:
Good morning, everyone. Let's get started.
We're here today to deal with Bill . We're here today to give clause-by-clause consideration to this bill.
We have as witnesses, from the Department of Foreign Affairs and International Trade, Stephen de Boer, director, softwood lumber; Carl Hartil, deputy director, softwood lumber; Dennis Seebach, director, administration and technology services; John Clifford, counsel, trade law bureau; Michael Solursh, counsel, trade law bureau; and from the Canada Revenue Agency, Ron Hagmann, manager, softwood lumber; and Cindy Negus, manager, legislative policy directorate.
Welcome to you all once again. You're getting to be familiar faces here, but hopefully not for too many more meetings.
Before we get into the meeting itself, I want to mention a few things. The officials are here to answer questions on the implications of amendments. There is also, of course, a legislative clerk to answer questions on procedure, and she will be moving over here when we get through the initial business. The officials really can't comment, of course, on any political questions. They're here to speak to the amendments and not from a political commentary point of view, so if you go there, I'll certainly interrupt at that point.
The committee has packages of amendments. They have been distributed to all members to facilitate the work. Part of the package is a package of sheets that show certain clauses in the softwood lumber agreement that are also included in other acts. They're kind of standard clauses that have been used in other acts, such as the Air Travellers Security Charge Act, the Excise Act, the Excise Tax Act, the Income Tax Act, and so on. This is to make you aware that these are clauses that are used elsewhere. You are aware of the other contents, but I simply wanted to point that out.
I'd like to thank the members for respecting the deadlines for amendments. At this time I'd also like to say that we've had three motions from Peter Julian--proper notice has been given--and we will deal with two of those motions right now, Mr. Julian, if you're ready. The third one will be dealt with after clause-by-clause is finished, because we had agreed to proceed with clause-by-clause. That's the agenda. It has nothing to do with clause-by-clause consideration of the softwood lumber agreement, so it will be dealt with at the end of the clause-by-clause procedure.
You can go ahead with the other two motions, Mr. Julian. Please go ahead and read the first one.
:
I would now like to move the first motion:
That the Standing Committee on International Trade hear testimony from those organizations, businesses and municipalities that have recently written to the Committee to request to testify on Bill C-24, and that they be heard either in person, or by video, or telephone conference before the beginning of clause by clause consideration of Bill C-24 by this Committee.
I'm moving this motion because on Monday of this week the government started making payments to the EDC. It's taxpayers' money, but it provided the support to the softwood industry that we've been advocating for many months. For nine months we've been saying that the government has the ability to do this. On Monday, the government made an initial payment of $950 million. We credit the government for doing that. It would have been better if it had been six or eight months ago. The important thing is that those funds from taxpayers are now going to the softwood industry. This allows the committee the opportunity to do our due diligence on .
As we heard from witnesses on Tuesday, there are some critical aspects of this bill that need to be considered. On Tuesday we received an important bit of information from the only witnesses we brought in, aside from departmental witnesses. Credible as government witnesses are, it's important to hear from outside folks. We heard that there is a risk of double taxation in clause 18. That's one element that we heard about on Tuesday.
The second element, which is a very important one, was the question of the actual language of . Mr. Pearson provided strong testimony that if we have loose language, or language that is vague or incomplete, we may be setting ourselves up for litigation that would happen almost immediately.
So the few witnesses we have heard informed us of important risks. If we don't do a measured, complete due diligence on , we could well end up provoking a further crisis in the industry, either through continued litigation, because Bill C-24 hasn't been drafted with the required exactitude, or through double taxation components or other perverse impacts. If we don't do our due diligence, we may indeed find that we're doing more harm than good.
These were the only witnesses we invited. Members around this committee table were invited to submit names, and I did so. Some colleagues haven't, but that may be understandable in light of who we requested. This is a different situation. We're talking about folks across the country who have indicated their interest in coming and speaking to us on , providing their expertise. Whether they come from industry, whether they're workers in the softwood industry, or whether they're municipalities, they're impacted by Bill C-24. There is real concern across the country about what this committee may be doing. From the letters we've received, we've gotten a clear indication that these groups, these folks who are experts in the area of softwood lumber and understand the impacts of Bill C-24, want to be heard. And they want to be heard before we enter into clause-by-clause consideration.
Let's look at who's asked to appear before us. We have Russ Cameron, the president of the Independent Lumber Remanufacturers Association--
:
Certainly, Mr. Chair. I apologize.
Let us take Bill , for example, which is being considered in the transport committee. We have now had four weeks of hearings from witnesses across the country on that particular bill, and in fact we are looking at a period of six weeks to submit amendments.
In this case, the opposition was extremely cooperative. Eight days after receiving a clause-by-clause report, it submitted clause-by-clause amendments to the bill. That level of cooperation is something that wasn't seen either in this or the previous Parliament.
So I would hope that the government would cooperate back, given that we have made concessions, both in terms of the time required for amendments and also in extending the time today for the hearing.
Mr. Chair, I'd like to come to the most important thing, the actual witnesses themselves, and what they have said in requesting to be heard in front of this committee. Whether it's by teleconference, video conference, or in person, I think this is of much less important than the fact that they want to appear.
Russ Cameron of the Independent Lumber Remanufacturers Association stated the following. He urges you to convene committee meetings so that the parties affected by Bill may appear as witnesses and express their views on this pending legislation:
We realize that sessions were held earlier in this process as we appeared at them, but things have changed a great deal since that time. For example, we were originally assured that all our interest would be returned to us, but now Canada will take some of it too. We were originally told in writing that we would get all our money back if we elected not to sell to EDC at a discount, but now Canada is imposing a special charge and will take that money from us too. We were originally told that 95% support was required, but when it was not there, Canada changed that requirement. We were originally told that all litigation must be dropped, but when it was not dropped, GOC changed that requirement too.
We have yet to see the much changed final agreement that the GOC plans to force upon us, yet we are currently operating under it. We now have experience with what this agreement will do to our industry and we need the opportunity to relate this new knowledge to the Committee.
At the July 31 Trade Committee meetings, a motion by Mr. Julian was passed to take the Committee to the affected parties and hold meetings in BC, Quebec, and Ontario. This has not yet occurred
--and we ask you to follow through with this motion.
The Independent Lumber Remanufacturers Association represents 120 B.C. companies, employing over 4,000 Canadians. Our annual sales are $2.5 billion on four billion board feet.
So that's Russ Cameron from the Independent Lumber Remanufacturers Association writing to urge this committee to have hearings on Bill before we move to clause-by-clause consideration.
We have a letter from Frank Everett, and Bill Derbyshire, who's president of Local 1425--
:
Thank you very much, Mr. Chair.
Moving to amendment NDP-1, as was expressed in the brief hearings we had on Tuesday on , the concern here is the overall impact on the softwood industry. What we have in the current Bill C-24 is a case where moneys that are owed effectively to the Government of Canada are subject to a rate calculated through the Government of Canada treasury bills sold at auctions of Government of Canada treasury bills during the first month of the calendar quarter and 4%. Essentially, in this clause as it's currently crafted, Mr. Chair, what we're doing is imposing an additional penalty on softwood companies.
As witnesses on Tuesday attested, we know this is a pretty draconian bill. There are a series of penalties that we'll be discussing in the course of the next few days. But the reality is that a lot of these penalties are penalties that should not be imposed on the softwood industry. They've already suffered enough, and they're certainly suffering from the softwood sellout itself.
Now, if we look at , we have clauses that are additional penalties—additional punishments, if you like—on how these companies are treated. When there is interest to be paid at a specified rate—and we've already acknowledged that because of the decision of the Court of International Trade on October 13, these taxes and these penalties do not need to be paid—the way the bill is currently configured, what we end up with not only penalizes the companies having to pay these taxes that they shouldn't have to pay because we won in the Court of International Trade, but we're also very clearly including a 4% penalty on top of
(a) the rate that is the simple arithmetic mean, expressed as a percentage per year and rounded to the next higher whole percentage where the mean is not a whole percentage, of all amounts each of which is the average equivalent yield, expressed as a percentage per year, of Government of Canada Treasury Bills that mature approximately three months after their date of issue and that are sold at auctions of Government of Canada Treasury Bills during the first month of the calendar quarter preceding the particular calendar quarter, and
That's the way the bill is currently worded.
Assuming that the Government of Canada treasury bills are above the inflation rate plus the 4%, we have companies paying taxes that they should not have to pay, because, as I mentioned, the Court of International Trade said we don't have to have these self-imposed taxes. In addition, in clause 4, we have this quite egregious penalty.
As a result of that, what we have offered up is an amendment that would simply allow the rate of the interest penalty to be paid by softwood companies. These are small softwood companies right across the country. These are folks who are already going to suffer from many aspects of the bill unless we clean it up. To have them pay the treasury bill rate plus 4%, as opposed to what our amendment proposes—which is the rate that is the Bank of Canada core measure of inflation calculated in respect of that....
In other words, what we do by incorporating this amendment is, in some way, to soften the blow of the double penalties that these companies are going to have to pay. We're talking about an onerous administrative burden. We're talking about onerous financial burdens, as we've heard—and hopefully we'll have the time and due diligence to go through clause 18 to eliminate the double taxation that occurs.
It seems to me quite straightforward and quite simple that we don't want to penalize and doubly penalize companies that have been operating in good faith, companies across the country that have paid the price of this agreement.
[Translation]
Mr. Chairman, what we are proposing is very simple. We are proposing to replace the suggested wording, in other words, the rate that is the simple arithmetic mean of Government of Canada Treasury Bonds. I have read the text in English, and there is no need for me to repeat it in French.
We are proposing an interest rate that would be the average return on Government of Canada Treasury Bonds, plus 4%. Very clearly, the effect of the bill would be to penalize, to attack, to harm these companies, who are already paying double: first of all, they are getting less money than their rightful share, money that was illegally collected by the government of the United States. Secondly...
:
What I am trying to say, Mr. Chairman, is that I do not agree when you say that this is the same debate. I am speaking here--and I did not do so in English--about companies that are situated in the Abitibi-Témiscamingue region, in Saguenay—Lac-Saint-Jean and on the North Shore. I am very familiar with the Saguenay—Lac-Saint-Jean region, having lived there for three years.
If we retain the provisions of the bill as they now stand, these companies will indeed wind up paying double, and this is not normal. If we really take their interests to heart, we will not want to impose upon them a penalty, in other words the rate of return of Treasury Bonds, plus 4%. What we are suggesting is much more reasonable: simply following the rate of inflation. It is a reference which to my mind is appropriate. The rate is set by the Bank of Canada. It is not set in a haphazard way, but by the Bank of Canada itself. This is done regularly, based upon solid statistics, which is why the rate is reliable.
If the Bank of Canada provides us with the reference level, in other words, the rate of inflation, then that holds a lot of weight. To my mind, this is what the reference point for this clause, clause 4, should be. We cannot impose a penalty such that the Government of Canada might well profit from the difficulties of softwood lumber companies. It is to my mind completely inappropriate to impose upon these companies an additional 4%, given that they have already had their share of setbacks.
What we are proposing is simple, important, and based upon a reliable rate, as I have already stated. The Bank of Canada is an organization we can place our trust in. It sets its rates based upon goods and services-related statistics Canada-wide. The rate of inflation gives the average picture of the performance of goods and services overall.
If, for example, the cost of fuel goes up, that would be reflected in the rate set by the Bank of Canada. There are other criteria as well, for example the cost of a food basket, an average basket of food that all Canadian families could purchase. This rate is based upon various factors affecting Canadian families. All of these elements are taken into account.
There is also the cost of fuel and the cost of heating one's home. All of this comes into play in calculating the rate of inflation. An estimate is done of the cost of a food basket including items such as juices, cereals, meats and fish, in other words all of the products that a Canadian family would normally purchase. Also included in the calculation are all of the other fixed or variable costs resulting from Canadian family lifestyles.
Every month, the Bank of Canada does a review of all goods and services. It takes everything into account and does its calculations. Then, from month to month, it calculates the overall cost of these goods and services, which are important and essential. These are not luxury items. The cost of a limousine does not come into play in the calculation of the cost of goods and services. The Bank of Canada does its calculations and compares the result obtained at the end of the previous month with that of the following month.
Based upon these calculations, it is able to establish over the year the variations from month to month. It also calculates the annual inflation rate. These numbers change from one month to the next, of course, but they really give us a good idea of the monthly evolution of the cost of living for Canadians.
This is why I say that, in my opinion, the inflation rate is extremely reliable, extremely valid and extremely important for a business having to pay interest because of Bill C-24. It is based on something that only represents the cost of the differences incurred that month by the Government of Canada. In other words, if there is money that is owed because of the passage of Bill C-24, because of these interest payments to be made, the only thing this represents for the Government of Canada is the shortfall while it awaits these payments.
Given that we have these calculations of the Bank of Canada, we know that this in no way whatsoever represents a loss for those who have not paid all of these taxes resulting from Bill C-24. Therefore, it cannot be said that the government is losing something by having to wait one, two or six months, but in making these changes to clause 4, we would be going back to a situation where nothing would be lost but where the company would not be unfairly penalized. It would not be on the receiving end of a punishment which, in a sense, would amount to a double or triple penalty.
This is why the measure I am proposing should indeed be taken into consideration.
At present, there are those who are starting to prepare contrary arguments. They will be critical of the rate of inflation. They will, for example, say that this rate does not take into account all data or that it is not exact, given that the results come one month later. It is a fact that all of these calculations cover the previous month. Therefore, given that they correspond to the previous month, the rate cannot be exact, and certain calculations would need to be adjusted.
If there is a drop in the price of fuel in a given region of the country, for example, what happens? Given that we average the prices charged across the whole country, it is quite possible that the inflation rate not be exactly representative of each region of the country. In other words, there clearly are variables.
In British Columbia, there might be a given objective or some kind of representation. If the cost of fuel slid down in British Columbia, this would not necessarily be reflected in the national rate. And if the price of fuel were to drop in Quebec, for example, that change would not necessarily find itself reflected in the overall data.
I believe that those who make these criticisms are mistaken with regard to one thing: the inflation rate cannot be the same from one end of the country to the other. It cannot be the same in Prince George and in Iqaluit. The cost of a grocery basket will clearly vary. The price of fresh fruit, for example, will obviously be much higher in Iqaluit relative to the cost of fuel in other regions.
:
Thank you very much, Mr. Chair.
I'd like to thank Mr. Cullen for his intervention, because I do believe this is important.
When we talk about the calculation of the inflation rate, there are differing points of view on the issue. I think it's important that this committee take very seriously into consideration the amendment because of the fact that we do have these disputes around whether the Bank of Canada inflation rate, calculated nationally, actually represents perfectly what the inflation rate is in certain regions of the country. Of course, Mr. Chair, that is not the case. If we are talking about the price of certain goods and services in the Yukon, for example, because of the high cost of transportation from southern Canada to northern Canada, the national basis point will not represent, ideally, what the inflation rate is indeed in that region. That is very true. I think it's a valid criticism.
In British Columbia, for example, we've seen in greater Vancouver, certainly, a rise in the cost of gas and in the cost of heating oil. Other parts of the country, like Nova Scotia, have seen that as well. And that will not be reflected in the national inflation rate.
But the argument I would make back, Mr. Chair, is quite simple: there is no way of guaranteeing with exactitude an inflation rate that takes into consideration every single region of the country. We're a vast land. We have a variety of resource bases in different parts of the country. So indeed, it would be very difficult--almost impossible--to have an inflation rate that would actually correspond with the actual inflation rate in each of the regions of the country.
[Translation]
I will give you an example. When I was living in the Saguenay—Lac-Saint-Jean, we did not take into account the cost of transportation from Quebec City to Chicoutimi through the Parc des Laurentides when establishing the inflation rate. The costs were lower. When we saw the inflation rate announced by the Bank of Canada, we realized that the inflation rate in the Saguenary—Lac-Saint-Jean region was much higher than elsewhere in the country. There were marked variations. This criticism is well-founded. Furthermore, I think it is important to underscore the fact that what we are offering now is the most precise possible element in the circumstances.
There is another matter that is also important. What is included in the basket? Does the basket truly reflect what people need to purchase? For example, I was talking about one element that the Bank of Canada takes into account in establishing the rate of inflation. I am talking here of Internet access. Is this an essential product or simply a matter of personal choice?
A few years ago, the cost of an Internet connection was not included as an essential product, because the majority of Canadian households did not have access to the Internet. However, as in the case of the telephone, with the evolution of technology, the cost of an Internet connection has been included as a core measure of inflation.
Today, access to the Internet is considered essential for the majority of Canadian households. The cost of an Internet connection for Canadian households must therefore be included in the consumer price index used by the Bank of Canada to measure inflation, and for a very simply reason: today, people need this access. Numerous taxpayers working at home require Internet access. The Internet is an element of our modern-day communications.
This second criticism of the rate of inflation as it is measured by the Bank of Canada is, I must admit, legitimate. Indeed, it represents essential goods. One must recognize that the definition of what constitutes an essential good has changed. This is important, and these things evolve. Clearly, the Bank of Canada has not always been on the cutting-edge of technology. It has often overlooked things that we would consider to be essential goods, in the belief that they were not truly essential. I believe that it is our duty as parliamentarians to exert pressure on the Bank of Canada in order for it to always take into account these essential products when determining the content of the basket of goods and services it uses to calculate the rate of inflation. It should indeed include all of these elements. It is sometimes true that the consumer price index lags behind. That being said, we can oppose that affirmation because, in essence, it nevertheless is the best we can do. If there are deficiencies in the general price index used by the Bank of Canada to measure inflation, to my mind, these are deficiencies that all of us have a duty to...
:
Mr. Chairman, as a matter of fact, I was dealing with an important aspect of what Mr. Cannan is proposing: let us look at all of the history and let us examine the workings of Parliament. This is the 39
th Parliament, and the present government has made promises, guaranteeing that the work of committees would be treated with much greater respect. The new government has promised changes to the way committees function.
Mr. Chairman, I have already told you several times that I find that your way of managing the committee has greatly improved over the last few months. You respect all members and give everyone an opportunity to participate and have his or her say.
However, we have before us Mr. Cannan's motion, aimed at denying this respect due to committee members. There is no need for that, because the government already has tools it can use in any situation. It has already used some to close off debate on the bill in the House. It has already shown its ability to hit hard on committees.
It would be inconceivable for us, as committee members, to accept that the government decide what we can say and seek to limit our debate. That is inconceivable for anyone who has fought for democracy. If we look at emerging democracies, such as South Africa, for example, we can see that Parliament has had to determine to what extent opposition members should be able to speak out and represent their riding.
In South Africa, Parliament has changed the way committees work because, previously, when the regime was much less democratic, committees had no real power. They did not have the power to draft bills.
We have but to look at was is going on in Taiwan. I was thrilled to go there last summer and to see the approach they have with regard to the legislature and the rights of the opposition.
In none of these countries do government members attempt to quash opposition members or limit their opportunity to speak. If we refer to Marleau and Montpetit, it is clear that they do not have the right to do that. They do not have the right to impose rules limiting the ability of members to intervene and they cannot decide that nothing goes, under the pretext that it is the government that is in charge.
Mr. Cannan does perhaps not respect what I am saying, and perhaps he is convinced that he need not listen to me, but I find this important, and I am not alone.
I would be very pleased to hear Mr. Cannan's comments on these issues.
:
Thank you very much, Mr. Chair.
I appreciate that, because the issue around limiting debate is an extremely important one for parliamentarians. It is important to note that Mr. Cannan didn't mention the one important issue that came up when we talked about the amendments, which is the fact that motions to amend a clause of a bill do not require notice.
What we've had from the opposition is full cooperation--for eight days--since the time the clause-by-clause package was actually delivered. In no other committee have we seen this kind of cooperation from the opposition. Within eight days, over 100 amendments were put forward to improve this legislation--which was badly drafted, badly crafted, badly botched.
What we've seen from the opposition is very clearly complete cooperation. We don't need to do that. We could have brought forward the motions today. We could have provided them without notice. We could have dropped them now, and certainly we can choose to do that in the coming days.
But the issue is how the government will try to deal with a bill that desperately needs to be improved. Even from the strongest supporter's standpoint, it is very clearly a bill that has been botched.
We've heard limited testimony on that; it would have been wonderful for this committee to hear more. But to now have the proposal, the sledgehammer, to ensure there is virtually no debate on these motions, no debate on issues like clause 10, where we see a clause that could have huge ramifications for the future of the softwood industry.... We've heard some limited testimony to that effect, but the government is saying, “Well, we don't want to hear any more. No, sir, we don't want to know that there are problems with this bill.”
In clause 18 we now have an imposed double tax, and the amendments that were brought forward on this imposed double tax are amendments that are going to make a substantial difference to companies.
Mr. Harris himself asked the question on Tuesday. For a company like Canfor, what is the difference between, in clause 18, a double taxation--in other words, a tax of 18% taken off on the duty refund--and then a special charge levied that is another 18%?
Now, in Mr. Harris' case, he asked the question of what that would mean for Canfor, for example, which is an important business in his riding. And he said--
:
Mr. Chair, with respect, we are debating a motion that will determine to what extent we can consider amendments. It is very much my right and my prerogative to point out some of the clauses that represent enormous difficulty and enormous danger that if this motion were adopted, if this legal procedural sledgehammer were adopted...what it would mean to our ability as a committee to deal with these important clauses.
I come back to clause 18, because that is something that was raised in the testimony on Tuesday and should have sounded alarm bells right through the Conservative members of the committee. What we're looking at in clause 18 is, now, the fact that.... The duty deposits, through the government's own legal machinery, take away 18% of the duties that are to be refunded to companies, and then in clause 18 we see that there is a special charge levied of 18%. That is double taxation that, as Mr. Harris asked about, would mean in the case of Canfor something in the order of $140 million that they would have to pay in the special charge.
We had testimony previously that alluded to the fact that somehow the government was going to fix it by regulation somewhere else. But we also know, the way clause 18 is currently worded, that the companies would be liable to pay the amount of the special charge by a fixed date. At this point, since we don't know when the actual moneys would be coming from the United States, perhaps it's a moot point because of the fact that the government is already making payouts of taxpayers' money. But the result of what has been, I think it's fair to say from everything we've heard, poor crafting on clause 18, is essentially that we have to gut and rewrite that clause, that amendment. We've had a number of amendments in that area that essentially deal with that particular issue. But clause 18 is something we need to have due consideration on.
Having already seen the procedural sledgehammer in the House that the government has been using to ram this through, and of course the procedural sledgehammer with the companies, we're now seeing the same procedural sledgehammer brought in at the committee stage.
Looking through the various amendments, such as Mr. Casey's amendment, and we see Mr. LeBlanc's amendments on clause 10, an important clause, one thing that the Maritime Lumber Bureau referenced very clearly is that it's a problem for the Maritime lumber industry, the way things are currently worded. In a sense, we didn't see the provision made for Maritime lumber that we expected to have. We have clauses that essentially are dealing with important aspects of the punitive nature of this particular bill. I mean, a bill that imposes an 18-month prison sentence on softwood business operators--18 months. That's incredible!
[Translation]
It is inconceivable! We are talking about a prison sentence for a person operating a business in the Abitibi-Témiscamingue region. Not only would this individual lose his or her ability to operate, not only would the province of Quebec no longer be able to intervene, given these anti-avoidance provisions preventing it from assisting the forestry industry in any meaningful way, but, on top of that, directors of such companies in the Abitibi region would be sent to prison for 18 months. It could happen that the directors of a company be held responsible for that company's debts. That aspect is, it too, important.
:
Thank you, Mr. Chair. I appreciate that, and I will be offering an amendment at the end of my speech, in reaction to Mr. Cannan's proposal.
Because indeed, Mr. Chair, that's what is at stake here. As we heard on Tuesday, we talked about draconian legislation. We have to make sure that every clause is fully amended, that every one of these punitive.... The punitive nature of the bill is quite incredible. But we have to make sure that essentially we're not jeopardizing the softwood industry, those poor softwood companies that have borne the brunt of the last five years.
So essentially because of that we have a wide variety of punitive measures, which have to be duly considered. They have to be fully considered because indeed what we are talking about is the future of our softwood industry.
Now looking at Mr. LeBlanc's proposals in clause 25, for example, he's offered a very extensive amendment at that stage, which I think is well thought out, as most of what Mr. LeBlanc does is thought out with a great deal of forethought and with the appropriate consultation.
Now this motion of Mr. Cannan's would basically eliminate any sort of in-depth debate on the provisions of that particular clause. We have Mr. Casey's amendments, and more from Mr. LeBlanc.
Then we have some of the elements around the punitive nature, which I mentioned—the 18 months certainly—but going further than that, the punitive nature of the government being able to go to softwood directors on an individual basis. This is after what is essentially an imposed assessment, because we've certainly heard from previous testimony that there is an assessment done by the Government of Canada. The assessment is done, but certainly the companies don't have the ability to respond to it. Effectively their recourse is tax court, which could take about a year, from the testimony we heard.
So we're looking at a procedure. If we adopt this bill without the amendments, as I believe Mr. Cannan is pushing, without the real in-depth discussion of the implications of each of these amendments, we would end up with a bill where the assessments are made, where the companies have no recourse in the short term, or recourse really in the medium term either, and then essentially the extremely punitive measures—a bit like what I see Mr. Cannan's motion as being, in trying to close off debate—take effect.
The punitive measures are as follows. The companies and the individual directors become responsible for those debts. Now these are assessments that are imposed, and the companies have no real way of reversing them in the short term. It's up to the minister.
From there, they're going through tax court. Perhaps on a long-term basis, they can expect to see some modification of the assessment. But the government has draconian tools, as Mr. Feldman testified, to go to those individual directors and say to them, you're responsible, and then look at those individual directors to see if they've transferred funds at any time. That's the way the bill is currently crafted.
The amendments we're bringing forward, that the opposition is bringing forward, are dying to address that. But imagine a company in Prince George, where a wrong assessment has been made and the company is going through the long process of tax court to try to get some repudiation of the assessment. Then the government can wade in, go to those individual directors and say to them, “Well, have you transferred money at anytime in your life? Do you have an educational trust fund for your kids? Have you transferred money to your spouse?”
They cannot only go after the individual, the softwood owner and director who started a small softwood company a few years ago in the Cariboo or Prince George, the areas of British Columbia that are highly impacted by —highly impacted if we do not do our job as parliamentarians to fully vet and investigate this bill....
What we see is that those directors and their spouses and their children could have the government going after them for moneys owed for an assessment that might well be incorrect. But the procedures, the systems of checks and balances that exist in other legislation, as we've seen, don't exist in Bill . So that system of checks and balances that we as parliamentarians are responsible for maintaining does not exist. Essentially, a director can be...
[Translation]
pursued by the government, and the same goes for his or her children and spouse. If we are talking about the Abitibi, a small company could find itself in the same situation. The amount of money due would be determined by the government. The calculation is not always very precise and the company could not go after the government. It would have to rely on the tax court, and that takes time, sometimes up to a year. There therefore would be no recourse. These directors and their families would see the government go after them. There is no system of checks and balances vis-à-vis the powers the government is assuming under Bill C-24. Small softwood lumber company directors are seeking justice and fairness and they wish to be treated with respect.
[English]
Other punitive elements of this, Mr. Chair, lie in the fact that not only can the company directors have the government going after them, but you actually have commercial clients of these softwood companies.... For example, in Quesnel, British Columbia, if that small company gets an incorrect assessment, and essentially what they're doing is trying desperately to stay afloat, they have to pay the assessment. If they don't pay that assessment, their recourse in tax court takes too long, and then you can have the government, under the current wording of Bill , actually go after their commercial clients.
What are the implications of that, Mr. Chair? What are the implications of this kind of draconian legislation that says now if you are a commercial client of a Canadian softwood industry...
[Translation]
Be careful, because if you are the customer of such a company, the government can go after you. This possibility would exist under the bill if it is adopted. Who would want to do business with a softwood lumber company from the North Shore, the Saguenay—Lac-Saint-Jean area or the Abitibi-Témiscamingue? Who would want to do business with a softwood lumber company in Northern Ontario?
[English]
Who would do business with a softwood company in Saskatchewan, Alberta, or British Columbia? If there are cashflow difficulties, we're in a situation under this draconian legislation that essentially what we could have is the government going after those clients.
So the perverse impacts of that kind of situation, once word gets out, if we were to adopt Mr. Cannan's motion and just ram it through with no due consideration of the amendments--just ram it through, and let's not go into any depth, let's just treat this as question period, very brief, nothing of any depth or any substance to it. The implications of just ramming this through are significant and they are irreversible, Mr. Chair--irreversible--because the decisions we make now could well run many of those companies that are already on the ropes right out of business, either directly, through the punitive measures that are imposed on those companies, the fines, the imprisonment, the fact that you can go after directors and certainly go after directors' families, but also because of the ability of the government to go after the commercial clients....
What we will see, those of us who've been in business, is a shying away of companies that don't want to get involved with companies that might be liable to draw them into legal difficulty with the government. Who would want that? What commercial client would want to be involved in a company that may have the government coming after them? Yet this is one of the very perverse and very unfortunate consequences of badly crafted legislation.
We have responsibilities. We have the responsibility as parliamentarians to fully vet this legislation. We have the responsibility to go through clause-by-clause in detail and indepth to ensure that essentially we do not at any time make decisions that would imperil the softwood companies that are left.
If we simply allow things to stand, if we simply allow the fines, the imprisonment, half of this legislation, more than half of the legislation...in fact, if we go from clause 50 on, I believe, we are looking at punitive measures, clause after clause after clause.
In the front portion of the legislation, we have legislation that imposes double taxation, double penalties. We have legislation that, at this point, desperately needs to be amended. That's whether we're talking about how the lumber remanufacturers are defined, which has been a serious issue that folks have raised, and the Independent Lumber Remanufacturers Association certainly raised that--and I'll come back to that in a moment.
In the back end of the legislation, as we've seen, we're talking about draconian measure after draconian measure--draconian measures that follow one after the other, penalties, fines, jail sentences, all for folks who just wanted to create jobs in their community and who just wanted to sell value-added softwood products. That's all they wanted to do.
So what we have when we go to the front end of this legislation, if we take Mr. Cannan's motion and if we have the government impose this on us, and what we have in the back of the legislation is draconian in nature and it has to be amended. We cannot simply allow the legislation to leave this committee as it is written. It simply cannot, and I don't see how any parliamentarian around this table would support such draconian measures for softwood companies in Quesnel, B.C., in Prince Albert, Saskatchewan, or in northern Alberta, and we can look right across the country, in The Pas, Manitoba--I'll certainly be going there to meet with folks in the softwood industry next weekend--and when we look at the north, northern Ontario, and certainly the reaction we've seen there in the softwood industry...a concern about the draconian nature of this legislation.
[Translation]
The representatives of the industry in Quebec are a little worried about this. And if you take the industry in the Maritimes, we have amendments...
:
Thank you very much, Mr. Chair.
I will say you're guiding us very effectively through this.
I am pleased to be able to speak now to what we will be voting for together, which is essentially NDP-2.
There are two components to that. There is a link, as you mentioned, which is reducing the percentage that is paid--and the companies would be paying it in treasury bills--down to the inflation rate. We don't have those numbers yet, but presumably we would be able to get them at some point through the course of these hearings. I believe what we do find, as I mentioned earlier, is that indeed we would bring down the treasury bill cost to the inflation rate and then we would increase...in paragraph 4(2)(b), which would be from 2% to 4%.
Effectively, what is the impact of that? In this case, we are talking about moneys that, in a sense, the government actually owes to softwood producers. When we look through all the many clauses of , and I won't use the words “draconian” or “dictatorial”--somebody suggested mean-spirited--we see many provisions of the bill that are so. There's very little in this that actually helps to support the companies that are suffering the brunt of this across the country, whether we're talking about the seed for Alberta, Saskatchewan, or Manitoba...certainly northern Ontario, northern Quebec, and even the Maritimes.... We'll be coming back to the issue around the Maritimes a little later on in our considerations as we move through clause-by-clause.
I will come back to what these companies are suffering and how best, as a committee, to respond to what they've been going through over the last few years. What they've been going through is cruel, and certainly being punished by these illegal, punitive duties is something no industry in Canada has had to suffer to the same extent.
We come to , and to the interest charges that would be levied to them. Essentially, the way Bill C-24 was originally crafted, in subclause 4(2) it said:
For the purposes of every provision of this Act that requires interest at a specified rate to be paid on an amount payable by the Minister to a person or applied by the Minister against an amount owed by a person, the specified rate in effect during any particular calendar quarter is the total of
(a) the rate determined under paragraph (1)(a) in respect of the particular calendar quarter, and
If we look at line 35, at the rate determined, that is essentially the treasury bill rate that we mentioned earlier, the rate of the treasury bills. Essentially what we did, looking at NDP-1, which this modifies also...as you mentioned, it is consequential, so we have to, in a sense, go back and forth between the two amendments to ensure everyone understands the full ramifications of these particular amendments.
By going back and forth between the two amendments, and I am putting the primary focus of my comments on NDP-2, what we do, for the purposes of subclause 4(2), is we reduce the rate that would be paid by the government to the company, in the case where there's interest payable by the minister.
Hopefully, other amendments that we'll consider later on in our deliberations will also help to right the playing field that exists so that we're not talking about this mean-spirited bill, but something that softwood companies can actually use in a much more effective way to help them further their business interests.
One of the key aspects of that is furthering business. As you know, Mr. Chair, and any other member of the committee who has been involved in business knows, the cost of capital, the cost of money, is a key component to that. How do you access funds? How do you access funds that are actually owed to you by the Government of Canada?
Mr. Chair, there are a variety of ways of doing that. We've reviewed some of the calculations around the core measure of inflation and how that in effect lowers the cost of capital when companies owe money to the government. Essentially, because we're talking about a big, big stick contained within this legislation, when money is owed to the government those companies are very much in trouble.
So by lowering the rate of money owed to the government, or by lowering the cost to companies so that they're not paying these excessive punitive penalties, we've lowered the cost of capital, in a sense, to those companies. They won't be paying, and won't be seeing, corresponding increases in the amounts of money owed.
Where do those go? They go, of course,
[Translation]
to accounts payable.
Mr. Chairman, when I was taking financial management classes, proper management of accounts payable was considered extremely important. Businesses that know how to adequately manage their accounts payable are able to lower their costs, whether these amounts are owed to other businesses or, such as here, to the government. The ability to reduce these costs is extremely important. This is what we are doing here with the first amendment.
This will benefit small businesses like those of the Estrie, and more particularly in Northern Quebec, in the Saguenay—Lac-Saint-Jean area, in Northern Ontario, in Timmins, in James Bay and other regions, because they have very little room to manoeuvre. They have to make money every day in order to pay their bills and taxes. This is why properly managing their accounts payable is so important to them.
I often congratulate the member for Sherbrooke, because Sherbrooke University is a good university. I studied financial management there and I found that the approach they took to financial management of a business was very well balanced. One must begin by adequately managing accounts payable, and then reduce the cost of these payables. This is what we are doing with our first amendment.
This is why our motion reads:
That Bill C-24, in clause 4, be amended by replacing line 38 on page 3 with the following:
Motions NDP-1 and NDP-2 go together. They are somehow twin motions. I agree to putting them to a vote together, even though I was less pleased with the fact that this was decided after the fact, but this has been corrected. Thank you very much, Mr. Chairman, for having made the correction.
By passing those twin motions, we will reduce the cost of accounts payable because we will reduce the interest rate on amounts owed to the Government of Canada. At the same time, this reduction, due to the wording of paragraph 4(b) which says that the rate should be based on the yield of Treasury bills, has a real impact on both money to be paid and money to be collected.
Therefore, if we lower the interest rate on the government's accounts receivable, we also reduce the rate it pays out to companies. This is an important aspect.
It is just as important to manage accounts receivable as accounts payable. Accounts receivable of a business are a very important asset when you have to go meet with your banker. We know that the government approached bankers to get them to push companies to sign the softwood lumber agreement, which they did. The reason why the government approached banks is that banks are important for businesses.
Banks play a major role, just like the network of credit unions, which is very extensive in Estrie and elsewhere in Quebec. The Mouvement Desjardins is the largest financial cooperative in North America and it has enormous capital at its disposal. This coop does a very good job with softwood lumber companies. But the caisses populaires, the credit unions or banks that finance those companies always want information on their accounts payable and the applicable rates of interest. The issue of accounts receivable is therefore extremely important. We should not underestimate its importance, because accounts receivable are more than simply being owed money. These accounts appear in the financial statements that are established at year-end. Accounts receivable can have very broad implications. This is not an insignificant subject we are discussing today.
What we are seeking is a better balance. On the one hand, we reduce the amount companies have to pay to the government by bringing down the interest rate. This is important in terms of the accounts payable. On the other hand, this does not reduce the interest rate that the Government of Canada must pay to those companies.
Let us take for example a small softwood lumber company located in Estrie. It deals with the caisse populaire of Sherbrooke, which is a credit union that has great involvement in the life of business people in this whole area. When the manager or the representative of that institution sits down with the representative or the head of that business, the first thing he or she will ask to see are the financial statements of the previous year and whether these have been audited by a chartered accountant. Without financial statements, you cannot even sit down with a banker. When you are dealing with a credit union, where people know each other better, the business person will be able to meet with the manager but will not be able to discuss financing without showing financial statements.
The first thing banks or credit unions look at in the financial statements of a business is the assets and liabilities, including accounts payable, their percentage, their turnover, whether they have increased or decreased over the last few months or the last year or couple of years, whether the business has financial difficulties, etc. All of those aspects are shown in the financial statements as audited by a chartered accountant. Accounts payable play an important role.
Next, banks will look at accounts receivable, at the assets of a business, whether there are substantial accounts receivable from the government and whether this will have an impact on the financing of the business. It is a critical aspect because if it appears that accounts payable increase and that accounts receivable decrease, the business will be told to at least try to get that money as quickly as possible. But the law gives very few tools to corporations to make the government pay them the money it owes, which is why we have a rather draconian way of doing things.
So, with those measures, companies cannot go to the government and insist that they immediately need the money owed them. We cannot ask these companies to live with such uncertainty. It is not only companies who are faced with uncertainty, but also their employees, the financial institutions that provide financing to them, such as caisses populaires, credit unions and banks.
These people look at every line in the financial statements to make sure that the business is solvent. One important factor in this review of financial statements is the turnover in the accounts payable and receivable, as well as the amounts that the business can expect to receive.
It is important to provide this service to softwood lumber companies, whether they be located in Estrie, in Abitibi, in Northern Ontario or in British Columbia. On Vancouver Island, for example, the softwood lumber industry is very strong. Local credit unions and lumber companies are jointly making a large effort, but nevertheless, due to the situation that we know all too well, 4,000 jobs have been lost over the last few weeks and many operations had to close. The situation is very serious for these people.
Bill C-24 allows us to offer something substantial to those companies. On the one hand, in terms of the credit unions and banks that provide financing to them, we must reduce the interest rate they pay when they owe money to the government. This is the first step, a first improvement. At the same time--and just as important--, when the government owes them money, they should be entitled to a better balance. I could read that subsection again, if a member so requested, but I do not think it is necessary. I believe everybody understands very well. We reduce the rate from the annual yield of Treasury bills down to the rate of inflation, while increasing from 2% to 4% the additional percentage paid to those companies.
Why is this important? We know that the lumber industry is seasonal, that the labour turnover is important at certain times of the year and less so at other times. Bill C-24 recognizes the seasonal nature of some parts of the industry, for example in the calculations based on the months of production.
Since Canada is a northern country, it is obvious that during the winter months, in some areas, it is not possible to log trees and to do all the field work that is required. We also know that in some areas, manpower is unavailable to the lumber industry at certain times of the year, for example in the fishing season or during periods when other primary industries are active. Therefore, we have workers going from the lumber industry to other industries.
Why is the seasonal nature of the softwood lumber industry significant? Because it is part of the factors that the industry and all businesses taking part in it must take into account in terms of financing. All companies must adjust to these fluctuations between periods in a year. We are not talking here about manufacturing a toy or a car, which entails steady levels of performance throughout the year.
Things are different in the natural resources sector. This is why financing is such a critical aspect for those companies. They have no other choice but to rely on the support of financial institutions. They are not doing so out of self-interest or because they like having a cup of coffee with the credit union manager, but because they have no other choice.
The first clause is perfectly within our rights as a committee. Mr. Menzies is proposing to limit time per member; I'm proposing to limit time per member too. I would assume he'd be in agreement, and it certainly would be a compromise between his very radical position and something that I think would allow us to go in depth into each of these amendments.
The first clause would read:
That the total number of minutes of debate per amendment, per member, be limited up to a maximum of thirty minutes, and that thirty minutes per member also be allotted to the clause, amended or not.
The second clause, currently reads:
That the committee finish clause-by-clause consideration for Bill C-24 by the end of the day on Tuesday, November 7, 2006.
That would be deleted from the motion.
The third clause, which is “That all clauses that have no proposals for amendment be voted on together in one vote at the start of the meeting”, currently reads, “on Tuesday, November 7”. With the amendment, it would read “on Tuesday, November 28”. So there's a fixed date, certainly, that the government can look to for finishing the clauses that don't have amendments.
The fourth clause reads, “That Bill C-24 be reported back to the House as soon as possible.” We would be deleting the words “on Thursday...”, so it would read, “That Bill C-24 be reported back to the House as soon as possible.”
The fifth clause, “That the clause-by-clause consideration for Bill C-24 be completed before considering any other committee business”, would be deleted.
And then the final clause of his rather extensive motion--it's a little more streamlined with these amendments--reads, “That any debate on motions related to Bill C-24 be limited to thirty minutes per person per motion.”
Hopefully, the clerk has those amendments.
Great. Thank you very much.
Now I'd like to speak to the actual amendments themselves.
Essentially, what Mr. Menzies has been proposing is closure. There's no other way of saying that. It's closure. It's limiting members to a scant three minutes of debate. It's saying that by the end of the day Tuesday, November 7, clause-by-clause consideration just happens, regardless of whether we've gone into the due diligence or not. What we are essentially doing is saying that on Tuesday, clause-by-clause consideration is done, no matter how serious, how irresponsible the impact would be on softwood companies across the country.
The various clauses that we've already gone through to a certain extent indicate that this bill has serious difficulties. So essentially, what we'd have to do, Mr. Chair--and I'm sure you'd agree with me--is go through the clause-by-clause consideration and ensure that we've done our due diligence.
So I believe very strongly that we as a committee have to take the due diligence that is required to do the clause-by-clause consideration in a responsible and in-depth way, going into each of those particular clauses that raise serious concerns across the country.
This deletion would essentially allow us to do our deliberations in an effective way and provide the clause-by-clause consideration that I think Canadians, particularly Canadians involved in the softwood industry, would require, rather than saying we're going to, at the end of day, have closure, that no matter how many problems there are on this bill, no matter how many things need to be fixed, we're going to bring this back to the House.
What an embarrassment that would be for members of the committee to bring something in that people outside this House have already flagged as major concerns, though we're not allowing those folks to testify, and other parliamentarians are aware of those concerns as well. So to come back with a half-baked, half-done job because the government wants to impose clause-by-clause consideration being done by the end of the day on Tuesday makes absolutely no sense.
We're talking about decisions that will make the difference in millions and millions of dollars between softwood companies and how this bill is currently configured and what softwood companies can actually expect back, and the kinds of penalties and the kinds of interest charges that softwood companies will have to endure. So for us to simply throw our hands up and say we're not going to deal with this, we're going to throw out the bill no matter how badly botched it is at the end of the day on Tuesday, November 7, certainly signals to me the highest irresponsibility.
Let's look at the third clause of Mr. Menzies' motions and I think what is a helpful amendment that I've offered to make the change, make the improvement to what he has actually said. He says in his motion that all clauses that have no proposals for amendment be voted on together in one vote at the start of the meeting on Tuesday, November 7--that's next Tuesday--that we simply vote them all together.
We've already had concerns that have been raised. We know in Marleau and Montpetit, very clearly--and I'll stipulate the clause--we have the right to raise amendments. Certainly even though we've responded as a courtesy to the government with dozens of amendments to help improve the bill in good faith last Tuesday, it is very clear that we didn't have to have that obligation.
Marleau and Montpetit, in chapter 20, which deals extensively with the committee structure in the House of Commons and how committees need to act--I don't need to signal that to you, Mr. Chair, as I know you're aware of all of those elements--says very clearly in the second paragraph that motions to amend a clause of a bill do not require notice. So we do not require notice to provide these amendments; we can simply provide them.
Well, we have had eight days to consider the clause-by-clause, and it is by no means certain I think for any of us that we have exhaustively gone through the various improvements that need to be made to this bill.