Mr. Speaker, on February 8 the government announced its national action campaign to combat smuggling. At that time Bill C-11 was introduced to address some of the enforcement measures and tax changes which were implemented, using a number of ways and means motions until Bill C-32 was introduced on May 27.
Members of the House may remember second reading debate on Bill C-11 on February 22 of this year. Reformers used that opportunity to consider and respond to all aspects of the action plan to combat smuggling and to express our opposition to the reduction in the tobacco tax. While our knowledge and understanding of the government's tax changes have improved, our opinion and opposition to the tax reduction on cigarettes and tobacco products have not changed.
As a little aside here, it has been an eye opener for me as a new parliamentarian to see the process the government uses in implementing these changes. Behind closed doors it implemented the ways and means motions and made these changes. Then it was brought to Parliament and we debated it, and it became official many months later. It was an interesting exercise. It is interesting to see how government operates. When it wants to
act it can act very quickly. If it wants to drag its feet it can drag them a long time.
Our concerns about the government's tax reduction on cigarettes were confirmed when the Parliamentary Secretary to the Minister of Health appeared before the Standing Committee on Finance on June 7 and advised that the government's goal was to reduce the demand for tobacco, the number one cause of preventable death in Canada. I will repeat. The government said that its aim or its goal was to reduce the demand for tobacco, the number one cause of preventable death in Canada.
The parliamentary secretary went on to say the government fully recognized that the action plan to combat smuggling and the tax measures associated with it would pose health risks. What a contradiction. On the one hand we have one of the highest risk factors in the nation being acknowledged. On the other hand the government introduces a bill which will be more of a threat to the health of Canadians than probably any other move it has made so far. How can the government continue to sit there and defend this move? I find that unconscionable.
Before we get into the reasons why we are opposed to the reduction in the tobacco tax, I would like to outline the measures announced by the government in Bill C-32 which Reformers support. There are some good things. If the government had listened to some of the amendments we proposed and some of the changes we would like to have made, we could have accepted this. However it was like a stone wall.
Reformers support the imposition of the new excise tax on exported tobacco products. Senior officials with the department informed us that before the tax changes were implemented between 30 per cent and 40 per cent of the total production of tobacco manufacturers in Canada was exported. Between 30 per cent and 40 per cent went outside the country, mainly to the United States. Tobacco companies agree that only 3 per cent of their exports were legally consumed and the rest was smuggled back into Canada. If that were the problem why did we not try to solve that problem before we took these measures?
It seems these figures show the extent of the smuggling problem as it existed prior to February 8. It confirms that Canadian tobacco manufacturers were benefiting directly from the smuggling of tobacco back into Canada. Bill C-32 will permit tobacco manufacturers to export 3 per cent of their tobacco production tax exempt. Under the bill, 3 per cent will be allowed and that is the same level as it was before.
The Canadian Cancer Society is concerned that a potential loophole exists in the legislation. Section 7(1) states: "The export tax will not apply when the national tax of the country of destination is paid". In this legislation the government included a loophole so that these companies would avoid paying the Canadian export tax.
For example, in the United States the national tax is only $2.40 U.S. per carton of 200 cigarettes. That is the tax going into the United States. The Canadian Cancer Society says that by paying this low federal tax in the U.S. the deterrence of the export value is reduced. They do not have to pay the Canadian export tax if they pay the American tax, and the American tax is much lower than the Canadian tax. It is common sense. Will they pay the Canadian tax? Of course not.
Reformers agree with the Canadian Cancer Society recommendation that this clause should be amended so that the export tax is reduced by the amount of foreign paid tax. The government fails to acknowledge the fact that needs to be amended or that loophole needs to be closed.
If the foreign tax paid is greater than $8 per 200 cigarettes then there would be no export tax payable. As I just illustrated it is only $2.40 in the United States where most of the tobacco is exported. If this change were made to Bill C-32 in the United States the industry would pay U.S. federal tax plus a partial Canadian export tax, the total of which would equal $8 per carton of 200 cigarettes. If that were done the loophole would be closed.
Reformers tried to propose an amendment to close the loophole but were told-again this is how government works-by the legislative counsel of the House that this amounted to a tax increase and that only the minister could move such an amendment. We were prevented from moving that amendment because it involved a tax increase. Reformers asked the minister to make such amendment as soon as possible. We ask that this be corrected and that it be done quickly.
The Reform Party also supports the health promotion surtax which will increase by 40 per cent the taxes paid on profits made by tobacco manufacturers. We support this surtax. We feel the surtax on profits of the tobacco companies is an excellent approach based on the principle that the tobacco companies should assume more responsibility for the health problems caused by their products. The surtax would do that. It is a surtax on their profits.
Unfortunately the tobacco companies have had a windfall of profits as a result of the increased sales of tobacco products. It is estimated that tobacco manufacturers will have earned enough
in increased profits in six months to more than pay the full three-year health promotion surtax obligation. That is interesting.
Reformers are confused about the rationale used by the government in only having the health promotion surtax apply for three years. In six months they will have made enough increase in their profits to pay it for three years. That surtax comes off in three years. It is built right into the legislation. It will only apply for a three-year term, while the tobacco tax reduction will be in effect and still cause increased consumption and increased health costs long after the surtax is taken off.
Reformers believe that the health promotion surtax should be in effect until the tobacco taxes return to their pre-February 8, 1994 levels. That is how long the surtax should remain in effect. That is common sense.
Reformers tried to propose an amendment to extend the health promotion surtax from three to six years. However again we have that problem. The legislative council advised us that the expansion of a tax could only be made or moved by the minister. The Reformers respectfully request the minister to do that as soon as possible, to make that change and to close the loopholes.
Reformers also support the increase in fines for illegal possession or sale of unstamped tobacco products: increase the fines and solve the problem where it exists.
Reformers believe that increased enforcement combined with the effective export tax should have been tried by the government before it reduced the taxes on cigarettes and tobacco products. If we knew there was a health risk here why did we not try some other avenues first?
We could have put an export tax on those cigarettes. We could have tried enforcement to see how effective it would have been. We knew where the problem existed. We knew where the smuggling was taking place. Reformers believe that if we had tried these things we may not have put the health of Canadians at such great risk.
The final part of Bill C-32 which the Reform Party supports is the immediate payment of tax rebates owing to retailers and distributors throughout Canada. Retailers and wholesalers are owed an estimated $150 million in rebates of excise tax paid on tobacco products held in inventory while the excise tax rates were reduced. That is legitimate. We support the government in that rebate.
The minister cannot issue the rebate cheques until Bill C-32 is passed. While we oppose the reduction in tobacco taxes retailers are likely to get upset if we delay the bill, and rightfully so, thereby delaying their rebate cheques even further. We do not want to hold them up.
Reformers proposed at committee stage to have a separate bill introduced dealing with the rebates so that it could be passed quickly. This would allow retailers to get their money quickly. It would allow Parliament the time necessary to debate the full health costs. We would not have to rush the legislation through. Implications resulting from the tax reduction on cigarettes and tobacco products could be more thoroughly examined. The finance committee refused to even consider our request.
Let us start to discuss the provisions of Bill C-32 which we oppose. We are opposed to the tax reduction on cigarettes and tobacco products because it will increase smoking particularly among young people, the most vulnerable sector of our society. As a result it will increase health costs. Increasing smoking will increase health costs. It is a logical conclusion. That is what will happen.
Reformers find it amazing that the government caved into the criminal element of society so quickly. This sent the wrong signal to those who chose to break the law. The Liberal government said that if you defy the law it will change the law rather than enforce it. That is the signal it sent out to the criminal element and I cannot accept that.
Reformers find it hard to believe the government did not take a more reasonable approach and impose an effective export tax and increase enforcement in the areas where the majority of the smuggling was occurring. Even the commissioner of the RCMP confirmed in February that 70 per cent of the contraband tobacco was coming through the three Mohawk reserves between Cornwall and Montreal. If that is where the problem was, why not have the courage to enforce the laws of Canada?
What will we do now when the criminal element redirects its smuggling to alcohol, drugs and guns? My understanding is that they are already looking at this. They are looking at where else they can turn to make some money.
When the government caved in and lowered tobacco taxes, all MPs received representation from Canadian distillers that we should also lower the taxes on alcohol and booze. That is the logical thing. If we can reduce taxes in this area, let us reduce it over here because the smuggling will now occur in a different area. Are we going to treat that in the same way? Are we going to reduce the taxes on that? Is that going to be our approach?
There are some segments of this society, law-abiding citizens who very much wish that their taxes were reduced as quickly as this government has chosen to reduce the taxes on tobacco. The problem will still exist, but it will only be transferred to other areas.
The further reduction of the excise tax on cigarettes negotiated in Ontario, Quebec, Nova Scotia, New Brunswick and Prince Edward Island has now created an interprovincial
smuggling problem. Now it is an east-west smuggling problem. The problem has simply been transferred to a different area.
The government responded to this problem by implementing excise tax and offence provisions to prevent interprovincial smuggling. While Reformers support these provisions, we must point out that these provisions would not have been necessary if the government had tried to increase enforcement and a new export tax on tobacco products in the first place rather than reduce the tax on tobacco products. Now we have to deal with the interprovincial smuggling.
Senior officials at finance say the four western provinces are satisfied that their anti-smuggling campaign is working and that their revenues are holding. They are not likely to reduce their tobacco taxes. Therefore the government's attempt to stop smuggling has created another smuggling problem as I have just explained.
The action on smoking and health group appeared before the Standing Committee on Finance. It told members of Parliament how a 12-year old called a 1-800 mail order number advertised by the fax network which goes right into private homes. The 12-year old ordered and received four cartons of cigarettes by mail, no questions asked. That was across provincial boundaries. That is how easy it is to contravene the regulations this government has put into effect. A 12-year old can simply order cigarettes by phone and get them by giving a credit card number.
These volunteers asked the finance committee to make improvements in the enforcement provisions and increase the fines for this activity. The finance committee approved Bill C-32 without discussion, without further change.
The main point I would like to make today is with regard to the government's disregard for the health of Canadians, particularly young people. When the government first introduced its national action campaign to combat smuggling in February, we asked the government to tell us what the increased health care costs would be.
How many people will start smoking as a result of the tax reduction? Because cigarettes cost less, how many people will begin this habit that they will later find very difficult to break?
How many Canadians will become addicted? If this is a temporary tax reduction, will we then have an addiction problem to deal with later? How many people will get lung cancer, emphysema, heart disease and strokes as a result of this plan? How many people will suffer or die as a direct result of the government's tax reduction? How much will this cost the Canadian taxpayer? This tax reduction will end up costing us a horrific amount of money.
The government has continued to push the implementation of this bill despite not having the answers to these very important questions. If we do not have the answers to these questions, how can we continue with this bill?
While the Parliamentary Secretary to the Minister of Health has made it clear that the tax reduction would pose increased health risks, these risks, the costs, the implications for government and the human suffering have not been quantified. Reformers find this appalling.
The Canadian Cancer Society asked the Standing Committee on Finance to complete a thorough evaluation of the health care costs and implications of smoking in Canada, because such an evaluation had not been done since 1986. The finance committee listened politely, but it completely ignored the dozens of recommendations and passed the clause by clause reading of Bill C-32.
Do you know how long it took the committee to pass all of those clauses in Bill C-32? It took 15 seconds. After all the representation we received and all the concerns that were expressed in 15 seconds the committee said: "Here they are, we approve them all". This clause by clause review of a 62 page bill was done in 15 seconds. That is democracy.
Is it any wonder that Reformers are advocating and pushing for a triple-E senate where legislation like this could be reviewed seriously and thoughtfully and amended reasonably. Amendments could be proposed and debated intelligently. Some sober second thought could be given to some of the things the government is doing. A triple-E senate would prevent some of the serious mistakes we are making in pushing legislation through so quickly.
I ask again: What will the increased health costs be? The Canadian Cancer Society provided the Standing Committee on Finance with some estimates prepared by Professor Robert Allen from the department of economics at Harvard University.
Using Professor Allen's most conservative estimates, he predicted that the national cigarette consumption would rise by 14 per cent among adults and it would rise by 35 per cent among young people. Those are the most conservative estimates.
Thus the tax reductions implemented by the Liberals will increase the total number of tobacco users in Canada by 840,000 and of these 175,000 will be teenagers. At this rate Professor Allen predicted health costs would rise in the long term by $1.33 billion-one thousand, three hundred and thirty millions of dollars-a horrific increase in costs. Those are conservative estimates; it could be higher.
This government will not be in power any more when the detrimental costs of the legislation it is implementing will have to be paid by the people of Canada. The government will not even be around to harvest its returns. As Professor Allen has said these are the most conservative estimates. It could be much higher. It could result in 1.89 million new smokers and if it was that high 245,000 of those would be young people.
If that happens it would result in increased health spending of an additional $3 billion every year. Still the government fails to tell Canadians what the impact will be. It has hidden that. It refuses to conduct its own evaluation of health costs and implications. It does not even look at it. That is ignoring the health of Canadians.
This is an example of a bill that has such serious health implications and risks it should have been debated jointly by the Standing Committee on Health and the Standing Committee on Finance. Both committees should have been involved. Only in this way could Canadians' concerns about the health risks be properly debated during committee stage.
Had this been done I believe many of the amendments proposed by the Canadian Cancer Society and action on smoking and health would have been made by the government rather than Reformers just talking about them today in the House of Commons. They would have had a chance to make the amendments.
For a government that claims to be listening to the people it does very little of it. Precious little listening is being done to the concerns of Canadians through the Canadian Cancer Society and action on smoking and health.
Another one of our major concerns is that the government has not provided Canadians with a timetable showing when the tobacco taxes will start going up again. Already the cost of cigarettes in three border states is higher than in Canada. Across the line you have to pay more for cigarettes than in Canada because of the action this government has taken.
The government acknowledges the dramatic effect high taxes have on tobacco consumption. It acknowledges that the health promotion surtax will end in three years, but it has not told Canadians what it plans to do at the end of three years. We proposed an amendment but as I said, it is out of order because the minister has to propose the amendment if it is a tax increase.
Will the government make a commitment to raise prices to what they were prior to February 8, 1994 when the health promotion surtax is removed at the end of three years? Will the government make that commitment? Reformers proposed it but legislative counsel advised us that only the minister can do that. Reformers respectfully request the minister to introduce a new bill to bring such an amendment into effect.
For the sake of the health of all Canadians, for the sake of all of those young people who will take up smoking as a direct result of the government's action, for those people, will the government tell Canadians today that this is not a permanent tax reduction? Will it come in with a plan to increase this again? Will this government tell Canadians that their health is of more concern than the interests of a few smugglers and a few tobacco manufacturers? It is very important that the government send a signal to Canadians that yes, it is concerned.
In closing, I have a list of recommendations for the government in regard to the whole subject of cigarettes and tobacco products.
First, we need an immediate evaluation of the health care costs and implications, particularly for young people. This government should begin to find out what is going to happen as a result of its action.
Second, we need to extend the health promotion surtax beyond three years. It should be in effect as long as tobacco taxes remain as low as they are. That is common sense. There should not be an end to one measure and a continuation of another.
Third, we need to make tobacco companies fully accountable for the increased health care costs. Accountability and responsibility must be laid at the feet of those that are profiting from the sale of this product.
Fourth, we need a clear timetable to increase taxes on cigarettes and tobacco products. That should be done. It should begin now. There should be an amendment put in place to make sure that these tobacco taxes are again increased. Co-operate with the Americans. Consult and discuss with them how we can jointly combat this problem.
Fifth, we need to close the loopholes in the export taxes. I have illustrated already, and I will not belabour the point, but let us close those loopholes. If the loophole is there, people will be going through it and profiting from it.
Sixth, we need a better enforcement strategy to stop the east-west smuggling problem. Mail order advertising has not been stopped. I gave the example of a 12-year old who was able to order cartons of cigarettes through the mail.
Seventh, the level of fines also needs to be increased to deter people.
Eighth, we need to ban small packages of smokeless tobacco products. I addressed this previously. I will not refer to it again other than to say that it is on the record.
The hon. member opposite acknowledged that the amendment I proposed should be implemented, but it was not done because of a technicality. Snuff and chewing tobacco designed for sale to young people should be discouraged.
Ninth, health warnings on cigarette packages are being obscured by manufacturers and government should put an immediate end to this practice. An example of that was given in committee, but the government has not addressed the problem.
Tenth, there is a need for a complete and total ban on tobacco advertising.
From what my constituents are telling me and from what I have been hearing from Canadians, it is clear that the government has once again passed a law that clearly the majority of Canadians do not support. The government continues to push things through, to railroad them through the House, when they are unacceptable to the majority of Canadians.
Reformers believe that the health of Canadians should be the government's first priority. The government has sacrificed the health of Canadians by lowering taxes on cigarettes and Canadians will have the opportunity some day to decide if it was the wisest thing for the government to do. But it may be too late.
Nothing much has changed since we began debating this. The government seems to have an agenda and no amount of common sense will cause it to ever amend the bill. I find that very regrettable. I hope government members are listening like they claim they are.