No New Taxes, Thank You: Time to Recycle Recyc-Quebec

[Previous] [Contents] [Next]

Eric Duhaime

October marked the beginning in Quebec, on the one hand, of the public hearings of the Commission on the Reduction of Personal Income Tax, and on the other hand, of the implementation of a brand new $3 tax on every tire sold in the province.

Beginning October 1, 1999, the new $3 tax is being levied to refinance Recyc-Quebec, the government’s recycling politburo - which, despite its mission, is one of the most wasteful and inefficient government organizations in the province.

Born of old-style central planning ideology, Recyc-Quebec was founded in 1990. Its mandate, like all such government organizations, was to correct a "market failure"; instead, it merely created a bureaucratic failure. Recyc-Quebec is now in dire financial straits, and required a $27 million emergency loan last January to cover its operating shortfall - more than the $21 million it originally received to begin with.

Here’s a typical example of Recyc-Quebec’s market ignorance: in its first years of operation, Recyc-Quebec made money by collecting the 5 cent deposit on consigned cans and bottles. Strangely, it agreed to pay retailers (who handle all of Quebec’s used can and bottle collections) 7 cents for each can returned. The central planners calculated that, as long as fewer than 71.4 percent of all cans and bottles were returned, they’d make money off the deal. In other words, they were counting on Quebecers to be idiots, to essentially throw their own money into the garbage 5 cents at a time. Now that the can-bottle-return rate has jumped to more than 76 percent, Recyc-Quebec is losing close to $3 million a year.

And that’s just the cans and bottles. For the 1998-1999 year alone, it also accumulated an extra deficit of $13 million due solely to its tire program.

Implemented in 1997, the tire program "works" like this: Recyc-Quebec accredits a single private carrier in each region of the province, thus enabling the carrier to collect old tires in his territory and take them to government-accredited recycling businesses to which he gives a tipping fee. That’s it. The private sector takes care of all the recycling per se. For this "essential service," Quebecers will now pay $3 per tire.

But wait. Quebecers get more than that for their three bucks. Recyc-Quebec also employs social and civil engineers to decide which kind of recycling is acceptable according to their own governmental criteria. Before accepting tires for recycling, a company must receive the stamp of state approval. The end result: the market produces 7 million unwanted tires every year, yet Recyc-Quebec-approved companies only take care of 4 million.

Thanks to Recyc-Quebec’s guidance, Quebec remains literally littered with used tires - between 25 and 40 million of them at last count, enough to form a chain from Montreal to Vancouver and back again. There are warehouses and dumps filled with unrecycled tires, including one in St. Amable, south of Montreal, which caught fire in 1990 and cost Quebec taxpayers over $12 million to clean up.

Many more of these 25 to 40 million tires are located in areas the government protects as "green zones." There are currently moratoriums on the most important sites, leaving potential entrepreneurs to wait helplessly while the used tires keep contaminating the soil and groundwater.

Stefan Schoeppe is one such entrepreneur. His company, Quebemex, has been trying to set up a tire-recycling factory in Quebec for the last 20 months. Mr. Schoeppe has 15 years experience in private tire recycling throughout Europe and Latin America.

Quebemex’s technology is about as environmentally sound as anything can get. Essentially, the company cuts tires in pieces, then recombines the remains to produce highway barrier rubber studs, roofing shingles, and so on. The technology recycles 100 percent of each tire, creates no toxic emissions, and has treated over 100 million tires in England and Germany over the last 12 years.

Quebemex could have treated over 6 million used tires a year and created close to 200 jobs in the Montreal region. Mr. Schoeppe only required access to a stable and ongoing supply of used tires, but because bureaucrats did not anticipate being asked to have a supply guarantee, Recyc-Quebec refused to provide such an assurance. Not surprisingly, the two most well-known businesses dealing with Recyc-Quebec’s tire program, Thermex and Tirex, are now in very bad financial shape. Thermex even sought bankruptcy protection last spring.

Fed up with Recyc-Quebec and refusing to follow Thermex’s experience, Stefan Schoeppe decided to look to Ontario, which is very ironic, considering that Ontario implemented a $5 tax on each new tire sold in 1989, only to abolish the tax after its total failure in 1993.

Last month, Mr. Schoeppe created a new company called Entire Co., which will open a factory next month in Chatham, Ontario, and create 25 new jobs right off the bat. The do-gooders of the Ontario bureaucracy did what they do best: nothing. They left the entrepreneur alone. Mr. Schoeppe currently keeps his days busy signing agreements directly with garages and used-tire providers all across Ontario.

While bureaucrats at Recyc-Quebec excitedly anticipate the Big Day when their new $3 tire tax will be implemented and begin to create new bureaucratic jobs at their headquarters, Ontario has inherited a dynamic new enterprise, created 25 new productive jobs and, on a micro-scale, has helped prepare for its next round of tax cuts. And that’s not counting the garages in the Ottawa region which are about to receive hordes of border-dwelling Quebecers looking to buy tax-free tires.

Will someone wake up in Quebec City and do the honourable thing now, before it’s too late: recycle Recyc-Quebec before its wheels get stuck even deeper in its own bureaucratic mud!

[Previous] [Contents/A>] [Next]

info@fraserinstitute.ca You can contact us at the above email address for any comments or information requests. Please report any dead links or technical problems.

If you know someone who would be interested in this web page, please enter their email address below, and we will forward this URL to them: Email Address:

Last Modified: Wednesday June 9, 1999.