Mr. Speaker, this bill is very interesting as has been discussed previously. It actually combines or marries three different things the House has been working on.
As a new parliamentarian I find an omnibus bill, which is the description of this kind of bill, to be quite interesting. It begs the question does the government really expect there to be some debate, some pros and some cons? This bill covers the area of a second section of tobacco taxes. It also covers the Air Transportation Act and the reduction of the GST for business meal exemption.
How does the government actually expect a party or even an individual member to be able to intelligently vote yea or nay when such totally unrelated fragments are pulled together in one bill? Or does the government actually have the idea that because it has 177 members it is going to get its own way anyway? Has the government pulled it all into one bill with the expectation that the people in its caucus, once the Prime Minister or the Deputy Prime Minister has risen to lead the way, will follow like sheep? It really begs the question as to why these would have been put together in one bill.
I intend to spend most of my time speaking on the air transportation tax changes, but I would like to address the issue of tobacco taxes. The majority of our caucus is opposed to the reduction of the excise tax on tobacco products. The majority believes it encourages more people, particularly young people, to smoke.
Having been in the field of sales and marketing for an extended period of my life, I appreciate there is always the law of supply and demand that is intervened with by the actual price point of a given commodity. If the situation is that prices for cigarettes are going to be lowered, it goes without saying that consumption will undoubtedly increase. Furthermore, my understanding is that studies have shown that young people are most sensitive to this price point.
The second factor is that the long term health costs for Canadians have not been calculated. With the tremendous amount of legislation which is currently coming before the House, this statement could be applied to probably the vast
majority of the legislation. In fact, there is no costing before the legislation comes before the House.
What will the cost be to the Canadian people? This is a very real part of the reason that when the federal, provincial and municipal debts are combined, we in Canada are in debt at a rate of over $1 trillion. It is because governments simply do not do the costing.
What will the health care costs be for Canada and for Canadians if there is an increase in consumption?
There has been a lot of debate today about the issue of more aggressive enforcement. Looking at the situation as it was prior to the decision of the government to lower the taxes, it is clear that the government was shying away from certain areas of our country and not addressing the issue.
If the government was attempting to address the issue, how hard did it try particularly when one area of our country was identified as having a 70 per cent hold? Of all of the product coming into Canada, 70 per cent was coming in through one very small geographic area, yet the government would not address the smuggling in that area.
Another reason the majority of our caucus is opposed to the reduction of the excise tax is it is believed there should have been new export taxes on tobacco products. I believe it was during the debate on Bill C-11 when I brought to this House two clearly marked Export A cigarette packages.
Both packages had been purchased in Manitoba. One package had been purchased immediately prior to the imminent imposition of the export tax. It was identified as having been made in Canada. It was the green package with white lettering that said "Export A" and "made in Canada" and very proud of the whole issue. That was fine. The second package was purchased a week later from the same illegal vendor. It was clearly marked as having been manufactured in Winston Salem under licence by RJR MacDonald.
The point of export taxes with respect to this product is that they will not work. Clearly that particular company's product was going through Buffalo and back into Canada. It had decided that if there was to be an export tax put on it would simply go to a licensing arrangement whereby it would have its product manufactured in Winston Salem and still be in the marketplace. I seriously question whether export taxes or even the imposition of export taxes as they presently sit really make any difference.
The final point is that constituents in the west are opposed to the tax reduction. Some feel they are being treated as second class citizens because their provinces oppose the reduction of taxes. Obviously what we have done is change the situation so that instead of north-south smuggling now we have east-west smuggling.
It begs the question that I raised earlier when the member for Esquimalt-Juan de Fuca was speaking. Does it really make sense? Is it really proper if we walk away from principles when it comes to laws, if we walk away from the foundation stone of how laws are brought in, the background to the laws? Is that really right and proper?
In other words taxes on cigarettes have basically happened. Over a period of time they simply have happened in exactly the same way as taxes on alcohol and other commodities people want and will pay for. Successively over the last 25 or perhaps even 50 years governments have said that people want or are addicted to cigarettes, that people want or demand their alcohol or whatever the case may be, and that therefore they are a source of taxation.
Over a period of many years-some 25, 30 or 50 years-taxes have happened. They have been added on and on until we suddenly reached the point with a slightly higher degree of sophistication of taking a look and saying that prices were so high on this particular commodity we had dampened enthusiasm, particularly of young people, for the product. Now we get into the whole issue we described earlier: If we reduce taxes will we actually end up increasing consumption?
The following question must be raised: If we are enacting good law and if as a member of Parliament I am expected to vote on various laws, am I actually voting on a matter of principle or a matter of expediency? To this extent, as I have expressed in a previous intervention, I find myself somewhat ambivalent about this specific question, fully recognizing that we have two doctors in our caucus who are very emotionally attached to the particular issue and the reality that if we end up lowering taxes we end up increasing consumption, particularly among young people, and recognizing that these people are faced with the reality that this is what will end up happening.
On the other side of the coin what about the principle that is involved? By saying that the taxes should stay up are we actually attempting to legislate behaviour or influence behaviour in a way that is not correct and not based on the basis of principle?
As I mentioned our data indicates that 40 per cent of total production of Canadian companies was being exported before the changes. Only 3 per cent was being consumed abroad. This shows the extent of the smuggling and this law allows an exemption for the 3 per cent.
The question I have is about the moral responsibility of tobacco companies. I am not speaking about tobacco farmers here because I recognize they are people who planted a crop in the ground, who have equipment and who have capital invested in various aspects of their business of growing tobacco. They are
caught in a real bind on the particular issue. However I would like to talk particularly about the multinational companies and again reflect on what I was speaking about a few moments ago.
These companies suspected an export tax was coming. With abject cynicism they turned around and took a package-and until one looked at it very closely one would not realize it-that had been manufactured in the U.S. I submit for the consideration of the House that it had been manufactured in the U.S. with the full knowledge of people in the tobacco companies that the package would end up being smuggled back into Canada. It would not only be smuggled back into Canada but smuggled in a way that was dangerous to life and limb.
I appreciated the interjection of the member for Glengarry-Prescott-Russell this morning. If his constituents were literally being shot at as a result of the smuggling effort, if there was absolute lawlessness as a result of the smuggling effort, I can appreciate the emotion the member brought to the debate this morning. How much culpability or how much responsibility should there be on behalf of international corporations? I suggest a tremendous amount.
The measure to ensure that unmarked tobacco products sold on reserves in Ontario and Nova Scotia are taxed at the same rate as marked products is a very touchy issue. I acknowledge that. When a commodity will be consumed by people, no matter what their distinction may be, when we have a two-tier tax system and when we have this situation, the difficulty is that it feeds the whole issue of illegal activity. That is really unfortunate.
We also recognize that until the particular legislation is passed and enacted wholesalers and retailers will have difficulty in looking for $150 million in tobacco taxes that have previously been extracted in inventories when the changes were announced. We look forward to the legislation being able to go forward. It is just unfortunate that it was not prepared at the time Bill C-11 was before the House. It would have saved the whole problem. The difficulty is that the government bunched together the tobacco tax question with the other two questions: the air transportation tax and the GST rebate.
We are looking at the fact that there will be a health promotion surtax, an increase of 40 per cent on taxes paid on the profits of tobacco manufacturers. Surely we recognize in the same way as price is a factor in the consumption of tobacco products that advertising must be both a positive and negative factor with respect to the consumption of tobacco products.
The main topic I would like to address is that of the air transportation tax. There has been very little discussion about it as I have listened to the debate today. Perhaps I could give a little background and description about the air transportation tax.
Currently there is a flat fee of $10 plus 7 per cent to a maximum of $40 on all airline tickets purchased in Canada. These fees are part of the Excise Tax Act even though they appear to be closer in function to user fees than actual taxes. This is the positive part. All revenues from the tax are directed toward the Department of Transport which routes the funds to the aviation component of its expenditures.
The reason I pause to mention that I consider this to be positive is that frequently taxes extracted from businesses and individuals do not ever end up where they are supposed to go. They just end up in consolidated revenue. I encourage the government to take a look at this as a model. There is also a new model within the Department of Canadian Heritage under National Parks. The specific revenues it is taking in for campgrounds, for pools and for specific functions are paying for the functions from which the funds were originally extracted. Surely that is the way it should be.
Going back to the air transportation tax, it makes up most of the funding for aviation services provided to all Canadian airports whether public or private. These services include air traffic controllers, aviation control for takeoff and landing, and air navigation costs. It is important to note that the current revenues from this tax of nearly $600 million do not cover the full government cost of aviation which runs at about $870 million.
Whether we are talking about airlines, aeroplane fees or the cost of running airports; whether we are talking about VIA rail and the cost of running trains down the track; or whether we are talking about transportation such as trucking where there are diesel fees and taxes on the fuel actually going into the trucks, historically in Canada we have shied away from making sure the revenue derived from the users of a particular transportation system ends up benefiting that transportation system.
The trucks pay the diesel road tax. Interestingly, CP rail also pays for its diesel locomotives which, the last time I looked, are not using our highways. The CP Rail corporation has to pay for the maintenance of its track, its roadbed and all other infrastructure with respect to locomotives in spite of the fact that a component of the fuel tax pays for roads for its competitors, truckers. It is a bit of an anachronism and probably points out as well as anything the component I am speaking about, that users should pay for the service they are receiving.
The air transportation tax will reduce the tax burden on short haul domestic and transborder flights by decreasing the flat charge per ticket and increasing the maximum fee. Living in Cranbrook I can appreciate many people take a look at whether they want to be going back and forth to Calgary by aeroplane or by road. Coming back to the factor we were just talking about, the costs of gasoline, fuel taxes, road maintenance and upkeep plus the time, I believe this will ultimately be of benefit. It will get more people off the road, through Kootenay National Park
and through the Crowsnest. Probably this will be duplicated in many areas throughout Canada.
The flat fee is decreased to $6 and the maximum increased to $50.
The changes will bring in an additional $24 million in 1994 and $41 million in 1995. While this is an improvement for the reason that I just set out where one has short haul being more competitive price wise because the taxes on the short haul are going down, on the other side of the coin I submit to the government the fact that the changes are only going to be $24 million and $41 million still leaves a significant shortfall in the concept of user pay.
I believe this levy should not be part of our complicated tax system. It is beneficial that the funds do not go into general revenue and that they are spent specifically on aviation. I would encourage the government as it goes through more bills and motions and as it takes a look at the practices within the Department of Transport to take a look at the concept of changing the user fee to full cost recovery basis.
I would suggest that in addition to air transportation tax, there are probably other areas in the cost of running airport terminals and being able to provide services to private pilots. We would be able to take a look at moving forward and getting closer to a user pay principle.
The final section of this act has to do with GST changes for meal allowance. Having been a commercial traveller for a number of years, I recognize the chagrin that was faced by the small commercial traveller who suddenly was faced with the cost of being able to expense his meals and being able to get, for example, shop owners and people he was selling to out of their place of business into a neutral location and being able to talk to them. This was a tax increase to someone who earns their income by travelling, by working and selling with people.
The Reform Party supported the changes when the budget came out on the basis that they amounted to a business subsidy. While we recognize that these expenses are legitimate business expenses for some, the reality is in the overall picture there was a tax break for a select few.
As I just indicated with a tremendous amount of sympathy, to the people who are commercial travellers and business people who use the business expense deduction for meals, it was exceptionally unfortunate for them that they ended up caught in the squeeze between these two factors. However, overall we support that.
On balance and in summary, I consider it exceptionally unfortunate that the government has chosen to cluster these three totally different and unrelated parts of our taxation system together. It is really unfortunate and I hope that in future the government will look with more favour to in this case bringing forward three separate bills so that we can vote on them separately.