- News Release 2002-013 -

Backgrounder

Canadian Air Transport Security Authority

Budget 2001 allocated $2.2 billion over five years to make air travel more secure in accordance with rigorous new national Transport Canada standards, and announced the creation of a new air security authority. The authority will be responsible for providing:

• armed undercover police officers on Canadian aircraft;
• better-trained personnel to screen passengers and carry-on baggage;
• new state-of-the-art explosives detection systems at Canada’s airports; and
• enhanced policing in airports.

The bill provides that the authority will be managed by a board of directors composed of 11 members appointed by the Governor in Council on the recommendation of the Minister of Transport. Two of the directors will be nominees of the airline industry, and two others will be nominees of airport operators.

Air Travellers Security Charge

The Budget 2001 commitment to enhanced air travel security will be funded by a new Air Travellers Security Charge. The charge will apply to air travel occurring after March 31, 2002, for which payment is made after that date, in the case of tickets purchased in Canada, and to air travel occurring after May 31, 2002, for which payment is made after March 31, 2002, in the case of tickets purchased outside Canada.

The total cost of the Air Travellers Security Charge will be the following (amounts include goods and services tax where applicable):

• $12 for one-way travel within Canada;
• $24 for round trip travel within Canada;
• $12 for travel to a destination in the continental U.S. (U.S. taxes also apply); and
• $24 for travel to a destination outside of Canada and the continental U.S.

The charge will apply to flights between the 90 airports planned to benefit from security enhancements under the Canadian Air Transport Security Authority. The 90 airports are listed in the schedule to the new Act. Direct flights to or from small or remote airports that are not on this list of 90 airports will not be subject to the charge.

The Government is committed to an open, transparent process to review the charge annually and to ensure that revenue over the five-year period does not exceed the cost of the enhanced air travel security system.

Employment Insurance

The bill includes amendments to the Employment Insurance Act to provide increased flexibility to parents whose child is hospitalized for an extended period following birth or adoption. A key benefit will be to increase the window during which they can claim parental benefits under the employment insurance program to up to two years.

Income Tax Amendments

The bill includes provisions to implement income tax amendments announced in Budget 2001. These include measures to:

• defer certain corporate income tax instalments for January, February and March 2002 for six months to help small businesses in meeting their cash flow needs;

• exempt from income tax tuition assistance for adult basic education provided under certain government programs, and extend access to the education tax credit;

• permanently implement a 1997 budget measure that provides special tax assistance for donations of publicly listed securities to public charities;

• make it easier for non-residents who invest through partnerships to retain Canadian investment managers and advisors;

• allow apprentice vehicle mechanics to deduct from their income a portion of the cost of new tools, to the extent that those costs exceed the larger of $1,000 or 5 per cent of their apprenticeship income; and

• improve the responsiveness of the goods and services tax credit.

Canada Strategic Infrastructure Fund

In Budget 2001, the Government announced its intention to provide at least $2 billion in funding for large infrastructure projects that can bring lasting economic and social benefits while providing both stimulus and productivity benefits. The Canada Strategic Infrastructure Fund will have the same goals and $2-billion commitment as set out in the budget. The infrastructure areas eligible for the fund include:

• highway or rail infrastructure;
• local transportation infrastructure;
• tourism or urban development infrastructure;
• sewage treatment infrastructure;
• water infrastructure; or
• other infrastructure prescribed by regulation.

The Government will administer the fund. Ministerial accountability to Parliament and Canadian citizens will rest with the Minister of Infrastructure, and the Government will report annually on its commitments and expenditures under the fund.

Africa Fund

In Budget 2001, the Government stated its intention to provide a $500-million fund for African development. We will also go ahead with our program for Africa, in order to preserve our flexibility going into the Kananaskis Summit where we will focus on health, education and other initiatives. The fund will be delivered directly by the federal government.

As agreed at the 2001 Summit in Genoa, the Africa Fund will finance projects and activities set out in the Action Plan for Africa.

Fiscal Framework

As a result of these changes, the Contingency Reserve for 2001-02 will be used for debt paydown. For 2002-03 and 2003-04, the Government plans to use the Contingency Reserve, to the extent that it is not needed to meet unexpected circumstances, to pay down the debt as well.

The public debt interest savings from this debt paydown will provide the fiscal room to finance the disbursements from the Canada Strategic Infrastructure Fund and the Africa Fund over the two years of the Government’s budgetary horizon.