FINA Committee Meeting

37th PARLIAMENT, 1st SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Wednesday, April 17, 2002

¹

1535

The Chair (Mrs. Sue Barnes (London West, Lib.))

Ms. Kathy Kendall (General Counsel, Nuance Group (Canada); Representative, Association of Canadian Airport Duty-Free Operators)

The Chair

Mr. Jacques Dagenais (General Manager, AerRianta International; Representative, Association of Canadian Airport Duty-Free Operators)

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1540

The Chair

Ms. Kathy Kendall

¹

1545

The Chair

Mr. Remo Mancini (Executive Vice-President, Canadian Transit Company; Representative, Association of Canadian Airport Duty-Free Operators)

¹

1550

¹

1555

º

1600

The Chair

Mr. Jean Messier (Chief Executive Officer, Produits Ronald Inc.)

The Chair

º

1605

Mr. Rob Cunningham (Principal Policy Analyst, Canadian Cancer Society)

The Chair

Mr. Rob Cunningham

The Chair

Mr. Rob Cunningham

º

1610

The Chair

Mr. Jason Kenney (Calgary Southeast, Canadian Alliance)

Mr. Remo Mancini

Ms. Kathy Kendall

Mr. Jason Kenney

Mr. Remo Mancini

Mr. Jason Kenney

Mr. Remo Mancini

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1615

Mr. Jason Kenney

Mr. Remo Mancini

Mr. Jason Kenney

Mr. Remo Mancini

Mr. Jason Kenney

Mr. Remo Mancini

Mr. Jason Kenney

Mr. Rob Cunningham

Mr. Jason Kenney

Mr. Rob Cunningham

Mr. Jason Kenney

Mr. Rob Cunningham

Mr. Jason Kenney

Mr. Rob Cunningham

Mr. Jason Kenney

Mr. Rob Cunningham

Mr. Jason Kenney

The Chair

Mr. Yvan Loubier (Saint-Hyacinthe--Bagot, BQ)

Mr. Jean Messier

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1620

Mr. Yvan Loubier

Mr. Jean Messier

Mr. Yvan Loubier

Mr. Jean Messier

Mr. Yvan Loubier

Mr. Jean Lalanne (Special AgriFood Consultant, Produits Ronald Inc.)

Mr. Yvan Loubier

The Chair

Mr. Gary Pillitteri (Niagara Falls, Lib.)

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1625

Mr. Rob Cunningham

Mr. Gary Pillitteri

The Chair

Mr. Bryon Wilfert (Oak Ridges, Lib.)

º

1630

Mr. Remo Mancini

Ms. Kathy Kendall

Mr. Bryon Wilfert

Ms. Kathy Kendall

Mr. Bryon Wilfert

Ms. Kathy Kendall

Mr. Bryon Wilfert

Mr. Remo Mancini

Ms. Kathy Kendall

Mr. Bryon Wilfert

Ms. Kathy Kendall

Mr. Bryon Wilfert

Ms. Kathy Kendall

Mr. Remo Mancini

Ms. Kathy Kendall

Mr. Bryon Wilfert

Mr. Remo Mancini

º

1635

Mr. Bryon Wilfert

Mr. Remo Mancini

Mr. Bryon Wilfert

Mr. Remo Mancini

Mr. Bryon Wilfert

Mr. Remo Mancini

Mr. Bryon Wilfert

Mr. Remo Mancini

Mr. Bryon Wilfert

Mr. Remo Mancini

Mr. Bryon Wilfert

Ms. Kathy Kendall

Mr. Bryon Wilfert

Ms. Kathy Kendall

Mr. Bryon Wilfert

Ms. Kathy Kendall

The Chair

º

1640

Mr. Roy Cullen (Etobicoke North, Lib.)

Ms. Kathy Kendall

Mr. Roy Cullen

Ms. Kathy Kendall

Mr. Roy Cullen

Mr. Remo Mancini

Mr. Roy Cullen

Mr. Remo Mancini

Ms. Kathy Kendall

Mr. Roy Cullen

Ms. Kathy Kendall

Mr. Roy Cullen

Mr. Remo Mancini

Mr. Roy Cullen

Mr. Remo Mancini

Mr. Roy Cullen

Mr. Remo Mancini

Mr. Roy Cullen

Mr. Remo Mancini

Mr. Roy Cullen

Mr. Remo Mancini

Mr. Roy Cullen

The Chair

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CANADA

Standing Committee on Finance

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NUMBER 089

l

1st SESSION

l

37th PARLIAMENT

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EVIDENCE

Wednesday, April 17, 2002

[Recorded by Electronic Apparatus]

¹  (1535)  

[English]

    The Chair (Mrs. Sue Barnes (London West, Lib.)): Bienvenue à tous. Welcome.

    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.

    The witnesses this afternoon are, from the Association of Canadian Airport Duty-Free Operators, Kathy Kendall, Jacques Dagenais, and Remo Mancini; from Produits Ronald Inc., Jean Messier and Jean Lalanne; and from the Canadian Cancer Society, Rob Cunningham.

    Welcome. I think we'll go just in the order you're on the list unless there is some concern about that.

    Kathy Kendall, who is going to give the first presentation?

    Ms. Kathy Kendall (General Counsel, Nuance Group (Canada); Representative, Association of Canadian Airport Duty-Free Operators): Mr. Dagenais is going to start off.

    The Chair: Mr. Dagenais, please commence.

    Mr. Jacques Dagenais (General Manager, AerRianta International; Representative, Association of Canadian Airport Duty-Free Operators): Dear Madam Chair and members of committee, I represent AerRianta International of North America. We operate Halifax, Dorval, Mirabel, Ottawa, Winnipeg, and Edmonton duty-free shops. We are pleased to appear before your committee on behalf of Canada's duty-free industry and in particular the Canadian airport duty-free shops across this country.

    Our main intent is to express our concern about Bill C-47, in particular that this legislation further undermines the foundation on which the duty-free industry has always been based.

    First a snapshot of our sector. Canada has established a strong position and is poised to increase its share of this growing $20 billion global industry. The Association of Canadian Airport Duty-Free Operators represents the operators of airport duty-free shops. Canadian airport duty-free stores employ at least 1,000 Canadians directly and many more indirectly through the purchase of local and national goods and services. In 2000, total sales of the Canadian airport duty-free industry were just over $167 million. On average, 40% of our products sold at Canadian duty-free airports are of Canadian origin. Indeed, airport duty-free operators have contributed in no small way to the success of the Canadian wine industry. The Canadian airport duty-free industry is part of the overall tourism package and the last memory that foreign travellers retain of Canada.

    International origin of duty-free. As international travel has grown, so the tax-free trade has expanded, and with the advent of international flights, tax and duty-free sales extended to this new form of travel. In 1944 the Chicago Convention, signed by 54 nations, paved the way for the development of tax-free zones at airports. The first opened in 1947 at Shannon in Ireland, as a shop permitted to waive national tax on goods destined for export. From the former, the duty-free industry has continued to grow, to represent almost half of the total duty-free industry worldwide. This growth over the last 50 years has been possible by keeping duty-free truly duty-free.

    Canada's duty-free policy and programs. Some of the benefits created by the industry are that it competes on the international market in terms of service offered to the travelling public, increases spending of the international travelling public in Canada, contributes substantively to the revenue required by local airport authorities by helping to keep costs down for travellers, contributes substantively to the revenue paid to the Minister of Finance by the airport authority under local airport authority lease agreements, strengthens the tourism package by offering a retail vehicle that the international travelling public expects, promotes the sales of domestic goods, and creates direct and indirect jobs.

    Before this industry existed in Canada, all travellers had to stop at U.S. or foreign duty-free shops to meet their travel needs. As a small result, the economy was losing millions of dollars in travel and tourism revenue. Successive Canadian governments have supported and encouraged duty-free enterprises, because the revenue lost through the exemption of customs duty and taxes is recouped by the direct and indirect economic benefits of local job creation, purchases from suppliers, and a boost to the tourism industry in general. The government strategy has worked and customers' shopping habits are now well established at duty-free outlets across Canada.

    Duty-free operators have made significant long-term commitments and financial investments since the government has encouraged the creation of this sector. More than $20 million has been invested in building, store equipment, technology, fixtures, staff training, etc. Shops in airports spend millions of dollars on design, construction, and opening of new outlets. Moreover, it is worth noting that we pay more than $55 million a year in rents to airport authorities.

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    The Chair: Thank you.

    Ms. Kathy Kendall: Again, my name is Kathy Kendall, and in addition to representing the Association of Canadian Airport Duty-Free Operators, I am general counsel for the Nuance Group, which operates 25 duty-free stores in Toronto, Vancouver, and Calgary airports. We're the largest concessionaire tenant in Calgary and Toronto. We also operate some pre-order facilities, including a 26,000-square-foot store in Vancouver. We're very pleased to be able to speak to you about this bill today, because it's had a very detrimental effect on our business.

    Against the very positive backdrop that Mr. Dagenais just outlined to you, the federal government announced on April 5 that Canada would impose a tax on duty-free shopping, and once again the taxes were increased in November by $1.50 a carton. This tax caused immediate and significant concern in the Canadian and international duty-free industries, and the concern would be the same regardless of the product, were it something other than tobacco—perfume, liquor, or foodstuffs.

    What's important is the principle of duty-free and the fact that it's been abandoned by the government overnight with very little fanfare, without the benefit of analysis, we feel, to see whether duty-free was in fact part of the tobacco problem. The effect of the taxes has been that almost immediately consumer perceptions about duty-free began to erode, and a new perception has emerged, here and internationally, that in Canada duty-free no longer means duty-free. This has caused increased uncertainty over the future of our business, not just among the operators but within the wider community of customers, suppliers, and employees.

    The nature of duty-free transactions is that they're infrequent and customers must leave the country afterwards for at least 48 hours. As a result, customers concentrate their purchases into a few visits. When customers discover that they're not in fact assured of duty- and tax-free pricing, one of the main attractions of the store disappears and passenger visits simply dry up, leading to reduced sales. And that does affect not only us but also our suppliers, our employees, and the rents that we pay to the airport authorities, which then pass through to the government.

    This isn't the first attempt in Canada to tax duty-free shoppers. In 1992-93 an attempt was made to impose an export tax on duty-free sales of tobacco products, but the federal government then reversed course, recognizing that the measure would not contribute to the control of smuggling and would severely damage the duty-free industry.

    In 1996, in its tobacco control blueprint to protect the health of Canadians, the health ministry exempted the duty-free industry from further restrictions on the sale of cigarettes and tobacco products, recognizing that this industry does not promote the sale of cigarettes to youth and does not encourage smoking.

    Our strong reaction is partly because while there were some discussions with government regarding tobacco taxes well before the taxes were announced last April, what came out at the end of the process was a complete shock to us. In fact, we go so far as to say that the government was not straightforward with us in those discussions.

    We do want to emphasize again that the duty-free industry does not take issue with the intent of the federal government's program to discourage tobacco consumption. The industry has never argued against this policy, and in fact we adhere to very strict codes governing the sale of tobacco products. In this context, it's important to note a couple of points.

    First, the government already imposes severe restrictions on the purchase of tobacco at duty-free outlets that aren't imposed on other duty-free retailers—for instance, the requirement to buy an airline ticket and to leave the country for 48 hours after making a purchase.

    Second, duty-free tobacco purchases are limited to one carton for personal use. This is not likely to be a factor in smoking, and any purchases above the limit are of course subject to duty.

    Third, a key government target is curbing youth smoking. Duty-free outlets don't sell tobacco products to minors, and in fact only about 3% of airport duty-free shoppers are minors.

    Finally, the price of an international air ticket and the requirement to leave the country rather makes a mockery of the notion than anyone would leave the country in order to buy one carton of cigarettes.

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    Lastly, or close to it, we encourage the government to remove this tax on the grounds that it contradicts the policy on which the duty-free industry was established. It purports to solve a problem by targeting an industry that is not the cause of the negative side effects of smoking. It has begun to erode the customer base of the duty-free industry. The airport duty-free industry is not part of smuggling activity. The industry doesn't encourage Canadians to smoke, least of all Canadian youth. The industry is highly regulated already and accounts for less than 1% of domestic consumption of tobacco.

    We would like to reiterate that we do not question the government's health motives, but surely the measures taken must not be arbitrary and must support the goal. Applying this tax to a sector that accounts for between 1% and 2% of tobacco sales in Canada, that has negligible sales to minors, that is not a factor in smuggling, and that was founded on the principle of duty-free can only make this stuff arbitrary.

    We strongly urge that Bill C-47 be amended to remove taxes on duty-free. Left in its current state, the legislation opens the door to many more future tax and duty increases that would continuously erode the very duty-free experience established by the government decades ago.

    In conclusion, by imposing the tax on duty-free stores, the government has undermined the principle of the duty-free industry, has begun to erode the traffic and sales of all goods and services in the duty-free outlets, not just tobacco, jeopardized the employment of hundreds of Canadians, and negatively affected tourism and the important role of duty-free shopping for travellers.

    We're hopeful that with the amendment we've proposed, the door will be closed on any tax and duty impositions on duty-free. Thank you.

    The Chair: Thank you.

    Mr. Mancini, please.

    Mr. Remo Mancini (Executive Vice-President, Canadian Transit Company; Representative, Association of Canadian Airport Duty-Free Operators): Madam Chair, members of the committee, my name is Remo Mancini, and I serve and represent the Canadian Transit Company as executive vice-president. The Canadian Transit Company has its operational headquarters in Windsor, Ontario.

    I much appreciate the opportunity to appear before your committee today to discuss our strong concerns about Bill C-47. I will first briefly tell you something about the Canadian Transit Company, then note our problems with the bill, and conclude with some suggestions.

    The Canadian Transit Company is a privately owned tax-paying business that owns and operates the Canadian half of the Ambassador Bridge crossing between Windsor and Detroit. The company was founded in 1921 by an act of Parliament. The Ambassador Bridge opened for business in 1929, and is a direct link between Windsor, Ontario, and Detroit, Michigan.

    The Ambassador Bridge has since become the pre-eminent international border crossing in North America. In 1992 we surpassed the Peace Bridge as the busiest commercial crossing in North America. During the 2000 calendar year, approximately $160 billion worth of trade traversed the Ambassador Bridge. Also in 2000, we became the busiest auto crossing on the Canada-U.S. border, surpassing the Windsor-Detroit tunnel.

    Through one of our associated companies, in a public-private initiative with the University of Windsor, we operate a duty-free outlet that on a regular basis employs 70 staff members, 75% of whom are University of Windsor students. This is a fair-sized enterprise that directly and indirectly contributes to the local and Canadian economies through employment and the use of local suppliers, such as insurance brokers, cleaners, and stationery suppliers, and through purchases made from Canadian manufacturers. We are here today because we have significant interest in the future of the Canadian duty-free industry, which we feel has been placed in jeopardy.

    So what are our problems with Bill C-47? I should say first that I agree with the broad thrust of the position of my colleagues from the Association of Canadian Airport Duty-Free Operators. I also view the threat to our industry as immediate and very serious.

    My suggested solution is to remove this threat hanging over our industry and return the industry to the same position it was in prior to the introduction of Bill C-47 and its predecessor, Bill C-26, which first imposed these taxes on tax- and duty-free stores. To put it more clearly, I am respectfully requesting the finance committee take all steps necessary to return the tax- and duty-free industry back to tax- and duty-free status. I dare say that if you were to canvass the travelling public, they would ask you to do the same thing.

    Please understand up front that our company does not take issue with the government's broad policy initiative on reducing the consumption of tobacco products. Indeed, we take our responsibilities in this area very seriously, as you would see if you were to visit our store and other Canadian tax- and duty-free stores.

    The government's policy to fight consumption itself is not the issue here. However, the government's policy is being carried out with no seeming understanding or concern about its collateral effects on the duty-free industry, and with little regard for due process.

    Let's take a look at the way in which the anti-tobacco policy is being carried out in duty-free stores. The government first imposed a tax of $10 a carton on cigarettes sold in tax- and duty-free outlets. Bill C-47 increases this tax by approximately $1.50.

    This tax invasion of a previously non-tax retail environment is ostensibly being carried out to curb the consumption of tobacco in Canada, especially among youth.

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    What is wrong with this move? I say plenty. It won't do a thing to reduce tobacco consumption, least of all among youth. In the process of not reducing tobacco consumption, it will have considerable negative side effects on our industry, changing its very foundation and the public policy principles the industry was founded and built upon.

    Why will it not reduce Canadian tobacco consumption? To begin with, tobacco sales through tax- and duty-free outlets account for only approximately 1.4% of tobacco sales in Canada, so we are looking at a very small catchment area indeed. Many of those buying tobacco at tax- and duty-free stores are non-residents visiting from other countries. This new tax will only encourage them to make their purchase of cigarettes at U.S. tax- and duty-free stores. I ask how this will help the health of Canadians.

    As well, the extra charge will have absolutely no impact on youth tobacco consumption. Very few travellers are unaccompanied minors, and we don't sell tobacco to them in any case. That's illegal. Our fine record of self-enforcement speaks for itself.

    The extra charge, therefore, will have no discernible effects on tobacco consumption. It will, however, have very discernible effects on the tax- and duty-free stores and their suppliers and on the communities in which they operate.

    Here's how. Tobacco products are a major part of the duty-free industry. When visitors come in to buy tobacco, they also purchase other items, such as fragrances, alcohol, and food, all tax- and duty-free. The new tax on tobacco products will simply encourage less frequent visits to our stores.

    The effect of this new tax is thus to reduce the viability of tax- and duty-free outlets, and with this comes the negative impacts on employment, on local and federal tax revenues, and on rents paid that are based on revenues, which help support border crossings and, as my colleagues have said earlier, airports.

    Another negative aspect of this extra charge is its effect on tourism in general. We have these large signs up in our stores that say “tax-free and duty-free”, but they are now absurd, because the statement is no longer true. In a highly competitive world tourism market, Canada will become less attractive. The negative spinoffs arising from a reduction in the number of visitors are surely clear to members of this committee.

    As well, the committee should be aware that in Ontario, duty-free stores must receive permission from the Liquor Control Board in order to sell wine, beer, and spirits. Obviously, if the LCBO wanted to, they could make a health argument regarding the sale of alcohol and thereby follow the federal lead and impose significant new taxes.

    Who will be harmed by such a policy reversal? I think Ontario wine producers would be the first injured. For example, at the Ambassador duty-free store in Windsor, we are proud of our vast selection of Ontario wines, such as Pelee Island, Inniskillin, Hillebrand, Henry of Pelham, Reif, Point Northern, Pillitteri, and Kittling Ridge. A tax on these homegrown products will discourage their sale and continue to erode the public's confidence and expectations of tax- and duty-free stores.

    Furthermore, regarding the issue of contraband, during hearings before the Senate banking committee on June 6, 2001, Mr. Brian Willis, senior chief of the sales tax division in the tax policy branch, was asked by Senator Banks to explain the current situation--i.e., contraband. Mr. Willis replied, and I quote for the members, “The Canadian duty-free industry has not been a source of contraband. They are tightly controlled.” End of quote. End of story.

    The issue of contraband, therefore, cannot be used to justify taxes in tax- and duty-free stores.

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    I should also point out that this extra charge was imposed with little regard for due process. There has been no public policy debate on the future impacts of this extra tax on the industry and others. This is contrary to the way in which our parliamentary system is supposed to operate. We are supposed to assess all the consequences of a policy before enacting it, and I put it to you that this has not been fully done in this case.

    The federal government has put a whole industry at risk without any public debate. This is wrong and the committee should find it unacceptable.

    What, therefore, should be done? We would like to see deleted the sections of the bill that deal with making the tax- and duty-free industry part of the new tax regime. The bill should be amended. This is not so the committee can take issue with the tobacco or contraband policy of the government; it is so the committee can stand up for the principles of due process and the full maintenance of the tax- and duty-free industry, which is so important to Canada's tourism.

    Amending the bill will, however, draw the attention of members of Parliament to a bill that does not deliver what it is supposed to--reduced tobacco consumption and contraband--but does deliver what it is not supposed to, which is the undermining of a legitimate, long-standing, important industry, an industry that has fully complied with the government's previously stated public policy objectives.

    There are other less economically disruptive ways of dealing with tobacco consumption and contraband. Although we are not part of the problem, we are prepared to be part of the solution. For example, I would recommend that our industry work with the government to build education programs on the key issues that would support the government's overall objectives.

    Indeed, we at the Canadian Transit Company feel we should all, collectively, be able to devise ways that advance the government's agenda on smoking and at the same time operate without putting an industry in jeopardy and without destroying the principles of tax- and duty-free shopping.

    To sum up, Madam Chair and members of the committee, imposing this tax on duty-free outlets is symbolic at best and not worth the many negative consequences that were not foreseen because there was not enough public debate before the tax was imposed. The Canadian Transit Company and the Ambassador duty-free store recommend it be scrapped, and we feel this can be done without any adverse consequences for the government's policies or image.

    I look forward to answering your questions and to working with you and the committee members.

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    The Chair: Thank you.

    Monsieur Messier, s'il vous plaît.

[Translation]

    Mr. Jean Messier (Chief Executive Officer, Produits Ronald Inc.): Thank you, Madam Chair, members of the committee. Thank you for inviting me today.

    My name is Jean Messier and I am the Chief Executive Officer of Produits Ronald Inc., which is a subsidiary of Industries Lassonde, which is mainly involved in the manufacture of fruit juices. Produits Ronald manufactures specialty food products. We have been in business for 35 years. In the past, our main area of business was canned vegetables. Business in this area began to decline a few years ago and in the early 1980s, we diversified into the manufacture of stock and sauces—mainly fondue.

    Wine is included in many of our sauces and stocks. We use wine in these products mainly to add flavour and not for its alcohol value. Unfortunately for us, wine is alcohol. The process that we use in adding wine or spirits to our food products eliminates the alcohol content. This is achieved either through a dilution process, whereby wine or spirits are diluted in many other ingredients or by a heat-based process, whereby heat is applied to evaporate the alcohol. When all is said and done, we end up with a food product which has an alcohol content of below 0.5%. Consequently, our food products may indeed contain alcohol residue, but at very low levels.

    The current Excise Act levies a tax on us. This tax mainly applies to wine and represents about a third of our costs. Consequently, one third of the price that we currently pay for wine is an excise tax. In our case, that represents a few tens of thousands of dollars in excise tax that we have to shell out each year when we buy wine.

    In addition, we are currently facing competition from imported food products, mainly from France. These products also contain wine but are not affected by Canadian excise taxes. We are well aware of the fact that these products are exempt from excise tax in Europe also. Consequently, in our view, these products represent unfair competition for us and we can do nothing about it.

    The majority of our current potential export markets do not levy excise taxes on these types of products. This makes it difficult for us to break into international markets.

    The excise tax levied on us currently cuts into our competitiveness and hampers the potential development of major value-added products containing wine, and impedes us from breaking into growing niche markets.

    Lastly, I have come here today to find out whether Bill C-47 that you are currently studying would exempt the wines and spirits that we use in producing our food products from excise tax. We would urge you to extend this exemption to all food products with an alcohol-residue level below a statutory limit of 0.5%. This would enable us to develop products and to enhance our competitiveness on foreign markets.

    Madam Chair, I would just like to thank you for inviting us here today. Thank you.

[English]

    The Chair: Merci, Monsieur Messier.

    Mr. Cunningham, it is your turn.

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[Translation]

    Mr. Rob Cunningham (Principal Policy Analyst, Canadian Cancer Society): Thank you, Madam Chair. On behalf of the Canadian Cancer Society, I would like to thank you for inviting me to speak on Bill C-47 today.

    The Canadian Cancer Society unreservedly supports the increased taxes on tobacco products provided for in the bill.

[English]

     The reason for this is that higher tobacco taxes reduce the consumption of tobacco products and consequently reduce the enormous health effects that arise from the use of tobacco products.

    We have prepared for this committee a report--seven volumes, 303 tabs--entitled, in English, “Compilation of Selected Evidence Regarding the Impact of Higher Tobacco Prices on Tobacco Use; A Submission Prepared for the House of Commons Standing Committee on Finance”.

    I know that during the debate at second reading there was discussion with respect to the impact of higher prices on taxes, and this compilation of the worldwide evidence is thought--or it's our intention--to be useful for the committee as a study for this bill, and indeed into the future.

    Given the historic review of the excise legislation, I wondered if the committee would receiv this as an exhibit to its proceedings.

    The Chair: That's fine. You can give it to the clerk and it will be an exhibit. You're not asking for it to be put into the record, are you?

    Mr. Rob Cunningham: That's correct.

    The Chair: Okay, that would be fine. I think everybody heaved a sigh of relief there.

    Mr. Rob Cunningham: One of the items distributed to members of the committee is a tax map showing the current prices in Canadian provinces and territories and U.S. border states. We see that there has been progress made, and we praise the government and the widespread support within Parliament for the tobacco tax increases that have occurred in recent years.

    We do see, however, Ontario and Quebec as having the lowest prices for cigarettes in North America, at approximately $42 or $43 per carton.  This is lower than the lowest state in the U.S., Kentucky, which is in the tobacco belt. There is the opportunity in the future for further progress in this area, and we've seen so far in 2002 provincial tobacco tax increases in British Columbia, Alberta, Saskatchewan, Newfoundland, Nova Scotia, and Prince Edward Island. And we've seen an announcement in the Yukon budget as well, which is intended to take effect on June 1.

    We support the increases on tobacco tax for the roll-your-own product. However, there remains a significant gap whereby consumers can obtain roll-your-own tobacco at less than half the price of the cost of a carton of cigarettes. The reason for that is the ever-innovative strategies and abilities of tobacco companies. They've expanded roll-your-own tobacco. They've puffed it up so that less tobacco is needed per cigarette, and thus the effective tax per cigarette is reduced. While we support the increase, there is particular room to address this area. Some provinces have taken significant action to narrow the gap, compared to the federal government.

    We also support a further narrowing and elimination of the gap with respect to a category of product called tobacco sticks.

    We support the export tax that is in this bill and indeed strengthened through the announcement on November 1, 2001.

    I would like to provide more detailed remarks with respect to the duty-free store issue, which we've heard some testimony on today.

    The Canadian Cancer Society and the national health community have long supported an elimination of the sale of tax-exempt products in duty-free stores for tobacco products. Higher prices reduce consumption. It may be that there's a small volume of tobacco products sold in duty-free stores. There are also 45,000 Canadians who die each year from tobacco products. A very small reduction in consumption has a disproportionately large impact.

    More significantly, the export tax, combined with the tax on duty-free stores, is a very important anti-smuggling measure. In the early 1990s, when smuggling was particularly significant, a large volume, billions of cigarettes, were ostensibly intended for duty-free stores in the United States and in Canada, but they never ended up there. They ended up in the hands of smugglers and into the U.S. market.

    By ensuring that you do not have a potential opening.... However well-intentioned particular stores may be, even if individual stores are fully law-abiding, you have a potential opening in which you could have a massive volume of contraband flow, and that is exactly what happened in the early 1990s. That is why we now see a worldwide consideration within discussions for an international treaty, the Framework Convention on Tobacco Control, to have a worldwide ban on duty-free stores. We're several years away from seeing the conclusion of the negotiations on that.

    But already within the European Community, if you're travelling on a flight from, say, Paris to London, you cannot purchase duty-free tobacco products. That intra-Europe travel no longer has duty-free tobacco products, and those stores continue to operate.

    We've heard that 1.4% of tobacco products in Canada are sold through duty-free stores. That represents a fully taxed basis, more than $80 million a year of revenue. That's significant revenue for the government that could be used for other government purposes, whether it's tax relief, debt reduction, or program spending. Why should a particular category of stores receive what is, in effect, a subsidy and favourable treatment, compared to convenience stores and other retailers in Canada that sell tobacco products? A lot of people consider this to be unfair.

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    Given the health objectives of raising tobacco prices, I'd like to reiterate today our strong support for the progress made in this bill in narrowing the still significant gap in the taxation of products between duty-free and non-duty-free stores.

    I'd like to thank the committee once again for the opportunity to testify today and present our views. I look forward to any questions members may have.

    The Chair: Thank you.

    We'll now commence an eight-minute round of questioning. We'll begin with Mr. Kenney.

    Mr. Jason Kenney (Calgary Southeast, Canadian Alliance): Thank you, Madam Chairman, and thank you to our witnesses for coming before us today.

    I would like to direct my first questions to Ms. Kendall and Mr. Mancini, who represent the duty-free stores. I have to admit my ignorance; you both referred throughout your presentations to “this tax”, and I'm not exactly sure what you meant. Is there a new tax imposed in Bill C-47 on tobacco products or other products handled in duty-free stores?

    Mr. Remo Mancini: Yes.

    Ms. Kathy Kendall: Yes, there's an extra $1.50 in addition to the existing tax of $10 a carton.

    Mr. Jason Kenney: I'm trying to understand the chronology of this. Was it introduced on April 5, 2001?

    Mr. Remo Mancini: I want to make sure our facts are correct. The tax went from zero to $10.00; now this is another $1.50.

    Mr. Jason Kenney: Okay, I understand now. That would be $1.50 higher per carton than if you were to buy them in a regular corner store somewhere?

    Mr. Remo Mancini: No. We're speaking to the committee in the context of an industry that has been created through public policy, and highly monitored, for the purpose of allowing tourists exiting the country to buy products tax- and duty-free. That's the principle we're dealing with here.

    We are actually quite surprised that this public policy, which I believe has served our country well, is being changed. Whether the issue is tobacco, alcohol, fragrances--any of the thousands of products sold at tax- and duty-free stores--no matter what the product, we would be here before you and members of the government to preserve the tax- and duty-free industry because it's done its job and done it well.

    We think the issue of tobacco, as the first product subjected to an openly stated government intent to reduce consumption and contraband, throws the door wide open for similar policies to be introduced by other governments. I mentioned the Ontario LCBO; it could say exactly the same thing, even though that would be factually incorrect. Then people who have difficult reactions to fragrances or other things might want to use the same arguments.

    So we're not here because of tobacco; we're here because of the principle we want to preserve.

º  (1615)  

    Mr. Jason Kenney: Are there any products other than tobacco affected by this?

    Mr. Remo Mancini: No, sir.

    Mr. Jason Kenney: Mr. Cunningham just asked the rhetorical question of why one kind of store should be exempted from a tax that otherwise is universally applied. What would be your brief response to this?

    Mr. Remo Mancini: It's government policy. The Government of Canada, under various governments of different political stripes, has endorsed the principle of tax- and duty-free stores for products that are exported.

    Mr. Jason Kenney: But what is the policy principle behind this? For instance, you mentioned that in Europe, if you travel within the European Union, there's no tax now on tobacco products. Are there no longer duty-free shops within Europe?

    Mr. Remo Mancini: There's no duty-free shopping between Ontario and Quebec, or between Quebec and other provinces. The European Union is run with the assistance of a European Parliament; Canada, which borders on the United States, is an independent sovereign country. There is no comparison of the European situation with the North American one.

    Mr. Jason Kenney: I have a couple of quick questions for Mr. Cunningham from the Cancer Society. What does the data demonstrate about the relationship between tobacco prices and smuggling? At what price level does the data suggest we would again begin to see a serious smuggling problem in this country?

    Mr. Rob Cunningham: I think we could have the prices in Ontario and Quebec increase to those in the west without a material increase in the level of smuggling, because we have anti-smuggling measures in place. If those anti-smuggling measures were not in place, it would be a different situation if the manufacturers were free to do what they did in the early 1990s, which is export vast quantities to upstate New York knowing they'd come right back into Canada as contraband. But because those anti-smuggling measures are in place, and we acknowledge what has been done in a previous bill, there's lots more room for further increase.

    Mr. Jason Kenney: My last question consists of two parts. First, what is the youth smoking rate in Canada today as compared with what it was two or three decades ago?

    Mr. Rob Cunningham: I can get the full statistics back to the committee.

    Mr. Jason Kenney: Are they higher or lower?

    Mr. Rob Cunningham: In the first six months of 2001, 23% of 15- to 19-year-olds smoked. Around 1994-95, after the tobacco tax rollbacks, there were a number of studies--

    Mr. Jason Kenney: But that wasn't my question. My question was--

    Mr. Rob Cunningham: Compared with 20 or 30 years ago, it's far lower. I'm not sure of the number; it's 45%, maybe, or in that category. But I can get that for you.

    Mr. Jason Kenney: Would you assert that there's a clear linkage between higher tobacco prices and lower youth tobacco consumption?

    Mr. Rob Cunnigham: Yes.

    Mr. Jason Kenney: People may think that's a ridiculous question, but it certainly is questioned by the tobacco industry, which suggests that in fact there is a reverse correlation.

    Mr. Rob Cunningham: It is questioned by the tobacco industry. They question a lot of things, including the health effects of tobacco use in terms of causation. The evidence is extensive, and it is included in our submission that was tabled today.

    Mr. Jason Kenney: Thank you.

    The Chair: Mr. Loubier, eight minutes, please.

[Translation]

    Mr. Yvan Loubier (Saint-Hyacinthe--Bagot, BQ): Thank you. I only have one question, Madam Chair. I would like Mr. Messier to elaborate on the problem facing his company and on how we could address the issue through Bill C-47.

    Mr. Jean Messier: Bill C-47, in its current state, states that food products, on the approval of the minister, may be exempted from the excise tax on alcohol used in the manufacture of these food products. As I said earlier, we have been paying excise tax on our products for 15 years now and on several occasions, when we appealed this levy to the department, we were sent packing.

    In our opinion, this levy is quite unacceptable, because food products are not normally subject to excise tax. Consequently what we are suggesting is to exempt all food products with a residual alcohol content of under 0.5% from excise tax. That does not mean however that there are no food products with a residual alcohol content of over 0.5%. There are. That is provided for in the act. For example, take chocolate. You have all seen liquor-filled chocolates; those types of chocolates contain well over 0.5% alcohol. However, the act provides that these chocolates are not considered alcoholic products and therefore, are not subject to excise tax. Consequently, we are talking about two different types of products here.

    Currently, we manufacture products with an alcohol content of below 0.5%. But it is possible that in the future we might want to manufacture Madeira sauces with an alcohol content of 2%. I don't think this type of sauce should be considered an alcoholic product that would be subject to an excise tax. As far as I understand the wording of the act, this would be subject to ministerial approval. I don't know whether I've answered your question.

º  (1620)  

    Mr. Yvan Loubier: Have you or your company made recommendations to the Department of Finance on this issue in the past, or is this the first time that you have put forward this type of suggestion?

    Mr. Jean Messier: No, it's the first time. Perhaps we have been somewhat slow in coming forward, but we have talked to the department in the past. We deemed our case to be a legitimate one, but at the end of the day, when the department looked into this issue it concluded that under the current act, it would not be possible to exempt us from paying excise tax.

    Mr. Yvan Loubier: I'm sure that you are not alone in that.

    Mr. Jean Messier: To my knowledge, there are very few Canadian companies like ours using wine as a flavour enhancer in the food products they manufacture. Other foods such as the chocolates that I referred to earlier, are provided for in the current act. Even vinegar, because it is an alcohol-based product, is provided for in the current legislation.

    Consequently, there is a shortcoming in the current legislation. It seems that it was not thought at the time that food products could contain alcohol. In light of the fact that our products are not provided for in the current legislation, we have to pay excise tax on the alcohol that we use in producing them.

    Mr. Yvan Loubier: Thank you very much.

    Mr. Jean Lalanne (Special AgriFood Consultant, Produits Ronald Inc.): Mr. Loubier, I'd like to just add that we have sought the advice and opinions of various stakeholders. We have letters from the Société des alcools du Québec, and Quebec wine producers, which are suppliers to Produits Ronald Inc., as well as the Quebec and Canadian associations of food producers, all supporting our company's request for an excise tax exemption on wines used in processed food.

    Mr. Yvan Loubier: Thank you very much.

[English]

    The Chair: Mr. Pillitteri first, and then Mr. Wilfert.

    Mr. Gary Pillitteri (Niagara Falls, Lib.): Thank you very much, Madam Chair.

    Welcome, and thank you for making a presentation before us.

    I'm possibly the old-fashioned person on this committee. Certainly the price of excise tax on tobacco did not stop me from smoking from the time I was 10 years old until I was 50 years old. I think I became wiser; I could surely afford to smoke today, so it's not the price. I think, more than anything else, we should spend money on education rather than the price of excise tax.

    Personally, Madam Chair, I believe the Department of Finance has surely not done an excellent job in putting these excise taxes on tobacco, and certainly on spirits, because I look at all duty-free shops as export points for Canadian products. I think they should be treated no different from any company that exports outside of Canada, be it spirits, beer, whatever the case may be, or even tobacco.

    I think we should be in the business of educating the world, because duty-free shops are at the point of exit, people leaving the country, not actually staying within the country. As a matter of fact, I think it has been said that it's the point of last resort when they're leaving and have so much excess capital that they have not spent in that currency, and they'd like to leave it in the duty-free shops.

    That's a good thing to be in, actually. We could truly say that tourism is an export business, and therefore that's how it should be treated.

    I understand the fact that we had to bring in some laws about smuggling, but I think that should be more in the enforcement, rather than trying to educate.

    As I recall, years ago, being in agriculture, when they used to auction off tobacco and foreign countries used to come in and buy it, there was no tax. I think there still isn't a tax today. If any tobacco goes to the auction and foreign countries buy it, I don't think there's any tax on it. Realistically, then, I don't see the difference. I understand that they're trying to educate the Canadian people, but of course it's home consumption.

    But I want to ask a couple of questions.

º  (1625)  

     Mr. Cunningham, do you believe we should be, in a sense, educating people on the use of tobacco or products that are harmful to one's health outside the borders of Canada, or should we just contain it within the borders of Canada?

    If so, why are you so adamant bringing this about, the tax...the differentiality between Canada and the United States?

    Mr. Rob Cunningham: In terms of a tobacco control strategy, we support a comprehensive strategy with legislative, taxation, and education components.

    Education about smoking and health could and does include the health warnings we see on packages. In terms of what we're doing outside Canada, the Canadian government has taken the lead role, in negotiations for the international treaty, to support this as a minimum worldwide standard, in terms of the size and use of pictures. We support education in the schools.

    We also support higher tobacco taxes, because it is unequivocal, clear, beyond a doubt, that this is a very important tobacco control strategy to reduce smoking--including among kids, who are particularly price-sensitive because they just have less money.

    Mr. Gary Pillitteri: Good.

    If I may, we had quite a thriving tobacco industry at one time, and now, by hitting us so much with tax we have an industry that is finding it even hard to diversify. I don't think...and we should have an effect on domestic consumption within Canada. Yes, let's do all we can to stop Canadians from smoking. After all, we'll be paying the bill through health care and all of that. But going outside of Canada is a different thing.

    Surely, when we have 1.2 million Chinese or Japanese and so on, surely to hell they're not stopping smoking, and we're not going to interfere with them. I think it's within their own country, within their own policies, they should be educated.

    There I go again, thinking, as a free entrepreneur, we should be looking at these duty-free shops as export points. They should not be treated differently from any other businesses, and I think we're encroaching on their ability to survive. They often, in places where they're located, bring some substantial high taxes and, of course, leases.

    Those are my thoughts.

    The Chair: Thank you.

    Mr. Wilfert, please go ahead. You have eight minutes.

    Mr. Bryon Wilfert (Oak Ridges, Lib.): Madam Chair, I thank the witnesses for being here today. I confess I don't smoke, although I do have the odd cigar; I will say that. Cigars are not touched in this bill, but just to let you know....

    I guess I'm a bit surprised at the response. In fact, I'm more than a bit surprised. The bill had first reading in December. We had second reading before the end of March. From particular comments there would seem to be a tremendous disconnect here between the fact that this bill has been around for a few months and the fact that you're now here today, as if somehow you were blindsided, which I find difficult to understand.

    However, the process notwithstanding, you have this concern about the $10. I know in April of 2001 there was a comprehensive strategy announced by the government, which included tobacco tax increases. Then on November 1 we announced new increases, as you know, across the board, along with a number of provinces. And while the total tax advantage enjoyed by duty-free shops over retail stores was not reduced in any province or territory, it was obviously increased in a few provinces. But if you're a foreign traveller and come to a duty-free shop, do you not get a refund? If they sell to a foreign traveller, does the duty-free shop get a refund as well on the duty they paid ?

º  (1630)  

    Mr. Remo Mancini: Not on Canadian cigarettes.

    Ms. Kathy Kendall: And that's the vast majority of the market.

    If I could just respond to your comment about it seeming as if we were blindsided, we did appear in front of a Senate committee last June—

    Mr. Remo Mancini: A year ago.

    Ms. Kathy Kendall: Yes, when this first.... So this is not our first attempt to bring this forward.

    Mr. Bryon Wilfert: Well, regardless of your going before the Senate, the question then is you've known it's been around a long time. Your comments here would indicate to me that somehow you think the government has suddenly dropped this on you, and that's certainly not my understanding. My understanding is you've had discussions with the finance department. You may not have liked the answers you got—

    Ms. Kathy Kendall: Prior to the bill being implemented? No. No, sir.

    Mr. Bryon Wilfert: I don't like all the answers I get from the finance department, either, but the process has been there.

    Ms. Kathy Kendall: We were invited to speak to the finance department prior to the bill being passed in April. Those discussions in no way suggested to us that there was going to be duty imposed on domestic tobacco or any other duty-free tobacco. Those discussions were in the context of World Health Organization initiatives to abolish the sale of duty-free tobacco some number of years down the line.

    Mr. Bryon Wilfert: Well, I won't debate it. But I go back to my question earlier, through the chair. If I am a foreign traveller in Canada and I buy Canadian cigarettes at a duty-free shop, you're telling me there's no refund.

    Mr. Remo Mancini: No. That's correct.

    Ms. Kathy Kendall: That's correct, because the tax is imposed at the level of the manufacturer. It's not a tax that the duty-free stores collect.

    Mr. Bryon Wilfert: On foreign tobacco.

    Ms. Kathy Kendall: Other than on foreign tobacco.

    Mr. Bryon Wilfert: You get a rebate on foreign tobacco. And as a duty-free shop, you will get also a rebate if you sell foreign tobacco.

    Ms. Kathy Kendall: We get a rebate on foreign tobacco, if we can prove that it was sold to a non-resident of Canada. It's hard to figure out exactly how we prove that, given that the driver's licences and passports aren't indicative necessarily of residency. Quite frankly, I don't know of any airport duty-free store that has decided it can meet the paperwork burden that the government requires in order to get that tax back.

    Mr. Remo Mancini: Land border stores have figured it out. We get our money back on—

    Ms. Kathy Kendall: Because you have the cars.

    Mr. Bryon Wilfert: That's my understanding.

    Mr. Remo Mancini: We are able to get licence plate numbers and other identification as required. And I appreciate that question.

    The difficulty we face is that we are an industry created for a very stated purpose--to serve a very narrow segment of the market, referred to as the travelling public. Our whole modus operandi was to ensure that as travellers were leaving our country, we could entice them into our stores and have them make purchases for export only.

    Picture in your minds how it works. There's usually more than one person travelling. Often it's a group of people or maybe a family or maybe a bus. People are travelling. They're on their way home. They stop at a tax- and duty-free store. There are services there that they can avail themselves of. There are facilities that can be used. There are monies that can be exchanged. There are bank machines that can be used. In some areas there are fax machines that can be used for people to send messages, etc. There's all of that.

    This whole atmosphere is being created so that we can entice these people who have visited our country to make one last contribution to the economy of the country. And that's what we were asked to do. I think we've done a good job of it. I think we've done a heck of a good job of it. Our duty-free land border stores are of the highest standard. I have visited stores in many jurisdictions, and we have a lot to be proud of.

º  (1635)  

    Mr. Bryon Wilfert: With all due respect, that isn't the issue.

    Mr. Remo Mancini: Well, it is the issue. It is the issue.

    Mr. Bryon Wilfert: With all due respect, it's not the issue to me, because in fact nobody is arguing that you don't have the highest quality. And I've certainly seen that.

    Mr. Remo Mancini: Well, I was also going to the next point. Not only do we have the highest quality for facilities, but we've met the highest standards possible to fight contraband, as stated by your own departmental officials. We've passed the test.

    We've done everything that the government has asked us to do. We've carved out this niche of an industry from nothing, and it was a good idea. Our concern is that we're getting lumped in with some of your other goals that we have no objections with.

    By placing the tax on tobacco we've opened the barn door wide. We've said okay, LCBO Ontario--I'll speak for Ontario, with respect to everyone else whose in the room, because I know the Ontario rules best--here it is. Somebody come and please make a case that alcohol is harmful to your health. Somebody please come and make a case that there's contraband in alcohol, because we need a $10 tax on every bottle of wine and every bottle of spirit produced in our country.

    And that's where I'm afraid we're going. That's really our point of contention with what has happened.

    Mr. Bryon Wilfert: Well, I don't think we're going that route.

    But my last question is--

    Mr. Remo Mancini: But you can't prevent the Ontario government, with all due respect, from—

    Mr. Bryon Wilfert: No, we can't.

    Mr. Remo Mancini: But you've shown them the way.

    Mr. Bryon Wilfert: Could you provide for this committee very specific data to show the detrimental effect that you claim the duty-free stores will have, notwithstanding the fact that you have an advantage already over normal retail stores in the country?

    Mr. Remo Mancini: Could I just address that before I turn it over to Kathy?

    It troubles me when I hear comments made that we have an advantage over someone else. We have no advantages in our industry. The entire duty-free industry--airport duty-free and land border duty-free--were told to operate under these rules. I have no advantage over the duty-free operator in Sarnia or any of the duty-free operators between Quebec and neighbouring jurisdictions. We have no advantage. We are an industry unto ourselves, doing what you asked us to do. So to continually say that we have an advantage over somebody is actually fighting your own policy.

    If we're going to go down that road, then we should say so, that we had a duty-free industry, we were proud of it, but we don't want it any more--thank you and goodbye. But the way it's going now, it's as if you have us in limbo.

    Mr. Bryon Wilfert: What's the advantage of me buying cigarettes, wine, or anything at a duty-free store versus the street?

    Ms. Kathy Kendall: I'd like to give you the specific numbers, at least for Nuance, with respect to the damage this tax has caused.

    Mr. Bryon Wilfert: And have you given these numbers to the finance department?

    Ms. Kathy Kendall: Yes, they have been given.

    Mr. Bryon Wilfert: When did you give them to them?

    A voice: December 9, I think it was.

    Ms. Kathy Kendall: These are numbers specific to Nuance. Just before I give you those numbers, I want to say I think there's a distinction that needs to be very well understood on the smuggling issue, because I do appreciate that it's a concern. There is a difference between tobacco manufacturers and duty-free operators. If there are issues with smuggling at the tobacco manufacturer level, then by all means address them, but surely a way can be found to address them without injuring the duty-free operators and their employees.

    We have over 700 employees. I will tell you right now that our tobacco sales are down 41%. Liquor sales, which are 30% of our business, by the way, are down over 10%. Those are very significant categories for us. So it is not just the tobacco, it's the add-on sales as well.

    As I was saying, Nuance has 700 employees. The effect is going to be felt and is being felt at that level. If the concern is something about smuggling, deal with it, please, at the manufacturer level, not by injuring the operators and their employees and their families. Surely we can find a way to do this.

    The Chair: Thank you.

    Mr. Cullen, eight minutes, please.

º  (1640)  

    Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Madam Chair.

    Thank you to the presenters. I had a couple of questions of my own, but I just wanted to follow up on Mr. Wilfert's point. If you have data that shows a drop in sales, how are you going to differentiate a drop in sales because of these measures versus a drop in sales because a lot fewer people are flying and travelling?

    Ms. Kathy Kendall: The numbers I quoted, sir, are January to the end of March, year over year. So they don't take into account the September 11 effect. By January of this year, we were back to within a few percent in terms of passenger numbers. I didn't give you 12 months' worth of numbers.

    Mr. Roy Cullen: That's not my understanding. I thought the passenger volumes were picking up very well, but they're not back to what they were, are they?

    Ms. Kathy Kendall: They're not back, but we've found they're within 10%.

    Mr. Roy Cullen: That's a smaller number than I'm familiar with, working with the Greater Toronto Airport Authority.

    Just coming back to Mr. Wilfert's point, you make the point well, Mr. Mancini, about duty-free enterprise and their raison-d'être. But is it not true that if I'm a visitor heading back to Detroit and I want to buy a carton of du Maurier, it's still cheaper to buy it through you than picking it up at the local A&P, other things being equal?

    Mr. Remo Mancini: But I'm not sure what the issue is—

    Mr. Roy Cullen: I'm wondering, could you answer the question.

    Mr. Remo Mancini: Yes, sir, that's correct.

    Ms. Kathy Kendall: Not so much, though; not so much. I mean, we don't have the purchasing power of a Costco, so there's a price differential in terms of buying from the manufacturers. It is still less expensive, but not so much that people are.... There's a point at which you're not willing to go out of your way to save $2.

    Mr. Roy Cullen: Yes, but if I'm going out of my way, if I'm leaving the country, I'm at an airport or something, instead of carting a damn carton around, it's actually more convenient to buy it at an airport, for example. Isn't that true in some cases?

    Ms. Kathy Kendall: I'd argue it's more convenient to buy it beforehand so you can pack it in your luggage, for the $2 extra it would cost you, rather than having to carry it with you through the airport.

    Mr. Roy Cullen: Okay.

    I want to move on to a couple of other questions. Have these measures affected differentially the land-based duty-free versus the airport-based duty-free? Are you representing all of them?

    Mr. Remo Mancini: No, I'm here representing the Canadian Transit Company and the Ambassador duty-free store at the Windsor crossing. I've teamed up with my colleagues, who are representing the airport duty-free industry.

    Mr. Roy Cullen: Oh, so they're airport and you're land-based.

    Mr. Remo Mancini: I'm land-based, yes.

    Mr. Roy Cullen: How does one become a duty-free operator? Do you have to get a licence from the government, or how does that work?

    Mr. Remo Mancini: I'll speak about Ontario because I know the rules. You have to get two licences. You have to get a licence from the Department of National Revenue, and then you have to get a letter of authorization from the Liquor Control Board. So you need two sets of permission to make the duty-free store work.

    Mr. Roy Cullen: So what do you need from the federal government?

    Mr. Remo Mancini: You need a licence.

    Mr. Roy Cullen: That licence is for what length of time?

    Mr. Remo Mancini: Typically it's for five years.

    Mr. Roy Cullen: And then it's typically rolled over, or...

    Mr. Remo Mancini: It's typically rolled over, unless something has gone amiss. But our industry has been very good. We're very proud of the conduct, history, and the things we've been able to achieve, all within the guidelines and parameters set out, which, I would add, are very strict.

    Mr. Roy Cullen: Thank you.

    That's it for me.

    The Chair: Does anybody else have further questions?

    On behalf of the committee, I'd like to thank all our witnesses today. We appreciate the time you've taken. We'll consider your remarks further in June.

    Thank you very much. The meeting is adjourned. I'll see you tomorrow right here at 11:30 a.m.