[ Page 1261 ]

CONTENTS

Routine Proceedings

Assessment And Property Taxation Amendment Act, 1987 (Bill 5). Second reading

Hon. Mr. Couvelier –– 1261

Mr. Blencoe –– 1262

Mr. Stupich –– 1263

Hon. Mr. Couvelier –– 1263

Corporation Capital Tax Amendment Act, 1987 (Bill 7). Second reading

Hon. Mr. Couvelier –– 1263

Mr. Stupich –– 1263

Mr. Miller –– 1263

Hon. Mr. Couvelier –– 1264

Insurance Premium Tax Amendment Act, 1987 (Bill 10). Second reading

Hon. Mr. Couvelier –– 1264

Mr. Stupich –– 1264

Hon. Mr. Couvelier –– 1264

Hotel Room Tax Amendment Act, 1987 (Bill 12). Second reading

Hon. Mr. Couvelier –– 1265

Mr. Stupich –– 1265

Ms. Edwards –– 1265

Mr. Miller –– 1265

Hon. Mr. Couvelier –– 1266

Motor Fuel Tax Amendment Act, 1987 (Bill 13). Second reading

Hon. Mr. Couvelier –– 1266

Mr. Stupich –– 1266

Mr. Miller –– 1267

Mrs. Boone –– 1267

Mr. Cashore –– 1268

Hon. Mr. Couvelier –– 1268

Miscellaneous Statutes (Finance Measures) Amendment Act, 1987 (Bill 14). Second reading

Hon. Mr. Couvelier –– 1268

Mr. Stupich –– 1268

Property Purchase Tax Act (Bill 17). Second reading

Hon. Mr. Couvelier –– 1268

Mr. Harcourt –– 1269

Mr. G. Hanson –– 1269

Mr. Blencoe –– 1269

Mr. Jones –– 1271

Mr. Cashore –– 1271

Ms. Marwri –– 1272

Ms. A. Hagen –– 1273

The House met at 10:08 a. m.

Prayers.

HON. MRS. McCARTHY: Mr. Speaker, it is with sadness that I have to inform the House of the loss of a very good friend of this Legislature and a person who represented all of the ideals that this House stands for, the democratic process. Ann Vice was the press secretary for our former Premier. Ann's service to the House and to the Premier's office, and to the people of British Columbia, was very well known. She had a very good rapport with members of the press gallery, and she took her career and her vocation very seriously, and represented us all so very well. Today, Mr. Speaker, 1 would like to ask if, on behalf of all members of this House, you would convey the sympathy of this House and its members to members of her family.

MR. G. HANSON: This side of the House would like to acknowledge the remarks made by the Minister of Economic Development. We are saddened whenever one of our colleagues and employees of this House passes away, so we would certainly acknowledge that. And we are deeply moved.

Orders of the Day

HON. MR. STRACHAN: Mr. Speaker, 1 call second reading of Bill 5, in the care of the Minister of Finance and Corporate Relations.

ASSESSMENT AND PROPERTY TAXATION

AMENDMENT ACT, 1987

HON. MR. COUVELIER: Mr. Speaker, the Assessment and Property Taxation Amendment Act, 1987, contains three related measures. The bill re-establishes leasehold water lots as assessable and therefore taxable. The bill clarifies the Assessment Act distinction between physical and market conditions. And the bill clarifies the application of the tax exemption for land and structures used in controlling pollution.

All of these measures reflect the government's concern about recent trends towards erosion of the property tax base, and in particular the impact this has upon municipal and other local authority tax revenues and upon the maintenance of equity between taxpayers.

The province defines the tax base from which the major portion of local revenues is generated and must therefore act to some extent as a trustee of local interests in this regard. Each of these measures addresses areas in which lack of legislative clarity has, through legal interpretation, resulted in unintended tax-base changes and inconsistent treatment of similar properties. The importance of these measures lies in their contribution toward the integrity of the property tax base.

The first measure makes leasehold water lots taxable to the lessee. It is in response to a 1985 Supreme Court decision that exempted water lots from taxation by restricting accessibility to the land beneath the water. The logic of the decision is that water lots are accessible only to the degree that the lessee uses the subsurface land. As a result of this decision, log-storage leases have become non-taxable and there is uncertainty about the tax status of major docking areas and marinas. Coastal municipalities in the lower mainland and on Vancouver Island have been particularly affected. Additionally, application of this decision has resulted in inequities between leaseholders. For example, fish-farmers who access their floating pens by boat and do not therefore use the subsurface land are not liable for taxation. Those that have ramps built on pilings put out into the pen area are liable. This legislation re-establishes the previous practice of assessing and taxing all leasehold water lots in the name of the lessee.

The second measure addresses problems arising from a point of ambiguity in the Assessment Act. The Assessment Act distinguishes between physical and market conditions for valuation purposes. This distinction has been blurred as a result of a recent Supreme Court ruling that occupancy levels — previously considered a reflection of market conditions — are part of the physical condition of a building. Application of the decision will alter the established practice of considering average vacancy rates in valuing commercial buildings. Values will reflect actual occupancy in a particular building at a particular point in time. As a result, inequities will arise between rental buildings where vacancy rates can vary and owner-occupied buildings where the vacancy rate is zero, by definition. Additionally, fluctuations in commercial building values will increase, resulting in instability of the property tax base. The amendment will avoid problems of this nature by more clearly drawing the line between physical and market conditions.

[10:15]

The third measure clarifies the tax exemption for pollution control property to restore the original intent of the legislation. Land and buildings used for pollution control are currently exempted from taxation under parallel provisions in the Municipal Act, Taxation (Rural Area) Act and the Vancouver Charter. The exemptions were originally granted in 1960, and were intended to facilitate the installation of distinct pollution control devices such as settling-ponds and particle-matter eliminators required to meet the industrial emission standards imposed at that time.

The nature of pollution control has changed significantly over the past two decades, and there has been increasing recognition of the commercial potential of many waste products. Through legal interpretation, the tax exemptions have been broadened to encompass selected industrial processes which used waste substances for commercial gain. There is real concern that the effect of this generous interpretation will be to exempt entire industrial plants on the grounds that they are pollution control devices. As a result, these facilities will receive an unintended tax benefit to a large extent at the expense of local governments.

The amendment more clearly describes those pollution control properties which are intended to be exempt from taxation. It will not affect most properties currently exempt, but will avoid further unintended extension of the tax benefit.

In summary, Mr. Speaker, the bill addresses areas of tax base erosion which are of particular concern to local governments and helps to maintain equity between property owners. For these reasons I commend it to you.

1 move the bill now be read a second time.

[ Page 1262 ]

MR. BLENCOE: Mr. Speaker, the New Democratic Party caucus sees no basic problem with this piece of legislation. From what we can determine, it really is tightening up, regulating and introducing some legislation to deal with some pollution control exemptions. It is my understanding — and maybe the minister can correct me — that as a result of the application by Cominco to have a company exempt from taxation, the government decided to tighten up the acts to clarify what constitutes a pollution-control operation. We don't disagree with that.

However, in committee we may have some discussion about the powers of the assessment commissioner. I see it says in the act: "The assessment commissioner may... determine the portion of the assessed value of the land or improvements attributable to that abatement, and that portion is exempt" from taxation. Perhaps in committee the minister could respond to the slight concern about what the powers of that assessment commissioner will be. Sometimes that can get into problems, and coming from a municipal area you know that those assessment debates and disputes are really hard to tackle. So we would like to have some answers on the boundaries of the commissioner's discretion, to put it in a nutshell.

In terms of water lots, I understand that this was made in response to a case involving a company called RivTow and their claim that the company should not pay tax on land leased from the Crown to store logs. Unless we have indication otherwise, 1 think that the government is just trying to deal with this kind of court case. Indeed, 1 don't think there is any question that, like anybody else, they should pay fair taxes.

In terms of pollution control, the minister is quite correct that that whole area is changing today, and I think it's time we took a far broader approach to this particular kind of issue. We in the New Democratic Party have a very definitive recycling policy that we would like to see the government start to move ahead on — to take a look at how we can encourage greater recycling in the province of British Columbia.

For instance, we think a financing formula should be developed to create industrial incentives for recycling. Maybe not this minister but the Minister of Environment (Hon. Mr. Strachan) could talk about that. I would like to know what incentives are being considered for industrial plants which get into expanded recycling and improved pollution control systems.

We also think that British Columbia should establish a provincial recycled products marketing board. It's something that's been done in other jurisdictions, and again, it's part of our global approach to try to tackle this very important issue. We would like to see some discussion of how we can market recycled products. We all know that recycling goes up and down because there really isn't an incentive to market some of those products –– I think we need to have a little more innovation and creativity in that area.

We also need to take a look at some transportation incentives for those in the recycling business. We all know that there often aren't many dollars to be made out of recycled products. Consequently, the costs of shipping those products are too high. We need to take a look, if we're going to encourage recycling, at transportation — how centres can be provided to encourage recycling — because many of the things that we get rid of in various forms today could be utilized in a very beneficial way.

Because we are talking about much of this act being applied by local government, one of the things we would like to see is the introduction of an annual per capita grant to municipalities for recycling programs. Something that we have talked about, I know at local government.... The Minister of Finance for many years, like me, when involved in local government, always struggled to have recycling programs continue. In his own municipality, I think there's a very innovative recycling program, but it's up and down in terms of the costs.

I think that for municipalities that do have the initiative to introduce recycling programs, a grant system should reflect that initiative. But again, many times these kinds of programs don't get much attention. I suppose they don't make big headlines, and therefore they don't get much attention from senior government. But in our estimation, in a world where the resources are dwindling and where there is concern about waste products and the disposal of those waste products, municipalities and cities and towns are constantly debating where they are going to get rid of their refuse. Again, look at the Minister of Finance. I remember that he was on the CRD board with me locally, and we went through I don't know how many meetings and discussions over the Hartland Road dump, and where we were going to do it and what we were going to do....

I know we are dealing with nuts-and-bolts legislation here today. But really, what I am trying to do is use that act to broaden the discussion about the whole issue of pollution control and recycling, and how we eliminate waste in a constructive way rather than sometimes in a destructive way, in terms of dumping and that sort of thing. I am very supportive of looking at per capita grants from municipalities that get into recycling programs.

I think we should take a look at grants or some incentive program for those municipalities that get into recycling plants themselves. One of the exciting things that has happened in my municipality.... I think it is happening in the minister's municipality and may even be happening in the Minister of Municipal Affairs' (Hon. Mrs. Johnston's) in Surrey, and it came because of financial constraints. in road construction.... When we reconstructed the highways and the roads, the blacktop that was taken away was just dumped. And someone started to think: "Well, why couldn't we recycle that in some way?" Now we have a system, and you can tell on the roads where the grinding machines are at work. The city of Victoria has its own recycling plant now for that kind of production. It has saved the taxpayers thousands and thousands of dollars. This is just one instance where we have innovatively recycled. I think there are so many other areas at the local level where we could recycle what's considered to be wastes and unusable. I would like the Minister of Finance, the Minister of Municipal Affairs and the Minister of Environment and Parks to really get on board with not just bringing down this kind of legislation — which is necessary — but innovative legislation that could deal with many of the things that are trying to control in a technical way the results of industrial growth and industrial production.

So, Mr. Speaker, we basically have no problem with this legislation. But we would like to see some further discussion in the future of how we can utilize the results of industrial production in a far more constructive way. Again, I would like in committee to have a response from the Minister of Finance about the powers of the assessment commissioner

[ Page 1263 ]

and his or her discretion. On that note, we support the legislation.

MR. STUPICH: From the point of view of Finance, of all of the taxation measures being introduced, this is one of least interest to the Minister of Finance — from the point of view of the money. It proposes to raise an additional $600,000 for the provincial revenues in the coming year, which is, I guess, 6/1000 of 1 percent of the budget. So it's not very important from that point of view.

The minister did say that it was tightening up on erosion of the tax base, from the point of view of local government. And local governments would be particularly concerned with these changes. I don't expect the minister to have any idea at all this morning as to what effect that will have on local government. We have the effect from the point of view of the provincial government. I wonder when we get to committee stage if it will be possible to give us some idea as to just what difference this will make financially to local government.

HON. MR. COUVELIER: Mr. Speaker, I move that the bill be now read a second time.

Bill 5, Assessment and Property Taxation Amendment Act, 1987, read a second time and referred to a Committee of the Whole House for consideration at the next sitting of the House after today.

HON. MR. STRACHAN: Could I have leave to make an introduction?

Leave granted.

HON. MR. STRACHAN: One of the remarkable leaders of the native community in British Columbia is with us in the gallery. I'd like the House to welcome Art Vickers. The guy's a real good builder if you're....

Mr. Speaker, I call second reading of Bill 7.

CORPORATION CAPITAL TAX

AMENDMENT ACT, 1987

HON. MR. COUVELIER: Mr. Speaker, in 1985 legislation was approved to phase out the Corporation Capital Tax Act by April 1, 1987, except for major banks headquartered outside the province. In an attempt to induce the banking industry to shift their head offices to this province, an exemption from the tax was provided if a major bank established a B.C. head office. In the intervening two-year period, no major banks have changed their head office locations or announced an intention to move their head office.

Not only is this provision ineffective; it is discriminatory. For consistency with other changes made in this budget to remove discriminatory taxation provisions and to reinforce the government's strong support of efforts to remove protectionist measures, I am proposing to remove the exemption from taxation for British Columbia headquartered banks. This change will not have any effect on taxpayers, since there are no banks with head offices in British Columbia which are large enough to pay the tax.

[10:30]

[Mr. Pelton in the chair.]

The 1985 changes also introduce another type of discrimination to this tax. By limiting the corporation capital tax to major banks, we would be effectively discriminating against banks in favour of other large deposit-taking institutions. Since large trust companies are in direct competition with banks, this also is unfair. Accordingly, I have introduced amendments to broaden the taxation base to include trust companies with taxable paid-up capital in excess of $500 million. However, I am providing some relief for the large financial institutions who pay this tax.

The tax exists largely because the financial industry has often earned large profits and paid little income tax. The Corporation Capital Tax Act ensured that the financial industry paid some tax to the province. Evidence exists, however, that the large financial institutions are now beginning to pay more income tax. Accordingly, I am proposing that corporate income tax become fully deductible against corporation capital tax liability. This proposal will ensure that corporation capital taxes on the financial industry are in effect a minimum provincial tax.

The provisions of Bill 7 are to take effect from April 1. I commend the bill to your attention, and move second reading.

MR. STUPICH: Mr. Speaker, the opposition will oppose this legislation. We're not opposed to the principles of eliminating the discrimination; we support that. We're not opposed to broadening the base to include all of the companies that are competing with each other. But we are opposed to a measure which on the one hand professes to eliminate discrimination, to broaden the tax base; and yet we're told in the budget that it's going to cost the citizens of British Columbia $6 million to get this extra revenue. That's going to be the loss, because of the next provision that the minister described: the one that will effectively eliminate, it would seem to me.... I don't understand why we're going to get as much money as we are out of this, by allowing the companies affected by this to deduct from their corporation tax all of the income tax paid to the province of B.C. Unless they're paying a very small income tax, it would seem to me that it will eliminate, to a large extent, the corporation tax. It's still a significant form of revenue. Maybe I misunderstand the calculation somewhere, Mr. Speaker; I don't know.

We can get into a discussion about the details of how this works in committee stage. But for the moment, in spite of the minister's description of the bill, telling us that it's going to broaden the tax base and eliminate the discrimination by including more people, the net effect of this is that the province will receive $6 million less in the current year and $7 million less next year than it would have without these changes, two of which were supposed to increase revenue.

So at this point, Mr. Speaker, the opposition will oppose the legislation.

MR. MILLER: I have some concerns, and I think it's an appropriate time to talk about them, under a bill that essentially is going to give some tax breaks to the banks in this province. I'll start with an item that the Minister of Finance is familiar with.

The Canadian Imperial Bank of Commerce recently closed down their two bank operations on the Queen Charlotte Islands, effectively leaving the communities on the Queen Charlottes without the services of a chartered bank. In saying that, I commend the credit union for moving in very

[ Page 1264 ]

swiftly to fill that vacuum. But it raises the whole point about service to some of the smaller communities in British Columbia, and the responsibility of the banks - who do make very good profits in this country - to provide those kinds of services. Increasingly, as I travel around British Columbia, I get the message from the small business community that the chartered banks — probably right across Canada, but we'll stick to B.C. — are simply not doing the job in terms of providing the kind of risk capital needed for small business entrepreneurs.

I really wonder about a bill designed to give the banks a further tax break when, quite frankly, there are some major concerns about what kind of service the banks really are rendering to the people of British Columbia. So along with my colleague from Nanaimo, I don't feel that it's appropriate at this particular time or at any time to bring in this kind of $6 million gift to the banks when there's really no evidence that they are fulfilling their mandate, particularly in terms of the small business community.

It's acknowledged on both sides of the House that in terms of job creation, small business is really leading the way. There are lots of improvements needed in terms of small business being able to take advantage of the kind of risk capital they need to apply those entrepreneurial skills and create some more jobs in this province. Until I see some signs of that kind of thing, I don't think there is any reason to support a bill that brings in a $6 million gift to the banks.

HON. MR. COUVELIER: Dealing with a couple of points raised here, in answer to the official Finance critic from the opposition, I think it's true that traditionally the view of the government has been that we have not received adequate income taxation from the major chartered banks. It was as a consequence of that that some effort was made to address that inadequacy.

At the rate that we are graduating lawyers in this country, it becomes a matter for all legislators, I think, to address the question of the propriety and defensibility of some of their legislative initiatives. As a consequence of that, it does seem prudent at this time to recognize the basic inequity in addressing only one segment of the financial community when we're in the process of breaking down the four pillars and broadening the scope of opportunity for other financial structures besides banks.

That might be a simple explanation on the first point made. Dealing with the second point, an equally valid one in my judgment, this government is committed to doing what it can to nurture the credit union movement in this province; and, like the speaker from across the floor, I take heart from the presence in our local communities of credit union branches. They provide a useful service and a service whose growth this government in the fullness of time hopefully will be able to assist.

Another reason it's probably important, therefore, that this initiative be approved is so that we can be satisfied that we will continue to receive adequate taxation from our financial community in the province. I move, therefore, that the bill be now read a second time.

Bill 7, Corporation Capital Tax Amendment Act, 1987, read a second time and referred to a Committee of the Whole House for consideration at the next sitting of the House after today.

HON. MR. STRACHAN: Mr. Speaker, I call second reading of Bill 10.

INSURANCE PREMIUM TAX AMENDMENT ACT,

1987

HON. MR. COUVELIER: In the 1986 provincial budget, provisions were introduced to grant an exemption from payment of the insurance premium tax for those companies that maintain their head office within British Columbia. This exemption has been subject to continuing review by the government.

There are three major concerns with the exemption: first, the exemption discriminates against out-of-province insurers who operate in British Columbia. The government is proud of its strong support for freer and fairer trade and for its outward-looking philosophy. This exemption is directly inconsistent with that policy. Secondly, it is not clear that the exemption would be effective in generating sufficient employment or economic activity. Finally, it has become clear that this exemption would provide a simple mechanism for all insurers to avoid tax, by incorporating a puppet subsidiary with its head office in British Columbia.

As a result, $30 million of revenue is at risk, compared with the original cost estimates of $4 million. Consequently, in keeping with the government's objective of supplying clear, fair and effective taxation legislation, this bill introduces amendments which will remove the exemption.

This change is consistent with changes announced in my recent budget to the corporation capital tax and to make the Insurance Corporation of British Columbia subject to the insurance premium tax. The government's intention to repeal the provision was made known to the insurance industry on November 26, 1986, in order that this proposal could be effective on January 1, 1987. I commend it to your attention.

I move the bill be read a second time.

MR. STUPICH: Mr. Speaker, the opposition will support the government's endorsement of the objections we raised when this legislation was introduced a year ago. We used the minister's same arguments then to oppose the move to apply this kind of discrimination, and one other: that all of the evidence that we had to that point — and admittedly it wasn't very much — indicated to us that those few insurance companies with head offices in B.C. had an even worse record of reinvesting in British Columbia than did the others. That was an additional argument that the minister didn't have this morning.

So we heartily endorse the government's taking up the position that the opposition presented so forcefully a year ago, unsuccessfully. Now the minister has come around the our way of thinking.

HON. MR. COUVELIER: Mr. Speaker, the reason that this becomes philosophically defensible and desirable at this point in time, from the government's point of view, is that we incorporated other changes in the budget, which brought some consistency to our approach toward taxing insurance business in British Columbia, the principal item being the decision to tax the ICBC operation. So while it didn't make sense before, it does now, by virtue of these other changes.

Bill 10, Insurance Premium Tax Amendment Act, 1987, read a second time and referred to a Committee of the Whole

[ Page 1265 ]

House for consideration at the next sitting of the House after today.

HON. MR. STRACHAN: Second reading of Bill 12, Mr. Speaker.

HOTEL ROOM TAX AMENDMENT ACT, 1987

HON. MR. COUVELIER: Mr. Speaker, this bill will amend the Hotel Room Tax Act as part of the government's program of restructuring the tax system. In particular, the changes in Bill 12 are part of a package of measures which change the taxation of the hospitality sector, one of British Columbia's most important industries.

The budget provided a significant degree of tax relief for the hospitality industry by removing the sales tax from all restaurant meals. This measure, which will cost the province $21 million in fiscal '87-88, should encourage tourists to spend more money in our restaurants and hotels. As a way to recover part of the cost of this initiative, the hotel room tax is increased from 7 percent to 8 percent effective March 20, 1987. This increase will raise an additional $4.5 million in '87-88. The government believes that this small rate increase is justified because it will add less than $1 to the cost of an average hotel room.

A second measure in this bill will provide a new source of funds to assist local communities to operate convention centres and other tourism amenities. Effective March 20, 1987, at the request of a local community, the province will levy an additional hotel room tax of up to 2 percent in specified areas. The revenue will be passed through to the local level. This measure will assist communities in developing the facilities necessary to become year-round destination resorts. In addition, it is a first step toward allowing communities to assume more responsibility for developing their local economies.

I move that the bill be now read a second time.

MR. STUPICH: Mr. Speaker, there is some peculiar wording in this that I expect the minister will get into in committee or will be asked about. When we talk about the additional two points on the request of a municipality, regional district or eligible entity, we wonder just what the minister has in mind when he talks about eligible entities.

I must confess that I have not received any correspondence or representations from anybody concerned about this, and it surprises me. I'm surprised that the minister would associate the removal of the sales tax from restaurant meals with hotel rooms, because it's not just people who are using hotel rooms who eat meals in restaurants. While there is perhaps some connection, that relief, if you like, is affecting a lot of people in addition to those who use hotel rooms.

[10:45]

I understand that B.C. already has a reputation — maybe not warranted — of having rather high rates for hotel rooms, and that this is one of the things that those promoting tourism are running up against. The minister said that this will add only $1 to the room rate, and of course it is another dollar that has to be charged to the traveling tourists or that has to be absorbed by the operator. In all likelihood, it will be charged to the tourist, with perhaps a little more added on the side.

But it is not just 1 percent, Mr. Speaker. This bill really says that it will be 3 percent. It is quite an impost, I think, to charge the traveling public at a time after Expo, when we are hoping that people will come back to British Columbia the year immediately after Expo; that they would travel not just to Vancouver, but that some of the districts removed from Vancouver would also get some of the benefit from the increase in tourism in the province. I hope that will happen; we all hope that will happen.

But it would seem to me it is the wrong time to hit people with an increase in hotel room rates, which as far as they are concerned is what it is. People don't look at their bill and analyze how much is tax and how much the hotel owner is getting. They look at the total cost, and I think the timing is wrong. I am concerned as to just who is going to get in on this gravy train of the extra two points.

Municipalities I can understand; regional districts I can understand. Other entities 1 have some questions about and will question the minister more about when we get to committee. At this point, from what we see of it, the opposition will oppose this legislation.

MS. EDWARDS: Mr. Speaker, I would like to add some comments that I have after having spoken to a number of municipal politicians and also a number of hotel operators and tourism people. I know that my polling methods were not complete. However, what I hear back from them consistently is that they are not in favour of this bill. They are not in favour of the tax. Even the municipal people have some doubts that it will in fact do what it is expected to do.

First of all, the idea has already been brought up that in fact this is perhaps a bad time to put more taxes on the tourist population — the visitors who come to our province to increase our industry, which we want to become a much stronger and much more viable industry.

But besides that, some of the people in the municipalities are suggesting that it could create some major centralizing effects. In other words, perhaps the only area that could afford to put an extra tax on hotel rooms might be the centre of an area, which can then afford to get the tourism benefits that they can spend the money on. The people in the rest of the region are not going to be able to benefit from that particular event. It could be a centralizing force.

There are some major doubts about who the eligible entities are and how that particular part of the legislation could be used. I might say that the tourism industry people that I have talked to are not at all pleased about the fact that there could be extra taxes put on at a time when municipal governments are feeling real squeezes and might be tempted to do that, perhaps against other judgments that would apply under different circumstances. So I would certainly add my voice against this particular bill.

MR. MILLER: I have some confusion about the bill, but I will just go through the areas that I think are of concern.

"Prescribed purpose," it seems to me — and perhaps maybe purposely so — is left without any real definition. Of course, any time you enact legislation that is that wide open or that discretionary, presumably the intent is for municipalities to use the funds raised through the tax to develop or promote tourist or visitor-oriented activities. If that is the case, I am wondering why hotels particularly have been singled out, because it is my experience that it is more than hotels who benefit from tourism. Having just returned from the municipality of Penticton, it is obvious that a number of businesses benefit from tourism and are interested in expanding it.

[ Page 1266 ]

Certainly the opportunity exists under current legislation for municipalities to raise revenue right across the board. For example, under the variable mill rate, there is nothing to prohibit a municipality from increasing the rate on the commercial sector, which would be the prime beneficiary in terms of their businesses and collecting probably a greater amount with less pain across a greater section of the assessment roll.

So I really do have some concern about that particular section of the bill, as well as the concerns raised by my colleague from Nanaimo with respect to the variations that I suppose could exist between municipalities. We had some concern in Prince Rupert when the variable mill rate was introduced, and really it ties in with something the Premier talked about, which is the kind of competition that could exist between provinces in terms of the kinds of tax incentives that various provinces offer to industry. The Premier said: "We're opposed to that kind of approach; we don't think we should be competing by offering industry the biggest break." We had that concern at the local level and I don't at this point have any evidence that that really came about, but it's discretionary in terms of.... The word "may" doesn't enter into the description or the explanatory notes under sections 4 and 7. It simply says it will enable municipalities — and presumably they can choose not to take advantage of that if they wish, thereby setting up some kind of intermunicipality competition in terms of lower hotel rates.

I realize there will be a deeper discussion and responses from the minister in committee, so I'll leave my remarks at that.

HON. MR. COUVELIER: Mr. Speaker, some good points have been made here. 1 just want to respond to some of them briefly.

Dealing with the question of eligible entity, it is conceivable that there are parts or areas of the province where a 2 percent surcharge on hotel tax may be required for some specified tourism-related purpose that would not fit within the narrow parameters or broad parameters of a regional district or a municipality. As a consequence, there has to be the flexibility in the legislation to allow the industry as represented by their local government officials to deal with the challenges of the moment.

The size of the increase of the dollar compulsory from 7 to 8 percent I think is defensible on the basis of what is generally charged elsewhere in the world. Certainly that can be absorbed with any industry without difficulty. The 2 percent surcharge that's offered is optional; it's merely enabling legislation and need not be picked up by local governments, if they chose not to do so. Bear in mind that it would still have to be put for a useful purpose in terms of expanding the tourism opportunities in an area, so it would have to meet the prescribed purposes.

So, Mr. Speaker, I'm pleased to endorse this initiative, and I move now that the bill be read a second time.

Bill 12, Hotel Room Tax Amendment Act, 1987, read a second time on division and referred to a Committee of the Whole House for consideration at the next sitting of the House after today.

HON. MR. STRACHAN: Mr. Speaker, I call second reading of Bill 13.

MOTOR FUEL TAX AMENDMENT ACT, 1987

HON. MR. COUVELIER: Bill 13 contains amendments to the Motor Fuel Tax Act that meet the government's objectives of reinforcing environmental priorities and maintaining a positive climate for development. At the same time, the measures will generate some additional revenue which will be available to fund essential programs.

The government is concerned with maintaining the quality of our natural environment. To address this concern, the provincial tax on leaded fuel is set at 2 cents per litre above the general rate for unleaded fuel, effective April 1, 1987. In recent years a serious problem has developed because of the use of lower-priced leaded fuels in a vehicle designed to be run on unleaded fuel and equipped with a catalytic converter. Misfueling, as it is commonly called, quickly and permanently destroys the converter's effectiveness and drastically increases the emission of toxic pollutants. In addition, the harmful effects of lead released into the atmosphere, particularly on children, are well documented.

The change to the tax on leaded fuel will narrow or eliminate the current price difference between leaded and unleaded fuel, thereby reducing the incentive to misfuel. The result should be a significant reduction in toxic emissions, particularly in the lower mainland where the problem has been most severe. An additional $37 million will be generated by this change in the fiscal year '87-88.

The government will improve the climate for development in British Columbia while maintaining a commitment to the environment by providing tax relief for the sale of gasohol. The provincial sales tax on gasohol, which is a mixture of gasoline and ethanol, will be set at 2 cents less than the appropriate gasoline tax rate. This measure will be made effective once a facility to produce ethanol from surplus farm products has been established in the province. The tax relief will assist Peace River grain-farmers to find a new market for their products by creating demand for ethanol produced from grain. The change will also help reduce environmental damage by promoting the use of a cleaner-burning fuel.

The government is continually looking for ways to make the tax system more fair and less difficult to administer. As part of this commitment, effective April 1, 1987, marine bunker fuel — and with some exceptions, natural gas used in stationary engines — are taxed at 7 percent of the actual purchase price. Prior to this change, these fuels were taxed at a cents-per-litre rate determined by formula. In the case of natural gas, this change will correct a problem which had been created by linking the tax rate to the price of gasoline, resulting in a much higher than intended effective tax rate. The new method of applying the tax will improve fairness by substantially reducing the amount of tax paid.

In addition to these major changes, Bill 13 makes a series of changes to make the tax easier to administer and reduce government costs. I move the bill be now read a second time.

MR. STUPICH: The opposition shares the government's concern about the effect of using leaded gasoline on the environment, on people's health generally and the increasing pollution in the atmosphere. So we have no concern about that. But we have just a little bit of concern, I suppose, and I have had one complaint from someone who said that people are misfueling. A representation was made to me by one constituent who said that there is one new model of Japanese

[ Page 1267 ]

car that is made to use leaded gasoline. So in that case it's not misfueling. There are a lot of — I'm not sure how many; I have no idea how many.... There are still people in the province who are driving older-model cars that were built to use leaded gasoline. They're sort of included in the same grab-bag as those who are misfueling, and they're all considered to be guilty of using the same kind of fuel even though their cars were made to use it.

I understand that people with cars that were made for leaded gasoline can use unleaded gasoline just as well, so from that point of view I'm not concerned. But the increase in tax on leaded gasoline will not really produce much more revenue, because I'm hoping people will shift away from leaded gasoline. I think that's really what the government is hoping in increasing the tax rate on leaded gasoline. It's much like increasing the deposit price on beer bottles and hoping that people will return them rather than throw them on the side of the road. Maybe we haven't gone far enough in that direction. Maybe we haven't gone far enough in increasing the tax on leaded gasoline. The time might come indeed when the minister will be standing up — or a Minister of Finance will stand up — and increase the tax rate on leaded gasoline so that it's substantially in excess of that for unleaded, which will really convince people that they should be using unleaded rather than leaded. We do endorse this approach.

[11:00]

With respect to the formula that the minister quoted, it seems to me that year after year a Minister of Finance stands up in the Legislature and talks about changing the formula for calculating the tax on one kind of motor fuel or another. I've never followed any of these formulae. I'm not paying too much attention to this recalculation that once again is supposed to be more efficient and ends up, I'm sure, collecting more revenue. But I haven't ever tried to follow the intricacies of any of these formulae and I'm not going to start now. The opposition will support this legislation.

MR. MILLER: Although we will be supporting it, I have a number of concerns. They really are in two areas. One is, and it's not clear.... I realize that in committee stage we'll get into the kind of question-and-answer responses that will be more enlightening, but the minister is probably aware of the concern with regard to the price of bunker fuel as a factor in terms of shipping off the coast of British Columbia. Just as an example, the port of Prince Rupert is a growing port. We'd like to capture some of that kind of business — or more of that kind of business. And yet we are at a distinct disadvantage, I believe, in terms of U.S. ports. I don't have the kind of facts and figures in front of me in terms of debating this, and hopefully I'll have more information at committee stage. So that's one area. Does it really create more of an advantage for British Columbia ports in terms of that end of the shipping business, refuelling ships that are calling into our ports?

Secondly, and this may be a little bit wide-ranging, but I would hope that other northern members would support me in this. I go back and recall that the former MP for Skeena made a long speech in the House of Commons about the need for, in effect, postage-stamp rates. The member for Prince George understands what I'm talking about. We generally are not served by the kinds of transportation systems that are available in southern British Columbia, most particularly in the larger metropolitan areas. We drive great distances to work. We drive great distances for travel. If you want to travel to the next community from Prince Rupert, you've got to drive almost 100 miles to Terrace. It seems to me that there's an onerous penalty. I believe that there should be postage stamp rates. I think fuel is a necessary commodity. It's not a luxury. And yet the bill will increase tax on leaded gasoline. There will obviously be some impairment — I can't really oppose that in principle — to people who can't afford to buy the newer cars that don't use leaded gasoline.

But my main complaint is that people in the north, who really have not been given — and in some cases it is impossible to give — opportunities for public transportation should in fact be allowed to have lower fuel costs. I don't know how you would do it — whether you would draw a line around certain sections of B.C. and say, "We're going to exempt you from these kinds of taxes," or how you would bring it about. But it seems to me that there is a need to equalize the cost of fuel around British Columbia.

I know I was quite surprised last year when I came down from Prince Rupert, where I was paying some 50 cents a litre, to walk into a price war in Victoria, where it went down to.... I hate to say it was ridiculously low, but by my standards it was. You could almost drive down to Victoria and fill up. So I think that is something that we have to deal with in this province, in terms of the kind of disparity that exists, in terms of incentives, perhaps, for people in some of those more remote areas.

The bunker question, I think, is one that I will be pursuing. Perhaps the minister will be able to allay any concerns that I have with regard to that question.

MRS. BOONE: Mr. Speaker, I certainly echo my colleague's thoughts regarding postage-stamp rates. All you have to do is go throughout various areas, go down to Quesnel. At one point, I know a survey was done in the Prince George area, and we discovered that Prince George had higher rates than Vanderhoof, than Quesnel, than many areas around. We could find no reason as to why this took place. If you go to Mackenzie, you will drive from Mackenzie out to the highway and find that suddenly it takes a drop of 3 cents. At one point last year, one citizen of Mackenzie was reduced to picketing the gas station, and managed to get it reduced 2 cents. So I think individual opportunities can come about and change some actions there.

The thing that I wanted to bring up.... I don't know if the minister is aware of this, and I don't know if the members for North and South Peace River (Hon. Mr. Brummet and Mr. Weisgerber) are aware of this either. But there are some stations around in some of the remote communities — I am aware of one — that within last year actually had their hose converted so that they could put regular gasoline into unleaded gas tanks. I am not sure whether it was a station in North or South Peace River, but in one of the areas up there they did this because they were a small gas station and they just couldn't afford to keep the leaded fuel, the unleaded fuel and all of these things on line. So in order to get around it, they changed their hose.

At that time, I looked into this, and I discovered that there wasn't anything we could do to force these people to.... They had done nothing against the law. There was no legal action that could be taken against them. My question to the minister, then, is: if these people are still doing this type of thing and putting leaded gasoline into unleaded cars, sometimes without the purchaser even knowing that this is taking place, does the minister see that there is something that could

[ Page 1268 ]

be done to prevent this? Is there some kind of action that could be taken on behalf of the ministry to ensure that, in fact, people are not getting leaded gas when they really do want unleaded gas?

MR. CASHORE: While I think it is very apparent, in terms of a number of aspects of this bill, that there are benefits here, certainly with regard to the environmental impacts, as the debate leader on social services I want nevertheless to register a concern with regard to the impact that the increase in the cost of leaded fuel will have for low-income people.

I don't think we have to do a great deal of research to recognize that probably most of the people who own older model cars, and therefore have been able to benefit from the lower fuel cost, will now have an increase of approximately 2 cents a litre, and that this is going to be a hardship for people who can least afford it.

I think this underlines the fact that all of these acts are connected. When such a measure is taken into consideration, I think it would be appropriate to be talking within cabinet about ways that relief can be made more available to low-income people in this province, especially those who are going to have to be paying this higher amount.

[Mrs. Gran in the chair.]

HON. MR. COUVELIER: Madam Speaker, the questions and comments from the opposition, I think, were in recognition of the fact that this bill is not a revenue bill. While the effect might be to raise some small additional sums for the provincial treasury, the bill is actually an environmental bill, and it's brought forward in the spirit of attempting to improve the environment in which we live.

I'd also just like to give some comfort to the Hon. member who raised the issue of bunker fuel tax. We have looked very closely at the structure of taxation revenues from bunker fuel to determine if it had any impact on sales of the product, and it would appear on the basis of our investigation that far more important to the question of selling bunker fuel to the marine industry are the decisions made internally in the refining industry in B.C. as to how and where they might market their end-product. So there does not appear to be any evidence that our taxation policies relating to bunker fuel have any impact whatsoever on the marketability of that product to the marine industry.

In any event, I move that the bill be now read a second time, Madam Speaker.

Bill 13, Motor Fuel Tax Amendment Act, 1987, read a second time and referred to a Committee of the Whole House for consideration at the next sitting of the House after today.

HON. MR. STRACHAN: Madam Speaker, I call second reading of Bill 14.

MISCELLANEOUS STATUTES (FINANCE

MEASURES) AMENDMENT ACT, 1987

HON. MR. COUVELIER: The purpose of this bill is to amend 13 statutes which make reference to responsibilities of the comptroller-general. The amendments clarify and give proper recognition to the roles of the Treasury Board and comptroller-general as defined by the Financial Administration Act.

I move the bill be now read a second time.

MR. STUPICH: The opposition will be supporting this legislation.

Bill 14, Miscellaneous Statutes (Finance Measures) Amendment Act, 1987, read a second time and referred to a Committee of the Whole House for consideration at the next sitting of the House after today.

HON. MR. STRACHAN: Madam Speaker, I call second reading of Bill 17.

PROPERTY PURCHASE TAX ACT

HON. MR. COUVELIER: The purpose of this bill is to impose a property purchase tax. This new tax will apply to most purchases or transfers of real property which are registered at a land title office in the province.

The property purchase tax replaces ad valorem land fees which formerly applied when charges against property or property transfers were registered. In replacing ad valorem land fees with a property purchase tax, the government has recognized that transfers of real property are a suitable base for generating additional revenue necessary to fund government programs and that the introduction of an explicit tax imposed by way of a fully developed taxation statute is preferable to imposing a hidden tax by way of a massive fee increase.

The Property Purchase Tax Act is a comprehensive piece of legislation which makes clear both the taxpayers' responsibilities and rights with respect to the property purchase tax.

The Property Purchase Tax Act identifies transfers of property which are subject to tax and how tax is to be calculated for each type of taxable transaction.

An important section of the bill pertains to exemptions from tax which may be claimed. A number of exemptions provided for in the bill are essentially technical in nature and have the effect of ensuring that tax is not imposed on transfers which do not result in a change of beneficial ownership of property. Other exemptions reflect general policy objectives of the government and relate to the status of the organization or individual to whom property is being transferred.

The administrative sections of the bill set out filing requirements and indicate the appeal procedures which taxpayers are to follow if they object to any tax assessment which has been imposed under the Property Purchase Tax Act. In order to achieve the policy and revenue objectives of the government in a fair and efficient way, the Property Purchase Tax Act contains measures not found in statutes which impose a similar tax in other jurisdictions.

An important aspect of the legislation is the transitional provision it contains. The transitional provision will allow transfers of property which were negotiated prior to budget day to be registered at a rate of tax which is equivalent to the rate at which ad valorem fees would have been imposed.

[11:15]

I believe the intent and effect of this legislation is to impose a fair tax. I hope that all members will debate this bill carefully and thoughtfully, and that it can be moved expeditiously through the process and enacted into law as soon as possible.

I move the bill be now read a second time.

[ Page 1269 ]

MR. HARCOURT: I rise to say that the opposition will be opposing this particular piece of legislation, because, Madam Speaker, it is indeed a missed opportunity. We are disappointed in the legislation because it is confusing, it is lax in consultation, and it is unfair. It's confusing because it's wrapped around one of the best land registry systems in the world, the Torrens system, which has certainty; it is a speedy process that is publicly available without having to go through the title searches that other jurisdictions do, in the United States and elsewhere. It is a self-financing system that is based on the fees paying for that excellent Torrens land registry system we've had in place in this province for many decades. It now throws that off. That self-financing user-fee approach has now been thrown aside, as a money grab. It is a confusing message, on the certainty that people wanting the title.... It's confusing because that certainty, that clarity, that easy public access, that self-financing approach — that we have had for decades; that is exemplary around the world; people come here to study our land registry system and user-fee approach — is being thrown into a state of confusion and insecurity. That is not good for people who are getting involved in first-time home purchases, who are looking at investing in this province. It shakes up that sense of stability and certainty and security that people want with property.

On top of that, Madam Speaker, it's a missed opportunity, because it not only sends out that confusing message, but it was done without consultation — that was what the "fresh start" was all about: consultation and cooperation. This was unilaterally landed on the people of British Columbia without the kind of thought that should have gone into it. So we're disappointed that it didn't have that sort of consultation. Other colleagues will be speaking about the confusing nature, the mixed signals, the lack of vision, and other problems that the budget faced, and that this was part of.

I've said also that it is unfair — this legislation — to a number of people, particularly first-time home-buyers, who are seeing part of their initial down payment now having to be applied to this tax. You know, that could be taken away from young people who were hoping to have those funds not just for the down payment, but to have for their appliances, for their carpeting, for the drapes, for the expenditures that you have to have when you get into your first house.

It is also part of the unfairness we've seen in the budget to small business and seniors. Small business had their taxes raised 38 percent; seniors were taxed to the equivalent of $22 million; and yet the large corporations had tax cuts. And the wealth surcharge was taken away; $29 million taken away in revenue, and brought in by this kind of unfair measure on first-time home-buyers and on seniors.

So we are, Madam Speaker, going to be opposing this disappointing piece of legislation for the people of British Columbia.

MR. G. HANSON: As our leader has indicated, we'll be opposing this statute. It's a statute that really strikes at the Canadian dream in many ways. It's a taxation on shelter. And I think it's a kind of taxation that would be.... I recognize that other provinces have modifications of this kind of tax, but I don't think it's an appropriate tax in the province of British Columbia. It is essentially a tax that has resulted from a series of bad economic decisions of the past; of a number of years of government policy which dampened demand in this province; that undermined investor confidence, consumer confidence — the whole restraint program of '83 to the present — and this is the net result. Government revenues are down, and the government is looking to pick up $168 million from homeowners.

I think the public in this province are very aware that the last few years has been a very tough time for people who were looking for their first home. We're not talking about people in their late teens or early twenties; we're talking about people, because of the poor economic conditions in the province of British Columbia.... Young families in rental accommodation do dream about having their own home and working towards that. It's very much a part of the Canadian psyche that we do aspire to have our own accommodation — our own place.

What we have now is an onerous tax of 1 percent, which increases the down payment that a person has to assemble; and it has be in cash, Madam Speaker, so a person has to have on a $100,000 home.... That's not out of line in the city of Victoria, when you look at what is presently on the market. We're looking at that range of $90,000 to $110,000 for people trying to get into a home for the first time. As a result of this measure, those individuals will have to have an extra $1,100 in their bank account that they have to apply in addition to their down payment. That dampens demand. It makes it more difficult for them to make that first breakthrough into the housing market.

Although new houses are being constructed, there is only a certain amount of housing stock, and it involves people moving through the system — moving to get a second home if their original home is no longer an appropriate size for a family. Every move through the course of the system is a heavy tax.

Madam Speaker, we always argue against a tax on food; we feel that's an inappropriate area of taxation. We don't believe there should be a tax on shelter; we feel that's an inappropriate tax. It's better to do it through a graduated and progressive income tax system; that's the most progressive way. The very large developers and landowners will have loopholes and ways to escape this. That's what tax lawyers are all about. There are ways that this acquisition of property can be handled through shares, debentures or other measures that will escape the tax. The tax will catch the people looking for a new home — an extra $1,000 they have to find. That is a very heavy taxation in a year when the economy in depressed, where job opportunities are not there for people, and people are living very near the margin of survival in many instances. So when the opportunity presents itself for people to get a first-time home, here they're slapped in a new budget, without any notice.... Six months ago, when this government faced the electorate of this province, there was no mention of a $1,000 tax on the purchase of a $100,000 home. This government would have been soundly defeated at the polls if it had been forthright with the people of this province about this taxation.

Madam Speaker, we oppose this tax. We feel it's a tax on shelter. It particularly hurts first-time home-buyers and young families. But it really is testimony to poor economic decision-making for about seven years by this administration.

MR. BLENCOE: This government, for a number of years, and certainly in this budget, has sent a message once again that it's going to continue in its financial policy to dramatically impact, in a tax way, on the average income

[ Page 1270 ]

earner, the average British Columbian. I'm not going to go into the details of the budget, but we all know that the budget hurt seniors and the average homeowner. Taxes went up at the same time that taxes for the high-income earners.... We've just dealt with a bill for the banks to get some breaks. The message is clear, as usual, from this government, where their priorities are.

Once again the young people struggling, trying to get a home for the first time particularly, out of the blue.... As my colleague from Victoria states, there was no mention in the election that this new tax was going to come into effect. The average British Columbian once again gets hit directly in the pocketbook.

You know, Madam Speaker, it's just so ironic that this government, which supposedly speaks for people who are interested in owning property — and the things it has said about our side of the House over the years and our supposed positions, and the scandalous kinds of comments they have used during elections to try to hurt our party, comments about private property and ownership.... And here we have, Madam Speaker, a so-called government, in its hypocrisy I believe, introducing a new tax that's going to hurt young people in their attempt to buy a home for the first time. We can't support that. That is a dream of young people. It is a dream to own your own home.

I have some letters — I'm sure we've all received letters — from people who are just offended by this new taxation, and I just want to read one or two of these letters, because I think they give a message that must be given to the government.

I have one letter here from a young woman who lives in my riding, written to the Premier:

"I am a single parent earning approximately $20,000 annually. In early March I put in an offer to purchase one side of a duplex for $55,900. Obviously it is very modest accommodation. The offer has been accepted, and all the 'subject-tos' have been removed. I now have a firm and binding contract with a possession date of May 29, 1987. I am one of the lucky ones who won't have to pay the surtax of 1 percent on my conveyance under the new Property Purchase Tax Act.

"Registration fees on my conveyance 'the old way' are $142 for the transfer and mortgage. Under the new act it will cost $559. At the end of June I was prepared to pay $200 for my property taxes after my homeowner grant. Now I must pay $350."

Another tax increase by a so-called government that's interested in putting people in their own homes.

[Mr. Pelton in the chair.]

Now I think what we're doing — if I may digress from the letter — is finally putting paid to the perception that this government and right-wing governments have tried to give over the years that they really have the interest of the average person at heart, and that they want to ensure they own their own homes. With the kind of policies that have come down in this session and with this budget, the average British Columbian is being hurt by this government, certainly being hurt in their attempt to own their own home for the first time.

Back to the letter:

"Your new budget, had I purchased my home just three weeks later, would have cost me almost $700. Now, because I am relatively lucky, it is costing me $150 for the additional property tax."

This is a single parent who just by chance, Mr. Speaker, missed the new, fresh start by the Socred government of taxing the little people of the province of British Columbia once again. But how many others, like this single-parent mother dreaming of owning her own home, are going to get kicked? Where's the incentive? Over and over again during the last ten years this government has taken the incentive away from ordinary working British Columbians who are desperately trying to get a job, be a useful part of their community, bring up a family and own their own home. What do they do? They bring in more taxes — real property taxes and this property transfer tax.

[11:30]

Let me carry on with the letter to the Premier. "I can't believe that you intended to hurt single parents and couples of modest incomes with your budget." This letter is so symbolic of thousands of other British Columbians. Here's this person saying, because the Premier said it's a fresh start, they wouldn't hurt people, they wanted to do things for people.... Yet what do they do in their first budget? They hurt the average, caring British Columbian. Back to the letter: "Traditionally, homeowners had middle to high incomes. Now, because of falling interest rates...." Ha! Interest rates start to drop. Once again the dream may be realized. What does this government do? It brings in a property transfer tax.

"Now, because of falling interest rates and declining housing costs, people of the low- to middle-income bracket find that they can afford a home. But this surtax will put an end to that.

"I propose that you exempt the first $85,000 of the cost of a home from the surtax."

We can hope that that will at least be considered, Mr. Speaker.

"The B.C. second mortgage is only available to people who purchase a home of $85,000 or less, in order to help the first-time home-buyer and those of lower incomes. Why not do the same for the surtax? Chances are, if your home is purchased for more than $85,000, it is not your first home. Therefore you are in a better financial position to pay the 1 percent surtax. Please reconsider your position on the surtax and the minimum property tax."

Here is a young person still trying to believe in the Premier's words, which every day sound more and more hollow, I've got to say. Here's a young person concluding her letter with: "I am sure it was not your intention to shatter the dreams of our young people."

Mr. Speaker, I have other letters, but I don't have to read them; I think that letter typifies the concern and the feeling of being betrayed by this government, not only in this legislation but in other financial bills and the budget. All they are saying is: "Give us a chance." Where is this so-called fresh start that would allow British Columbians...? When the interest rates are starting to drop and prices of houses — I know in my area — are back to some reasonable rate, what does this government do? It kicks the average working British Columbian, those young people I've seen over the last few months, many of whom just can't believe that this has happened to them.

All we can say to this government is that we hope that they will reconsider, and we certainly are opposed to this piece of legislation.

[ Page 1271 ]

MR. JONES: Mr. Speaker, I would like to rise to comment briefly on the property transfer tax and raise a point that I don't think has been raised, which is the utter stupidity of this legislation. It seems to me that it's stupid financially and it's stupid politically.

At a time when our economy has been beginning to see some improvement, when we need to combine the efforts of the forest industry and the housing market and when we see an opportunity to have some growth in that sector, to introduce legislation at this time when it dampens the fragile housing market in this province is utterly stupid.

I suppose I should take joy in the political stupidity of the government. In my long tenure of something like six months as an MLA there has not been a single issue on which I have received more correspondence than this particular issue. It is an issue that I didn't realize would impact so strongly on the citizens of this province as to have them send to me virtually hundreds of notices exercising their right to protest this legislation. I feel compelled on their behalf to comment and voice my opposition to it.

I can't believe that after we have taken money from the seniors and those in need of health care, we have to carry on further attacks on the middle class. This government seems intent on destroying that middle class and creating a two-tiered society.

I think that the political stupidity and the economic stupidity of this legislation compels us on this side to strongly voice our opposition, and we'll continue to do so.

MR. CASHORE: When my hon. colleague the member for Burnaby North (Mr. Jones) just mentioned that this is a stupid tax politically, economically and socially, I think I heard the Minister of Finance say: "Well, do you think Manitoba's stupid?" For the information of the Minister of Finance, I would like him to know — and perhaps his research on this has been defective — that if he wishes to compare this with Manitoba, he's comparing apples and oranges.

HON. MR. COUVELIER: Who's the apple?

MR. CASHORE: Judging by the more than 200 mailings that I've received and that probably you've received opposing this, I think you know who the apple is, Mr. Minister.

In Manitoba the first $30,000 of the selling price is tax exempt. From $30,000 to $90,000 there's a 0.05 percent tax. From $90,000 to $150,000 there's a 1 percent tax and from $150,000 up there's a 1.5 percent tax. If the minister wanted to take seriously the concern that's been raised very effectively by members on this side of the House with regard to first-time home-buyers, with regard to the additional impacts that are found elsewhere in this budget and that pertain to young people and to seniors, I think he would realize the Manitoba package is a much less bitter pill. This is a bitter pill.

This is going to be a very difficult time for a number of people who find themselves, as a result of Social Credit policies, in a very marginal situation with regard to their disposable income. These are people in our society who have scraped and have tried to cooperate with your idea of restraint, in order to get themselves into a position of being able to acquire that first home. Now what do they get? They get a kick in the head. I don't think that's appropriate, Mr. Speaker.

I think it would be helpful if we could take a look at the situation for people who live in the lower mainland. I realize that throughout British Columbia this tax imposes a hardship, but there is a unique situation in the lower mainland. We find that in Vancouver, for instance, the average price of a residence is $126,108. The tax on that purchase would be $1,261.08. Now because of the way this legislation is written, this first-time home-buyer would be in a position of having to pay that amount in cash right away, and that amounts to approximately 10 percent of the average down payment. So the impact this is having on people is not simply the 1 percent on the total amount. People who have been getting into careful budgeting, into watching their dollars and their pennies, are now having to have the experience of not a 1 percent impact on their planning, but 10 percent of the amount that they thought they had saved for the down payment.

That is a terrible impact to impose upon people who are in a marginal situation with regard to their disposable income — people who have tried very hard during difficult economic times to save and prepare for that day when they could achieve that dream. That dream, by the stroke of passing this bill, will be much further away from them, and for many people will become a nightmare. I think that's really unfortunate.

I would also like to refer to the point about the B.C. second mortgage, especially with regard to people who live in the lower mainland and perhaps in areas such as Victoria. I said a moment ago that the cost of an average residence in Vancouver is $126,000. A couple with two or three children, trying to get into a barely adequate home, are faced with a $126,000 cost, which means that they don't have the eligibility to receive the B.C. second. Not only are they not able to receive that, which is there to help first-time home-buyers, but they are having this additional cost as well. That's shameful, and I think that point alone should be cause for some sober reflection on the part of the Minister of Finance and some consideration that because of the economic and political consequences of this type of action that's going to impact so directly on so many people in this province, people upon whom we depend to pay an increasing share of the tax burden already, because of other measures that have been taken over the last four years, this additional impact is most unfortunate.

I would also point out that the amount having to be paid out in cash at the time of purchase is a hardship. Also, in terms of the total package, there's a kind of convoluted pricing situation that's going to develop there. We find out that this tax probably is written in such a way that it makes a loophole available to corporations. I would like to ask the minister, when he is summing up his debate on this bill, that in view of the fact that it will be possible through some corporate property transfers to avoid this tax for the very rich, what is the minister doing in terms of social housing societies and co-ops? Does he intend that those organizations that are working very hard to try to increase the housing stock for low-income people and for people who really do need an opportunity to get into their first home, that those organizations will also have to pay this tax at the rate stated for projects — say, to give one example, one that I know of in the downtown east side that is costing upwards of $1 million for the property...? Will that property be taxed at 2 percent, thus increasing the multiple unit price of the units that that volunteer social housing society is attempting to deliver as a means of being responsible citizens? What justification can

[ Page 1272 ]

the minister give for placing that kind of burden on that effort? I would ask the minister in all seriousness to reflect on that, especially during this United Nations International Year of Shelter for the Homeless.

[11:45]

Why would the minister want to institute this program, which is going to take some social housing projects and push them to the point of non-viability? In some instances the people who have been working on these projects have been working on them for more than a year. I would like the minister to address that question specifically. Will he assure this House that social housing will not be subject to this tax, in the same way that some large corporations will not be subject to it? Or if not in the same way, will he at least make provision, in fairness, that they will not have to be subject to this tax?

The main thrust of my comments, Mr. Speaker, is to say that this is a very bad act. It's a regressive act. It's detrimental not only to the economy of the province but to some very special people, people I'm sure the minister looks upon as precious and significant and valued within our society. I am very pleased to be able to stand united with our caucus as we oppose this most unfortunate attempt to raise revenue on the part of this government.

MS. MARZARI: Mr. Speaker, I'd like to address myself to this bill, not just because of the values that it encompasses but because this, of all the promises made in the budget speech, was the promise that turned into a threat for many of my constituents.

I am sure that both sides of the House have received petitions, letters and clippings from newspapers decrying the advent of this bill. I myself have been in receipt of at least 100 form letters saying:

"As a property owner...I now feel betrayed. Recent legislation proposed by the Minister of Finance which seeks to place a tax on all future real estate transactions was apparently prepared without any consultation with British Columbians outside the innermost circle of government."

These letters go on to urge us all to do a rethink on the impact of this bill on home-buyers. I'd like to go a little further than that, Mr. Speaker, and suggest that it's not just first-time home-buyers, although that is obviously the person that we have a lot of feeling for right now. This bill places a unique burden on those first-time home-buyers. Since we are all probably past the age when we bought our first home, if you can remember what it was like to scratch together that initial down payment on your first home, you know how difficult it was to negotiate with a bank or credit union that down payment of whatever it was — 10 percent or 20 percent; more like 5 percent now.

To bring up the business of a 1 percent tax on a home of $125,000 places on that home-buyer the onus of scratching up an additional $1,250. It is not an insubstantial amount of money. If in effect your equity position and your mortgage ratio depends on coming up with that additional money, the bank is not going to count that money as part of your equity. It is going to count that money as part of the tax you must pay. If you are lucky enough to make a lower down payment or to raise the mortgage a little higher to afford to pay the tax, you are paying 10 percent on your money for the next five years, amortizing it over 25 years. That money is actually going to cost us and that homeowner a great deal more than $1,250. It just comes out as blatantly unfair for that first-time homeowner or home-buyer.

[Mr. Speaker in the chair.]

It would seem to me that there are other ways of raising capital. If we want to create an economic development plan for this province which encourages development in some areas, which encourages perhaps home-building in the suburban areas of Vancouver, then there are other ways of the provincial government capturing some profits from major developers. There are ways of perhaps imposing downtown development. There are rational ways of liberating tax dollars from foreign investors, I believe. I do believe that this tax, however, is not rational. It hasn't been clearly thought through.

My colleague from Maillardville-Coquitlam has pointed out why the Manitoba experience, which was used as a rationalization when the bill was presented in the budget speech, is not applicable to this particular tax. Manitoba is not charging 1 percent on the first $200,000. Manitoba is charging 0.05 percent tax on the first $30,000. The cumulative effect of the Manitoba experience, as my colleague has pointed out, on an average residential unit price of $78,000 is one-eighth the tax that will be paid by the average British Columbian buying their house. The difference between $242 paid by the Manitoban and over $1,200 paid by the British Columbian suggests that we really have to go back to do a little bit of serious thinking about the impact of this bill.

Nova Scotia's experience in dealing with property, I gather, is that it's only applied to city acquisitions. In Ontario the tax is .05 percent on the first $55,000. In other words, we've come in with a rather drastic tax on something that the province hasn't received revenue from before. We've done it all at once, and we've done it without consultation. We've done it in a rather massive way, and it's going to seriously impact not only on the first-time homeowner but the cost of land itself.

If I turn to the suburban areas, we would expect to see new homes being built and a lot of first-time-on the-market people with one or two children going to buy their first home. We look at that raw land, and we're making some of that raw land available too, even in the lower mainland. The scenario that I have in front of me, that was drawn up by a real estate agent — who traditionally would have been on your side of the coin and who has asked me for an NDP membership — suggests that a developer who purchases a five-acre parcel of land for $200,000 an acre is right off the bat paying $18,000 tax. That may be appropriate, but there are ways in which we should be taxing a land development. The way that we're suggesting here adds another tax when he creates five lots to the acre, for a total of five acres times five lots, and then sells the lots to a builder for $50,000 each. There's an additional $12,500 paid on that parcel of land in tax within a month or two months. Then when the builder builds the 25 homes that he's allowed to build on the lots and sells them for $100,000 each, an additional $25,000 is paid in tax. In the space of a year, Mr. Speaker, this property being developed, hopefully using local labour and supplies, is going to cost the consumer — that family — $55,500 amortized over those 25 units.

I have to reiterate here that the consumer ultimately bears these costs. There may be nothing wrong with taxing land. Municipalities have done it for years and it's a legitimate

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form of taxation. But what I'm saying here is that it should be more carefully thought through. It should be a part of an economic plan, so that we are encouraging development and encouraging economic growth where we want to see it occur. In depressed areas we do not go out and tax. I would suggest that taxing property acquisition at this point in this province should be very, very carefully thought through, with a great deal of consultation, and a great deal of consideration for those people who stand to suffer, who will not spend their money when they otherwise would have; to keep the money out of B.C., if we're talking about the larger investors. I think that we have to look at this tax in terms of a much bigger picture. Consult with those people who are going to be affected, and take a look at it once again. Withdraw it from this session of the House, so that if we are going to do it at all, at least it be done with consideration for citizens.

MS. A. HAGEN: My comments will be brief. I'm not sure that I'll be able to encompass them in the time we have before noon adjournment, but that may put some constraint on them, and I'll try to keep them within that time-frame.

I wanted to speak to this bill primarily from the context of my own riding of New Westminster. In that riding the average income of people who live within the city is the second lowest in the metropolitan Vancouver area, going out as far as Langley and Maple Ridge. There have been too for people who live in my riding many effects from the economic downturn that we have experienced. I know that the riding is not atypical, but I think sometimes it is good to look at a particular community to see how the impact of a particular tax will affect residents. Many people within my community no longer have the opportunity to work at jobs that pay them the kind of wages that make it easy for them to acquire property. Our mills employ significantly fewer people than they did in the past, and people who work in those mills, of course, have had at least an average income that has made it possible for them to consider owning a home. At the same time, my riding is one that has many advantages for families. It's a compact riding; it's a riding where people can live and work, and have the kind of recreational and educational and service facilities that make it a very, very attractive community. It's a riding that has many skilled workers — people in the construction trades, who have suffered from unemployment rates above 50 percent average. So this tax is going to have on my small community a very significant impact. I think that's going to be reflected across the province.

People have written to me, as my colleague the second member for Vancouver-Point Grey (Ms. Marzari) has noted from constituents in her riding. They've written to me about their concerns about this tax. Several of them have commented that the tax may in fact cause them to delay or to reconsider their ability to buy a home, and perhaps their ability to buy a home where they would prefer to live for reasons that it would be advantageous to them, because that's where they work; that's where they see they can have the kinds of amenities that they want to have available for their family. Real estate people have already noted that it is having an effect on the market. I won't repeat some of the detailed analyses that various members have noted in their analysis of the bill, but those certainly will add costs to two or three areas in New Westminster where there's an awful lot of land to be developed but where we do have, for the first time, some single and family homes being added to the community's housing stock.

I would like to conclude by voicing my concern about this bill coming forward at this time and about the level of tax that will be imposed, the hardship it will be bringing to the average working person who is the kind of person who lives in my community and the effect that that has potentially on the community and its development as a whole.

MR. STUPICH: Mr. Speaker, I move adjournment of this debate until the next sitting.

Motion approved.

Hon. Mr. Strachan moved adjournment of the House.

Motion approved.

The House adjourned at 12 noon.