Financial Procedures / Legislation

December 2, 1998

Debates, pp. 10788-91

On November 18, 1998, Don Boudria (Leader of the Government in the House of Commons) rose on a 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, adopted by the Senate and sponsored in the House by Carolyn Bennett (St. Paul’s). The government House leader argued that the bill was not admissible because it proposed a taxation measure and that, as such, the bill ought to have been introduced in the House where it would have had to have been preceded by a ways and means motion. Ms. Bennett argued that the Speaker ought not inquire beyond the face of the bill and that to do so was to go beyond the realm of procedure into an area of law. After debate, the Speaker declared that he would look at all the material given to him and return to the House with a decision.^[1]

On December 2, 1998, the Speaker delivered a ruling on the point of order. He ruled that the charge imposed by the bill did not benefit the tobacco industry but was directed to a matter of public policy. The charge imposed in the bill could not therefore be considered a levy but was a tax. He pointed out that the House of Commons had the exclusive right to legislate financial measures acting on the initiative of ministers of the Crown. The bill, which proposed a tax, did not originate in the House of Commons and was not preceded by a ways and means motion. Therefore, the first reading proceedings were null and void and the item was withdrawn from the Order Paper.^[2]

Decision of the Chair

The Speaker: I am now ready to rule on the point of order raised by the honourable government House leader on November 18, 1998, concerning the procedural acceptability of Bill S-13, An Act to incorporate and to establish an industry levy to provide for the Canadian Anti-Smoking Youth Foundation.

First of all, I would like to thank the honourable government House leader and the honourable member for St. Paul’s for their learned contributions on this subject.

I also want to thank the other members who intervened on this point of order: the honourable members for Macleod, Winnipeg North Centre, Pictou—Antigonish—Guysborough, Haldimand—Norfolk—Brant, Esquimalt—Juan de Fuca, Hillsborough, Kamloops, Thompson and Highland Valleys, Pierrefonds—Dollard, New Brunswick Southwest, Lac-Saint-Jean, Delta—South Richmond, Whitby—Ajax, Burnaby—Douglas and Wentworth—Burlington. Their contributions were very helpful to the Chair in examining this case.

We heard almost two hours of argument on this point of order and, while I do not propose to match those arguments minute for minute, I ask the House to bear with me as I explain the facts of the case before us and the conclusions which I have drawn from them.

Bill S-13 establishes the Canadian Anti-Smoking Youth Foundation, a non-profit corporation whose mandate is to reduce and to work toward the elimination of the use of tobacco products by young persons in Canada. To this end, Bill S-13 proposes that a levy be imposed on tobacco manufacturers to provide the Foundation with the necessary funds to carry out its mandate.

A private member’s bill originating in the other place, Bill S-13, was adopted there on June 10, 1998, and was given first reading in the House of Commons on November 18, 1998.

The point of order raised by the honourable government House leader, simply put, is that the Bill S-13 proposes a taxation measure and that, as such, the bill ought to have been introduced in the House of Commons where it would have to have been preceded by a ways and means motion. On that basis, he argues that the bill is improperly before the House and asks the Chair to rule that the House of Commons cannot proceed with its consideration.

Before I address the substance of this point of order, I want to respond to the contention made by the honourable member for St. Paul’s. The honourable member argued that inquiring beyond the face of the bill and questioning the express provisions of it is to go well beyond the realm of procedure and into an area of law with which the Speaker is not to deal. The honourable member argued that the question of whether Bill S-13 imposed a tax was a matter of law and legal interpretation and, as such, not normally within the jurisdiction of the Speaker.

The general proposition that the Speaker will not decide a question of law is set out in Beauchesne 6th edition, citation 168(5) at page 49, although the honourable member for St. Paul’s did not invoke this citation. The examples provided by Beauchesne involved questions that could only be considered as questions of law and which had no procedural dimension. In both cases the issue was whether the legislative proposal before the House was within the legislative powers of the House as set out in the Constitution Act, 1867.

The question that I must consider in relation to Bill S-13, that is whether or not the charge imposed by the bill is a tax, relates to the procedural rules and practices of this House as well as to the time-honoured privilege of this House in respect of taxation measures.

More specifically, two questions are presented on this point of order and both are clearly within my jurisdiction as Speaker. First, is a ways and means motion required for Bill S-13? Second, should this bill have originated in the House and not the other place? However, both these questions depend on the answer to be given to a third question, that is, does Bill S-13 impose a tax? If it does, a ways and means motion is required and the bill ought to have originated in this Chamber.

This third question is unavoidable if the procedural and privilege questions are to be addressed. For this reason, though this tax question might be characterized as a question of law and in another context outside this Chamber might be raised and considered as a question of law, in this context it is considered only as an integral part of a question on procedure and parliamentary privilege. Accordingly, it is proper that I address this question and let me do so now.

In his presentation, the honourable government House leader argued that Bill S-13 should have originated in the House of Commons since it imposes a tax.

Section 53 of the Constitution Act, 1867, states:

Bills for appropriating any part of the public revenue, or for imposing any tax or impost, shall originate in the House of Commons.

Furthermore, as described in citation 980 found at page 265 of Beauchesne, 6th edition, bills imposing a tax must be preceded by adoption of a ways and means motion.

To safeguard the financial privileges of the Commons, it is the duty of every member of this House to be vigilant and to ensure that every bill that comes before the House respects this criterion.

Standing Order 80 is categorical on the subject and states in part:

All aids and supplies granted to the Sovereign by the Parliament of Canada are the sole gift of the House of Commons, and all bills for granting such aids and supplies ought to begin with the House—

In short, the House of Commons claims pre-eminence in financial matters-that is public expenditure and taxation-and all such legislation must originate in the House.

To determine if Bill S-13 is properly before the House, the Chair must ascertain whether or not it imposes a tax. If it does impose a tax, the bill should have originated in the House of Commons and been preceded by a ways and means motion.

Members will appreciate that this matter involves issues of a complex and technical nature. For this reason, the Chair has taken particular care to examine closely the relevant authorities on this issue. I have consulted extensively the works of Erskine May and have found May to be a comprehensive and reliable source of information on financial procedures. I ask for the House’s indulgence as I offer the following exposition of the problem at hand.

As members know, financial procedure is primarily concerned with the authorization of public expenditure and taxation. It has been argued that the charge proposed by Bill S-13 is not a tax because the funds collected would not form any part of the Consolidated Revenue Fund.

Under the heading of “Matters requiring authorization by Ways and Means resolution”, May, 22nd edition at page 777, states:

Although impositions are not generally charges on the people (that is to say, taxes) unless the proceeds are payable into the Consolidated Fund, the absence of a requirement for payment into the Consolidated Fund is not by itself conclusive indication that a charge upon the people has been avoided. If, for example, money raised by statutory imposition is not to be channelled to the Consolidated Fund but is nonetheless to be used for the benefit of the public at large or for purposes which might otherwise have required to be financed from the Consolidated Fund, that imposition is likely to need authorization by a ways and means resolution.

In other words, if a charge raises funds that are channelled to the Consolidated Revenue Fund, that charge is a tax. Even if a charge raises funds that are channelled elsewhere, the charge may still be a tax, however. But a charge can only be considered a levy, and thus free to go forward without the usual constraints of financial procedure, if it is a charge made for an industry purpose.

Thus, the point of order, as I see it, hinges on the nature of the charge in Bill S-13 and its objects or purpose. Consequently, a closer examination of the bill is required.

The argument has been made that Bill S-13 imposes a levy “for an industry purpose”. In chapter 32, “Ways and Means and Finance Bills” of May 22nd edition, we read, at page 779:

Levies upon employers in a particular industry for the purpose of forming a fund used to finance activities beneficial to the industry are not normally regarded as charges (that is to say, taxes).

May goes on to state:

Modern legislation, however, frequently makes provision for the imposition of other types of fees or payment which, although not taxes in a strict sense, have enough of the characteristics of taxation to require to be treated as “charges upon the people” and therefore to be authorized by a ways and means resolution moved by a minister of the Crown. This distinction between the types of payments which are or are not covered by the rules of financial procedure is not always straightforward in practice.

In other words, the central issue here is whether or not the levy imposed by Bill S-13 is a charge that is imposed primarily for a purpose beneficial to the tobacco industry. If so, the charge would not be a tax.

Here too May is helpful when he describes a case which presents some similarities with Bill S-13, namely, the U.K. Merchant Shipping Bill of 1973-74. That bill obliged oil importers to contribute to an international fund for compensation for oil pollution damage. In the 21st edition, at page 731, May states:

This impost was so clearly not for the benefit of the industry concerned that it was held to be a tax in spite of the fact that its proceeds were not payable to the Consolidated Fund.

Ultimately, therefore, it was decided that particular bill fell under the rules governing financial procedures and so had to be preceded by a ways and means resolution before being considered by the House of Commons in the United Kingdom.

In studying the case now before us, I have examined whether our House has ever dealt with the public bill providing for an industry levy. In a session of the 35th Parliament, Bill C-32, An Act to amend the Copyright Act called for the imposition of a levy on blank audio tapes.

The levy was of benefit to that industry since it permitted the audio duplication of copyright material for private use. This would enhance the market for blank audio tapes. The levy on the tapes was designated to raise funds by which owners of copyright material would be compensated for losses caused by private duplication of that material. The link between the benefit to the industry and the levy being imposed seems clear in that case. The levy appears to satisfy the criterion that it was of benefit to the industry and so would not normally be regarded as a tax.

Bill C-32 was not required tb adhere to the usual financial procedures and was not preceded by a ways and means motion.

In the case of Bill S-13, the Chair must determine the nature of the charge being imposed by the bill. It has been argued that the charge is a levy for the benefit of the tobacco industry. In support of that view we are referred to clause 3 of the bill which bears the heading “Purpose” and which states in subsection (1), in part:

(1) 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—

I will set aside, without comment, the question of whether or not the industry has publicly stated as its objective the reduction of smoking in any segment of the population.

Let me simply continue to quote from clause 3(1) which expands on the purpose of the bill to reduce the use of tobacco products by young Canadians as follows:

—given that

(a) numerous debilitating and fatal diseases and other consequences injurious to health are associated with tobacco use;

(b) young persons throughout Canada use tobacco products and become addicted to tobacco and dependent on its use;—

(d) young persons can only use tobacco products because the products are manufactured and sold;—

The text then goes on to read in subsection (2) of the same clause 3:

(2) The Act complements the general legislative response to the national public health problem of substantial and pressing concern—

These statements seem to me to indicate that the purpose of the bill is a matter of public policy, namely, the health of young Canadians and not, as many members have argued, a matter of benefit to the tobacco industry.

There are those who say that the two need not be mutually exclusive and that the benefit to the industry is such that the charge in question is not a tax, but a levy. Proponents of this view point to paragraph (l)(c) of this same clause 3 which reads:

(c) 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—

Surely the lack of credibility referred to here is a function of our common sense understanding of the self-interest of the tobacco industry, namely, that as a commercial enterprise its primary goal is to expand its markets and thereby to increase profits. Young people would constitute the future growth potential for the industry’s market. How could it be to the benefit of the industry to reduce smoking among the very people who would constitute its growth market? It is this implausible proposition that underlies the credibility problem to which the bill refers.

Proponents of the bill argue that the public relations benefit represented by the establishment of the Foundation would be a benefit for the industry. They cite the independence of the proposed Foundation and its role in the national co-ordination of anti-smoking efforts. Is it not reasonable to suppose, if the industry had wanted to improve its public image in this matter, that of its own volition it could have created an arm’s length body like the Foundation? Why is legislation like this required?

Let us return to clause 3, this time to paragraph (l)(e) which reads:

(e) 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;

It has been argued that this section points again to a benefit to the industry since the Foundation activities may pre-empt further restrictions on the industry. This is to speculate on future government measures and to conclude that the establishment of the Foundation will obviate the necessity for such measures. But is this simply not another way of saying that this charge in this bill is a benefit to the industry only because future measures might be less palatable?

I have carefully considered all of the arguments presented and have examined all of the cases which honourable members have brought to my attention, even though I have not discussed each one in detail in this ruling.

I am forced to conclude that the charge imposed by Bill S-13 is directed not toward any benefit to the tobacco industry but to a matter of public policy, that is, the health of young Canadians, a laudable purpose without doubt.

The bill seeks to establish the Canadian Anti-Smoking Youth Foundation whose objective is to reduce and eventually eliminate the use of tobacco products by young persons in Canada. It strains credulity to claim that this objective is a benefit to the tobacco industry.

However ingenious the framers of Bill S-13 have been in drafting and structuring the Bill to resemble an industry purpose, one that perhaps would enhance the standing in our society of the tobacco industry, Bill S-13 has as its main object the reduction and elimination of smoking. This is a matter of public health policy and it is by virtue of this public purpose that I have concluded that the charge Bill S-13 imposes on the industry is a tax.

The House of Commons has the exclusive right and obligation to legislate financial measures. Only the House of Commons, acting on the initiative of ministers of the Crown, can impose taxes to generate the funds needed to support public policy programs. I am obligated as your Speaker to ensure that these fundamental financial privileges are not compromised.

Simply put, any bill imposing a tax must originate in the House of Commons and must be preceded by a ways and means motion. Since Bill S-13 proposes a tax, did not originate in the House of Commons and thus was not preceded by a ways and means motion, I therefore find that it is not properly before the House.

Accordingly, first reading proceedings are null and void and this item is withdrawn from the Order Paper.

I thank honourable members for their attention.

P0612-e

36-1

1998-12-02