Thank you, Mr. Speaker. Mr. Speaker, I have a return to oral question asked by Mr. Picco on March 3, 1998. A reply made by myself in regard to the Canadian Departure Tax on March 3, 1998. The date this House adjourned, the Premier took a question on notice from the Member for Iqaluit concerning this Canadian Departure Tax. I believe the Member was referring to the Air Transportation Tax.
Mr. Speaker, Canada is changing the way it pays for its air navigation system. Transport Canada used to operate Canada's air navigation system as a federally subsidized public service. The federal government recovered about 85 percent of the cost of the air navigation system through the Air Transportation Tax. The tax was added to the price of air passenger tickets. The remaining cost of the system was paid for from Transport Canada's annual appropriation from Parliament.
NAV Canada was established as a private corporation to assume responsibility for the air navigation system from Transport Canada and to operate the system independently of government on a cost recovery basis. The transition to cost recovery is taking place this year in two steps. Phase 1 took effect on March 1st and Phase 2 will take effect on November 1st. As NAV Canada introduces its new service fees on air carriers, the Air Transportation Tax on passenger fares is eliminated. Half the Air Transportation Tax was removed on April 1st and the rest will go on November 1st.
How the air carriers decide to recover NAV Canada's new service fees from their customers is a matter of the carrier's corporate pricing strategy. The Air Transportation Tax was collected strictly on passenger fares. Now, the air carriers have new flexibility to recover the NAV Canada service fees from either their passenger or their freight revenues or some combination of both.
I would like the Member to know that, with the northern air carriers, the Department of Transportation mounted a vigorous lobbying campaign that has been successful in modifying the impact of the new service fees on northern air routes.
The lobbying campaign made NAV Canada recognize that the fee structure, as it was originally proposed, had a greater impact on northern than southern air routes. As a result, NAV Canada agreed to raise the weight limit of the aircraft to which the Phase I fees would apply from 5.5 to 8 tonnes. The higher weight limit exempted twin otters and similar sized aircraft from the Phase I fees. The department also won the important concession that the new fees would not apply to flights departing from northern and remote airports where the air navigation services are delivered by our CARS Program.
The next and last phase of the service fees will come into effect on November 1st. So far, NAV Canada has circulated a discussion paper on the Phase 2 fees that considers several options. It has made no firm proposal at this time.
With other Departments of Transportation and northern carriers, the department has proposed, (1) exempting small aircraft under 8 tonnes altogether in Canada, or (2) exempting small aircraft under 8 tonnes in the northern and remote areas of Canada. NAV Canada has not rejected either proposal and appears to be giving them serious consideration. We will have to wait and see. The department expects NAV Canada to release its Phase 2 fee proposal sometime in August.
Although, I cannot be specific at this time, I am reasonable confident that we will have similar success in influencing the Phase 2 fees as we have had with the Phase 1 fees. Mahsi, Mr. Speaker.