FINA Committee Meeting
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37th PARLIAMENT, 1st SESSION
Standing Committee on Finance
EVIDENCE
CONTENTS
Tuesday, April 23, 2002
| ¹ | 1535 |
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The Chair (Mrs. Sue Barnes (London West, Lib.)) |
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Mr. Yvan Loubier (Saint-Hyacinthe--Bagot, BQ) |
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The Chair |
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The Chair |
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Mr. Scott Brison (Kings--Hants, PC) |
| ¹ | 1540 |
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Mr. Gary Pillitteri (Niagara Falls, Lib.) |
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Mr. Scott Brison |
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The Chair |
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Mr. Bryon Wilfert (Parliamentary Secretary to the Minister of Finance) |
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The Chair |
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The Chair |
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Mr. Scott Brison |
| ¹ | 1545 |
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The Chair |
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Mr. Richard Harris (Prince George--Bulkley Valley, Canadian Alliance) |
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The Chair |
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The Chair |
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Mr. Yvan Loubier |
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The Chair |
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Mr. Yvan Loubier |
| ¹ | 1550 |
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The Chair |
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Mr. Bryon Wilfert |
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Mr. Yvan Loubier |
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The Chair |
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Mr. Bryon Wilfert |
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Ms. Patricia Malone (Chief, Excise Act Review, Department of Finance) |
| ¹ | 1555 |
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Mr. Yvan Loubier |
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Ms. Patricia Malone |
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Mr. Yvan Loubier |
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The Chair |
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Mr. Yvan Loubier |
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The Chair |
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Mr. Bryon Wilfert |
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Mr. Gary Pillitteri |
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Ms. Patricia Malone |
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Mr. Gary Pillitteri |
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Mr. Yvan Loubier |
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The Chair |
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Mr. Jason Kenney (Calgary Southeast, Canadian Alliance) |
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The Chair |
| º | 1600 |
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Mr. Jason Kenney |
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The Chair |
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Mr. Yvan Loubier |
| º | 1605 |
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The Chair |
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Mr. Yvan Loubier |
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The Chair |
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Mr. Yvan Loubier |
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The Chair |
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Mr. Yvan Loubier |
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The Chair |
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Mr. Yvan Loubier |
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The Chair |
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Mr. Yvan Loubier |
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The Chair |
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Mr. Yvan Loubier |
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The Chair |
| º | 1610 |
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Mr. Jason Kenney |
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The Chair |
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Mr. Jason Kenney |
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Mr. Yvan Loubier |
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The Chair |
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Mr. Yvan Loubier |
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The Chair |
| º | 1615 |
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Mr. Scott Brison |
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The Chair |
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Mr. Bryon Wilfert |
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The Chair |
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Mr. Nick Discepola (Vaudreuil--Soulanges, Lib.) |
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The Chair |
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Mr. Yvan Loubier |
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The Chair |
| º | 1620 |
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Mr. Yvan Loubier |
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The Chair |
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Mr. Jason Kenney |
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Mr. Nick Discepola |
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The Chair |
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Mr. Nick Discepola |
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The Chair |
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Mr. Jason Kenney |
| º | 1625 |
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The Chair |
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Mr. Gary Pillitteri |
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The Chair |
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Mr. Nick Discepola |
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The Chair |
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Mr. Bryon Wilfert |
| º | 1630 |
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The Chair |
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Mr. Yvan Loubier |
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The Chair |
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Mr. Yvan Loubier |
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The Chair |
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Mr. Yvan Loubier |
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The Chair |
| º | 1635 |
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Ms. Pauline Picard (Drummond, BQ) |
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The Chair |
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Ms. Pauline Picard (Drummond, BQ) |
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The Chair |
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Ms. Pauline Picard |
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The Chair |
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Mr. Bryon Wilfert |
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The Chair |
| º | 1640 |
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Mr. Bryon Wilfert |
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The Chair |
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Mr. Bryon Wilfert |
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The Chair |
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Mr. Bryon Wilfert |
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The Chair |
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Mr. Bryon Wilfert |
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The Chair |
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Mr. Scott Brison |
| º | 1645 |
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The Chair |
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Mr. Scott Brison |
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The Chair |
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Mr. Bryon Wilfert |
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The Chair |
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Mr. Gary Pillitteri |
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Mr. Brian Willis (Senior Chief, Excise Tax, Sales Tax Division, Department of Finance) |
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The Chair |
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Ms. Pauline Picard |
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The Chair |
| º | 1650 |
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Mr. Charlie Penson (Peace River, Canadian Alliance) |
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The Chair |
CANADA
Standing Committee on Finance |
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EVIDENCE
Tuesday, April 23, 2002
[Recorded by Electronic Apparatus]
¹ 
(1535)
[English]
The Chair (Mrs. Sue Barnes (London West, Lib.)): Good afternoon, everyone. The meeting is called to order.
The order of the day is Bill C-47, an act respecting the taxation of spirits, wine, and tobacco and the treatment of ships' stores.
We have officials from the Department of Finance joining us: Ms. Patricia Malone--welcome again--who is the chief, Excise Act review, sales tax division, tax policy branch; and Mr. Brian Willis, who is the senior chief, Excise Act, sales tax division, tax policy branch.
Is Mr. Brazeau joining us again? Okay. We'll get started with our clause-by-clause consideration of this bill.
Pursuant to Standing Order 75(1), consideration of clause 1 was postponed.
Next we'll go to clauses...and with the permission of the committee members, I will group all those that are not potentially being amended at this time. Do I have that consent? Yes.
Mr. Loubier, I understand you now have an amendment to clause 2 and it's just being copied.
[Translation]
Mr. Yvan Loubier (Saint-Hyacinthe--Bagot, BQ): That's right.
[English]
The Chair: Mr. Loubier, would you have any objection if, while they're making those copies--because I was just advised of this, too--we stand clause 2 for a minute and deal with clauses 3 to 52 inclusive? No problem?
Mr. Yvan Loubier: No.
The Chair: Okay. So we'll stand clause 2, and as soon as we get the copies, so that everybody can see what I have in my hand, we'll come back to that.
(Clause 2 allowed to stand)
The Chair: Right now, we will be voting clauses 3 to 52 inclusive.
(Clauses 3 to 52 inclusive agreed to on division)
The Chair: An amendment to clause 53 has been submitted by one of our colleagues who is not presently in the room. Shall we stand that for a few minutes? In fact, it's clauses 53 and 54.
An hon. member: There he is.
The Chair: We'll just wait for one second until Mr. Brison gets settled.
Mr. Brison, I will just inform you that the first amendment, as I read it, as you've written it here, “That Bill C-47 be amended by deleting clause...”, is not the usual proper format for clause-by-clause. I'm going to allow you to say what you wish on this, but the proper method would be for us to vote for or against the clause. Maybe, for instance, at another committee stage you might put it that way, but it's not in order in this format. But before we vote on Bill C-47, if you would like to make any statement, that's--
Mr. Scott Brison (Kings--Hants, PC): The purpose is to eliminate the special duty on imported tobacco to duty-free stores. It is consistent with some of the other amendments we're proposing.
It's helpful that you're allowing me to speak to it at this point, from an information purposes perspective, but I feel strongly, or we feel strongly, that the committee ought to be taking the position that Mr. Pillitteri in fact has expressed at this committee as well, on the nonsensical nature of the way we're dealing with the duty-free stores right now in terms of the treatment of tobacco products and alcohol products.
Perhaps Mr. Pillitteri has something to offer at this point, as well, in addition to my comments.
I know you've spoken before, Gary.
¹ (1540)
Mr. Gary Pillitteri (Niagara Falls, Lib.): If you're trying to say what I said during the questioning of the witnesses, there was a reference to treating duty-free shops as points of export. The duty-free shops did agree with the $10 per carton tax. So I have nothing to say but to support that, because their submission was to have no further taxes on that.
Mr. Scott Brison: Duty-free ought to be exactly that: duty-free. In my view, this is not an issue associated with health, smuggling, or anything else. This is the last purchase point of a country. I think it is wrong-headed. I think the committee ought to return to the original intention, and that is, of course, that these items be duty-free.
The Chair: Thank you.
Mr. Wilfert.
Mr. Bryon Wilfert (Parliamentary Secretary to the Minister of Finance): Madam Chair, the position of the government is that, obviously, it would be inconsistent with the government's health strategy.
I would like to provide a few facts for the committee. Duty-free shops continue to enjoy a significant tax advantage vis-à-vis domestic retail stores. They're not required to charge GST or provincial tobacco and sales taxes. Even with an $11.50-per-carton tax on tobacco products, duty-free shop operators enjoy a tax advantage relative to sales in the domestic retail market, from approximately $14 in Ontario to over $35 in British Columbia for a carton of cigarettes.
I'd also like to point out a couple of items the committee may not be aware of. Hopefully, you are. Through consultations involving the industry and finance department and CCRA officials, duty-free shop regulations are being amended to eliminate duty-free shop licence fees retroactive to July 2001, resulting in industry savings of over $5.5 million per annum, and to permit off-site storage of goods, alleviating current storage constraints, especially for airport duty-free shops. This was done in consultation with the industry. As I say, one of those changes alone will save them $5.5 million.
But it would be inconsistent, Madam Chair, with the government strategy on reducing the consumption of tobacco to accept the amendment as proposed by the member.
The Chair: This amendment is not in order because it's not in the proper form, as per the advice from the experts at my side. But I have allowed the discussion because I understand what Mr. Brison was trying to put before us.
We will now vote on clause 53 as it now stands. Is everybody clear on that?
(Clause 53 agreed to on division)
On clause 54--Meaning of “traveller's tobacco”.
The Chair: The next amendment is also from Mr. Brison. It is in order, Mr. Brison, so you have the floor.
Mr. Scott Brison: The motion amends subclause 54(4) by striking out the words “if it was manufactured in Canada and is stamped.” It will then read “The special duty is not imposed on traveller's tobacco imported by an individual for their personal use.” This restores the exception that once existed for traveller's tobacco.
¹ (1545)
The Chair: Are there any other comments?
Mr. Richard Harris (Prince George--Bulkley Valley, Canadian Alliance): I have a point of order. Is this in the proper form?
The Chair: Yes, this is. I ruled it in order.
(Amendment negatived)
(Clauses 54 to 72 inclusive agreed to on division)
The Chair: Our next amendment is BQ-1 on clause 73, page 3 in your package.
Mr. Loubier, this is in order. Would you like to take the floor and move it?
[Translation]
Mr. Yvan Loubier: Madam Chair, the amendments I am moving to sections 73, 90 and 145 are similar. Consequently, I will explain them together and if you wish we could vote on all three of them at the same time.
The sole purpose of these amendments is to see to it that manufacturers of products such as those made by Produits Ronald Inc., whose representatives appeared before the committee, who use wine as an important ingredient in their instant meals, which contain practically no trace of alcohol after cooking, not be penalized by the imposition of an excise tax, since they do not sell alcohol products. This is the reason behind my three amendments. The trace alcohol limit is 0.5, that is to say that 99.5% of the alcohol used has disappeared after processing. So this is a matter of fairness. The witnesses in fact explained this very well. They should not be taxed on the alcohol they use, since they are not manufacturing alcohol products. There is indeed a precedent which exists regarding manufacturers of chocolate products which contain alcohol. They do not pay excise taxes and when 99.5% of the alcohol has been eliminated in a product, that manufacturer should not pay any excise taxes either.
Those are the reasons behind my three amendments, which I hope my colleagues will support. This is a matter of common sense and fairness.
[English]
The Chair: Mr. Loubier, I just want to be clear for all the members here. You're saying that consequential to BQ-1, which is on clause 73, you would take the vote on this to affect also BQ-2, BQ-5, and BQ-6 in our package. Is that correct?
[Translation]
Mr. Yvan Loubier: Yes, these are the amendments to sections 73, 90 and 145. The same changes must be made if we want to attain the same objectives. I also moved them in a spirit of consistency.
¹ (1550)
[English]
The Chair: That is confirmed then. So it will be on all of those. They will be consequential.
Yes, Mr. Wilfert.
Mr. Bryon Wilfert: Madam Chair, I hope my comments will be helpful in dealing with this issue.
The bill itself provides industrial users of alcohol, such as those indicated, with greater flexibility and efficiency. Ultimately, it will create an excise regime that improves the ability of Canadian manufacturers to compete against foreign-produced products both here at home and abroad. Under this bill, industrial users of spirits or wine may use alcohol without any payment of duty when that use is approved by the Minister of National Revenue, otherwise in accordance with the proposed legislation. An example would be the production of vinegar. The existing duties on spirits and the existing excise tax on wine are eliminated when alcohol is used in an approved non-beverage application.
If we take Mr. Loubier's proposed amendments, in the view of the government they are unnecessary. They are more restrictive than what Bill C-47 permits. Pursuant to the amendments, a licensed user could only use alcohol in an industrial process without the payment of duty as long as 99.5% or more of the alcohol is destroyed in the process.
Finally, Madam Chair, Bill C-47 does not restrict the extent to which alcohol must be destroyed during a process in order for duty not to be payable. Again, the Minister of National Revenue will determine what is acceptable after considering the circumstances that evolved and the extent to which remaining alcohol could be reserved. Therefore the bill itself actually allows more room than would the amendments, if we adopted the amendments, which I'm sure is not the intent of the member.
[Translation]
Mr. Yvan Loubier: Madam Chair, last week we heard from a witness who told us that for the past 15 years, in spite of repeated requests to the Department of Revenue and in spite of not having changed the manufacturing process he uses for his food products, he has been obliged to pay excise tax on the alcohol used, which is a third of his production costs. The witness has been paying the excise tax for 15 years.
If that person has been paying the excise tax for 15 years, in spite of an ongoing battle with Revenue Canada, and cannot see how the new bill, C-47, might change things at the processing level, it is because he has a problem and because certain clarifications are necessary. If there were no problem, the question would have been resolved 15 years ago. The company's representative would not have come here to make representations and tell us that there is a problem and that 99.5% of the alcohol used in their products is eliminated. This is a threshold that is used in other areas. As I said, there is a precedent in the case of chocolate products; even though they contain alcohol, they are not considered to be alcohol products.
Mr. Wilfert, if everything were always perfectly clear in life, we would not be here and you would not be there trying to make me accept things that are patently unacceptable, when we have a precise case here where a business has paid the excise tax for 15 years. Since you are telling me that all of the necessary guarantees are contained in this bill, if the owner of that business still has the same problem, I'm going to ask him to go and knock on your door the next time, and not just with his fist.
[English]
The Chair: Mr. Wilfert.
Mr. Bryon Wilfert: I don't want to sell Mr. Loubier anything. I want to present the facts to him.
Perhaps, through you to our officials, they can go into a little more detail on exactly what I've indicated, which is clearly that the amendments, with all due respect, would be more restrictive. And I know that is not the intent.
[Translation]
Ms. Patricia Malone (Chief, Excise Act Review, Department of Finance): Currently, wine is taxed under the Excise Tax Act. The act contains no exemptions for cases such as the use that is made of wine by Produits Ronald Inc. . Under the Excise Tax Act, the users of spirits may use them and be exempted if the use they make of these spirits is approved by the Department of National Revenue. At this time, there is a disparity between the tax treatment of spirits and wine.
This bill proposes to eliminate that unfairness, and the bill proposes that the use of spirits and wine be tax-exempt if those uses comply with the law.
¹ (1555)
Mr. Yvan Loubier: Are you telling me, and I would like this to be on the record, that Mr. Messier from Produits Ronald, who came here last week, will no longer be paying the excise tax under these new provisions?
Ms. Patricia Malone: That is correct, insofar as their use of wine complies with the act. I believe that the agents of the Canada Customs and Revenue Agency have spoken with Mr. Messier's consultant following his presentation to let him know that what he is seeking is already being proposed in the bill.
Mr. Yvan Loubier: Madam Chair, in light of those assurances, I am prepared to withdraw my amendments. But should Produits Ronald, or other businesses that might be affected, find themselves in the same situation as the one they have been in for 15 years, you can be sure that I will be back here and I will remember the names of those who answered me. That being said, I will withdraw my amendments concerning this product.
[English]
The Chair: We need unanimous consent to withdraw the amendments.
Is that what you wish to do, Mr. Loubier? It's in your hands whether you wish to withdraw them.
[Translation]
Mr. Yvan Loubier: This is the first time I have been given such massive support by the Liberals, Madam Chair. This is unbelievable. Thank you very much for your support. I hope that you will keep an open mind for the other one as well.
[English]
The Chair: Mr. Wilfert and then Mr. Pillitteri.
Mr. Bryon Wilfert: This is through you to Mr. Loubier to give him the assurance of the undertaking that if it turns out that it is not correct, I'll be the first one with the officials at the door.
Mr. Gary Pillitteri: I want to ask a question to the officials. If this amendment would have been implemented, wouldn't that have opened up Pandora's box? It's all restaurants that use wine and spirits in their cooking. The alcohol would be evaporated in the preparation of food, so they would be exempt.
Ms. Patricia Malone: In order to use wine on a non-duty-paid basis, the user would have to be a licensed user, and they would have to use the wine in accordance with the bill. It would either have to be in an approved formulation, in a product that's produced in accordance with a formula....
Mr. Gary Pillitteri: Yes, I do understand that part, but open up to everyone actually through the use of....
[Translation]
Mr. Yvan Loubier: Could we move on, Madam Chair? That is a good idea; we will have that discussion at some point, but we have other things to do.
[English]
The Chair: Okay. Do I have unanimous consent for amendments BQ-1, BQ-2, BQ-5, and BQ-6 to be withdrawn?
Some hon. members: Agreed.
The Chair: Do I have the committee's consent to group clauses 73 to 123 inclusive? There's a new clause that is an amendment, but that's not included in this.
(Clauses 73 to 123 inclusive agreed to on division)
The Chair: Mr. Kenney's amendment was moved in first, but we have stood down clause 2 from Mr. Loubier , which I think is related to a similar clause of Mr. Kenney's.
Yes, Mr. Kenney.
Mr. Jason Kenney (Calgary Southeast, Canadian Alliance): I don't know what the protocol is, but I do believe I submitted this to the clerk first, Madam Chair, before you had a motion.
The Chair: Yes, you did, and I would normally deal with it first. The only reason I'm raising it differently is because Mr. Loubier has just circulated something dealing with clause 2 that also ties into his amendment.
Do you understand why I would want to do it the other way then, Mr. Kenney? Is that agreeable to you?
º (1600)
Mr. Jason Kenney: Sure.
The Chair: Thank you.
So we go back to clause 2, which we stood down earlier. Does everybody have it in front of them? May I have my copy, please?
Mr. Loubier, now that everybody has it before them, I have checked with the clerk and we have looked at this. What you have here would operate to amend the interpretation clause of a bill, and the interpretation clause of a bill is not the place to propose a substantive amendment to a bill.
In addition, an amendment to the interpretation clause of a bill that was referred to a committee after second reading must always relate to the bill and not go beyond the scope of or be contrary to the principle of the bill. Therefore, I have to find this not in order under our rules, and that ruling comes from Marleau-Montpetit, page 656.
So that part of it is out of order, but we can go and finish your next part. They are substantially similar, but I will continue with Mr. Loubier's or Mr. Kenney's. I can do them separately. Now that I have ruled the amendment to clause 2 out of order, I am going to ask the question. Shall clause 2 carry?
On division, Mr. Loubier.
(Clause 2 agreed to on division)
[Translation]
Mr. Yvan Loubier: Madam Chair, just a minute, please. I don't understand your argument concerning this first amendment because Bill C-47 aims to amend the Excise Tax Act. When you look at it, you see that the Excise Tax Act, which the Department of Finance has worked on since 1997 with various stakeholders, including the Brewers Association of Canada, refers to all of the substances such as wine and spirits. It concerns breweries, beer, tobacco, ships' stores, packaging, stamping, the excise tax, for all of these substances.
If I look at Bill C-47, I can see that the only element that has not been taken into consideration in this bill is beer, Madam Chair, whereas the excise tax, which Bill C-47 is designed to amend, applies to all of the products already included in C-47, plus beer. What is incongruous and unacceptable, Madam Chair, is that the purpose sought was to do a complete overhaul of the excise tax legislation, while deliberately excluding beer. I have read all of the arguments provided by officials on this since last week, and I did not find one that was sufficiently clever to make me believe that there is not a deliberate move here to exclude beer from this revision of the excise tax.
I keep coming back to the letter I mentioned last week, signed by the president and CEO of the Brewers Association of Canada. Although—ostensibly—the association had publicly asked for a reduction of the excise tax through Bill C-47, in the name of Canadian microbrewers, who were part of this association until recently... However, it says in this letter which was tabled last week with the committee, that they do not wish to see—and this letter is addressed to you, Madam Chair— the excise tax reduced in Bill C-47. They're not saying that this is not feasible; they simply state that this is not the right time, that we should wait, etc.
We waited from 1997 until today, and 38 microbreweries have gone belly up, Madam Chair. Do we want to wait till another 40 businesses go bankrupt?
So, please explain to me why this goes against the very basis of Bill C-47, when this bill involves a review of the excise tax regime for all products, including wine, spirits, beer and tobacco. Tell me why this goes against the fundamental principles you have just set out, while I have a legal opinion here which says just the opposite.
º (1605)
[English]
The Chair: Mr. Loubier, what we just finished doing was saying that clause 2 of the bill, as it is, has carried on division, and you are engaging in some dissent right now. That is not the proper place--
[Translation]
Mr. Yvan Loubier: I am asking for some additional explanations—
[English]
The Chair: Mr. Loubier, can I finish, please?
[Translation]
Mr. Yvan Loubier: I am asking for more than superficial explanations.
[English]
The Chair: And I would like to explain how I can perhaps elucidate this.
[Translation]
Mr. Yvan Loubier: Why did you reject my amendment out of hand, by saying that it was out of order? Go ahead, I'm listening.
[English]
The Chair: Pardon? It was not in order.
[Translation]
Mr. Yvan Loubier: Why did you tell me that my amendment to section 2 was out of order because it introduced beer?
[English]
The Chair: I have given you the reasons from the.... Mr. Loubier.
[Translation]
Mr. Yvan Loubier: You read me the reason in the... No, I would like to have the explanation, Madam Chair.
[English]
The Chair: I would like to give you the arguments if you will allow me to speak. I would like to speak.
[Translation]
Mr. Yvan Loubier: Go ahead.
[English]
The Chair: The arguments are really wrapped up in the decisions on the two clauses that both you and Mr. Kenney.... We will now go to them and then I will be able to give my full ruling and give the information that I think would help you understand these issues from the materials.
We are now going to Mr. Kenney's amendment, which is amendment CA-1 on page 5 of your amendments package.
Mr. Kenney, before you start, I have consulted with both the legislative counsel clerk and the clerk of the committee on this to see if it is in order. And I have to give you a ruling, because I find that it is not in order. I've accepted their guidance to me.
The proposed amendment would reduce the duty that would otherwise be applicable to the first 75,000 hectolitres of beer produced, provided the brewery produced less than 300,000 hectolitres of beer annually.
The imposition of a duty on beer is governed by section 170 and the relevant schedule of the Excise Act, and they are not included in Bill C-47, an act respecting the taxation of spirits, wine, and tobacco and the treatment of ships' stores.
Mr. Loubier, as Speaker Fraser pointed out in his ruling of April 28, 1992, and I quote:
| “When a bill is referred to a standing or legislative committee of the House, that committee is only empowered to adopt, amend or negative the clauses found in that piece of legislation and to report the bill to the House with or without amendments. The committee is restricted in its examination in a number of ways. It cannot infringe on the financial initiative of the Crown, it cannot go beyond the scope of the bill as passed at second reading, and it cannot reach back to the parent act to make further amendments not contemplated in the bill no matter how tempting this may be.” |
That was in Selected Decisions of Speaker John A. Fraser, volume one, on page 333.
Now, to move on, Marleau and Montpetit state on page 654 of House of Commons Procedure and Practice that “...an amendment is inadmissible if it amends a statute that is not before the committee or a section of the parent Act unless it is being specifically amended by a clause of the bill.”
As Speaker Lamoureux pointed out in his ruling on July 20, 1973, concerning Bill C-2, an act to amend the Criminal Code, thereby reinstating the trial period on restricted capital punishment, and I quote:
“Because the amendment or motion refers generally to the subject...does not make it automatically acceptable. If the amendment seeks not a modification to the bill before the House but, rather, a change in the statute which the bill seeks to amend, there is no alternative but to find it unacceptable.”
That's in Selected Decisions of Speaker Lucien Lamoureux, on page 488.
Therefore, I must rule the amendment out of order. And this logic would not only apply to Mr. Kenney's amendment, but also to Mr. Loubier's amendment. Believe me, if the rules showed otherwise, I would be ruling otherwise, but that is the ruling on this matter.
º (1610)
Mr. Jason Kenney: I would like to debate clause 123.
The Chair: Clause 123 has already passed. You were wanting a new clause 123.1.
Mr. Jason Kenney: All right, then, I would like to debate clause 124.
[Translation]
Mr. Yvan Loubier: What do you think of my amendment to proposed section 123.1?
[English]
The Chair: Okay. First of all, I can put it on the record more clearly. I thought I was clear enough.
Mr. Kenney's amendment, new clause 123.1, is out of order for the reasons I read into the record. And there were the same reasons for amendment BQ-3, or the modified version; that is also out of order.
So we are now at clause 124.
Yes, Mr. Loubier.
[Translation]
Mr. Yvan Loubier: Madam Chair, on a point of order.
I challenge your ability to judge the relevancy or lack thereof of these amendments I am presenting and I accuse you Madam Chair of being in a conflict of interest from the beginning of our study of this bill, since you never mentioned that your spouse is an executive with John Labatt and that he is also the Chair of the Tax Committee at the Canadian Brewers Association. In my opinion, this disqualifies you—and we will see what my colleagues have to say—from dealing with this bill and from deciding whether or not we can deal with the excise tax on beer, especially where microbreweries are concerned, when it was the Brewers Association of Canada which sent you a letter stating that we should not introduce a provision reducing the excise tax in Bill C-47, that this was not a good idea, that we should wait, that we had to examine the complexity of the issue and do further analyses of the whole excise tax matter, in addition to everything that has been done over the past five years.
Madam Chair, I demand that you withdraw from this debate, that you no longer take part in the study of Bill C-47, and that you suspend the committee's proceedings; I ask that you resign as chair because you concealed this situation from us. I am in complete disagreement with the way in which you have handled this. I think this is hypocritical and I believe you are in a clear conflict of interest by taking part in the study of this bill, by making decisions and analyzing this bill, and have been from the very beginning of our work on the bill.
[English]
The Chair: Thank you for your comment, and I will make some comment on that. Conflict of interest, Mr. Loubier, as a backbench MP, even if I'm chair of a committee, is direct pecuniary interest. I am well aware that all of us have that. I have no direct pecuniary interest in this bill.
Mr. Loubier, you have said some very serious things here, and I am not going to let them pass. I am well aware of my husband's occupation and his work, and I am well aware of my responsibilities. Far in advance of this bill, I got advice to see whether I was capable of doing this without any conflict of interest concerns. I received the reassurance that I was certainly able to do that. I carry out my job very seriously and reject this concern of yours. Thank you very much.
Mr. Brison.
º (1615)
Mr. Scott Brison: Madam Chair, on Mr. Loubier's point, I have to agree that you have no more direct pecuniary interest in this legislation than a farmer in a discussion of agricultural issues at the agriculture committee.
As pecuniary interest is defined, if you have a judgment from the House legal counsel, that strengthens your argument. I rarely disagree with my friend, the baritone Mr. Loubier, but in this case I have to disagree with him. I do not believe you have a direct pecuniary interest in this case, just based on my understanding of it and my dealings with the House legal counsel on legislation.
The Chair: Thank you, Mr. Brison.
Shall we move forward?
Mr. Wilfert.
Mr. Bryon Wilfert: I just want to very quickly reiterate what I said when I was a witness before this committee: the new legislation does not cover beer. It will remain under the existing Excise Act. I made very clear from the beginning the rationale as to why that was, but that the minister was reviewing the issues from the analysis that was presented to the department. Very clearly, without question, this legislation does not cover beer.
The Chair: Thank you.
Mr. Discepola.
[Translation]
Mr. Nick Discepola (Vaudreuil--Soulanges, Lib.): Madam Chair, I would like to know from Mr. Kenney or Mr. Loubier, if the word “brewery” is used in the bill.
[English]
It's my understanding that the word “brewery” doesn't appear anywhere in the bill, so even if you propose your new clause 123.1, Jason, you'll have to define what a brewery is somewhere else. There's no definition. That signifies to me this is not the appropriate place to put your amendment.
The Chair: I have ruled and we are moving on. Thank you.
[Translation]
Mr. Yvan Loubier: Madam Chair, I raised a point of order and I have not finished presenting it.
The situation is the following. Since 1997, there have been discussions between the Brewers Association of Canada and the Department of Finance. You are the Chair of the Finance Committee. Your spouse is the chairman of the tax committee of the Brewers Association of Canada, and that association sent you a letter asking that we not reduce the excise tax, even though it stated publicly that it defended the microbreweries. The microbreweries decided to leave the Brewers Association of Canada because they feel betrayed and knifed in the back in connection with their request for a reduction in the excise tax; 38 of them have already disappeared since 1997.
From the beginning, you made no mention of these links you have with the chair of the tax committee, one of the seven directors of John Labatt who suggested that the excise tax not be included. You could have withdrawn when we began our study of this bill. You did not do so, and in my opinion, you no longer have any credibility whatsoever to chair this committee, while we are studying Bill C-47 in any case. You are both judge and defendant. You may well have a career that is independent from that of your spouse, but the fact remains that your spouse is one of the seven directors and a shareholder of John Labatt. It is unacceptable that you should make decisions, take part in the debate on whether or not microbreweries should be included, a move that is being opposed by John Labatt and Molson, when you are the wife of one of their chief executives.
I reiterate my motion asking that you withdraw as chair of this committee during any further discussion of the fate of Bill C-47. In my opinion, you have no credibility whatsoever to conclude this process, and I am making this a motion.
[English]
The Chair: Thank you very much, Mr. Loubier. I have already ruled. I did seek advice early on and I got the advice. I will read from my letter:
“Accordingly, in our view, there is no conflict of interest, whether real, potential or apparent, between your chairing the Standing Committee on Finance in its study of the bill, and the fact that your spouse works for Labatt Brewing Company.”
º (1620)
[Translation]
Mr. Yvan Loubier: You kept these facts to yourself, Madam Chair, until the final analysis and adoption of the bill, when it was your duty, ethically speaking, and in order to maintain your credibility in all of this, to mention right from the beginning this connection between you and one of the chief executives at John Labatt, who does not want us to discuss reducing the excise tax for microbreweries. What you have done and continue to do is immoral, Madam Chair. If you think that the fact of having or not having financial links, and of having an opinion from the ethics counselor will correct this situation, I don't agree. It's a matter of credibility; you don't put the fox in the hen house to protect the hens, Madam Chair. This is an old saying we should remember more often.
I feel, for my part, Madam Chair, that you are disqualified from pursuing this analysis of Bill C-47 and I ask you with all due respect to withdraw from our study of this bill, and to put someone else in your place, if you please. I feel you have no credibility when you open your mouth to refuse amendments or to say that including microbreweries would run counter to the principles of the bill.
[English]
The Chair: We are moving on. Thank you very much. You have put your points on the record, and I have very seriously considered the ethics of doing my work. I do that very, very seriously. Thank you.
(On clause 124--Duty payable when packaged)
The Chair: Mr. Kenney.
Mr. Jason Kenney: Thank you, Madam Chair.
At the outset of addressing clause 124, I would like to--
Mr. Nick Discepola: On a point of clarification, are you at clause 123.1?
The Chair: We're now on clause 124.
Mr. Nick Discepola: So what are we doing with his amendment? Has that been ruled out of order?
The Chair: Both of them were ruled out of order.
The Chair: Do you have a question, Mr. Kenney?
Mr. Jason Kenney: I don't have a question, Madam Chair. I have a statement I'd like to give with respect to clause 124, which begins with my expression of disappointment with your ruling with respect to my amendment at new clause 123.1.
I must say, Madam Chair, that I agree with Mr. Loubier on this point. To quote the former leader of your party, John Turner, the appearance of a conflict of interest is what matters most. Given the very clear appearance of a conflict, I think at the very least it would have been appropriate for you to have disclosed that issue to this committee prior to its receiving submissions and debating an issue that arguably affects you. I think your credibility as chair of the committee in the future would have been enhanced had you done so. I regret that did not occur.
I want to address clause 124 for its failure to deal with.... First let respond to a rhetorical question posed by Mr. Discepola about whether the word “brewery” appears in the bill. Frankly, I don't know. I haven't read every clause of the bill. But I do know the words “excise” and “excise tax” appear in the bill several dozen times. My motion sought to address the question of the application of excise tax to one form of distilled beverage, namely products produced by breweries. Madam Chair, I just want to address why this motion came up and why I'm disappointed that clause 124 doesn't address this issue.
Canada's microbrewery industry is struggling to survive right now. Nearly 40% of the microbrewing companies in this country have gone bankrupt in the past five years. We are forcing them to compete against tax regimes among our major competitors in this industry, almost all of whom have a preferential lower rate, in the order of 40% of normal excise, that is applied to microbrew products in the United States, for instance.
The absence of addressing this question in clause 124 means we will continue to force Canadian microbreweries to sell their product in the United States with a 28¢ excise against an American product with a 9¢ excise tax. It's impossible, Madam Chair. Clause 124, as currently worded, absent of addressing the excise tax issue on microbrew products, will continue to be a nail in the coffin of our microbrewery industry.
The amendment being sought by the Canadian Federation of Independent Business and the regional Brewers Association of Canada, and supported in principle by the Brewers Association itself before this committee in its pre-budget submissions in November of last year, would affect only about 3% of the production of beer in Canada. Namely, it would reduce the excise by 60% on the first 75,000 hectoliters of production for companies that produce less than 300,000 hectoliters. That's less than 3% of total production in Canada. That would represent a nominal reduction in government revenues of some $12 million, which I and some economists who have analyzed this estimate would in fact be easily made up for in increased production sales and particularly exports.
The government apparently has said this bill does not address the issue, because they're opposed to granting separate tax rates for particular kinds or sizes of business. But clearly that's not the case. The Income Tax Act and the corporate income tax regime are rife with preferential rates for smaller businesses. We have a small corporate rate. We have a special manufacturing rate. All these things reflect the different realities of businesses. Microbreweries do not have the economies of scale of a Labatt or a Molson. They simply cannot compete and survive and employ people and particularly export product at the current levels of taxation.
Again, I regret that these motions have been ruled out of order and I certainly intend to raise this again at report stage in the House. I'm hopeful that the government members opposite, who just sort of sit here blithely and hide under procedure when industries in their own constituencies and provinces are dying because of this tax regime, will seriously take this up and won't just passively let the bureaucrats of the finance department decide what is good public policy. That, Madam Chair, I submit, is irresponsible.
º (1625)
I hope that all the opposition parties will join in supporting the kinds of changes that are being sought by both the Canadian Federation of Independent Business and the Canadian Council of Regional Breweries.
Thank you.
The Chair: Thank you.
Mr. Pillitteri is on my list, as well as Mr. Discepola, Mr. Loubier, and Mr. Wilfert.
Mr. Gary Pillitteri: Thank you, Madam Chair.
I think Mr. Kenney should choose his words carefully when he says that we're sitting here blithely. I'm not.
You cannot make a comment to the effect that they are not competitive in export. There's no tax on export. Would you like to ask the officials that? They will verify that. So it's competitive within the domestic market, not within an export market. The tax on spirits, liquor, beer, and wine far exceeds any competitive market within the domestic or export markets. But there are no taxes on an export market. If you'd like to get a proper answer, before you throw out some words and you think they were asleep, ask the officials to see if there is any taxation on the export market.
The Chair: Mr. Discepola.
Mr. Nick Discepola: Thank you.
Mr. Kenney, what Mr. Pillitteri was trying to say is even if you reduce the excise tax, the breweries are going to keep most of it and use it to increase their profits, because that's the normal thing to do.
Mr. Kenney, you were not present when the officials were here.
We're not sitting by as an government waiting for more microbreweries or other small businesses to go bankrupt. There was a firm undertaking by the finance department officials, the Prime Minister's secretary, and the minister through the parliamentary secretary that this will be dealt with. But this is not the appropriate vehicle in which to do that. There has been an undertaking on this side to do something for the microbreweries when we deal with the specific issue of beer.
The Chair: Mr. Wilfert, please.
Mr. Bryon Wilfert: Madam Chair, I'm sure Mr. Kenney didn't mean to be disrespectful to my colleague in suggesting that somehow he was incoherent, because he was very coherent. What he indicated was in fact the case.
I'll say this again very slowly so that everyone will catch it. The Minister of Finance has asked his officials to review the request that has been put forth. Once this analysis is completed--and it will be done sooner rather than later--the government will decide what action to take with regard to this issue. Unfortunately, some of you were not here when I originally gave that undertaking two weeks ago. I again put it on the record that this will be done.
The issues Mr. Pillitteri indicated were absolutely correct.
Is this issue on the radar screen? Absolutely. Is it being dealt with? Absolutely. I will not prejudge what the results will be, obviously. But, again, I gave that undertaking very clearly. That's all I can say, Madam Chair.
Madam Chair, the long and short of it is I don't know why we're debating it, as you ruled it out of order. I presume we should move on to the next item.
º (1630)
The Chair: He has the ability to talk on clause 124.
We're not talking about that right now.
Mr. Bryon Wilfert: But it's not germane to the issue.
The Chair: Mr. Loubier, go ahead, please.
[Translation]
Mr. Yvan Loubier: Madam Chair, contrary to what Mr. Wilfert and Mr. Discepola are saying, I think that the main problem microbreweries are experiencing at this time is the rate of excise tax they have to pay, which is much higher than that of their competitors. In the United States and in European countries, the excise tax is barely 35 or 40% of what we levy here, and it is not normal that we maintain this tax at the 28¢ a litre level for microbreweries, when microbrewery beers from elsewhere that are sold on the Canadian market are subject to a rate that is three times less.
Secondly, the Brewers Association of Canada... That is the big problem: until very recently, the Brewers Association of Canada, which includes John Labatt and Molson, made recommendations. It made public statements that it supported the microbreweries in their objective to have the excise tax reduced, but, hypocritically, behind the scenes, it was cosying up to the Department of Finance, to Minister Paul Martin, as it happens—and we'll get back to him in the next few days—to ask that the excise tax not be touched. The microbreweries' problem is precisely that and no other; its problem is an excise tax regime that is unfair and unjust in comparison with the one that applies to their competitors.
Nick, what you were saying earlier is inaccurate. Since 1997, 38 microbreweries have gone bankrupt. They had more than 5% of the market and they now have 4.1%. Don't make the mistake of thinking that there is no financial benefit in John Labatt or Molson trying to recover every single percentage point they can. Every percentage point of the market provides a net profit for Molson or John Labatt of $17 million to shareholders. That begins to add up.
Thus, I challenge your decision to reject our amendments and I'm going to ask for a recorded vote to challenge your decision to reject my and Mr. Kenney's amendments on microbreweries.
[English]
The Chair: It's no problem. It's non-debatable.
[Translation]
Mr. Yvan Loubier: I challenge the chair's decision and I ask for a vote. We have a right to do this; it is in the standing orders. I challenge the chair's decision and I request a recorded vote on that decision.
[English]
The Chair: Yes, you are allowed. I know the rules, Mr. Loubier, thank you very much. It is an acceptable motion to challenge the chair, and it is non-debatable. What will have to happen is a vote. Do you wish a recorded vote on this?
[Translation]
Mr. Yvan Loubier: Yes, I am asking for a recorded vote. Do you want to know why? The president of Unibroue, Mr. Dion, said last week that it would be easy to recognize the friends of the microbreweries: they would be those who would vote against our amendments.
[English]
The Chair: Good, that's fine. I'm going to continue, Mr. Loubier. It is non-debatable. We'll do it by recorded vote. The motion contesting my decision is “Shall the chairman's ruling be sustained?” I knew there was proper wording. In other words, shall the chairperson's ruling be sustained. This is a recorded vote. This is to keep my ruling.
The clerk will do a recorded vote, please. He has just done a substitution, so we just have to wait until the proper paperwork is here. The vote is to sustain my ruling.
(Motion agreed to: yeas, 9; nays 8)
The Chair: The ruling is sustained, 9 to 8. We will move forward.
(Clauses 124 to 134 inclusive agreed to on division)
On clause 135--Imposition--wine packaged in Canada
The Chair: Clause 135 is BQ-4, on page 7. Madame Picard, do you wish to move this?
º (1635)
[Translation]
Ms. Pauline Picard (Drummond, BQ): Yes.
[English]
The Chair: I need to confirm something before we proceed. I just need to confirm that your amendment does not increase tax, because this is covered by ways and means motions. I need you to confirm to me that it does not increase tax.
[Translation]
Ms. Pauline Picard (Drummond, BQ): No.
[English]
The Chair: Okay, in that case it is in order. Would you like to speak to it?
[Translation]
Ms. Pauline Picard: Madam Chair, everyone agrees that the 150,000-litre limit is the threshold. It is in the law.
[English]
The Chair: Okay, are there any other comments?
Mr. Wilfert.
Mr. Bryon Wilfert: I just want to make the point again, for the record, that the government is aware of the proposals from the Quebec wine and cider producers that small producers of wine and cider be exempt from excise levies. This is under review by the minster, along with other proposals from the small brewers, and I again want to put that on the record.
The Chair: I'm going to call the question on amendment BQ-4, an amendment to clause 135.
(Amendment negatived: yeas 7; nays 8)
(Clause 135 agreed to on division)
º (1640)
Mr. Bryon Wilfert: Madam Chair, I don't want to stop the flow here, but I want to put the chair on notice, if I might, that at an appropriate time, I want to submit for the committee, for the record, an undertaking that was discussed.
As you know, the Association of Canadian Distillers were before the committee, and I undertook to resolve their issue. We have done so. I have presented the letter to them. They are satisfied. They are here today, and I will at some point want to submit this for the public record, as an understanding that we are undertaking for the Department of Finance.
The Chair: Are you going to table that letter?
Mr. Bryon Wilfert: I'm going to table it whenever it's appropriate.
The Chair: You can table it with the clerk at any time.
Mr. Bryon Wilfert: Then I'll table it now.
The Chair: That's fine.
Mr. Bryon Wilfert: Thank you.
The Chair: We are on clauses 136 to 329, because amendments BQ-5 and BQ-6 were consequential and withdrawn--remember? Do I have the permission of the committee to go with those clauses together?
(Clauses 136 to 329 inclusive agreed to on division)
The Chair:We are now on clause 330. I believe Mr. Wilfert has a government amendment. It's amendment G-1, on page 10, and it affects clause 330.
Mr. Wilfert, do you want to move it?
Mr. Bryon Wilfert: I'll move it. It's just a translation clarification.
The Chair: Are there any questions?
(Amendment agreed to--See Minutes of Proceedings)
(Clause 330 as amended agreed to)
(Clauses 331 to 413 inclusive agreed to on division)
(On clause 414)
The Chair: Now, clause 414, who has this? It's Mr. Brison--PC-3, page 11 in your notes.
I understand there's a new copy of this that we're just going to circulate. I understand there were some changes made with the legislative clerk.
This is in order, Mr. Brison. So first of all you would like to move it, and then speak to it.
Mr. Scott Brison: Thank you, Madam Chair.
I move this motion. It's consistent with our other amendments that would remove the export tax on tobacco products delivered to duty-free stores, hence making duty-free stores effectively duty-free, which was the intention of duty-free stores in the first place. So it's consistent with that.
Would you like me to read the motion?
º (1645)
The Chair: Whatever you wish, Mr. Brison. The floor is yours.
Mr. Scott Brison: I don't feel it's necessary. Everyone has a copy of it. I've explained the intention of it.
With regard to the export tax on tobacco products in duty-free stores, we've gone away from what the original intentions were in terms of these stores. It has nothing to do with the government's intentions on health issues. It has nothing to do with the government's issues around contraband or smuggling. This is a tax grab for the government. I don't really believe that there's a greater public policy or public good being served except the government's ability to draw more tax revenues, in this case from duty-free stores.
Thank you.
The Chair: Thank you.
Are there any comments or questions from any other party?
Mr. Wilfert and then Mr. Pillitteri.
Mr. Bryon Wilfert: Madam Chair, my comments on this issue from earlier still stand. I don't think I have anything more that I could add. I just want to again re-emphasize that point in case Mr. Brison didn't hear me the first time. Sometimes over there the air isn't quite as.... It's a bit thin over there, so they don't hear me.
The Chair: Mr. Pillitteri, go ahead, sir.
Mr. Gary Pillitteri: My question would be more to the officials. Automatically any time we have a raising of an excise tax, it umbrellas all. Does this also include the duty-free shops?
The first time the tax was imposed on the duty-free shops was last year--$10--and now it's $1.50. Does this bill automatically bring everyone in? Anytime you are raising taxes, does that include the duty-free shops?
Mr. Brian Willis (Senior Chief, Excise Tax, Sales Tax Division, Department of Finance): Madam Chair, the bill doesn't speak to the future. Any changes in tobacco taxes in the future--the extent of them, the size, the timing--would be a call that the Minister of Finance and the government in general would make. What this bill does is deal with the proposals that were put on the table last November, which are the increases. In this case, you are correct that they deal with all tobacco products. But it doesn't say anything about the future.
The Chair: Ms. Picard.
[Translation]
Ms. Pauline Picard: Madam Chair, I was under the impression that this question for the officials was not linked to what we were doing. I think this is not the place for a debate or questions addressed to the witnesses, because that has already been done. So I would like us to hold the vote.
[English]
The Chair: That's fine. People are entitled to question, and that's why we have the officials.
We will move on now. We are voting on PC-3, the amendment proposed by Mr. Brison, which is on clause 414.
(Amendment negatived: nays 9; yeas 6) (See Minutes of Proceedings)
(Clauses 414 to 433 inclusive agreed to on division)
The Chair: Now we move to schedules 1 to 7. Can I deal with them together?
Some hon. members: Agreed.
(Schedules 1 to 7 inclusive agreed to on division)
The Chair: Shall clause 1 carry?
Some hon. members: Agreed.
The Chair: Shall the title carry?
Some hon. members: Agreed.
Some hon. members: On division.
The Chair: Shall the bill as amended carry?
Some hon. members: Agreed.
Some hon. members: On division.
The Chair: Shall I report the bill, with amendments, to the House?
Some hon. members: Agreed.
The Chair: Thank you very much. And thank you to the officials. We are done with the bill.
I have one housekeeping piece of information to deal with here. Today I received notification that we have new members of the committee. Because we have new members from the Alliance side, we have an opening for the vice-chair position, because Mr. Epp was our former vice-chair.
Mr. Penson, would you like to make a motion?
º (1650)
Mr. Charlie Penson (Peace River, Canadian Alliance): Yes. I would like to nominate Dick Harris as the vice-chair.
Some hon. members: Unanimous.
An hon. member: No, I nominate Charlie.
Some hon. members: Oh, oh!
The Chair: All those in favour?
Some hon. members: Agreed.
The Chair: I think it's carried. We welcome Mr. Harris as our Alliance vice-chair.
Thank you very much, ladies and gentlemen. We'll see you tomorrow with the Governor of the Bank of Canada. We are adjourned.