Bryon Wilfert

[Taxation, April 26th, 2002]

Mr. Speaker, currently the federal and provincial ministers are meeting in Corner Brook, Newfoundland, to discuss a number of issues, including the issue that the member has raised. It is an important issue to all members and to all provinces across the country. The government is reviewing the situation and I know further discussions will be taking place.

[Excise Act, 2001, April 26th, 2002]

Mr. Speaker, I appreciate the opportunity to speak at third reading to Bill C-47 which introduces a modern legislative and administrative framework for the taxation of spirits, wine and tobacco products under the Excise Act.

The measures in the bill address a long-standing need of both industry and government for a new excise framework. As many colleagues are aware, the Excise Act is the foundation of the federal commodity taxation system for alcohol and tobacco products. It would impose excise duties on spirits, beer and tobacco products manufactured in Canada. It would include extensive control provisions relating to the production and distribution of these products.

Commodity taxes are an important element of Canada's federal tax system. In 2000-01, for example, duties and taxes on alcohol and tobacco products raised about $3.4 billion in federal revenues. The Excise Act is one of the oldest taxing statutes in Canada. Some of its provisions date back to the 1800s and except for periodic amendments the act has never been thoroughly reviewed and overhauled. In recent years it became obvious to both industry and government that the excise framework needed to be modernized.

Industry, for example, has introduced new technology and product marketing and distribution initiatives that the existing Excise Act is not equipped to accommodate. The base of controls in the act impose high compliance costs on industry and impair the competitiveness of Canadian producers. Given the increased foreign competition in Canadian markets for beverage and non-beverage alcohol this problem needs to be addressed.

From the government's perspective the Excise Act is increasingly difficult to administer and impedes the ability of the Canada Customs and Revenue Agency, CCRA, to fully adopt modern administrative practices. Furthermore, wine which is currently taxed under the Excise Tax Act is not subject to any substantive controls on its production and possession. Tobacco manufactured in Canada is taxed under both the Excise Act and Excise Tax Act. This creates problems both for industry and government.

All of these factors point to the need for a revised excise framework which is a key component of Bill C-47. The new excise framework is a direct result of a discussion paper on the Excise Act review which the Department of Finance and CCRA released in 1997. That paper outlined a proposal to provide legislative and administrative framework for the federal taxation of alcohol and tobacco products.

The government subsequently released draft legislation and regulations in 1999 and held public consultations with all major stakeholders. During the review the government was guided by three goals: first, to provide a modern legislative framework for simpler and more certain administrative systems that recognize current industry practices; second, to facilitate greater efficiency and fairness for all the parties leading to improved administration and reduced compliance costs; and third, to ensure the continued protection of federal excise revenues.

Bill C-47 meets all three objectives. A modern legislative and administrative framework introduced in the bill would generate stable and secure revenues and also address contraband pressures. Moreover, this would be achieved without imposing unrealistic or unnecessary costs and administrative burdens on industry.

The measures relating to alcohol would include: maintaining the imposition of duty at the time of production of spirits, replacing existing sales levy on wine with the production levy at an equivalent rate, deferring the payment of duty for spirits and wine to the wholesale level, and introducing modern collection tools. At the same time the bill would help to address the government's ongoing concern over smuggling and the illegal production of alcohol.

I will discuss some of these key measures in more detail. Along with the production levy on spirits and wine that I have just mentioned the legislation would incorporate strict controls on the production, importation, possession and use of non-duty paid alcohol together with significant penalties for breaking the law. The spirits industry would no longer be hindered by outdated and onerous controls over premises and equipment. With these controls removed businesses would have greater flexibility to organize their commercial affairs to respond more quickly to market changes.

[Pension Savings, April 19th, 2002]

Mr. Speaker, the motion proposes the introduction of what are commonly referred to as tax prepaid savings plans, TPSPs.

Hon. members may be aware TPSPs have been proposed by the C.D. Howe Institute and others as a new retirement savings vehicle to complement the existing system of registered pension plans, RPPs, and registered retirement savings plans, RRSPs.

I welcome the initiative of the hon. member for Vancouver Island North in putting forward the motion to the House. Tax prepaid savings plans are an interesting idea and worth exploring. While TPSPs may offer certain benefits they also raise a number of important issues.

I would like to review the current retirement income system and the system of tax assistance for retirement savings and touch on some of the issues surrounding TPSPs.

Hon. members may be aware Canada's retirement income system is composed of three pillars. These three pillars help achieve two basic objectives. First, to ensure a basic minimum income guarantee for all seniors. Second, to enable Canadians to avoid serious disruptions in their living standards upon retirement.

The first pillar compromises the old age security and guaranteed income supplement programs, which provide a basic minimum income guarantee for seniors.

The second pillar is the Canada and Quebec pension plans, which provide a basic level of earning replacement in retirement.

The third pillar is the current system of tax assistance for retirement savings. As hon. members are well aware this system provides Canadians with opportunities to save on a tax-assisted basis. Individuals may contribute 18% of earnings per year to an RRSP, a registered pension plan, or a combination of both, up to a maximum dollar limit of $13,500. For defined pension plans benefits are limited to 2% of earnings per year of service up to a dollar maximum of $1,722, which corresponds to 2% of $86,100. These limits allow a pension equal to 70% of covered pre-retirement earnings after a 35 year career.

The pension and RRSP maximum contribution limits are legislated to increase from $13,500 to $15,500 by 2004 and 2005 respectively, and be indexed to average wage growth thereafter. The $1,722 maximum pension limit for defined benefit pension plans is legislated to be indexed to an average wage growth starting in 2005.

The government's commitment to the pension and RRSP system is significant. According to estimates published last year the federal government will provide tax assistance of more than $14 billion this year alone on savings in RPPs and RRSPs. It is clear that the government's investment is significant.

Statistics Canada data indicates that Canadians had accumulated assets of more than $1 trillion in RPPs and RRSPs in 1999, accounting for 34% of all assets owned by Canadian households. Seventy-one per cent of all family units had assets in registered plans in 1999.

Most members would agree with me when I say that the current system of tax assistance for retirement savings has been a success, given the statistics that I just mentioned. Indeed Canada's retirement income system is regarded as an excellent system internationally and has been cited as such by the OECD, the World Bank and the IMF.

Nevertheless, this would not prevent the government from considering further measures to encourage and assist retirement savings in Canada and to make the tax-assisted savings system as fair and effective as possible, given competing needs and available fiscal resources. In this context tax prepaid savings plans are an idea worth examining.

I would like to raise some of the questions that need to be examined with respect to TPSPs but before that, allow me to explain exactly what TPSPs are, how they would work and the sense in which the tax is prepaid.

It is easier to see how TPSPs would work by comparing them to RRSPs which everyone is familiar with. An RRSP is an example of a tax deferred savings plan. Contributions to RRSPs are tax deductible. Investment income earned within RRSPs accrues free of tax. Withdrawals from RRSPs are taxable. In this sense the tax owing on contributions and investment income is deferred until the funds are withdrawn from the RRSP.

In contrast, contributions to a TPSP would not be tax deductible but investment income and withdrawals from the plan would not be subject to tax. The tax would be prepaid because contributions would be made from after tax dollars. Under certain conditions the tax assistance benefits to savers and the net costs to the government under a TPSP would be identical to those associated with an RRSP.

As some hon. members may be aware, tax prepaid plans exist in other countries notably the United States and United Kingdom. In the United States they are known as Roth IRAs. In the U.K. they are called individual savings accounts or ISAs. Since tax prepaid plans are being used in other countries hon. members may wonder why we cannot adopt them here. The U.S. and the U.K. have different systems for retirement income and tax assistance for savings than we have in Canada.

It is not clear that TPSPs should be adopted in Canada simply because they exist in other countries. We should first study fully their implications. Many questions need to be examined in assessing the appropriateness of TPSPs for Canada. First, how would a TPSP program fit in with the tax assisted retirement savings programs currently in place?

Second, what would be the impact on government revenues of introducing TPSPs?

Third, should income earned within a TPSP be taken into account in determining income tested tax and social benefits such as old age security and guaranteed income supplement benefits?

Fourth, would a tax prepaid option for retirement savings be attractive to savers given that the Liberal government has introduced the largest tax cut in Canadian history and future tax rates are declining?

The question of introducing TPSPs would have to be considered in the context of the many competing tax and investment needs for available fiscal resources. These and other issues need to be examined.

Before concluding I will take the opportunity to remind hon. members of the recent tax reductions made by the Liberal government. In the October 2000 economic statement and budget update the federal government announced the largest tax cut in our history. Canadians are already benefiting from the tax reduction plan. The tax cuts are providing significant stimulus to the economy and contributing to building a strong economy in the future.

The tax reductions will lower the personal income tax burden by 21% on average and by 27% for families with children by 2004-05. In addition, the reductions are promoting jobs, growth, entrepreneurship and innovation by creating a Canadian advantage in the taxation of businesses and capital gains relative to the United States. The tax reduction plan provided tax relief of about $17 billion in 2001 and will provide about $20 billion in tax relief this year.

Among the personal income tax reductions announced in the 2000 budget and the October 2000 economic statement and budget update were the restoration of full indexation of the tax system, the lowering of tax rates for all taxpayers, legislated increases in the tax bracket thresholds by 2004, and a reduction in the capital gains inclusion rate. These measures are putting more money in the pockets of Canadians, money they can choose to save and invest.

To conclude, it is not appropriate to support the motion when many important issues regarding TPSPs still need to be carefully examined and assessed. Furthermore, as I mentioned in my remarks, pension and RRSP limits are scheduled to increase beginning next year with limits being indexed to an average wage growth beginning in 2005 for RPPs and in 2006 for RRSPs.

Again, I thank the hon. member for putting the motion forward and giving us a chance to address it today.

[Payment Clearing and Settlement Act, April 19th, 2002]

Mr. Speaker, a potential cost to these clearing houses is the risk that any member may default before a transaction is settled which would result in a financial loss to both the clearing house and its members.

As a central counter party, securities and derivatives clearing houses take measures to reduce this risk. For example, members are required to post collateral and to net their payment and delivery obligations with the clearing house.

By way of explanation netting is a way to significantly reduce the net payment and delivery obligations of members of the clearing house, in some cases by tenfold. If, for example, a member of a clearing house buys a security for $1,000 and sells another for $900, the member's net obligation to the clearing house is $100.

Collateral, as hon. members know, is an asset that is posted, in this case with securities and derivatives clearing house, to partially offset members' obligations to the clearing house in case they cannot fulfil their obligation. Collateral is usually provided in the form of a cash deposit or the transfer or pledge of a security.

Like many of its counterparts in other countries, the Canadian securities and derivatives industry has been faced with the challenges of globalization, rapid technological change and consolidation.

Proximity to the United States and relatively low barriers to entry for foreign securities dealers, free movement of capital and an increasingly North American focus of many large Canadian corporations have made the securities and derivatives markets be more competitive. As a response, larger Canadian securities firms have been improving their quality to service clients on a North American basis. Canadian exchanges have also been facing this intensifying competitive environment.

Issuers of capital are increasingly able to access global markets, bypassing local markets and intermediaries. A growing number of Canadian firms are choosing to list their stock on U.S. exchanges. In addition, U.S. derivatives exchanges offer derivatives on Canadian indexes, commodities and companies.

It is imperative then that the Canadian securities and derivatives industry be able to compete with other countries, particularly with the United States where a significant portion of Canadian securities and derivatives trading occurs.

The industry needs a competitive legal regime that lowers settlement risks and the associated costs to these clearing houses. Such a change will make these clearing houses in Canada more efficient and competitive with the United States and other G-7 countries and help to keep trading activity here at home.

Without these changes, more securities and derivatives trading will occur outside of Canada, primarily in the United States where bankruptcy and insolvency legislation generally exempts securities and derivatives clearing organizations from court ordered stays and allows them to net the obligations of members and realize their members' collateral.

Recent changes in Europe also reaffirm the importance of keeping our industry competitive.

The settlement finality directive which came into force in 1998 established a legal framework for payment and securities settlement systems in the European Union. EU member states must ensure that securities settlement systems can net obligations and that the netting is legally enforceable and binding on third parties in the event of insolvency. The directive also provides for collateral to be realized in a timely manner in any wind-up procedure.

Laws in Canada do not fully protect netting agreements and collateral posted with securities and derivatives clearing houses to the same extent.

Stakeholders in Canada have raised concerns that current federal legislation does not prevent court imposed stays from securities and derivatives clearing houses realizing collateral in the event of their members becoming bankrupt or insolvent.

The Bourse de Montréal, on behalf of the CDCC, along with the WCE Clearing Corporation and the Canadian Depository for Securities have all requested that the Payment Clearing and Settlement Act be amended to cover securities and derivatives clearing houses. They are concerned that Canadian bankruptcy and insolvency laws add to the cost of their clearing house operations and to their members by increasing the costs related to the risk of a failure of one of their members.

It is difficult to attract large international dealers and trades to Canada if these Canadian clearing houses face higher costs because they cannot enforce their netting and collateral agreements with members in the event of the insolvency of one or more members.

Given how our competitors function, it is imperative that changes be made to ensure that Canadian securities and derivatives clearing houses can compete with those in the United States and in Europe.

Bill S-40 addresses these issues. The amendments in Bill S-40 will make Canadian securities and derivatives clearing houses more efficient and competitive with the United States and the other G-7 countries, allow them to lower their costs and help to keep trading activity in Canada. This is accomplished by amending the Payment Clearing and Settlement Act to include legal protections for securities and derivatives clearing houses of their netting agreements and collateral posted by their members.

These amendments protect netting agreements and prevent stays imposed by a court on the ability of securities and derivatives clearing houses to realize collateral in case of bankruptcy or insolvency of one of their members.

Hon. members should bear in mind that the protections being sought through this bill are over federal bankruptcy and insolvency laws. These legal protections will allow Canadian securities and derivatives clearing houses to lower their settlement risks and settlement costs, thereby making them more efficient and competitive with the United States and other G-7 countries.

Before closing I want to draw the attention of hon. members to recent recommendations made by the Bank for International Settlements, the BIS, to which the amendments of the bill adhere.

The BIS is an important forum for international monetary and financial co-operation between central bankers and other regulators and supervisors. Its work has contributed to the setting of standards, codes and best practices that are deemed essential for strengthening the financial architecture worldwide.

Last November the BIS made recommendations about securities settlement systems, including securities clearing houses. These recommendations support a well-founded legal basis for securities settlement systems so that rules and procedures can be enforced with a high degree of certainty. In particular, it favours the enforceability of netting arrangements and the ability to realize assets pledged as collateral.

As I mentioned earlier, securities and derivatives clearing houses are important to the efficient operation of our financial markets.

First, securities and derivatives markets are critical in providing opportunities to raise capital for investments and hedging financial risks.

Second, securities and derivatives clearing houses take measures to reduce settlement risks and associated costs through netting and requiring members to post collateral.

Third, it is important that the measures taken by these clearing houses to reduce risks are supported by a sound and competitive legal regime.

In considering the bill, I urge hon. members to keep these three additional points in mind: First, that these amendments are in keeping with recommendations by the Bank for International Settlements regarding securities settlement systems; second, that they are supported in Canada by financial sector participants and their associations, by provincial governments and by the insolvency community; and third, that they help meet a throne speech commitment to keep Canadian laws competitive.

It is essential that Canada's financial sector remains strong and efficient. The amendments in Bill S-40 will help to ensure this. A competitive legal regime will help keep securities and derivatives trading in Canada and assist the industry in attracting international deals and brokers here.

For those reasons, I urge hon. members to pass the legislation without delay.

[Middle East, April 19th, 2002]

Mr. Speaker, the current crisis in the Middle East reminds us that the old hatreds and animosities do not fade easily.

As Canadians we condemn all acts of terrorism and all acts of violence. Neither serves the interest of peace. The emotions and passions of the latest suicide bombings and Israeli reactions have led to deepened suspicions and left hopes for a just and lasting peace in tatters. We must not allow, nor can we accept, the spilling of innocent blood in the name of so-called justice.

However we must not allow our society to be polarized and politicized by events which, however painful to some, cannot obscure our country's desire to see a political settlement that provides for secure borders for Israel, recognition of the Jewish state by the Arab world, and the creation of a Palestinian state living side by side in harmony with its neighbours.

I am saddened and disturbed to see Canadians young and old shouting slogans and demanding retribution. This is not the Canadian way. Nor does it serve the cause of peace. Benedict Spinoza said of peace:

Peace is not an absence of war; it is a virtue, a state of mind, a disposition for benevolence, confidence, justice.

Canada is working with its friends and allies to seek an end to the cycle of violence and mistrust, develop the beginnings of a dialogue that can lead to bringing the parties together to break down the walls of hatred and suspicion, and begin the process of healing and building a framework for concrete discussions.

[Payment Clearing and Settlement Act, April 19th, 2002]

Mr. Speaker, I welcome the opportunity to present for second reading Bill S-40 which amends the Payment Clearing and Settlement Act.

This legislation provides Canadian securities and derivative clearing houses with legal protection, similar to those in place in the United States and other G-7 countries, in the event that one of the members becomes insolvent or declares bankruptcy. Before discussing the bill, I would like to take a few minutes to provide some background which will put these changes into context.

These amendments are in line with the commitment the government made in the Speech from the Throne in January 2001 to keep Canadian laws and regulations competitive. Bill S-40 helps to meet this commitment. I want to remind the House of the government's long term plan to build a strong economy, a plan that also includes an internationally competitive economy. An efficient and strong financial sector is a key requirement for achieving a strong economy.

With the major contributions to job creation, export growth and tax revenues, Canada's financial sector is vital to the country's economic well-being. Central to a healthy financial sector is the Canadian securities and derivatives industry, its exchanges and their clearing houses.

The Canadian securities derivatives industry is a key player in Canada's financial system. Its contribution is significant. The industry provides a mechanism for raising capital and hedging financial risks through derivative contracts. It is a highly competitive industry.

For example, in recent years the number of security firms in Canada has increased from 170 in 1995 to almost 200 today. These firms are important players in Canada's securities and derivative clearing houses. The size of the industry is significant. Gross revenues in 2001 were $10 billion. In 1999 security firms assisted corporations raising $39 billion in debt and $21 billion in equity. Security firms also assisted provincial governments in raising $25 billion in debt and participated in the sale of $50 billion of Government of Canada bonds.

The Winnipeg Commodity Exchange trades over $2 million agricultural futures and options contracts per year worth about $13.5 billion. Participants trading in the Winnipeg Commodity Exchange include international grain trading companies, brokerage firms, primary and terminal elevator companies, local floor traders, financial institutions and farmers.

The bill we are debating today focuses on Canada's security derivative clearing houses, which are among the most efficient in the world. These organizations enable consumers and businesses to settle securities and derivative transactions in a timely manner and at a reasonable cost. They accomplish this by acting as a central counter party to securities and derivative trades.

In Canada, the clearing and settlement of securities derivative trades is conducted through three clearing houses. The Canadian Depository for Securities, CDS, is Canada's national securities depository clearing and settlement centre. It handles about $57 million security trades each year for banks, brokers, trust companies and other industry members. The CDS is also a custodian of securities for federally incorporated institutions like banks, trust and loan companies, insurance companies and pension funds.

The Canadian Derivatives Clearing Corporation, CDCC, is the clearing house for derivative contracts traded on the Bourse de Montreal.

The third organization, the WCE Clearing Corporation, WCECC, is the clearing house for derivative contracts relating to agricultural commodities traded on the Winnipeg Commodity Exchange, the WCE. The WCECC has an arrangement with CDCC to provide certain clearing and settlement services for the WCECC.

These three clearing houses clear and settle trades carried out on the four major exchanges in Canada. Securities and derivative exchanges underwent a major realignment in 1999 to enable them to better compete with exchanges around the world and new electronic entrants to the Canadian market. Each exchange now specializes in a certain area.

The Toronto Stock Exchange is the sole market for senior equities. Its listed companies represent a broad range of businesses from across Canada, the Untied States and other countries.

The Canadian Venture Exchange, CDNX, in Calgary, which was created through a merger of the Alberta and Vancouver stock exchanges, is the major market for junior equities. The Canadian Venture Exchange recently has been renamed the TSX Venture Exchange. Its companies are particularly active in the mining, oil and gas manufacturing and technology sectors.

The Bourse de Montréal is responsible for all non-commodities derivatives trading and other clearing services to its corporation, the CDCC. Transactions involving agricultural commodity derivatives take place on the Winnipeg Commodity Exchange, which is Canada's only agricultural futures and options exchange. Future contracts traded at the WCE include canola, canola meal, flaxseed, domestic feed wheat, western barley and field peas.

The centralized clearing and settlement services provided by clearing houses for securities and derivative markets are important in three aspects.

First, securities and derivatives markets are critical in providing opportunities to raise capital for investment and hedging financial risks.

Second, securities and derivatives markets rely upon the efficient and timely clearing and settlement of transactions through clearing houses.

Third, these clearing houses take measures to reduce risk and cost and settlement of securities and derivatives transactions.

Any factors that negatively affect the operation of these clearing houses and increase their costs will impact on the securities derivatives markets by reducing their efficiency and increasing trade costs. A potential cost to these clearing houses--

[Vimy Ridge, April 9th, 2002]

Mr. Speaker, today marks the 85th anniversary of the battle of Vimy Ridge, one of the greatest battles in Canadian history. Vimy Ridge proved to be a turning point in the Great War. Canadians were an important part of the epic battle. They fought exceptionally and were awarded four Victoria Crosses for that single battle, the country's highest award for bravery. The entire Canadian contingent was commended as being an elite fighting corps, and it has been said that Canada became a nation on the battlefields of Vimy Ridge.

As a tribute to this historic event the Royal Canadian Mint has announced the official unveiling of the new Vimy Ridge commemorative coin. The new five cent coin was introduced during a ceremony earlier today hosted jointly by the Royal Canadian Mint and Veterans Affairs Canada.

The Canadians at Vimy Ridge demonstrated our character at its best and reminded us of the strength of our proud heritage and what is possible for human beings to endure. For the courage and bravery the veterans have shown, Canadians nationwide sincerely thank them.

[Excise Act, 2001, March 22nd, 2002]

Mr. Speaker, I appreciate the opportunity to present Bill C-47, an act respecting the taxation of spirits, wine and tobacco and the treatment of ships' stores, for second reading today.

Bill C-47 introduces a modern, legislative and administrative framework for the taxation of spirits, wine and tobacco products under a new Excise Act. This new framework does not address substantive tax rate or base matters for alcohol and tobacco products. Bill C-47 also implements other excise measures, specifically the changes to ships' stores provisions that were announced on September 27, 2001, and the tobacco tax increases announced on November 1, 2001.

Before elaborating on the details of the new Excise Act, I want to take a moment and provide hon. members with some background that will help put these new measures in context. The Excise Act is the foundation of the federal commodity taxation system for alcohol and tobacco products. It imposes excise duties on spirits, beer and tobacco products manufactured in Canada. It includes extensive control provisions relating to the production and the distribution of these products. Duties equivalent to the excise duties on domestically produced goods are levied on imported spirits, beer and tobacco products under the customs tariff. As well, excise taxes are imposed on domestic and imported wine and tobacco products under the Excise Tax Act.

Historically, commodity taxes on specific goods have been an important element of Canada's federal tax system. In the first half of the 1900s they accounted for as much as 25% of federal revenues. While their relative importance has declined in recent years, these levies are still significant. In 2000-01, duties on alcohol and tobacco products raised about $3.4 billion in federal revenues.

Why, then, is this bill needed? Quite simply because the current Excise Act is archaic. It is one of the oldest taxing statutes in Canada, existing in previous configurations before Confederation with parts of the present act flowing from the consolidated inland revenue act enacted in the 1800s. While periodically amendments have dealt with specific issues, the Excise Act has never before been the subject of an indepth review and revision.

Let me provide a few illustrations of the archaic provisions in the existing Excise Act. The existing act allows excise officers to enter premises at any time and break up or remove parts of the premises such as the walls, ceilings and doors. Taxpayers who suffer losses as a result of the actions of excise officers are only entitled to damages of 20¢. Any person found guilty of possessing or selling alcohol in contravention of the Excise Act could face up to 12 months of hard labour.

Licensed producers are prohibited from operating at night without prior authorization from the Canada Customs and Revenue Agency, CCRA, and must comply with the requirement to have an excise officer present at the licensee's expense. Licensees who intend to make any alterations to their premises are required to provide the CCRA with a detailed description of the proposed alterations and, following the completion of the work, with plans of the work. Pipes that are used in a distillery to convey spirits are required to be coloured blue and those used for beer are to be coloured green. Licensed producers are prohibited from erasing any words or figures from their books and records. The only way changes to a licensee's books may be made is by crossing out words or figures with ink in such a way as to ensure that they remain legible.

These are but a few examples of how outdated the current Excise Act is.

In recent years, both industry and government became increasingly aware of the need for a substantive review and modernization of the excise framework. In particular, industry has undertaken significant development with respect to new technology, product marketing and distribution initiatives which the existing Excise Act does not accommodate adequately.

Other factors also pointed to the need for review of the framework. For example, there is now greater foreign competition in the Canadian markets for beverage and non-beverage alcohol. However, the pervasive controls mandated by the Excise Act impose high compliance costs on industry and impair the competitiveness of Canadian producers. The Excise Act also has become increasingly difficult to administer and impedes CCRA's ability to fully adopt modern administrative practices. In addition, there was a need to address recent wine contraband pressures that have arisen in part because wine, which currently is taxed under the Excise Tax Act, has no substantive controls placed over its production and possession.

Finally, there are complexities and inefficiencies to both government and industry because tobacco manufactured in Canada currently is taxed under both the Excise Act and the Excise Tax Act. As a result, the government recognized that a revised excise framework was in everyone's best interests. A modern framework would generate stable and secure revenues and also address contraband pressures. Moreover, this could be achieved without imposing unrealistic or unnecessary costs and administrative burdens on industry participants.

Prompted by the need to update the Excise Act, the Department of Finance and the Canada Customs and Revenue Agency jointly released a discussion paper on the Excise Act review in 1997. This paper outlined a proposal for a revised legislative and administrative federal framework for the taxation of alcohol and tobacco products.

The review was guided by the following three objectives: first, to promote a modern legislative framework for a simpler and more certain administrative system that recognizes current industry practices; second, to facilitate greater efficiency and fairness for all parties, leading to an improved administration and reduced compliance cost; and third, to ensure the continued protection of federal excise revenues.

Building on this discussion paper proposal, the government followed up in 1999 with the release of draft legislation and regulations. Public consultations, an important element in any federal policy initiative of this kind, formed an integral part of the review. With the discussion paper and the draft legislation regulations as a basis, extensive consultations were conducted with affected industry groups and businesses, provincial governments, liquor boards, various federal departments, the Royal Canadian Mounted Police and other enforcement agencies. Refinements were made to the original review proposals with the result that Bill C-47 has been given broad support among the spirits, wine and tobacco sectors, the provincial liquor boards and the law enforcement agencies.

Before discussing the new legislative framework, I should mention that the bill does not address beer, which, with the concurrence of the brewing industry, will remain under the existing Excise Act for the time being.

While time unfortunately precludes me from reviewing all the measures in Bill C-47, I would like to provide the House with a brief overview of some of the key components. Bill C-47 introduces core elements of the framework outlined in the discussion paper issued by the government in 1997, including: maintaining the imposition of duty at the time of production for spirits; the replacement of an excise levy at the time of sale for wine with a production levy at an equivalent rate; the deferral of the payment of duties for spirits and wine to the wholesale level; and the introduction of modern collection tools. At the same time, Bill C-47 helps to address the government's ongoing concern about the smuggling of alcohol.

Let me be more specific. A key element of the framework is the maintenance of the production levy, which as I mentioned, is extended to wine in the bill. The production levy incorporates strict controls on the production, importation, possession and use of non duty paid alcohol and significant penalties for breaking the law.

At the same time the bill removes the current outdated and onerous controls on premises and equipment which have hindered the spirits industry operating under the Excise Act. This means that businesses will now have greater flexibility to organize their commercial affairs to respond more quickly to market changes. Anyone producing or packaging spirits or wine will be required to have a spirits or wine licence.

Although vintners must be licensed under the new framework, the current small manufacturers tax exemption will be maintained for wine produced by very small vintners, especially vintners with sales of wine not exceeding $50,000 in the previous 12 months. As well, individuals who produce wine for their personal use will continue to be exempt from having to be licensed and pay duty.

Bill C-47 also proposes a new warehousing regime for deferring duty on packaged alcohol that will place domestic and imported packaged alcohol on an equal footing. As well it will accommodate the privatization initiatives of some provinces for the warehousing of liquor.

As under the existing Excise Act, comprehensive controls will exist on non-beverage uses of spirits and wine to protect federal excise revenues derived from beverage alcohol. These controls include the licensing or registration of users, the approval of product formulations for which spirits and wine may be used without the payment of duty, and the specification of denaturing standards.

The bill also eliminates the current nominal rates of duty that apply to certain non-beverage uses of spirits, such as spirits used in the manufacture of pharmaceutical goods. These nominal duties are inconsistent and erroneous in application and disadvantage domestic products manufactured with spirits vis-à-vis similar foreign products entering Canada.

While the fundamental controls over non-beverage alcohol remain unchanged from the existing excise framework, Bill C-47 contains new measures on imported industrial alcohol to ensure the integrity of the domestic alcohol market and the production of federal revenues. In particular there will be a requirement for imported denatured industrial alcohol to be sampled and tested to ensure it meets Canadian denaturing standards.

The comprehensive controls on the possession, distribution and use of non duty paid spirits and wine will also significantly improve the offence structure and enforcement function in regard to alcohol.

Finally, fines for alcohol related offences will be substantially increased. Proceeds of crime provisions will now cover serious alcohol offences.

Turning now to some of the tobacco provisions in the bill, the new legislative framework in Bill C-47 merges the current excise duty and excise tax on tobacco products, other than cigars, in a single production levy. This will result in improved administration and reduced compliance costs for the industry.

The new legislative framework incorporates the revised tobacco tax structure introduced in April 2001 and previously enacted, which formed part of the government's comprehensive strategy to reduce tobacco consumption.

My hon. colleagues will recall that the tobacco tax structure now includes: an excise tax on imported manufactured tobacco sold in duty free shops; a customs duty on manufactured tobacco imported by returning residents under the terms of the travellers allowance; and a revised excise tax and duty structure for exported domestic manufactured tobacco.

While the measures in Bill C-47 will provide a more streamlined framework for the taxation of tobacco, I want to assure the House that the fundamental controls over tobacco under the existing excise framework will be maintained. In particular, the current stamping and marketing requirements for tobacco products will continue to apply and will play a key role in the enforcement of tobacco provisions in the bill.

In addition, the legislation incorporates the current offence provisions relating to the illegal production, possession or sale of contraband tobacco which have proven to be effective.

The new excise framework also contains a number of administrative measures that will enable the Canada Customs and Revenue Agency to improve its level of service to clients and its overall administration of the excise framework for alcohol and tobacco products.

These measures, which are consistent with CCRA's integrated accounting initiative, include: a duty remittance and return structure harmonized with commercial accounting periods and the goods and services tax and harmonized sales tax, GST/HST, legislation; new assessment and appeal provisions similar to those under the GST/HST legislation; and a range of modern collection mechanisms, such as certificates of default, garnishment, seizure and the sale of goods and director liability.

In addition, the bill provides for a range of administrative penalties that will be imposed on licensees, registrants and others dealing with excisable goods who fail to comply with particular requirements under the law.

The new legislative framework will ensure that the excise duties on alcohol and tobacco are collected in a more effective and efficient manner. As well, it provides an array of modern administrative and enforcement tools for ensuring compliance with the proposed statute.

In summary, the new legislative and administrative framework for taxation of spirits, wine and tobacco products will provide: a simple and more certain taxation structure; equal treatment for all parties; improved administration and lower compliance costs; greater flexibility for businesses to organize their commercial affairs; and enhanced protection of excise revenues.

In the few remaining minutes, I will briefly discuss three additional measures in Bill C-47.

The first concerns changes to the ships' stores provisions under the customs and excise legislation. As my hon. colleagues know, ships' stores provisions grant relief from duties and taxes for goods used on board ships and aircraft in international service.

These changes, which were announced on September 27, 2001, respond to a recent Federal Court of Appeal decision that ships' stores regulations went beyond the scope of their enabling legislation. Bill C-47 provides the proper legislative authority for these regulations. The changes will take effect on the date the provisions identified by the court were incorporated into the regulations.

A second measure implements a temporary fuel tax rebate program for certain ships that will no longer qualify for ships' stores relief as a result of the proposed amendments to ships' stores regulations effective June 1, 2002.

Ships that would be entitled to this rebate are commercial tugs, ferries and passenger ships travelling on the Great Lakes and the lower St. Lawrence River that are not engaged in international trade. This rebate will apply on fuel purchased between June 1, 2002 and December 31, 2004. It is intended to provide affected operators with adequate time to make the transition to the new ships' stores rules.

The third measure implements the federal tax increases on tobacco products that were announced on November 1, 2001. Like the April 2001 measures I referred to earlier, this tobacco tax increase is part of the government's comprehensive strategy to improve the health of Canadians by discouraging tobacco consumption.

These increases re-establish a uniform federal tax rate for cigarettes across the country and amount to $2 per carton of cigarettes for sale in Quebec, $1.60 in Ontario and $1.50 in the rest of Canada. The increases are co-ordinated with provincial tobacco tax increases.

The government has always said that it would continue to work toward restoring tobacco taxes to pre-1994 levels as quickly as possible. The measures in Bill C-47 are one more step in the process of restoring tobacco tax rates in ways that will minimize the risk of renewed contraband activity.

In closing, let me say that the three elements of the bill all deserve to be passed without delay. It makes sense to implement a new Excise Act for addressing a longstanding need of both industry and government to rationalize the ships' stores provisions and to approve the tobacco tax increases for reducing tobacco consumption.

I urge all hon. members to support the passage of the legislation without delay.

[Elvis Stojko, March 18th, 2002]

Mr. Speaker, I rise today to commend Elvis Stojko, a native of Richmond Hill, on the occasion of his retirement from competitive figure skating.

Mr. Stojko has made a great contribution to the sport by bringing awareness to the sport and by raising the bar. The three-time world champion and two-time Olympic silver medalist made history in the 1991 world championships when he became the first skater to do a quad-double combo in competition.

I have always found Elvis to be a true gentleman who has given generously to his community. The mayor's gala celebration for figure skating in Richmond Hill is the venue that he has participated in to promote local skating talent and the town's sports awards.

We wish him the very best in his second career as a professional skater and in his other personal endeavours.

[Supply, March 18th, 2002]

Mr. Speaker, I listened attentively to my colleague across the way. I must say that one of the things that struck me is that our fiscal house is now in order and because of that we were able to come up with the agreement with the provinces in September 2001 of $21.5 billion in support of the CHST. From 1981 to 1997 we had a $560 billion cumulated deficit. We are now able to transfer additional dollars to the provinces because of good fiscal management.

The issue is not just one of dollars. For example, last year Ontario announced $1.2 billion in new health care funding. It forgot to say that $1.1 billion was federal transfers. It is a question of management.

The national round table on health care said it years ago. The issue is not simply money, it is how its managed. Who manages the health care system? The provinces, not the federal government. We notice in the latest Environics poll that Canadians are now saying that maybe the federal government should be involved in managing the health care system and managing education. I notice my friend from the Bloc is getting agitated which is always good to see.

Would my friend from the NDP comment on the issue of management of those programs and not simply on the issue of dollars?