers. This is the biggest opportunity this country has in this sector. It is untapped. It really could unleash with the changes that we are proposing here in literally every member of Parliament's riding around the country. Not every riding has a distillery, but it certainly does not matter if one is a government member of Parliament or in the opposition, there are distilleries in some members' ridings and with the opportunity for many more.

The problem is the way the current system is set up with the excise tax and the requirements from CRA in the warehousing, it is a huge impediment to opening up a new business. What we do not want to have in this country is taxation and regulation being the reasons that we do not open up new businesses.

In the province of Ontario where I live, the LCBO is starting its modernization project. It is going to be less of a burden and less of a barrier to these new businesses. It is also time for the federal government to be a proactive partner, take a first step, and take a look at this.

We want to get this thing done. We are open to suggestions and ideas from other members. If they have amendments, or if they would like to see changes or additions, this is not cast in stone. We are open to ideas. I look forward to questions.

[Air Canada Public Participation Act, April 18th, 2016]

Madam Speaker, all I will say is we will get no better results than we will get from the people who are currently doing the job today. The people who are doing those jobs are the centre of excellence. It is fine if the company wants to move 20 miles, but if it thinks it is going to move to a place in my riding, for example, where are all the workers going to come from? The skill is in those communities. Let them do the work and let them do it well.

[Air Canada Public Participation Act, April 18th, 2016]

Madam Speaker, I would call that, at the very best, a technical amendment of very little subsequent consequence, so what is the urgency? If that is one of the only things that we need to change with this bill, why waste all this debate on one little line in the legislation? Why not tell Air Canada that we will do this, but we also want to have a much larger bill that has many more benefits that would dovetail in with what the review said.

Why do this little bit and then tell us that next year we are going to do another one? We know there are four years to a mandate, and there is really only one chance to do a piece of legislation like this. That is not going to work. This is going to be post-2019.

We should have waited. We should have done a lot more to help make aviation in this country competitive.

[Air Canada Public Participation Act, April 18th, 2016]

Madam Speaker, it is a pleasure to rise today in the House to speak to the bill.

I like Air Canada. I fly it whenever I can. I generally support what it has done. Therefore, I am not just any Air Canada person up here speaking.

How did we get to this point? Many roads and paths have brought us to this point. However, one of the biggest impacts to Air Canada in recent times, certainly in the last decade, and we do not need to go too much further than back to 2008-09, was when we saw sky-high fuel prices in the midst of an economic downturn. That caused many problems for Air Canada, and many other corporations as well in North America. Pension solvency was a huge issue, as were massive debt load, and many other issues.

If we take a look back almost 10 years now, that really put Air Canada in a make-or-break situation. I give it full credit for what it has done in the last decade. It has turned a company that is over 70 years old around and has a 40% top-line revenue growth. Therefore, it is obviously doing many things correctly, and I congratulate it on that.

There is one thing that would be tremendously helpful. We have heard this today and have heard it in the past. When I was at the technical briefing some weeks ago, I was not quite sure if this bill passed all of the litmus or smell tests that we would like to see in a bill. It would be great if the minister would turn over the correspondence he has had with Air Canada, Bombardier, and the Government of Quebec, so we can understand the timelines we are now looking at. I do not know if it is coincidence, but certainly many things have happened in a very short period of time that have caused the raising of a Spockian eyebrow.

I give full credit to Air Canada for turning around its finances. Its 2015 annual finances were reported a little while ago. It showed record profits of $1.22 billion in net income for 2015. In 2014, its previous record, it showed $531 million of net income. Therefore, many things have fallen into place for that to occur.

Another accounting and reporting term Air Canada uses is EBITDAR. I always refer to it as EBITDA, which is earnings before interest, taxes, depreciation, and amortization. I guess the aviation industry adds an “R” to its reporting for restructuring. That was also a record $2.5 billion.

Another great number that is working in Air Canada's favour is the cost per available seat mile, which was another record.

In addition to that is the average projected fuel cost, which plays a huge part in the success or failure of an airline's finances. I believe Air Canada is projecting about 52¢ a litre, if memory serves me correctly, compared to last year which was over 60¢ a litre. If we compare that to 2008-09, the numbers are really good.

Therefore, a lot of things are trending in the right direction for Air Canada and its finances. In fact, everything is going so well that it has also announced it will repurchase up to 10 million shares, with the option of repurchasing an additional 5 million shares. Those shares are close to $9 per share. Therefore, there is some available capital to Air Canada at this point in time.

I want to read directly from Air Canada's media room site with respect to its expense side and what it experienced in 2015. This highlights one of the points that I think many members are scratching their head over with respect to the argument of where, when and how we should perform maintenance.

It states, “Aircraft maintenance expense to increase $250 million from the full year 2015...”. If we read that on its own, we would think that it is making a point here. However, if we read further, it states, “...of which approximately $100 million is estimated to be due to the weaker Canadian dollar when compared to the U.S. dollar.” That means it is performing maintenance contracts around the world and when it brings all of those financials back home, there will be a $100 million negative impact on that, which would also raise an eyebrow.

In addition, the remaining increase is mainly due to higher end-of-lease maintenance provisions, which is due to fewer lease extensions in 2016 versus 2015, the impact of a higher number of operating leases, an increase to maintenance expenses to the Boeing 787 aircraft, and the fly-by-hour arrangements that they have.

My point is that in doing business in Canada, if the maintenance of Canadian labour were such a burden, we would have certainly seen this in the 2014 annual report and in the 2015 annual report, where the CEO or the CFO would have made explicit mention of these high costs. In addition to that, CEOs travel the country, go to conferences, and make presentations to investors and industry. I am not criticizing the CEO, because he has done a fine job of the economic and operational performance of the company, but I would think that the long-term concern for high labour costs would have to come up in a presentation or an official document that the company sends out in annual or quarterly reports. We do not see that, and I am not the first to mention this point. Today the narrative is certainly not being made for these high costs.

I go back to my time when I worked in the automotive parts sector. In 2000 we started seeing these problems on a competitive front, and 15 years later we are still seeing them. In annual reports we would see the CEO and the CFO always commenting about the lower labour rates in developing countries.

Also, today I have heard other members, mainly government members, saying that this would unshackle Air Canada, that it would now be able to become competitive around the world on maintenance, etc., which is fine. However, what I would say goes back to the review of the Canada Transportation Act. It is that we cannot do just one thing on competitiveness. This is just picking a low-hanging fruit while neglecting all the other issues that would allow the aviation industry here in Canada, and the airline industry more specifically, to be extremely successful.

One key component that is a long-standing issue is traffic rights—landing slots or spots—and the issues around the protectionist nature that we have in this country.

As an example, Air Canada flies to Dubai every day. It flies from Dubai back to Canada every day. We would think that reciprocity would be extended to the Emirates airline so that it would be able to fly every day into Pearson and every day from Pearson back to Dubai. My research indicates to me that it is only three days a week.

It is the same with the major airline out of Qatar. It has three flights a week from Qatar to Montreal and vice versa. Why not include landing slots? Why not make it available? Air Canada has increased the number of flights to Dubai. Why not reciprocate? This is all about competition. It is all about thinking about the consumers, the travellers, and letting them have choice. That is just one example.

The review act actually mentions that there should be seven days a week for flights to those countries, so I lay that out for consideration.

I have talked about timing. Others have talked about Aveos. I would be interested as well to hear if the union, which just ratified an agreement on behalf of 7,500 members, was aware of this legislation coming forward. I am sure they would have some interesting comments for the public on that point.

As for getting it cheaper elsewhere, I do not believe that. I know that the company I used to work for, Wescast, dealt with China, South Korea, and Mexico. We dealt with all these, but where do they go now to get world-class R and D work? Right in Ontario, because we have the know-how.

[Aerospace Industry, March 21st, 2016]

Mr. Speaker, Canadians are concerned. A billion dollars of taxpayers' money will still result in Bombardier shipping production to Mexico and China.

There is a better solution that does not cost taxpayers a dime. A private Canadian company came forward with a major order for C Series aircraft. They just need a little longer runway.

When will the minister allow the expansion of the Toronto island airport and get Bombardier employees back to work?

[Citizenship Act, March 10th, 2016]

Madam Speaker, I appreciate the member's comment. I disagree with a few of his comments on Bill C-24. The bill really has not been around long enough to measure any of its impacts, positive or negative. I know he mentioned those in his speech.

The path to citizenship remains the same. It was just a little longer in our past bill compared to the bill proposed today. Why does he feel that the requirement is reasonable? Is it so unreasonable to live and work in this country 183 days a year in four out of six years? In addition to that, why are they taking out the clause to compel immigrants to live in the country? Part of being a citizen here is to live and work here, not to get citizenship and then go somewhere else. What would he like to say to that specific point in Bill C-6?

[Citizenship Act, March 10th, 2016]

Mr. Speaker, I noticed this morning that the Liberals and the NDP are talking about one small component of this bill. That makes me think they do not feel very good about the rest of the bill, primarily the requirement about living in the country for at least 183 days 4 out of 5 years, and filing an income tax return. Also, they are going to repeal the intent to reside provision. I think most Canadians would expect that to be a basic threshold.

Could the member comment on that, because it seems as if the Liberals and the NDP really do not want to talk about that today?

[Citizenship Act, March 10th, 2016]

Mr. Speaker, the member pretty much stuck to one point of the bill, but what are his thoughts on the value of citizenship, the value of permanent residence, and the way to becoming a full-fledged citizen?

In a previous bill, one of the criteria we brought as government was the requirement of four years to six years, being here 183 days, and filing tax returns in our country for those four years to six years. Most the people I talk to in my riding of Huron—Bruce feel this is a reasonable threshold.

What are the member's thoughts in reducing that threshold in the bill?

[Business of Supply, March 8th, 2016]

Mr. Speaker, airports do evolve. The London airport in 2008 was recognized and allowed by then Minister John Baird to have an international air cargo transport program. The government subsequently vested $8 million in an agreement to put a terminal there. Airports can change and evolve. They fit the needs of those today, and those in the future.

If all the requirements were met, the environmental assessments were met, all the requirements of Transport Canada were met, the needs of the community were met, and the fisheries and oceans requirements were met, would she be open to allowing an expansion of Billy Bishop airport? Would she allow that to happen if all the requirements were met?