Mr. Speaker, I am very pleased to rise to speak on this point of order concerning Bill S-13, an act to incorporate and to establish an industry levy to provide for the Canadian anti-smoking youth foundation.
Mr. Speaker, I rise as you suggest, not to speak to the merits of this bill but to address the four main concerns which have been raised by the House leader. I intend to address each of the concerns individually. There is some overlap between those concerns. I hope we can deal with this carefully and that we can put the proper clarity on this issue.
I agree that the government has the prerogative of financial initiative in respect to the imposition of taxes by the convention and as the hon. minister pointed out proposed by section 53 of the Constitution Act. They must be introduced in the House of Commons.
The issue today is whether the levy as established in part II of the bill is indeed a levy or a tax. The principal authority, Erskine May, says that a levy on an industry for its own purposes is not a tax.
The four issues that the House leader has raised are: what is the criteria to determine a levy; what is the stated industry purpose; whether this bill proposes a levy or a tax in relationship to a ways and means motion; and does the beneficiary group of the levy have to be specific as in Bill C-32 to which the House leader referred.
Simply because the benefits of the levy are not narrowly identified, we do not believe that it constitutes any procedural justification to rule Bill S-13 out of order. Nothing in Erskine May supports the notion that beneficiaries of the levy need to operate on the model of Bill C-32, i.e., be directed to a specific group.
I am afraid that the hon. member was referring to a previous version of the bill. I would like to point out that the version passed in the Senate in June of this year has nothing to do with sponsorship or farmers. This is purely to set up the foundation. I think the hon. House leader has referred to an older version of this bill.
First I want to talk about levy criteria. In British practice as followed here in Canada, a levy is in order procedurally. We have to remember we are only talking about procedural issues and the definition of a levy. The levy must be imposed on the industry. It must serve an industry purpose. The funds from the levy never form any part of government revenues. I can say that Bill S-13 was very carefully drafted to meet these three criteria.
The purpose of this bill is the tobacco industry's publicly stated purpose. Mr. Robert Parker stated before the Standing Senate Committee on Legal and Constitutional Affairs in April 1997:
The member companies are prepared to work with any responsible agency on the issue of youth smoking to further reduce it.... As I have said, I have some legitimate questions of how credible we can be.... A program started voluntarily by the industry when it is selling cigarettes to tell kids they should not smoke would be attacked most vocally by... the anti-tobacco people.
Thus we have S-13 to help them out here.
Imagine next year the public relations benefit to the industry if Mr. Parker gets to hold a copy of the bill and say “We are spending $120 million a year to stop Canada's youth from smoking”.
It is quite clear that the first two paragraphs of clause 3 refer to the industry's objectives. Clause 3 deals with the purpose which is that of the industry.
Regarding clause 3(a), the industry would like to be involved in initiatives to reduce youth smoking but it does not have the credibility to do so. It would participate in 3(b) however in any initiative of a credible agency.
As recently as October of this year, Mr. Don Brown the chairman and president of Imperial Tobacco, made similar comments regarding youth smoking and the industry's absence of credibility to the Vancouver Board of Trade. He said:
We believe children should not smoke.... We might achieve more if we tried working together. Perhaps a better approach would be for like-minded groups to take a fresh look at the issue of underage smoking.
We know we cannot be the messenger; we simply just do not have the credibility.
Bill S-13 is a measure that has been created to assist the industry in accomplishing this publicly stated objective. Six explicit industry purposes are listed in Bill S-13. Clause 3(1) gives the purpose of the act:
The purpose of this Act is to enable and assist the Canadian tobacco industry to carry out its publicly-stated industry objective of reducing the use of tobacco products by young persons throughout Canada—
Clause 3(1)(c) addresses the lack of credibility:
the industry is incapable of addressing on its own the problem of tobacco use by young persons because, by its own admission, its members and agents lack credibility as advocates for a reduction in the use of tobacco products;
Clause 3(1)(e) talks about pre-empting further restrictions:
it is foreseeable that the industry's ability to manufacture and sell tobacco products will be further restricted if the rate of use of tobacco products by young persons is not reduced—
The industry is well aware of the flood of legislation attacking the use of tobacco in the U.S. and recognizes that it will not be long before it arrives here in Canada, for example the recent B.C. and Quebec legislation.
Clause 3(1)(f) deals with co-ordination:
industry efforts to reach this objective need national co-ordination.
In as much as tobacco companies market their products nationally, there needs to be national co-ordination of industry efforts to reduce or eliminate youth smoking.
Clause 31 is about sponsors:
—a sponsor of the Foundation may use the name of the Foundation—
Even with the debate around this the bill allows the industry to use the name of the foundation for the purpose of seeking recognition for the sponsorship. There is no point in the industry being a party to the legislation without receiving appropriate recognition for its contribution. Clause 31 specifically entitles the industry to seek recognition of its sponsorship of this foundation.
Clause 32(1) is about independence:
The Foundation is established on behalf of the Canadian tobacco industry but is independent of it.
It is the very independence of the foundation that provides the legislation with the credibility Mr. Parker said the industry lacked in his statement of April 1, 1997.
The bill is also beneficial to the industry in a number of less specific ways. It is likely to help improve its negative public image. It will probably reduce the possibility of civil litigation and restrictive legislation being enacted, both of which restrict the industry's very existence.
It is well accepted that smoking is addictive, toxic and in many cases fatal. The industry's defence to liability lies in the smokers' voluntary acceptance of these risks. The industry recognizes that addiction is more likely when smoking starts in youth who are less likely to make informed decisions regarding this risk.
Bill S-13 could contribute to a successful defence against liability for causing the addiction of youth. It is evidence of the industry's efforts to combat youth smoking.
The levy purpose need not be exclusive for the industry.
Broader purposes are served by Bill S-13 as well.
The purpose of the levy in Bill S-13 is to provide the tobacco industry with a credible claim that it does not deliberately market its products to youth and that it supports efforts to curb youth smoking.
The fact that any reduction in youth smoking also serves a public policy objective does not challenge the procedural acceptability of the bill.
Nothing in Erskine May's Parliamentary Practice suggests that an industry purpose cannot also coincide with a public policy. Indeed, the precedents cited in May have both a private and a public purpose. They include the Industry Training Act of 1964. This bill was to establish a mechanism for the creation of a number of industry boards, the purpose of which was to provide training opportunities for the employees. Such a scheme not only benefited the particular industry, but served a public purpose.
One of my favourite ones is the Betting Levy Act of 1961. This bill was designed to improve horse breeding and to further the advancement of veterinary science. This clearly goes beyond the private industry purpose and is in the interest of the public at large.
In the Sea Fish Industry Act of 1951, a white fish organization was established to develop and regulate the white fish industry. The purpose was to benefit the industry and to serve a public objective to preserve employment in the fisheries.
In fact, the bills cited in May that were not exempted from the financial procedures and therefore required a ways and means motion failed to meet the criteria because they were not for an industry purpose or the funds became part of government revenue.
In 1974-75 there was the Air Travel Reserve Fund. This bill established a levy to compensate passengers who sustained a loss as a result of the financial failure of a travel company. The charge was considered to have an industry benefit. As such, it met the first of the two criteria for a charge to be a levy for industry purposes.
It failed, however, on the second criteria, that the funds would not form part of the consolidated fund. The charge was held to be a tax because the government had the discretion to dispose of the assets of the fund in the event of its being wound up, thus making it possible for the consolidated fund to benefit at the expense of the travel organizers.
In Bill S-13, any surplus reverts to the tobacco manufacturers.
The merchant shipping bill which the hon. member mentioned established a charge to pay for pollution damage. This impost was viewed to be so clearly not for the benefit of the industry concerned that it was held to be a tax in spite of the fact that the proceeds were not payable to the consolidated fund.
The precedent that the hon. member mentioned in terms of Bill C-32, an act to amend the Copyright Act, adopted in the last parliament, contained a levy provision. In this particular case the levy was imposed on the sale of blank audio tapes and the funds thus collected were to be distributed to authors, performing artists and recording companies. That also did not require a ways and means motion.
The Canada Shipping Act of 1987 established a levy to be paid by the ship owners for the purpose of creating a pollution fund to deal with oil spills caused by ships and tankers. The rate of the levy is set by the Minister of Transport and the money collected is in a special account in the consolidated revenue fund. This act was presented twice without a ways and means motion preceding its introduction.
The Canada Petroleum Resources Act created an account known as the environmental studies research fund to be under the administrative responsibility of the Minister of Energy, Mines and Resources or the Minister of Indian Affairs and Northern Development to finance environmental and social studies to assess the impact of petroleum exploration and development on frontier lands. Every interest owner in the frontier lands is to pay into that fund according to a rate set by the minister. Again, this act was presented twice without a ways and means motion preceding its introduction.
Those are the first two points. The third point is the whole issue of a levy versus a tax.
We believe that Bill S-13 does not require a ways and means resolution because it does not impose a tax and therefore does not have to originate in the House of Commons.
The levy in Bill S-13 is not a tax. The express provision of the bill makes this clear. The clauses of the bill refer to a levy, not a tax. Levies, for industry purposes, and as we have talked about in Erskine May, are recognized in all procedural authorities as being distinct from taxes.
If the levy in Bill S-13 were indeed a tax it would constitute a charge on the people. According to Erskine May's 21st edition at page 726, a charge on the people is normally imposed generally and intended to be used for general purposes.
That is why, as May further explains, that levies upon an industry, the proceeds of which are intended to form a fund for the purposes of that industry, have been held not to be charges.
Erskine May lists 12 bills that have been considered levies for industry purposes and not taxes, and so did not require the ways and means resolutions. Some of these include the Industrial Training Act, the Betting Levy Act and the Sea Fish Industry Act that we talked about.
Also, as I have just alluded to, there were a number of Canadian precedents of levies for industry purposes which did not have a ways and means resolution: Bill C-32, the act to amend the Copyright Act; the Canada Shipping Act; and the Canada Petroleum Resources Act. The last two examples were introduced twice, as we said, without a ways and means motion.
The Canadian precedents suggest that the criteria applied in Canada to the consideration of bills containing levies are not as strict as those followed in British practice. Bill S-13 not only meets the criteria suggested by those Canadian precedents, it also meets the more strict criteria spelled out in Erskine May.
To reiterate, levies for industry purposes have three characteristics: the levies must be imposed on the industry; the levies must be imposed for the industry's own purposes; and the money must never form a part of government revenue.
The levy under Bill S-13 is clearly imposed on the industry. Clause 36 of the bill expressly provides that the funds come from the tobacco companies:
36.(1) Every person who, for the purposes of trade, manufactures, produces or imports tobacco products is liable, on selling, transferring, or otherwise disposing of the tobacco product, to pay a levy...
The levy in Bill S-13 is imposed for the industry's own purposes. Of course, there is also a broader public policy objective which I will not go into. The two purposes, however, are not mutually exclusive goals and there are Canadian and British precedents to prove that this is acceptable procedurally.
The funds generated from the levy never form part of government revenue. The specific clauses of the bill make this clear. Subclause 33(1) states that the foundation is not an agent of Her Majesty and the funds are not public funds. The funds are collected by the foundation, placed in its own account and distributed to the foundation alone. Any surplus funds after wind-up of the foundation are returned to the tobacco companies.
Subclause 35(3) states that in the event of the dissolution of the foundation, any property of the foundation shall be transferred to the council, that is, the Canadian Tobacco Manufacturers' Council.
In any event, the question as to whether the levy imposed is in fact a tax is really a question of law to be determined by the courts, not the Speaker.
The procedural question must be limited to whether the bill, on the face of it, is a tax or a levy for industry purposes. The bill expressly provides that the foundation is established for the industry and that the purpose of the bill is to meet this industry's objective. Inquiring beyond the face of the bill and questioning the express provisions of it is going well beyond the realm of procedure and into an area of law with which the Speaker is not to deal.
The more legal opinions cited for or against the question of whether Bill S-13 is a levy or a tax, the more obvious it becomes that the issue is a matter of law and legal interpretation. These matters do not normally fall within the jurisdiction of the Speaker of the Commons.
As a matter of law, a number of legal experts have already testified before the Senate Standing Committee on Social Affairs, Science and Technology that the charge imposed in Bill S-13 is not a tax. They have also provided written opinions to that effect. Mr. Mark Siegel, senior tax counsel at Gowlings, Strathy & Henderson, is of the view that the levy in Bill S-13 is part of a regulatory scheme. The money is not intended to provide revenue for general public purposes. The money is to be used to carry out the objectives of the foundation for the tobacco industry. He reaffirmed his opinion on November 5, 1998, as a result of the Supreme Court of Canada decision in the Eurig Estate.
Mr. Michael Clegg, an expert on matters of parliamentary law and procedure, also has concluded that this bill is not a tax.
The last point concerns whether the beneficiaries of this levy are specific, as the House leader pointed out, in terms of Bill C-32.
If the argument is that Bill S-13 is out of order because the beneficiaries of the levy are not specific, simply because the beneficiaries are not narrowly identified does not constitute any procedural justification to rule Bill S-13 out of order. Nothing in Erskine May supports the notion that the beneficiaries of the levy have to be specifically designated. What is required is that the levy must serve an industry purpose.
There is no precedent available from British or Canadian sources that substantiates any claim that the beneficiaries must be a specified group. There are numerous British and Canadian examples which suggest that the beneficiaries of a levy can be broadly defined and that they do not need to be directly related to the industry on which the levy is imposed.
For example, consider again the Betting Levy Act which was implemented for the advancement and encouragement of education in veterinary science. This purpose was much broader than the specific industry objectives of improving breeds and horse racing. We believe that certain dogs, cats and cows also benefited.
Although the industry objective of the Canada Shipping Act is to protect that industry from excessive liability with respect to suits for pollution damage, there is clearly a broader public policy objective in ensuring that spills are properly treated and that the environment is preserved.
It is important to realize that we are here to debate whether or not this is a tax or an industry purpose levy. Mr. Speaker, we believe that you are a servant of the House and that your rulings will seek the interest of the House as a whole. The question as to whether the levy imposed is a tax is really a question of law, as I have explained.
The procedural question we must limit ourselves to is whether the bill, on the face of it, is a tax or a levy for industry purposes. Bill S-13 expressly provides that the foundation is established for the industry and that the purpose of the bill is to meet the industry's objective. Inquiring beyond the face of the bill and questioning the express provisions goes well beyond the realm of procedure and into an area of law in which the Speaker does not deal.
In the case of any doubt, we know that the Speaker should favour the course that will allow the House to debate the merits of the bill and to decide rather than the Chair. This can only happen if the Speaker lets the bill proceed to second reading.
If the Speaker rules that there are other arguments and precedents not discussed in this debate, we would appreciate the opportunity to address them at that time.
Canadian practice provides a precedent based on British cases, proving that it is possible for a ways and means resolution, should it be deemed required, to be moved post-second reading. I believe that the Speaker should consider this option.