Bryon Wilfert

[Question No. 252, October 23rd, 2003]

It is up to provinces to define the eligibility criteria for their prescription drug benefit plans and other social programs. Some provinces have chosen to provide benefits for low-income seniors based on their eligibility for the guaranteed income supplement, GIS, provided under the federal old age security program, (OAS).

Under the OAS, seniors with limited income may be eligible for the GIS. The amount of GIS benefits is dependent on both the marital status and the family income.

For a single, widowed or divorced pensioner, the monthly maximum GIS, which is adjusted to CPI inflation every quarter, currently stands at $548.53. The maximum amount for the whole year, 2003, is $6,496.26. This amount is in addition to the OAS benefit of $5,497.62 in 2003. The GIS benefit is reduced at the rate of 50¢ for every dollar of other income, non OAS and non-GIS. This means that the GIS benefit is fully phased out when other income reaches $12,992.

For a two-pensioner couple, each spouse can currently receive GIS benefits up to $357.30 per month, $4,255.83 for the whole year, in addition to OAS benefits of $5,497.62 each. The GIS benefit is reduced for each spouse at the rate of 25¢ per dollar of other family income. For the couple, this implies that total GIS benefits are reduced by 50¢ for every dollar of other income and are phased out when other family income reaches $17,020.

Similar benefits are available for low income pensioners' spouses and widow(er)s who are between the ages of 60 and 64.

Newfoundland and Labrador's seniors drug subsidy Program provides prescription drug coverage for residents 65 years of age or over who are in receipt of the guaranteed income supplement. Even though the eligibility for the program is based on the GIS, it is the Government of Newfoundland and Labrador that designed the program in this way and is ultimately responsible for setting the eligibility criteria. The federal government has therefore no control over the design of provincial programs.

[The Income Tax Act, October 9th, 2003]

Mr. Speaker, I understand the member's concerns and I share many concerns with regard to the environment. However, this bill deals with taxation.

The fact is that his New Democratic friends in the province of Saskatchewan, where the oil and gas and the potash industries are, will benefit from this. His NDP cousins in the province of Saskatchewan support this legislation. The working people in Saskatchewan, many of them in these industries, will benefit because of this legislation. Here an NDP member is standing up and saying we should scrap the bill.

The member talked about the environment. In fact, this bill will assist. As I said this will put the non-renewable energy sector on the same plane as others. The fact is we are doing lots with regard to the environment but this is not the forum, I would say with due respect to the member, as this bill deals with taxation issues which are going to put our mining companies and our oil and gas companies on an equal footing.

I point out to him that with respect to the Kyoto commitment, the oil sands industry will be called upon to make significant contributions to a 55 megatonne emission reduction target through the large industrial emitters program. It goes on. He knows about the $2 billion commitment of the government on Kyoto, et cetera.

The reality is let us not mix apples with oranges. This is a taxation bill. It is going to benefit provinces like Saskatchewan. I assume that he has not talked to his colleagues in the province of Saskatchewan because they support this bill and so do other provinces. I talked about that before. I would like the member to comment on that.

[Income Tax Act, October 9th, 2003]

That is the most intelligent thing you have said all day.

[Income Tax Act, October 9th, 2003]

Mr. Speaker, I am not quite sure that I understand the question. The fact is these are tax measures. I mentioned some environmental aspects, but this essentially is a tax bill. It is there to benefit provinces such as Nova Scotia and the oil and gas industry. It is to put Canada on an internationally competitive advantage with others, and in particular within the North American sector.

He specifically asked about coal burning, et cetera. That is not specifically germane to this bill. I understand the member has concerns in that regard. However, as far as the specific tax measures and if one type versus another type was taken into account, the answer is no.

[Income Tax Act, October 9th, 2003]

Mr. Speaker, there is nothing like asking a question when the answer is already known, and I assume the member knows the answer. Yes, overall this will have a positive impact on the industry.

There is no question that some specific individual companies may benefit more than others. The industry accepts that. The Mining Association of Canada has made it very clear that even though some may not benefit initially and others may benefit greatly, it wants to see the legislation go through. It would not be fair to tell the member that everyone will benefit on day one. Clearly, overall the vast majority will benefit significantly because of these measures.

[Income Tax Act, October 9th, 2003]

Mr. Speaker, was that a question or an editorial comment? I assume the member is supportive of the fact of a reduction from 28% to 21% by 2007. The fact is the industry came forward. The industry is obviously anxious to see the legislation go through. We do not want to wait. We need to get it through.

Obviously, if the industry can live with this five year phase-in, although as I pointed out to the member that the exception of a new mineral exploration credit will only take three years, if the provinces can live with it, then I hope the member can live with it. I certainly respect the fact that the member is concerned about the legislation. I thank him for the question.

The reality is that after the consultations, after the discussion before the Standing Committee on Finance where no amendments were proposed, if we get this through in a timely fashion, we will be able to deal with the very issues with which that member has indicated he is concern.

[Income Tax Act, October 9th, 2003]

Mr. Speaker, I would have expected the member to get up and actually praise the fact that the government has brought in Bill C-48 and that we are now ensuring that we have a competitive tax regime for the mining and the oil and gas sector.

Clearly, we want to ensure on this side of the House that when we bring in legislation, we do it with the full support and concurrence of the major stakeholders, whether they be in the resource sector or with the provinces.

The hon. member also knows that the government has been a leader in not only eliminating the deficit and paying down the national debt, but also ensuring that we have the necessary dollars to do these things and that we do not go back into a deficit. We have had now six balanced budgets or better.

Rome was not built in a day. Obviously we are responding to the industry, to the provinces and we are doing it in what I believe is a timely fashion. We are implementing a phase-in over a five year period, again in concert with the consultations that we have had.

I would assume, the member being from the province of Alberta which is obviously very supportive of this, that we can expect his support on this legislation.

[Income Tax Act, October 9th, 2003]

Mr. Speaker, the legislation before us, Bill C-48, implements a new federal income tax structure for Canada's resource sector, to be phased in over five years.

To begin, I want to give the House a sense of the overall importance of the resource sector, especially mining and oil and gas, to the Canadian economy as a generator of investment, exports and jobs for Canadians.

In 2001, for example, the sector accounted for almost 4% of Canada's GDP, with over $64 billion in exports and more than $30 billion in capital expenditures. As well, over 170,000 Canadians work in resource businesses.

The potential for future resource development exists right across the country. While the mining industry is vital to rural and northern economies, the oil and gas industry is important to both the western and Atlantic provinces and the territories.

Internationally, Canadian resource industries are large investors in innovative technology and they also play a significant role in the provision of exploration and extraction services.

Overall, the changes in Bill C-48 will be positive, both for mining and for the oil and gas industry, but before discussing them, I want to briefly review the existing sector specific tax measures.

As hon. members know, income earned in Canada from the extraction and initial processing of non-renewable resources has historically been subject to a range of targeted tax measures.

For example, certain provisions determine the timing of deductions for capital expenditures. They include Canadian exploration expenses, Canadian development expenses, Canadian oil and gas property expenses and capital cost allowances. These measures recognize the risks involved in investing in resource exploration and extraction and also play an important role in ensuring a competitive business environment.

In addition, the resource sector is able to use flowthrough shares to raise capital for resource exploration and development. Individuals investing in flowthrough shares for grassroots mineral exploration are also eligible for the 15% mineral exploration tax credit, introduced in October 2000 as a temporary measure to moderate the impact of the global downturn in exploration activity on mining communities across Canada.

Another resource specific provision is the 25% resource allowance. This provision was introduced in 1976 primarily to protect the federal income tax base from what were rapidly increasing provincial royalties and mining taxes, which had been deductible for federal tax purposes.

The resource allowance, however, is an arbitrary deduction that does not necessarily reflect the actual cost of royalties and mining taxes. Consequently, it can distort the returns from individual resource projects and the allocation of investment between projects within the resource sector and between the resource sector and other parts of the economy.

As well, the complexity of the resource allowance calculation has meant substantial compliance costs for the industry and administrative costs for government.

The economic conditions that led to the introduction of the resource allowance have changed significantly since the 1970s, leaving the original need for it less relevant. In today's economic environment, there is greater pressure on producers to be efficient and on host jurisdictions to levy royalties at competitive rates.

The government recognized that the resource sector tax regime is capable of generating even greater investment and jobs for Canadians. In designing a new tax regime for the sector, the government was guided by three main goals.

First, the tax regime must be internationally competitive, particularly in the North American market. Second, it must be transparent for firms and investors. Third, it must promote the efficient allocation of investment both within the resource sector and between sectors of the Canadian economy.

Following extensive consultations with the industry, and I underline extensive, the government announced in the 2003 budget that it intended to improve the taxation of resource income.

Subsequently, on March 3 the Minister of Finance released a technical paper on the budget proposals. These proposals were reviewed in the course of extensive consultation with the industry and with the provinces. In response to these consultations, some special transition measures were incorporated into the legislation before the House today.

I would now like to briefly review the measures in Bill C-48. The proposed new tax structure will ensure that the resource sector firms are subject to the same statutory rate of corporate income tax as firms in other sectors. It will also ensure that these firms can deduct their actual cost of production rather than an arbitrary allowance.

Let me explain a little further. The first measure in Bill C-48 would reduce the federal statutory corporate income tax rate on income earned from resource activities from 28% to 21% by 2007. This rate is often the first piece of information viewed by prospective investors. If Canada is to send a positive message to investors that it is competitive, then this uniform lower rate is indeed essential.

The second measure would eliminate the arbitrary 25% resource allowance and would provide a deduction for the actual amount of provincial and other crown royalties and mining taxes paid. This means that projects would now be treated in a more comparable fashion. This change would promote efficiency by ensuring that the investment decisions were based more consistently on the underlying economics of each project. It would also result in a simpler tax structure, streamlining tax administration and compliance.

The government has recognized the particular circumstances of the mining sector in Bill C-48 by proposing a new 10% mineral exploration tax credit and it will apply to both Canadian grassroots exploration and preproduction development exploration for diamonds, base or precious metals and industrial minerals that become base or precious metals through refining.

It is proposed that these new measures be phased in over a five year transition period. An exception is the new mineral exploration credit which will reach its full rate in only three years. The proposed implementation schedule provides a reasonable transition to an improved tax structure in a fiscally responsible manner.

In addition to the resource tax changes, Bill C-48 includes measures that promote renewable energy and energy conservation projects by improving the treatment of Canadian renewable and conservation expenses, the CRCE. These expenses are fully deductible in the year that they are incurred and can be transferred to investors under a flow-through share agreement.

As I clarified in the standing committee hearings, we are discussing federal tax changes only. To the extent that the provinces rely on the federal tax base though, if offsetting adjustments are not made, provincial income tax revenue from the resource sector may increase as a result of these changes.

The international competitiveness of Canadian firms will be maximized where provinces provide a mechanism to return to the industry any provincial revenue gain arising from the changes to the federal tax structure.

The new tax structure for the resource sector complements other measures in the 2003 budget. We discussed these measures during the debate last spring on Bill C-28, the Budget Implementation Act, 2003. That bill eliminated the federal capital tax over five years, which will strengthen the Canadian tax advantage for investment in the capital-intensive resource sector.

Together with the elimination of the federal capital tax, the new measures in the bill we are considering today will substantially reduce the effective tax rates, both for the mining and the oil and gas industries.

For oil and gas, this reverses a current disadvantage relative to the United States. For mining it will build on an existing advantage. In both cases the changes place the Canadian resource sector in a markedly improved position to attract capital for exploration and development.

Bill C-48 reflects the government's ongoing commitment to an efficient and competitive corporate income tax system which plays an important role in creating a stronger and more productive economy. The resource sector attaches considerable priority to the delivery of these proposed changes. I cannot emphasize that enough for the members.

During the finance committee hearings on Bill C-48, the industry representatives and many committee members indicated that they considered the timely delivery of the legislation to be of utmost importance to their constituents and, indeed, to many provinces such as Alberta, Saskatchewan, Nova Scotia, et cetera. Given the benefits of these changes for the resource industries and the communities on which they depend, I would encourage all hon. members to give quick and speedy passage to Bill C-48.

[World Sight Day, October 8th, 2003]

Mr. Speaker, World Sight Day will be celebrated on October 9 in over 100 countries, including right here on the steps of Parliament Hill.

With vision loss affecting 180 million worldwide, organizers of this year's World Sight Day on Parliament Hill are asking for greater support in combating the tragedy of avoidable blindness. It is estimated that 80% of the world's blindness is avoidable: either preventable or curable. In fact, both the causes and cures are known and we are even aware of what steps to take.

The Canadian National Institute for the Blind and its sister blindness organizations, both in Canada and worldwide, require our resources to ensure that blindness treatment and prevention are indeed a part of national health programs.

In Canada, the leading causes of blindness, which are macular degeneration, glaucoma and cataracts, are all age related. As the Canadian population ages, there will be a higher demand for resources to meet the needs of blind, visually impaired and deaf-blind Canadians.

I would therefore invite all of my colleagues to participate in World Sight Day activities planned for Thursday, October 9. Activities begin outside on the steps of Parliament Hill at 12:30 and are followed by a reception in the Commonwealth Room.

[Income Tax Act, October 7th, 2003]

Also the Canadian women's soccer team, the hon. colleague mentions. It has gone further than anyone would have expected with great heart and determination.

Sport is also a school of life for young Canadians at a time when in schools we see less stress on physical activity. I do not know, maybe the hon. member really liked gym class. The problem is that so many young people do not and we have seen that often fall by the wayside. That is again where the need is to promote that.

The federal government agrees with the ultimate goal of promotion of participation in sports and we agree with the hon. member. It also believes, though, that there are other ways to achieve the goals of the hon. member other than in Bill C-210.

In fact, while it is well intended, the proposed tax measure would be inefficient, it would provide an unfair advantage to sport activities to the detriment of other activities and it would constitute an inappropriate use of the tax system. While I did not hear the member say the exact amount, clearly it would be very costly.

Let us take a few minutes to look at that.

First, the measures proposed in Bill C-210 would be inefficient and would not have any significant impact on the participation rates in sports, which the hon. member and I agree we would like to see increased. According to recent a Statistics Canada survey, only a negligible portion, 2.3% to be exact, of inactive Canadians believe that costs such as amateur sports fees are a barrier to their participation. Indeed, there seems to be a lack of time or interest as most important in terms of the impediment as to why people do not become active.

Second, the proposal would provide an unfair advantage to sport activities to the detriment of other types of activities. For example, the performing arts, and I am thinking in particular of theatre or orchestra subscriptions, also contribute to Canada's social cohesion and identity. Yet they would not be covered by the proposed tax measure.

Next, implementing this measure would be an inappropriate use of the tax system. Why? Because the general taxpayer would be subsidizing another individual's personal consumption choices. I am sure my hon. colleagues would agree that participation in amateur sport is a personal choice and that should not be influenced by the tax system. The tax system should remain neutral as to avoid distorting consumption patterns. I am sure my hon. colleague would note that.

Finally, the measures proposed in this bill would be very costly. As the Parliamentary Secretary to the Minister of Finance, I am bound to tell my hon. colleague that we have figured it would be about $450 million annually to only marginally increase the participation rates, if we accept Statistics Canada's view that 2.3% would be motivated by such legislation. The net result of $450 million is just not worth it.

However make no mistake. The federal government believes in the many benefits of sport and that is why it continues to do much for the development of amateur sport in Canada. Let me quickly provide some examples.

Where it is appropriate, amateur sport is supported through the tax system. For example, registered Canadian amateur athletic associations do not pay income tax, and I know the member agrees with that. These organizations also can issue tax receipts for donations they receive from individuals.

Further, thanks to our political commitment and succession of strategic investments, Sports Canada's annual grants and contribution budget now stands at $77 million. From that budget, Sports Canada provides some $49 million annually to support a wide range of sports organizations that contribute directly to federal sporting objectives.