Recommendations for Budget 2005
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Removal of GST Pesticide Exemption

Summary
Recommendation: remove the zero-rated GST status for all pesticides, and only permit agricultural pesticide users to claim the Input Tax Credit. Use the revenue generated from GST on pesticides to create a national non-essential pesticide reduction program.

Revenue
$8 million per year.⁶¹

Benefits for Canadians

• promote healthy and innovative pesticide-free alternatives
• reduce human health risks, particularly in children
• capture international market opportunities for organic pest control products
• reduce the amount of pollutants that run-off into waterways, improve water quality, prevent fish kills
• limit health risks to wildlife
• decrease medical costs associated with pesticide exposure

Background and Rationale
In 2002, Canadian pesticide sales totalled $1.27billion.⁶² Of these sales, approximately 9 per cent was used for non-agricultural purposes,⁶³ valued at $114 million. Municipalities across Canada have heeded the warnings about the detrimental health effects attributed to pesticide use and are working towards reducing non-essential pesticide use within their jurisdictions. Bolstered by the Supreme Court's landmark decision in Hudson⁶⁴ municipalities across Canada have passed by-laws phasing out or prohibiting the non-essential or aesthetic use of pesticides on public and private property.⁶⁵ As a result, 11 million Canadians or approximately 35 per cent of Canada's population will be protected from the unnecessary exposure to harmful chemicals, when all the by-laws are fully implemented.⁶⁶ Relying on the decision in Hudson, the Ontario Superior Court recently upheld Toronto's pesticides by-law, making Toronto the largest Canadian city to have such a by-law.⁶⁷

The federal government should assist municipalities in achieving their goals by changing the current tax structure to create an economic disincentive for the use of pesticides. Currently, pesticides labelled in accordance with the Pest Control Products Regulations as having a purpose that includes agricultural use and a product class designation other than "domestic" benefit from a zero-rated GST status.⁶⁸ In other words, certain pesticides listed under the pesticide regulations as having a primarily agricultural purpose are not subject to GST when any person purchases them. Furthermore, lawn-care companies or other companies who use pesticides in the course of their business are entitled to apply for an Input Tax Credit and be refunded the GST they paid on non-agricultural pesticide products.

Homeowners annually apply pesticides at a rate greater than agricultural pesticide users. The Canadian Environmental Law Association estimates that urban residential users apply between 1.97 and 3.65 times more pesticides per hectare than their counterparts in agricultural settings.⁶⁹

Some studies have suggested that there are economic benefits to pesticide use. However, of the studies routinely cited, none have quantified the enormous social costs associated with pesticides. Evaluating pesticides solely on the basis of crop output or aesthetic attraction is incomplete and misleading.

Pesticides have consistently been shown to be associated with brain cancer, prostate cancer, kidney cancer, pancreatic cancer, non-Hodgkin’s lymphoma, leukemia, and nervous system, dermatological and neurological effects.⁷⁰ Furthermore, occupational exposure to pesticides has been linked to adverse reproductive effects including birth defects, fetal death, intrauterine growth retardation, decreased fertility, and endocrine disruption.⁷¹

The high concentration of pesticide use in residential areas places children at particular risk because they tend to play where pesticides are applied. The Ontario College of Family Physicians has reviewed studies that demonstrate an elevated risk of kidney and brain cancer, hematologic tumours (including non-Hodgkin’s lymphoma and leukemia) and acute leukemia.⁷²

The increased risk of developing clinical illnesses as a result of pesticide exposure translates into hidden costs for Canadians including: increased trips to emergency rooms for asthma attacks; the long-term cost of treating environmentally-induced cancers, asthma and diseases relating to endocrine disruption; general increases in clinical illness due to decreased cell mediated immunity; the associated medical and educational costs of the increased prevalence of learning disabilities; and decreased workplace productivity and increased absenteeism due to illness.

The federal government should join municipalities and employ the precautionary principle to prevent the non-essential use of pesticides.

Recommendation
The Green Budget Coalition recommends that the Canadian government remove the zero-rated GST status on all pesticides, and only permit agricultural pesticide users to claim the Input Tax Credit to offset the GST payments, thereby making non-agricultural pesticide users ineligible to claim the Input Tax Credit. Agricultural pesticides users could be identified as being owners and/or
operators of agricultural operations.

Removing the zero-rated GST status on pesticides will result in $8 million in tax revenue from pesticide sales. The government should match the GST revenue generated on pesticide sales to create a national non-essential pesticide reduction program, which will:

• assist municipalities to adopt and implement pesticide by-laws
• promote alternative pest management techniques, product knowledge training, and research to assist pesticide wholesalers, retail outlets, lawn care companies, and agricultural operations to substitute current pest control practices for organic and environmentally friendly integrated pest management techniques
• create business incentives and provide financial assistance for organic lawn care and agricultural operations employing organic or integrated pest management techniques
• support marketing partnerships and programs to increase international market demand for organic pest control products
• invest in research and development of natural pest control methods, and re-evaluate pesticides currently sold to the public
• develop a national organic food certification and labelling programme
• implement a pesticide education campaign targeted at physicians, policy makers, schools and daycares, and homeowners to encourage pesticide reduction, promote environmental pest control, and warn people of the harms associated with pesticide use

Alternative and Complimentary Policies
The Green Budget Coalition also recommends that the federal government take a leadership role in encouraging all provinces to enact legislation preventing the non-essential use of pesticides.

Contact
Robert Wright or Anastasia Lintner,
Sierra Legal Defence Fund,
416-368-7533

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