Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

THURSDAY, MAY 14, 1992

Volume 3, Number 5

[ Page 1529 ]

The House met at 2:04 p.m.

L. Reid: It's my pleasure this afternoon to welcome the president of the Registered Nurses' Association, Inge Schamborzki, and I ask the House to make her welcome.

Hon. T. Perry: In the absence of the Minister of Health, I'd also like to acknowledge Dr. Schamborzki from the government's side, and all the other members of the Registered Nurses' Association of B.C. who hosted members to such a delicious and very interesting lunch today.

L. Fox: I have great pleasure today in introducing four individuals from the great riding of Prince George-Omineca. I might add that without the cooperation and support of the first of these individuals, you would not have had the great opportunity of having me in your presence. In the members' gallery this afternoon is my partner and supporter within the community of Vanderhoof, Mr. Terry King; his wife, Judy King, who is a school trustee from School District 56; and their two children, Tyler and Carla. Would the House please make them welcome.

N. Lortie: I'm extremely pleased to have a guest in the gallery today. She's a tireless worker in my campaigns, a great supporter and my daughter -- Sherry Lortie. Would Sherry please stand, and would the House please make her welcome.

G. Farrell-Collins: Despite the fact that my parents do agree with the member for Saanich North and the Islands that introductions perhaps aren't appropriate, they are in the House today and I intend to introduce them anyway: my parents, Jack and Kay Collins.

Hon. A. Charbonneau: I'd like to introduce a resident of Kamloops, a manager with ICBC, Mr. Kevin Krueger.

Oral Questions

GOVERNMENT CONTRACTS

G. Farrell-Collins: Hon. Speaker, my question is to the Minister of Tourism. Can the minister confirm that a contract for polling research was given to Viewpoints Research Ltd. of Manitoba? Or will she have to admit that she's not in charge of her own ministry and that she will have to go and ask her deputy minister, who has a penchant for giving B.C. taxpayer dollars to Manitoba friends and insiders?

Hon. D. Marzari: Hon. Speaker, these kinds of questions might be best asked during the estimates process, and we are in the middle of estimates now. But I will confirm that in fact a contract has been let to a company named Viewpoints.

G. Farrell-Collins: Can the minister also confirm for us -- and perhaps she can clarify -- the fact that Viewpoints Research had done polling for the New Democratic Party in the lead-up to the last election, that the vice-president and one-third shareholder is Virginia Devine, who is the wife of the NDP Leader of the Opposition in Manitoba and that Ms. Devine held the same position -- i.e. principal secretary to the leader, Howard Pawley...

The Speaker: Your question, hon. member.

G. Farrell-Collins: The question is coming, hon. Speaker. ...the same job that John Walsh, the Deputy Minister of Tourism, currently holds.... Will the minister confirm that this appears to be an abuse of the duties and the office of the deputy minister?

Hon. D. Marzari: Hon. Speaker, the hon. opposition has done its very best over the last week or so to impugn motives and to drive allegations home, and they have been remarkably unsuccessful in terms of finding the facts. They have assumed that Mr. Paul Sabatino, for example, was a principal in a company that....

An Hon. Member: Read the record; he was.

Hon. D. Marzari: We have gone through it.

The answer to the question, I believe, that is appropriate for this House today is: yes, a contract has been let. Yes, it has been let for a good reason; that is, to look at the Seattle market for a potential Seattle-Victoria ferry. Yes, the contract has been vetted with local business people in Victoria to ensure that the Victoria tourism association was fully in line with the questions being asked. Yes, market research is required when we are engaging in new business, whether it be public or private business. Yes, a contract was let to a company called Viewpoints. Yes, I did supervise that contract. Yes, I did ask for it to be done. No, I did not contract it. Yes, the deputy minister did contract it, and did it fairly and well and well within the confines of ministry and government guidelines.

The Speaker: Could the minister wrap up her reply, please.

Hon. D. Marzari: No, the opposition has not done its research on most of these issues. No, the opposition is managing, once again, to drag private people's names and businesses into this House during question period. Yes, I believe the appropriate place for this is in estimates.

The Speaker: Final supplemental, hon. member.

G. Farrell-Collins: Perhaps if the minister has lengthy explanations she can save them for estimates, if they ever dare call them again.

If this contract was not tendered, and it was given, once again, to the friends and insiders of this government -- a company from Manitoba -- why was there 

[ Page 1530 ]

not due process given to companies in British Columbia to do the same contract? Why was this contract not tendered? Will this minister ask for Mr. Walsh's resignation today, given that he is obviously misspending the taxpayers' money in this province?

The Speaker: The minister, for a brief reply.

Hon. D. Marzari: The opposition doesn't even know the difference between a financial audit and a management audit. The opposition has had difficulty even asking its questions. The opposition has once again leapt to conclusions and assumptions about the capacities and the integrity of good people doing good things within fair guidelines. I would suggest that the answer to the question about the deputy of my ministry is absolutely not, and you will be pleased with the results of the contract.

B.C. UTILITIES COMMISSION

J. Weisgerber: I have a question today for the Minister of Energy, Mines and Petroleum Resources regarding the B.C. Utilities Commission. Can the minister advise if it is now government policy to encourage or permit ministers to directly lobby an independent body like the Utilities Commission in order to influence them with positions that they may personally favour, or which the organizations the minister represents may favour? Is that now the policy of the government, to encourage that kind of direct contact between ministers and independent regulatory agencies?

Hon. A. Edwards: I would suggest to the leader of the third party that I don't know of any minister lobbying the Utilities Commission. I do know that a minister who is in charge of B.C. Hydro, which is a Crown corporation, wrote a letter to the Utilities Commission, and that letter laid out the position for the utility -- again, the minister's position for that Crown corporation.

J. Weisgerber: I would understand, then, that the minister approves of ministers responsible for B.C. Hydro or other agencies contacting the Utilities Commission directly. I would suggest to the minister that that's most inappropriate action for any minister to take. I would urge and ask the minister today what action she has taken to preserve the integrity and the independence of the B.C. Utilities Commission, and has she asked her colleagues to refrain from this type of interference in the future?

[2:15]

Hon. A. Edwards: No. I laid out the terms of reference for the Utilities Commission in the current hearing. Those terms of reference remain there with the commission, and the commission will review the evidence and come with its decision.

The Speaker: Final supplemental.

J. Weisgerber: It's obvious that not only were the utility commissioners upset with this interference, but also B.C. Hydro was upset and confused by the interference by the minister. It was interesting to note that Hydro indicated that it was in fact Bob Williams who drafted the letter for the minister, not B.C. Hydro itself.

Is the minister not upset with this end run by Bob Williams, around her and B.C. Hydro to the Utilities Commission? Will she instruct Mr. Williams and the minister to desist from this kind of interference?

Hon. A. Edwards: The point, I believe, is that the Utilities Commission has its terms of reference. A minister of the Crown who is responsible for a Crown corporation put a letter before the Utilities Commission and made that minister's position clear. I believe that the Utilities Commission will take the evidence that has been put forward and will come back with its decision.

PATRONAGE APPOINTMENTS

K. Jones: This question is to the Deputy Premier. Does the Deputy Premier have a policy on nepotism when it comes to fulfilling the patronage list?

Hon. A. Hagen: The government of British Columbia has a policy of appointing good and capable citizens of the province to boards and commissions and responsible positions.

K. Jones: Can we expect the government's own patronage guru, John Pollard, to have any strong feelings about nepotism when it was the absence of any policy that propelled him into his chair in the first place?

Hon. A. Hagen: The members of the opposition try the patience of this member in respect to impugning the integrity of people who work on behalf of citizens. I would just like to remind the members of this House that the person in this government who is responsible for assisting us by providing recommendations for boards and commissions is a servant of all of us. The opposition members have been fully informed of the positions available and have been encouraged, as all of us have been, to provide names of people who can serve us on the 4,000 boards that help us in various parts of the province. It's a big task and one which all of us, as servants of this Legislature and of the people of British Columbia, are committed to fulfil with the utmost integrity. That's our job, and yours as well.

The Speaker: Final supplemental, hon. member.

K. Jones: Is the Deputy Premier aware that Hardave Parhar and the Minister of Labour, Ron Johnson and Johanna den Hertog, Gordon Hanson and Gloria Williams, along with John Pollard and the member for Surrey-Green Timbers, provide us with a new version of "Family Ties" knotted up with patronage? Is the motto of this government "An NDP family that stays together gets paid together?"

[ Page 1531 ]

The Speaker: Order, hon. members. The Chair does find that certain aspects of that question could be offensive to another hon. member, and I'm sure that wasn't the intent of the questioner. Was that the intent?

Interjection.

The Speaker: All right. That being expressed by the questioner as not being the intent, the Deputy Premier may wish to answer the bulk of the question.

Hon. A. Hagen: Men and women of this province have, independently, an opportunity and a right to serve. We in this province have come to recognize that men and women, independently of their own skills and their own abilities, can offer great service to this province. That member's question impugns the independence of men and women in this province to serve on behalf of all of us, and I find it very offensive.

WESTAR MINING LTD.

A. Cowie: A question to the Minister of Finance in the absence of the Minister of Municipal Affairs. Earlier in this session the government moved to provide rights to the municipalities of Sparwood, Elkford and Fernie to cover more than $12 million in property taxes owed by Westar Mining. What guarantees has the government made to these communities in view of the fact that they are now no longer able to seize lands and sell them in a tax sale?

Hon. G. Clark: I'll take the question on notice for the Minister of Municipal Affairs.

A. Cowie: Again to the House Leader, in the absence of the Minister of Municipal Affairs. With Westar apparently on the verge of filing a court protection and in default of at least one of its loans, will the minister commit to introducing Bill 20 for third reading in this House today, so that the urgent affairs of these communities and of Westar mining can be debated here?

Hon. G. Clark: I'll take that question under advisement. Frankly, I don't think anybody.... The position of Westar is a concern of all members of the House and a concern of the government. There are a variety of actions being taken. The job protection commissioner is looking at these questions, and this whole matter is under review by the government. I'll take that suggestion from the member opposite and review it.

MILFOIL CONTROL

J. Tyabji: In the absence of the Minister of Environment, I'll put this question to the Minister of Agriculture. In light of the fact that Eurasian milfoil is a pervasive weed that spreads quickly through waterways, and in light of the fact that this is both disruptive to the environment and not in the interest of the people of the Okanagan, does the minister think that the program to control the growth of weeds through mechanical methods is essential to the well-being of the region?

Hon. B. Barlee: I will take that under advisement, and I will ask the Minister of Environment to comment on that in due course.

The Speaker: As a clarification, that is a question taken on notice.

Ministerial Statement

TRIUMF-KAON PROJECT

Hon. G. Clark: Hon. Speaker, I wish to address hon. members on a matter of the utmost importance to all British Columbians.

Today I'm informed that more than 100 world-class scientists and technical staff are facing imminent layoff at the internationally acclaimed national TRIUMF centre in Vancouver. This action is the clear responsibility of the federal Minister of Science. This is a matter of great concern to the province of British Columbia, because it threatens the continued existence of one of the world's finest research facilities. Federal government funding for TRIUMF is some $4 million short this year, causing serious hardship to the dedicated scientists and staff at this facility. I'm advised that this action could take place as early as the end of June.

Incredibly, this act of economic sabotage -- and that's the only way it can be described -- against British Columbia is being conducted at the very time that the government of British Columbia is negotiating with the government of Canada to establish a national KAON project at the TRIUMF centre. The TRIUMF-KAON project would create 17,000 person-years of employment during construction and some 2,000 permanent jobs for British Columbia. KAON would put British Columbia and Canada at the forefront of physics research and would bring hundreds of millions of dollars of investment from our foreign partners in the project. Once KAON is operational, it should be a major source of high-technology input for the British Columbia economy. It has been estimated that up to $243 million of high-technology sales for the private sector will be generated every year by this kaon factory once it is operational. I'm very concerned that the government of Canada appears ready to pull a Polar 8 on British Columbia -- in other words, make a grandiose announcement one year about federal money for jobs for British Columbians and then dash our hopes months later by pulling out. It seems incomprehensible that just before the election the government of Canada would announce its support for KAON, which builds on TRIUMF, and then a few months later kneecap the current operation to the point where many of our best scientists will be forced to move outside Canada to find work.

How can the federal government talk about its $236 million capital commitment to KAON while it's driving our best scientists out of the province and out of the country? The government of British Columbia intends to vigorously and formally protest this outrageous action by the federal Conservative government. I spoke 

[ Page 1532 ]

to Bill Winegard, the federal Science minister, in mid-April and informed him of our great concern about potential layoffs. I've written him as well and urged him to reconsider. British Columbia stands prepared to proceed enthusiastically with the TRIUMF-KAON project. We are committed to provide one-third of the capital costs of this national science facility, an unheard of provincial contribution to a national facility. We do so because the benefits to British Columbia and all of Canada are clear. We will continue to press the government of Canada to live up to its commitments to British Columbians. We will continue to insist that Canada not kill the KAON project with this kind of underhanded attack on the British Columbia science community.

F. Gingell: I too regret that the federal government is not living up to its responsibility in funding TRIUMF. However, we all recognize that the provincial government also has a responsibility to ensure that British Columbia's growing reputation as a centre for high technology and research is not lost. There is no room for federal and provincial squabbling when it comes to an issue as important as science and technology and the position that an important centre like TRIUMF holds in the B.C. economy. This problem also reflects the larger difficulties with the KAON project, where federal-provincial infighting has put at risk the entire future of this very important project. The provincial government has a responsibility not to quarrel with the federal government but to work in a constructive manner to bring all of the parties to the table to ensure both TRIUMF and KAON will be able to succeed. Tragically, this federal-provincial quarrelling has served only to accelerate the brain drain from Canada's high-technology industry. If the quarrelling does not stop, we risk losing our best and brightest scientists to the United States and Europe. Their economies will be beneficiaries of our indecisiveness. It is important for the provincial government to ensure that that doesn't happen.

J. Weisgerber: I think we're all deeply concerned that the federal government would withdraw its funding for KAON. The Social Credit Party and the Social Credit government for the past five years were very active in promoting the KAON project. In fact, Stan Hagen kept KAON through his various ministerial responsibilities and was dedicated to it and to achieving a fair share of funding from Ottawa, and he was able to achieve that.

I think one of the things that may well have confused Ottawa is the position taken by the NDP. During the past five years, when they were in opposition, the present Premier was the science and technology critic. I don't believe he ever raised the KAON issue in this House. He certainly was not a vocal supporter of KAON. In fact, we heard very little from the NDP regarding the KAON project, and it was always the other side of the House that was driving the issue.

The NDP have now jumped in as government and decided that they're on side with KAON. They should be, and they should have been three and four and five years ago. Perhaps then they would have some credibility in Ottawa when they go to talk about these issues. As colourful as the minister's statement is, I think it would be far more productive if he were to correspond with his colleagues and his counterparts in Ottawa and try and find a solution and an agreement that the government can reach.

[2:30]

Clearly British Columbia is and should be committed to KAON. Clearly there is an advantage for not only British Columbia but Canada, and with that rationale, the government of Canada should be supporting KAON -- I agree wholeheartedly. I believe that this government has got to show a little more long-term commitment to the project itself, and that in turn may give the government of Canada the sense that there is a real commitment in British Columbia by all British Columbians to this project.

Orders of the Day

Hon. G. Clark: Committee on Bill 33.

GOLF COURSE DEVELOPMENT
MORATORIUM ACT
(continued)

The House in committee on Bill 33; E. Barnes in the chair.

On section 3.

C. Serwa: Just continuing debate on section 3, I would like to say that I believe that the sense of fairness and justice of most British Columbians has been offended by this particular section of the bill. I know the minister has a fairly good sense of justice and fairness, but it is certainly not displayed in this particular bill, where the goalposts have in fact been moved in the middle of the game.

There is an obligation on the part of this government to accept the responsibility, if they deem it in the public interest, which I sincerely doubt, for that particular decision. I do not understand how the minister can evade that type of responsibility. I know that the government of the day is trying to evade a great deal of responsibility, and I again lament that. This is not indifferent to the specific position taken on the doctors' pension issue. It's not significantly different than the mineral compensation. So why not follow that same tendency here with the Golf Course Development Moratorium Act?

As I said at the start, I think that most British Columbians' sense of fairness and justice has been badly compromised with section 3.

Hon. B. Barlee: I've alluded to it before. This is done municipally, provincially, federally. In fact, the last case municipally -- I think this is a very clear example -- was Berglund Holdings in the Central Saanich area. Berglund Holdings applied to the council of the day -- this was about October 1990 -- to have land removed from the agricultural land reserve to make a new golf course. The council of the day granted that approval. They passed all the hurdles. However, about three 

[ Page 1533 ]

weeks later a new council was elected, and under the Municipal Act -- I believe it's the Municipal Act -- the new mayor and council came back and said: "We want to re-examine that. We want a second look." They did have a second look. They turned it down. This new council, duly elected by the citizens of Central Saanich, turned down that proposal which had passed all the hurdles. The interesting thing is that this individual was not given one cent in compensation. That is how the process works. These individuals are speculating. The member and I have many things in common, but philosophy is not one of them. When you speculate, you take a chance. They speculated; they took a chance. When you speculate, you gain or you lose; they happened to lose. That's too bad.

The rules we drew up were the same for everyone. We did not pick and choose any of those 102 applications. I find it rather odd, because even the previous government changed the ground rules. They originally allowed golf courses, between '75 and '78, to be an acceptable part of the agricultural land reserve. Then the Agricultural Land Commission went to the government of the day, the previous Social Credit government, and asked them to change it. They said this was having a negative impact on the agricultural land reserve. The government of the day changed that ruling, because they realized it had an impact. We weren't the only ones. This is what I considered.

As I said before, this is not perfect legislation. We don't expect it to be perfect, but we do expect it to be fair and all the ground rules to be the same. The ground rules essentially are the same. If you're a speculator, as I said before, you do take a calculated risk.

C. Serwa: For the last time, the minister continues to miss the point completely. I recognize that government has the opportunity to amend regulation or to change legislation. That is not the question at the moment. I acknowledge and give you that licence and latitude. It is yours in fact.

[M. Lord in the chair.]

Under the former rules the applications were in compliance with the requirements. It is wrong to change and move the goalposts. You continue to justify it by using the word "speculator," and yet you have also told me that the 60 applications were fundamentally rejected on the point of land classification, of agricultural land capability. You can't have it both ways. There seems to be an inordinate amount of anger directed to those who would initiate, promote or be a proponent of projects. The economic lifeblood of this province depends on that type of quality in the individual British Columbian. That is the question at issue, not all of the other things.

Hon. B. Barlee: Again, we depart on different courses. I do not think the average taxpayer of British Columbia, who works very hard and is up to here with taxes, should be asked to take on an extra burden that has been imposed upon them by a very careless, we'll call it, investor who has not been prudent, an investor who hoped to take advantage of an order-in-council that was not approved by the public in the first place. This order-in-council was never approved. It was approved by the cabinet. Now you're asking that the public accept an economic burden to pay this guy back for some sort of loss that he may have achieved when he speculated. Indeed, he did speculate. I'm not saying he was a speculator, but he did speculate. Whenever you deal in land, you speculate.

Interjection.

Hon. B. Barlee: Indeed, they are. You can speculate in many different things. It goes on all the time, and the rules change all the time. We tried to make these rules level, fair-minded. I believe we did.

C. Serwa: Again, the point I'm trying to make is that you interfered. Your government interfered in the process. When you have taken that responsibility and that particular direction, you have a liability that accrues. You're trying to evade that liability with your arguments that you bring forward. The fact remains that the people of British Columbia know that you have accepted a liability that you're trying to evade. That is the whole point in this particular section.

Hon. B. Barlee: I seldom use a document like this. Certainly this is a document that should agree with your premise. The Urban Development Institute, Pacific region, states that the moratorium should be lifted on all golf courses where the applications have gained or exceeded third reading approval by the municipalities -- precisely what we did. These are not a bunch of individuals noted to be on the left of the political spectrum; these are individuals who are, by their own admission, developers. They are saying that the process is fair. This is from people who certainly are not aligned with us politically. They are not of my persuasion; I do know that. They are essentially saying that this is a fair process. I accept that verdict.

W. Hurd: On the issue of process, one would assume that the people affected by the compensation clauses in item 3 of this bill are granted redress in the courts, are they not? They're able to proceed with a court case against the Crown and be awarded a judgment, as would be the right of any party that was aggrieved by a municipal government or by the federal government. Do they have the right to go to court?

Hon. B. Barlee: I think it is very obvious in the bill -- if the member has read the bill, which I assume he has -- that they are not granted the right to sue the Crown, which in essence is a right to sue the taxpayer.

These were decisions that they made. Most of them were grown people -- I assume they were, at least. They knew they were speculating. They knew where we'd come down. We did say that we would rescind this order; we did rescind the order.

They can go back if they so wish. They still hold the land. They can go back to the Agricultural Land Commission and reapply if they so wish. That, again, is 

[ Page 1534 ]

a decision of the Agricultural Land Commission, not a decision of mine. That's where the decision should rest.

W. Hurd: This minister has spent the last three hours talking about due process and speculators paying their money and taking their chances, but nowhere in this country am I aware of people being denied the right of access to the courts if they so choose. Surely that is an inalienable right that goes with being a democratic citizen in a democratic society. How can the minister explain the fact that not only are these people being denied access through a policy that has been axed, but they are also being denied access to the court system that in any other jurisdiction -- municipal, provincial or federal -- they would have the right to pursue? They are being denied their right to go to court and seek redress from the Crown. This minister apparently doesn't recognize the principle involved in separating the Legislature from the courts of this country. People have a right to have their day in court.

Hon. B. Barlee: It happens all the time. If a municipal council turns down your rezoning proposal, you don't have a right to go to the appeal board. You can if you so wish. They can appeal it. They simply won't get compensation, that's all.

I'm very surprised with the official opposition. Some of them are giving lip-service to Bill 33; others, including the House Leader, are basically admitting that compensation was not due. We heard a speaker on the Liberal side of the House say this morning that he agreed that compensation was not due. We heard from the speaker on the Liberal side of the House this morning, saying that he agreed that compensation was not in order -- that compensation should not be allowed. This individual had a long experience in municipal government and as a developer, and he candidly admitted that, no, compensation was not due.

W. Hurd: The hon. minister is totally missing the point. We're talking about process here. The government has every right to pass a bill denying compensation, but they do not have the right to pass a bill that prevents a person from going to court to seek compensation, and that's what clause 3 of this bill is all about. It's not the first time we've seen a bill before this House with that type of expunging of rights. The sad fact of the matter is that people have a right to go to court to seek compensation, and we can't have a government in this province that eliminates that right simply on the basis of people being perceived as speculators or as people taking advantage of the previous government. That's not the issue here, hon. Chair. The issue is that people have a right to take the municipal government, the federal government and the provincial government to court if they so choose. Section 3 of this bill would indicate to me that they have been denied that right, and for that this bill should be defeated by this House.

[2:45]

Hon. B. Barlee: I think that is the issue. Here the member is standing up for the land speculators. Essentially what he is doing is standing up against the taxpayers of British Columbia. It's as simple as that. You have to choose one side or the other. I choose the taxpayers; you choose the speculators. That's your choice. Indeed, it isn't a unanimous choice on the opposition benches, but it is your choice. They can take due process to court, but they will not be compensated. They simply will not be compensated, and that's too bad. It happens not just in the provincial government, not just in the federal government, not just with the railways or the banks or any other area. It happens all the time, and I believe the member knows it very well.

W. Hurd: I realize this minister doesn't have a high regard for so-called speculators in British Columbia, but the fact of the matter is that these people are citizens of the province as well. They have a right to seek their day in court, as this minister would if he had a piece of land subjected to an arbitrary review in this manner by any level of government. He would have the right to go to court. This particular clause suggests to people that they may go to court if they so choose; I haven't even been able to establish that with the minister. But retroactively the courts will not be able to award any damages or any compensation to the people involved who have, as we indicated early in debate, gone through this process in good faith. How can the minister stand and defend a bill that denies people due process in a court -- much less in the province of British Columbia?

Hon. B. Barlee: I find it very interesting. I just outlined the Berglund case in Central Saanich where this was denied. They had gone through all the ropes. Everything had been passed by a duly elected municipal council. Another municipal council came in and said: "We want to re-examine this. We do not think it is the wish of the people in this area." And it was turned down, after everything had been accepted by the previous council. Of course it happens in other jurisdictions. The member well knows this. It happens all the time. It is simply a matter of saying: "You were speculating on land. That's fine. Be my guest. Please speculate on the other 95 percent of the land in British Columbia. Don't speculate in the agricultural land reserve. It's a very dangerous business indeed."

W. Hurd: I'm glad the minister is talking about dangerous business. When he starts passing legislation that instructs the courts how to do their business, to me that represents dangerous business in this province.

I would like to point out that no other jurisdiction I'm aware of denies people a right to go to court to seek damages if they feel the process has wronged them. The courts have that type of independence. They should have that type of independence, and the type of independence to award damages in a case like this. This is the trouble that the opposition is having with clause 3 of this bill. I think it's important for the people of the province to realize exactly what this expunges: "No compensation is payable to any person for a reduction in value of any interest in land, or any loss or damages that result, or resulted, from one or more of the repeal, effective November 8, 1991, of section 2(1)(m) of the Agricultural Land Commission subdivision and land 

[ Page 1535 ]

use regulation...and the enactment, effective November 18, 1991, of the moratorium regulation." What this means is not only have the people been denied access through this ministry, they've also been denied access through the courts. I don't know how this minister can stand and defend a clause in his bill which interferes with the role of the courts in this province.

Hon. B. Barlee: Since the member has resorted to a little bit of reading, let me read from the Municipal Act of British Columbia. This is the Municipal Act and has nothing to do with the provincial government. This is what the municipalities say: "Compensation is not payable to any person for any reduction in the value of that person's interest in land, or for any loss or damages that result from the adoption of an official community plan, a rural land use bylaw, or a bylaw under this Division or the issue of a permit under Division (5)." That is fairly plain.

Interjections.

The Chair: Order, please.

L. Fox: I'm really pleased that the Minister of Agriculture has all of a sudden become an authority on municipal law. Perhaps if he had really read that and consumed what it said.... Each one of those areas that it identified was after due process. It was not short-circuiting due process. As well, the minister points to one incident in Saanich that he holds up as a flag, saying: "This is what we want to follow." I'm very doubtful that this particular initiative ever got to the reconsideration and adoption stage of the municipal bylaw process, or it couldn't have been revisited. If, Mr. Minister, it was revisited after that step was taken, the individual who in fact was championing that particular initiative had the right to go to the courts in order to defend his integrity and his wealth. You're using the wrong items to hold up and indicate what is right within this province, and I charge you to read those areas very carefully so that you understand the intent of that act.

Hon. B. Barlee: First of all, the Berglund case, which we're discussing, was formally passed. It had gone through fourth reading. It was adopted and was, in essence, law. It was again revisited. I think we're seeing a clear division in the House, which I find most interesting. You are siding with the speculators; I'm siding with the taxpayers. It's pretty obvious that's what this has been all about.

We have spent...

Interjections.

The Chair: Order, order!

Hon. B. Barlee: Now I'm rabble. ...three hours discussing this and, of the three hours, almost all of that time has been spent on compensation to the land speculators. Most interesting. It has been not on the general balance of the bill, not on whether it is fair-minded, not on whether it is basically only process for one individual who may be negatively affected economically, and that is the individual who I think is a very careless and incautious -- shall we say? -- developer. That will sit more easily with the opposition. Essentially it comes down to one thing: you're either on the taxpayers' side in this, or you're on the speculators' side.

N. Lortie: I'm pleased to rise in support of this bill and in support of this amendment.

Some Hon. Members: Surprise.

N. Lortie: Surprise? Thank you very much.

I don't think the hon. members on the other side understand that no citizen has the inalienable right to sue the Crown. It is a right that is granted, and you have to seek permission from the Crown in order to sue the government. I think that's a good point, but in this case no rights were taken away. No change in allowable land use was initiated. All we did was stop the process before third reading. They never had the right to put a golf course on any of that land. The right would be granted by the municipal council after third or fourth reading. That never happened. So no wealth was destroyed; no wealth was confiscated by the Crown from the owners of that land. I see that no compensation is valid -- in this case, anyway.

I wonder why the members opposite are so emotional about protecting the rights of these developers, these speculators? Are these the people who have supported these parties, this united opposition? Are these the people who supplied the money for your campaigns?

Interjections.

N. Lortie: Are these the people you owe your election to?

The Chair: Order, hon. members. May I remind you all, please, not to speak unless you are sitting in your seat.

N. Lortie: I think I'm hitting too close to home for the united opposition over there, because they seem to be getting upset about any mention of their friends and insiders that they're fighting tooth and nail to try to protect. Well, it won't work.

I wonder if you've thought of this. Those people who had their golf courses passed by the ministry and by their municipal councils gained wealth, gained new designations and were allowed to put their golf courses in. Should that wealth come back to the Crown? You can't have it both ways. You can't say that we owe one group, but the other group doesn't owe us. If you're willing to consider that any change in land use that was granted by the ministry or by the municipal councils should come back to the taxpayers of British Columbia, then maybe the minister will think about the issue of compensation to those who weren't allowed. I don't think you would agree to that. I would let the hon. members stand up and agree to that, and then we'll consider it.

[ Page 1536 ]

G. Farrell-Collins: I won't take much time, because we do have lots of business before this House. I might just point out one item to the member who just spoke, the matter of friends and insiders. I might also let the member know that my campaign was run on $7,000, none of which came from golf courses.

Interjection.

G. Farrell-Collins: It's directly related to the issue of speculation, hon. Chair. The member for Richmond Centre ran his campaign on $2,000, unlike the $100,000 campaigns run by the Premier and the member for Esquimalt-Metchosin. I wonder where the friends and insiders are with those people.

R. Chisholm: There seems to be a bit of a problem here, and it seems to be with justice. Somehow that side of the House doesn't seem to understand what justice is. We talked about 140 people who didn't get justice, and a good percentage of those are farmers. I talked with the hon. minister this morning. He stated that there were no bankruptcies, and they're doing quite well. I want to quote from that hon. member. It's from Beef in B.C. He states: "Farmers need to be very adaptable and can't afford to make many mistakes. They must deal generally with harsher weather conditions than their U.S. counterparts as well as pay twice the fuel costs, almost twice the taxes, higher interest rates, higher land costs and higher labour costs." His words were: "I'm amazed that they survive at all." Half of them have tried to build golf courses, and now you've changed the rules on them.

The problem of section 3 in Bill 33 lies not in the notion of the preservation of farmland, but in the fact that the government would deny due process to the people of British Columbia who have an opinion on this matter. The problem lies in the fact that the NDP would strip rights away from farmers and property owners and presumptuously judge that they are not entitled to judicial consideration for compensation. This article, and other NDP bills of expropriation without compensation, smacks of nothing less than contempt for the rights of individuals, contempt for the judicial system and contempt for the parliamentary system and due process.

Hon. B. Barlee: To the member for Chilliwack, I think the divisions in the House are becoming very clear. The divisions on this side of the House are for the taxpayer and the general public. Obviously the other side is speaking for a very narrow band of speculators. They are saying very little about those individuals who managed to get through the net and make, in some cases, millions and millions of dollars. Those who were caught in the net didn't. I reiterate that that is the very nature of speculation. You win or you lose. If you win, that's fine -- you accept that. But you do not accept the loss. The taxpaying public did not share in the winnings and they should not share in the losses.

[3:00]

W. Hurd: Just so I have this straight. We have a process that was eliminated, denying due process to 140 applications, and those individuals are being told that even though they played by the old rules, they're not eligible for compensation by the government and they're not able to appeal to the courts or to have the courts award compensation. I can't fathom how this bill can possibly be defended by this government when it denies due process in court. It's an inalienable right of any member of our society, whether they be a speculator or anybody else. It's absolutely unfathomable that this bill, in its present form, would pass the House with this type of clause intact that denies people the right to appeal to the courts of the land and to have the courts make a decision as to whether or not they have been wronged. That's what we're talking about with section 3 of this bill.

Hon. B. Barlee: They do have a right. If they think they have a good case, they have the ability to go back to the Agricultural Land Commission and reapply.

K. Jones: Can the people of B.C. believe this minister, when on the one hand he says that he's protecting the agricultural lands, and at the same time he's saying that speculators -- that's his word, "speculators" -- have a route to reapply to the Agricultural Land Commission, and that they will then be judged on the basis of their application? Or is it on the basis of whether they've got third reading through council? What chance do the real farmers and the serious development people have in this process by reapplying? Do they have a chance? Or is this just a phony charade to put the people off?

Hon. B. Barlee: I think it's a fair question. A number of individuals, over the years of the Agricultural Land Commission and the years since the act was enacted, have reapplied to the Agricultural Land Commission, and in a number of instances those reapplications have been allowed to proceed.

K. Jones: What criteria will they require to get approval? Is it third reading at municipal council? Or is it going to be some decision made by the land commission separate from that?

Hon. B. Barlee: The criteria are exactly the same as in any other application to turn land to non-farm use. The rules are exactly the same for anyone who wants to take land out of the agricultural land reserve for non-farm use.

K. Jones: I hope that the minister will see fit to make that much more clearly understood to all of the people who are trying to do something in making progress in our communities. The direction that's there today is totally ambiguous. It gives people who want to invest their money in this province no clear direction. You're not saying that it's something they can get approved through the municipality if they go through that route; you're not saying that there will be anything decided by the Agricultural Land Commission, if they go through that route. You're just saying: "Take your chances, folks. Spend your money. If you're lucky, we might get you through." This is totally unsatisfactory.

[ Page 1537 ]

At this point I'll conclude this debate. There seems to be no further response coming from the minister that's adequate.

Hon. B. Barlee: That deserves a response. I believe the member should read section 6 of Bill 33, which covers that very point.

Section 3 approved.

On section 4.

H. De Jong: Since the minister hasn't given any period of time for those who were in the process to complete it, why is the minister now suggesting that a two-year limitation be put on the completion of the golf course? Under normal circumstances, in case of weather or any other matter that may be detrimental to the establishment of the golf course, I understand that perhaps some delay is accepted. Perhaps the minister may want to comment on that.

Hon. B. Barlee: This is one of the two conditions we did lay down, which are reasonable conditions. This gives the developer two full years -- from April 6 of this year to April 6, 1994 -- to be substantially completed. I don't think that is that onerous. It does indicate, from our point of view, that this should not be a shallow speculation, in that they should be ready to proceed. They should have been ready to proceed much prior to this. In some instances, this allows the developers almost six years, because this was passed originally on June 30, 1988. Now we're going right to 1994. I think that's ample and fair-minded, and it gives everyone the same playing-field.

H. De Jong: I suppose from a bureaucratic point of view that two years isn't all that severe in terms of establishing a golf course, but there are many things connected with the finalization of a golf course, and there is a fair amount of money involved. Within that two-year period, if the developer had paid for the land and was prepared to do most of the work on the land in order to get good sod on it for golfing and the establishment of greens and what have you, and he wanted to, for instance, experiment with the golf course in terms of use by the community -- not necessarily the extended use of all the facilities that a golf course normally has, such as lunch rooms, club house, etc. -- would such an application then fail during the process of the two years, in case the developer was not prepared or needed additional funding, where his own share of funding may become less than what he borrows in total, or shareholds or whatever, and would he lose the course because of the situations I've outlined?

Hon. B. Barlee: I think that under section 4 that is fairly apparent. He can apply for a loan if he so wishes. He can sell up to 49 percent of his shares if he so wishes. Indeed it has gone through third reading, so he should be well prepared.

I think those conditions are fairly obvious. They're not in legalese, so those individuals -- many of whom have been on board for three years or more and have gone through all the process -- should be essentially ready. We're giving them an extra two years.

K. Jones: On section 4, could you clarify? If an applicant -- you've already indicated a person can apply anytime in the future and will be considered through the process -- were to bring in an application on April 5, 1994, would they be allowed to proceed with their application? This clause states, "...in addition to any terms and conditions that have been set...." The condition is that the golf facilities described in the application must be substantially completed no later than two years after the date on which the commission has set forth the standards or April 6, 1994.

Hon. B. Barlee: That's a long, convoluted question. Essentially I believe -- I'm not sure -- that you're referring to the 19 golf courses upon which the conditions still have to be set. If not, would you please clarify that in the next question?

K. Jones: To clarify it further, you've indicated that any person can reapply for a project to start a new golf course within the agricultural land reserve, and that they would have to go through the due process -- approval by the municipality and by the Agricultural Land Commission. If a person brings forward a new application or even one of these previous applications on a renewal basis on April 5, 1994, are they going to be allowed to proceed if they meet all the requirements? Or are you going to say that because they've got to be substantially completed on April 6, 1994, they're having to do the impossible?

Hon. B. Barlee: This section applies to the 42 that have been accepted. Any others would go through the same route as any other individual who applies to the commission.

K. Jones: With regard to the 42, don't they also have rights? Don't they have a process to come at any time? Can they apply on April 5, 1994?

Hon. B. Barlee: As I stated before, they can take their chances like anyone else up to April 5, 1994.

L. Fox: Can the minister tell me whether or not there is a mechanism that would bring a particular application before either the agricultural land reserve or your ministry, given that there is some unforeseen circumstances which cause a delay beyond his control? Is there a mechanism under which he can come forward and ask for an extension?

Hon. B. Barlee: I think this is covered under section 4(2)(a): "...the condition that the golf facilities described in the application must be substantially completed, in the opinion of the commission...." So there is a little leeway there substantially. It doesn't say "completely completed," but "substantially completed." So I think they would give a little ground there.

[ Page 1538 ]

L. Fox: One other point I'd like to clarify, and it probably falls under (2)(b) and perhaps partly under (2)(c). If an individual or a group have indeed sought financial assistance and given the land as security through a financial agency in order to develop it to the final stage, should the individual for some reason get into a financial bind partway through the process and therefore this land reverts to the bank, do these clauses in fact stop another individual from picking up that golf course and completing it? It would seem to me that this lack of being able to transfer the title would prevent an individual from giving banks security on his land.

[3:15]

Hon. B. Barlee: It's a good question, and essentially that is covered under 4(d): "...that is of a prescribed type or is made in prescribed circumstances." It would require a new government regulation if that did occur, which it probably wouldn't, but could occur.

L. Fox: Given that that in fact is a question that obviously is not addressed within the bill, does the minister not believe that he should amend the bill so that the financial institutions have some comfort in granting and accepting those kinds of liabilities and guarantees with respect to these lands? Otherwise the individual may not be able to underwrite his particular development, because the banks will not feel as comfortable as you do that they'll be given fair consideration because it's not outlined within this bill?

Hon. B. Barlee: I believe it is, because under section 4(1)(b), disposition does not include a disposition "...that is the granting of security for a loan." So that essentially covers that. I think that most financial institutions would accept that it is covered fairly well under section 4(1).

L. Fox: By the minister's own words earlier, foreclosure was indeed a concern. The transfer of land title is indeed a concern on a foreclosure, and any financial institution is going to look at what its security is, given a foreclosure. I would suggest, hon. minister, that in fact that is not protected under the act the way it's presently written.

Hon. B. Barlee: It is a policy being considered and may require a further regulation. I don't think it would occur in any of the 42, but there is an outside chance that it may. In that case, the member may take some ease of comfort that indeed that would be a regulation we would have to consider.

Sections 4 and 5 approved.

On section 6.

A. Cowie: A quick question. I think it would be quite appropriate that I could ask this through section 6. Do municipal golf courses have to go through the same application procedure as private courses?

Hon. B. Barlee: Yes, they do -- same procedure.

Sections 6 and 7 approved.

Title approved.

Hon. B. Barlee: I move that the committee rise and report the bill complete without amendment.

Motion approved on the following division:

The House resumed; the Speaker in the chair.

Bill 33, Golf Course Development Moratorium Act, reported complete without amendment, read a third time and passed.

[3:30]

Hon. G. Clark: Committee on Bill 19.

FINANCIAL ADMINISTRATION
AMENDMENT ACT, 1992

The House in committee on Bill 19; M. Lord in the chair.

Section 1 approved.

On section 2.

F. Gingell: Perhaps the Minister of Finance would take this opportunity to cover this particular subject, which I believe provides for the Lieutenant-Governor-in-Council designating a specific individual to negotiate changes in various financial arrangements between the provincial government and debtor organizations or corporations. I wonder if he might at this point explain how this is going to be handled and the kinds of policies that are going to be put in place to ensure that the provincial government is still held accountable for their decisions.

[ Page 1539 ]

Hon. G. Clark: May I first, for members of the House, introduce Arn van Iersel, who is the director of the bank and cash management division of the Ministry of Finance.

The practice is that we now have a loans administration branch which tries to negotiate favourable terms for the Crown in the repayment of outstanding debts -- say, for example, the student loans program. When we send one of our staff people to negotiate a settlement at, say, small claims court, it requires someone who has the ability to make a deal for the government. Right now we have this cumbersome process of an order-in-council being required to extinguish any debt or liability. We're simply finding that as we have more of these student loans, we need flexibility in order to make a deal. As you know, we have a lot outstanding, and we have a very outstanding loans administration branch which is trying to negotiate terms in a way which minimizes hardship but also collects revenue for the government. That's really the purpose of this amendment.

F. Gingell: If one were dealing in a case that wasn't student loans, but a much larger amount caused by guarantees that the province may have given to particular massive developments -- and the particular creditor arrangements might be quite complex and complicated and require the province to go along with other creditors, to accept different forms of security, either subordinated debentures or perhaps even equity -- would the minister see those kinds of arrangements also being handled through this section of the act?

Hon. G. Clark: We virtually never forgive the principal payment of a loan. The only thing that's negotiated by the government is interest payments. In terms of negotiation, the purpose of this is to deal with the small debtors that we are now incurring and trying to negotiate a deal with. So I don't think it's contemplated that we could negotiate. There was a question that we could negotiate some kind of trade of assets or some more complex financial transaction. We can, can we not?

Staff tells me that the usual amount is $2,000 to $3,000. They're very small amounts, and so it simply would be, I am sure, beyond staff's intent to negotiate any kind of financial transaction in a detailed or complicated arrangement. We're simply forgiving a certain portion of the debt as we try to collect some of these loans, and we do that across the board.

We do that now, hon. members. There's no change from what we do now, except that when we go to small claims court, we're not in a position to make a deal. That's putting the Crown's assets at risk, because we can't extract the maximum amount of revenue. So this just gives more flexibility to the government.

F. Gingell: I understand that we are talking about relatively small sums and about interest only -- that kind of arrangement. When I read this particular section of the act, it opened to me great vistas of any form of renegotiation or compromise of creditor-debtor relationships between the provincial government and some business organization.

Would the minister consider bringing in an amendment to this section that would clearly restrict it to the type of compromise arrangements that he has discussed here?

Hon. G. Clark: I'm prepared to give a commitment to members of the House that those restrictions will be in the regulations. That's precisely what we're contemplating.

C. Tanner: Madam Chair, what always concerns members on this side of the House, when you get new and green Finance ministers and ministers over there, is that the bureaucracy trumps up all the old stuff they've been trying to run through for the last 25 years. They try to push it through with the new government.

If the minister has some reservations about putting a limitation on how much he's prepared to let the member negotiate, it immediately makes us suspicious that he's got an ulterior motive. I can't see any reason at all why the Minister of Finance would have any objection to putting some limit on the amount of money this bill will apply to.

Hon. G. Clark: I understand the policy concerns of the members opposite, but this is not something that came up through the ministry directly. This is part of a dialogue that I've had with staff. If any of you have read the Peat Marwick report, you will know there was no loans administration branch; it's brand-new.

The previous government -- and this is a positive step basically in the Ministry of Finance; probably Mr. Couvelier and staff deserve credit for this -- pulled together all the various loan programs to be administered in the Ministry of Finance. They did a superb job, and they have a very high rate of return for the government.

That wasn't happening before, and so as a practical matter -- for the first time the government is trying to collect some of these loans with sensitive and professional staff -- they came to me and said: "We are hampered in our ability to do that by the fact that everything requires an order-in-council." The order-in-council doesn't protect members from any of these questions, anyway; they can still do it. So this does not enhance the power of the government in any way; it simply makes it technically easier to do it.

When we bring in freedom-of-information legislation, for example, I'm sure all of this information will be available to the public. The information is available in Public Accounts. There's no attempt to hide anything here. There's no substantive difference, except it doesn't have to go to cabinet.

One of the frustrations as a new member of executive council is that all of these orders-in-council come to cabinet. Members who have been in the executive council will know that. You see these routine things coming through orders-in-council and it's actually kind of ridiculous -- you know, $500 forgiveness for this student loan. How does cabinet know whether this makes any sense or not? The Ministry of Finance is saying that this should be in the ministry. We should give the tools to our staff to be able to negotiate as best 

[ Page 1540 ]

they can on behalf of the Crown, and that information will be public and people can scrutinize and question it at any time.

This is the legislative counsel's amendment to achieve that purpose, and I'm prepared to accept that. The regulations will be made public, and they can be criticized or scrutinized at any time. We're prepared to amend it as we move along. This gives us the needed flexibility to make a deal on behalf of the taxpayers. I think it's generally good news.

J. Weisgerber: I don't have any argument with the scenario that the minister lays out in front of us -- where we're going to make a deal with a graduate student to collect a couple of thousand dollars or $10,000 in arrears on a student loan. On the other hand, I don't believe that it has been terribly cumbersome. The fact of the matter is that an OIC can be developed which will cover a whole range of settlements that have been reached. I have no argument with that portion of the bill.

I think that what we have to keep in mind is that as we move into larger settlements, when we involve ourselves in the settlement of debts -- perhaps with larger organizations -- that may have a significant effect on a community or a workforce within the community, I don't think it's good public policy to take the ultimate decision and responsibility away from cabinet, away from the minister. We have to remember that there should be ministerial accountability and government accountability on these transactions. I would be much happier if there were a figure. I think the member for Saanich noted that there should be some plateau. I'm thinking that there should be a plateau of perhaps $500,000 or $100,000. When you reach a settlement involving significant amounts of public money involving a significant group in society, you shouldn't delegate that responsibility to staff. Government should accept the responsibility for the settlement and for the consequences of the settlement.

I'm opposed to this section of the bill, because it doesn't seem to in any way limit, for example, someone sending out someone from the Ministry of Finance to Cassiar and saying: "Look, you go cut the deal, and if it isn't a good one, we can always hang it on you." Then you could say: "We as a cabinet didn't really agree with this settlement that you came to, and it's too bad that you put that little town out of business, and it's too bad that you sent 3,000 people off to the unemployment lines. It wasn't us as a government; somebody in the ministry is responsible." That's where this legislation fails to draw the line between delegation of responsibility to staff and ministerial responsibility. I would be much happier if there were some plateau here to recognize where the minister or government has responsibility.

Hon. G. Clark: First of all, the draft regulation, which we will be passing and which of course is public, limits the ability of delegation of power to $40,000 -- not $100,000 or $500,000, but $40,000. Any deal to be struck by delegated staff would require an order-in-council authorizing anything higher than $40,000. So public scrutiny is still there. Our clear intent, and I say this sincerely, is to do it....

Interjection.

Hon. G. Clark: It's in the regulation. The regulation requires an order-in-council, which is public. So that's the same thing we have now.

I just want to be clear, though -- to the leader of the third party -- that it's not our intention to delegate the responsibility. The problem is that when we go to small claims court, we can't make the deal now, because the order-in-council is later on. Sometimes there are other debtors. Maybe the individual has to sell a mobile home or something and pay things out. That's how the deal is cut in court. We are not in a position to make a deal right now. What ends up happening is that we try to convince the court to let us enter into a deal subject to the approval of cabinet. Sometimes they're successful in arguing that; sometimes they're not. This is an attempt to allow the staff to make the same deal they're making now but to make it in court. We clearly want to limit it to $40,000. We're doing it by regulation. Any adjustment from that will require new regulation, which requires cabinet to make approval in that regard.

[3:45]

I think that's sufficient comfort for members that we're not trying to remove ministerial accountability in this question at all. The accountability is still there. It's still there in any event, of course. It's just that the regulations prescribe the limits. I'm sensitive to the question.

If you'd like, hon. members, we could just stand this section right now and move on. I'm just seeking some advice on that question. There is certainly no intent on our part. I think all members of the House are in agreement on this question; it's how we accomplish it. I'm just seeking some technical advice on that question. I'm comfortable with what we've done here. I don't want to say that we're prepared to make any changes, but I want to see if there are some easy changes we could make to give more comfort to members opposite -- even though I don't think that's required. With that, if we could stand on this section and move to the next section.

The Chair: Section 2 is now stood down.

J. Pullinger: I'd like to ask the permission of the House to make an introduction, if I may.

Leave granted.

J. Pullinger: I have the pleasure today of greeting some English-as-second-language students from Malaspina College in the gallery. They are here today, visiting the precincts and having a tour of the Legislature. They're here with their instructor Ms. A. Greenwood. Would the House please help me make them very welcome.

Sections 3 to 5 inclusive approved.

On section 6.

[ Page 1541 ]

F. Gingell: First of all, in the year 1990-91 the provincial treasury operations showed a loss or a net cost of $3.7 million. I don't have the numbers for '91-92, because the accounts aren't out yet. For '92-93 there's an estimated profit -- that's an unfortunate word but the best description -- of $8.25 million. It's not really a profit. It's just that the provincial treasury operations have charged more than it costs to the various divisions and Crown agencies of the provincial government that it performs services for.

It seems to me that the more appropriate action would be to reduce the charges to the various Crown agencies or ministries rather than showing a profit. After all, the particular Crown or the particular ministry has its responsibilities to perform and is, in a small way, being restricted by the profit portion of the fee they charge. It seems to me that that's a more appropriate way of doing it.

The next question I need a little help with is how, at the moment, a surplus in this special account can be used for other purposes. At this moment in time, can a surplus in this special account be used in the Ministry of Finance? Next, can it be transferred from the Ministry of Finance to a different ministry for their purposes? Or is this amendment the only way in which that can happen?

Hon. G. Clark: I'm working on some way we can accommodate members on section 2 here.

Let me just discuss this question so that members are clear. You're quite correct -- the provincial treasury charges the Crowns for their services at slightly under the market rate. They make a profit. That's why there's a surplus in the special account. That profit is in the special account. It's on paper, but no one should be under the illusion that there's any money in the bank account. This is a special account question.

Interjection.

Hon. G. Clark: No, these special accounts allow.... You're quite right, and that's the problem, because it means that people see a surplus and suggest, as my hon. critic suggested, that we should reduce the cost to the Crowns for that service. We could do that, and that would do two things: firstly, it would increase the deficit by several million dollars, and secondly, it would subsidize the Crowns.

F. Gingell: Decrease the deficit.

Hon. G. Clark: Increase the deficit.

F. Gingell: It would decrease it.

Hon. G. Clark: It would increase the deficit, because the money is spent in the special account. There is no money in that surplus. It's a book surplus, which is essentially carried on the books. By giving a break to the Crowns, we subsidize them, because the treasury branch is required to charge a market rate. Because they've been doing so well in a market sense, the surplus in their account has been growing, and that increases their spending authority.

Frankly, I think the members opposite should be applauding the government for limiting the ability of treasury to spend up to this surplus in their account. It is possible; it requires no spending approval by the House. But it doesn't make sense to me, because it would simply increase the deficit if we allowed it. Really, this is just an attempt to limit the special account there, which is growing quite rapidly. We have every reason to believe that, because treasury is so efficient -- and I know some members opposite had at least some briefing on aspects of their functions -- their surplus will grow significantly. We don't want pressure on treasury to spend significantly. This gives the Minister of Finance the right to reduce the spending authority of the treasury branch of his ministry.

C. Serwa: Our leader, the critic, had to leave for the moment.

This only applies to Crown corporations. Is that correct? Or to any special account?

Hon. G. Clark: This only applies to the provincial treasury operations special account, which is not just Crowns -- it's Ministry of Finance mostly. In order to stop what appears to be cross-subsidy, the previous government -- and I think this is good policy -- hived off treasury into a special account so we could track them on a market basis, on a business-unit basis. They're doing extremely well. They're doing so well that they have this big surplus in their special account. I'm saying let's reduce that surplus. I want the power to take some of that surplus out whenever we can. In a sense, there's no cash in the surplus, because the government is running a deficit generally, but there's a surplus on paper. It's a real surplus that they're generating; it's revenue to the government that they're generating. But we want to limit their ability to spend it statutorily without coming for approval to the House. I think it's actually good public policy.

C. Serwa: One of the advantages and perhaps the reason for the incorporation of special accounts in the Ministry of Finance or Treasury Board was the fact that funds could be retained from year to year in those particular accounts. I'm thinking of such things as the habitat conservation fund, which is a small one; the land acquisition fund, which is another account. Often we have to accrue a substantial sum in those accounts to purchase, let's say, habitat sites, estuary lands, etc. If a level is deemed appropriate in that particular account, we may not be able to use those funds so that they will accrue and strengthen. Will the minister be looking at that type of a fund and restricting and deciding on an arbitrary surplus?

Hon. G. Clark: That's an excellent question, actually. We're not trying to limit this. You're right; there are certain advantages to being able to carry over surpluses or deficits so that we can track them on a business-unit basis. It's not my intent to be arbitrary in this, but it's also ludicrous to have this operation making huge surpluses on the books that are growing every year. It creates -- the member might appreciate this -- a certain pressure to spend it by treasury, and I 

[ Page 1542 ]

don't blame them. They're saying: "Hey, we're making all this money. We want more staff. We want to spend it." In some respects they have a good case, to be frank.

We have other priorities to deal with as government. I'm just saying that I don't want to be arbitrary about it. We want to still track and see how they're doing on a business-case basis; we want the flexibility that special accounts provide. But this is a bit much, and we should be able to reduce some of that surplus from time to time in the provincial treasury account. Frankly, we should be able to do that in other accounts as well, but that's not contemplated, because that brings all kinds of other problems.

F. Gingell: I want to go back to the Minister of Finance while he has his staff with him, because I have a little bit of a misunderstanding. Surely, if these surpluses are wiped out, that will decrease the deficit, not increase it.

Hon. G. Clark: No, that's not correct. The balances are already part of the consolidated revenue fund; they're already taken into account in our deficit picture. If you reduce the surplus, it has no impact on the deficit necessarily, but if you spent it by reducing the cost charges to the Crown or other agencies, that would have an impact on the deficit.

V. Anderson: As I understand the question that was raised earlier about the practice in the past of surplus out of these funds being transferred.... If there is a surplus, where would it be transferred to and for what purpose? Does this give the Minister of Finance a very large slush fund, if you like, for lack of a better term? Was that Minister of Finance then able to put it into his or her favourite project? I'm not thinking so much of the present minister, but of the practice, the principle that's put into place of how these funds are managed and controlled. Does that go into particular ministries? Where do these funds go when they are transferred from here?

Hon. G. Clark: We are not transferring any funds; we are reducing the ability of treasury to spend -- their statutory authority to spend. The funds that they make are already spent. They do make a profit. This shows us how much the profit is. But it's already spent on all the government operations: all you're taking into account is the consolidated revenue fund. The way the special account works, because they are making money and we show it as a separate item, they have a statutory authority to spend without approval of Legislature, and I'm limiting that. I think it's good public policy, but it has no impact.

Section 6 approved.

Sections 7 and 8 approved.

On section 9.

F. Gingell: As I understand it, this particular section should perhaps be entitled the Commonwealth Games section; it allows the provincial government to assist the Commonwealth Games Society in the fulfilment of their responsibilities. Is it possible, through arrangements that might be entered into with the Commonwealth Games, that the provincial government may be taking on a new responsibility, or new exposure, which they do not presently have?

[4:00]

Hon. G. Clark: No, this does not involve any borrowing; only managing the assets they have. It says investment, financial and other banking services. We will not be borrowing on behalf of designated institutions.

F. Gingell: One other matter is that section 59.2, as it will be amended if this passes, doesn't just limit this to the Commonwealth Games Society. One can think of other organizations this could apply to. Could I have the opinion of the minister, or the understanding, whether there are any other organizations they intend to assist and help through this section, and what arrangements can be put in place so that members of the Legislature would be aware of any changes in the future to any policy that is established at this point?

Hon. G. Clark: Nothing is contemplated right now. It's quite narrowly defined. They have to be substantially publicly funded organizations. But you should know, because I don't think it's any secret -- it might be -- that the Canada Games Society has asked for provincial treasury to be their banker. Maritime centre, international financial centre: those are examples of services which we could provide should we choose to do so, and it would be.... It's just good public policy. These are 100 percent funded by the provincial government. They don't necessarily have the ability to do banking, some of the ways, and they don't have the economies of scale that we have as government. We're just simply providing it as a service.

In a sense, it's of no cost to us -- increased cost. We think we're saving them money. In that respect you could argue that the Commonwealth Games is being subsidized, but it's very modest, and it doesn't show as a subsidy for us because we're charging market rates. We're just doing it more efficiently, and I think we're ensuring the prudent use of public funds, which hasn't always been the case in some of these quasi-government agencies. It's a modest attempt to help some of these publicly funded agencies.

F. Gingell: I would like one other assurance from the minister. We have heard about different types of banking arrangements that were entered into for members of the Senate and the House of Representatives in the United States. I think it is really important, with the people of British Columbia seeing section 59.21 being proposed to be brought in, that the minister gives us his full assurance that under no circumstance will the province enter into bank arrangements on behalf of Members of the Legislative Assembly.

Hon. G. Clark: You can certainly have my assurance. I want to say, in all seriousness, that any designated financial institution has to be by order-in-

[ Page 1543 ]

council. Any shenanigans on the part of the government, in that respect, would be fully public for all British Columbians to see. It's certainly not contemplated, nor would anybody in this House, on any side, support such an endeavour.

V. Anderson: The minister has indicated -- and I thank him for being open about it -- that this opens a new channel of activity for government, which I'm sure many groups will try to apply to. I'm wondering about the criteria of those groups. Also, what are the obligations -- if they're doing banking and investment on behalf of the groups -- of the government for debt that might be incurred by these groups for which they're doing banking?

Hon. G. Clark: Borrowing is not allowed. This gives no authority to borrow on behalf of anybody; this is managing existing assets. We charge a fee for it, as well. Essentially, it's probably slightly below market, but we charge a fee for it, so our costs are recovered.

Sections 9 and 10 approved.

On section 2.

Hon. G. Clark: I'm just checking with my staff members for an amendment that would give some comfort to the opposition. I agree with their basic points in terms of public policy. We want to do as much as we can by legislation rather than by regulation. I was trying to get legal advice as we were going through this bill, but I'm prepared to move it. We may have to come back to this House before the session ends and amend it, if legal counsel says otherwise.

If you look at section 2, you will see that section 2(c) says, "require that in specified circumstances, the maximum amount of a debt or obligation that may be forgiven with the approval of the Treasury Board, minister or other persons is limited to a prescribed amount." I propose to amend that by eliminating "a prescribed amount" and replacing that with "$100,000," which is in keeping with.... I believe the leader of the third party said $100,000 or even $500,000. We're contemplating, by regulation, $40,000, but if it gives comfort to members opposite, we could limit the amount to $100,000 in the bill. I'm prepared to move that amendment at this time.

We have some legal advice from the Clerk here that it say, "limited to a prescribed amount not to exceed $100,000." The amendment would be "not to exceed $100,000." That provides the flexibility and gives some comfort to members that we're not talking about big dollars here. In the future, someone may come to the House and amend it, and we could have a debate at that time. Just to show great flexibility on the part of the government and....

In all seriousness, this is exactly the kind of debate we like to have in this House. I hope it shows that the government is prepared to accede where we think the opposition has made a good point.

That's fine; it's in order. I move that amendment.

Amendment approved.

On section 2 as amended.

V. Anderson: I thank the minister for expressing his appreciation, for hearing and responding, because I think it does indicate -- which we were not sure of before -- that the government is actually listening. I think he needs to be commended for listening and acting.

Section 2 as amended approved.

Title approved.

Hon. G. Clark: I move the committee rise and report the bill complete with amendment.

Motion approved.

The House resumed; the Speaker in the chair.

Bill 19, Financial Administration Amendment Act, 1992, reported complete with amendment.

The Speaker: When shall the bill be read a third time?

Hon. G. Clark: With leave of the House now, hon. Speaker.

Leave granted.

Bill 19, Financial Administration Amendment Act, 1992, read a third time and passed.

Hon. G. Clark: I call second reading of Bill 6, hon. Speaker.

CORPORATION CAPITAL TAX ACT, 1992

Hon. G. Clark: Bill 6 introduces the new Corporation Capital Tax Act and repeals the existing act of the same name. The new capital tax established by Bill 6 will ensure that the business community pays its fair share of the additional revenue required to address the province's fiscal difficulties. The tax also meets this government's commitment to introduce a minimum tax on large corporations. Under this bill all corporations with a permanent establishment in the province and paid-up capital of $1 million or more will be liable to corporation capital tax.

The existing capital tax applies only to a small number of large financial institutions. The new capital tax will have different tax rates and methods of calculating the tax, depending on the type and size of corporation. The existing tax rate on banks, trust companies and credit unions with paid-up capital of $500 million or more will be increased from 2 percent of paid-up capital in British Columbia to 3 percent. Crediting of provincial corporate income tax against corporation capital tax will be eliminated. A tax rate of 1 percent will apply to banks, trust companies and credit unions with paid-up capital of less than $500 million. Non-financial corporations will pay the general tax rate of 0.3 percent of paid-up capital.

[ Page 1544 ]

This rate structure is consistent with capital taxes in other provinces. For example, the general tax rate is the same as in two of the four provinces which levy a broadly based capital tax, and lower than the rate in the other two provinces. The exemption level of $1 million of paid-up capital removes the need for roughly 80 percent of all corporations in British Columbia to pay the capital tax. This exemption demonstrates the government's support for small business.

Paid-up capital for companies subject to the general rate is calculated from the liability and equity side of the balance sheet and is defined as a sum of share capital, retained earnings and other surpluses and indebtedness, less current liabilities. I know this will make for scintillating debate when we move to committee stage.

[4:15]

Special definitions of paid-up capital are established for banks, trust companies and credit unions to reflect the distinct capital structure of these institutions. A deduction from paid-up capital equal to the corporation's share and debt interest in other Canadian corporations will be given to all companies paying the general rate. This will prevent the same capital from being taxed in the hands of both the subsidiary and parent company.

To encourage investment in the province, a deduction against paid-up capital for eligible new investment will be available to corporations paying the general rate. The deduction is equal to the cost of acquiring qualifying property, and for certain other expenditures. The deduction will be available for the acquisition costs of equipment and associated buildings used in British Columbia for manufacturing and processing, or the extraction and processing of natural resources, including the costs of related pollution abatement equipment; natural resource exploration and development costs in the province are also exempt; research and development expenditures made in British Columbia and the acquisition costs of equipment and associated buildings related to certain new tourism facilities as prescribed by regulation.

I might say that we had the discussion of regulation -- that tourism-related activities are, of course, difficult to define. It was found that it would be easier to define by regulation rather than in the body of the act.

Costs of eligible investments made in the corporation's first taxation year ending after March 31, 1992, will be deductible from paid-up capital in that year. Costs of eligible investments incurred in subsequent taxation years will be deductible from paid-up capital in the year they are made and in the following year. This effectively gives new investments a two-year holiday from the capital tax. I might say that this is the only province in Canada that's recognized the need for new investment by way of a tax holiday with this capital tax. The deduction for eligible new investment is the first of its kind in Canada, and we expect that other provinces will closely examine the advantages of such a deduction.

A special notch provision will apply to corporations. They always term this a "notch" provision. What happens is that if you have $999,000 of paid-up capital, you don't pay the capital tax; if you have $1 million, you pay the whole amount. We've tried to phase it in with a notch provision, a lower rate for capital between $1 million and $1.25 million. These provisions will phase in the tax rate and ensure that corporations with similar amounts of paid-up capital do not pay widely varying amounts of capital tax. Corporations with an estimated annual tax liability of $300,000 or more will be required to pay quarterly instalments.

In summary, hon. Speaker, the new capital tax established by this bill meets the government's commitment to introduce a minimum tax on large corporations and ensures that the corporate sector pays a fair share of the new revenue required to address the difficult fiscal position facing British Columbia. At the same time, the tax for British Columbia corporations will remain competitive with the taxes they pay in other jurisdictions.

Just a few further comments, hon. Speaker. This is a tax which, I think it's fair to say, the government would have liked not to have brought in, but given the fiscal situation, we had to make some difficult choices. We tried to be balanced in terms of how we dealt with our expenditure cuts and our tax revenue side, and this will raise over $200 million in new revenue. That is not, of course, a huge part of the new revenue we've generated. We've tried to make it equal amounts from business and individuals; we've tried to be as balanced and as modest as we can in dealing with this difficult situation.

There will be several amendments to this bill when we move to committee stage. We are in consultation with the business community generally and with individual businesses that have concerns about the application of the tax. We want to work cooperatively with them. We will be bringing in this bill; we need the revenue, frankly, this fiscal year. We are looking at ways in which we can improve it, and there will be several amendments. Any amendments generally cost taxpayers money, but we want to be fair and reasonable and work with the business community in the implementation of this tax. I'm not prepared to say at this time how many amendments there will be, or their exact nature, but there will be several of them to try to deal with what we think are some anomalies in the bill -- in other words, to try to make sure there's no double taxation. We really do intend to be as flexible as we can in that regard.

It is also my intention, after the bill is in place and there are some amendments, to deal with those concerns. We intend to work closely with the business community over the next year. Because it is the imposition of a new and complex tax, we want to make sure we do it in cooperation with the business community. In spite of the fact that we realize this is difficult and not particularly popular in the business community, we want to work with them to ensure that we minimize any unintended problems.

In keeping with the notion that we want to work with the business community in trying to deal with the impacts of this tax, I would like to point out once again that other options were available to the government. We could have raised medical premiums. We could have 

[ Page 1545 ]

imposed a sales tax on restaurant meals. We could have raised the sales tax, and many people in the business community said that if we had to raise taxes, that's in fact what we should do. The problem with that is that the provincial sales tax is paid by business in this province. In fact, half of our revenue comes from business. Even though we are significantly lower than the rest of the country in our sales tax, with the exception of Alberta, one point raises $330 million; of that, about $170 million is paid by business. If you take out the banks and trust companies and credit unions, this corporation capital tax will probably, in terms of new taxes, raise less than that, and it raises it from large rather than small corporations.

We had some difficult choices to make. We felt that a sales tax increase would be difficult for consumer confidence. It would hurt working and lower income people more. It would have an impact on the small business community that at this time would not have been beneficial. The tax burden on business as a result of this capital tax is in fact modest, although it is disproportionately on large corporations, some of which are, I know, not doing extremely well this year.

It's a difficult one for us. It's not one that the government takes any pleasure in bringing in, but it's one in which we've tried to come to grips with the fact that we have to be fair and reasonable in terms of how we raise our tax revenue, and raising it from average working people, obviously, would have meant the burden fell disproportionately on one group. If you look at our tax revenue side, most reasonable people would say that we have been reasonable and fair in how we allocated the increased tax burden, albeit recognizing that some particular sectors may face a difficult time with some of the tax measures. We want to work with those communities over the next coming months to deal with those impacts. We're very optimistic that we can do that.

With that, I move second reading.

F. Gingell: I took it from the lack of applause from your own caucus, Mr. Minister, that they think about as much of this tax as I do.

During the course of debate we deal with all sorts of issues, one of which is the title of the act. In the normal course of events the title of the act describes what it is, but in this particular case it doesn't. It talks about a corporation capital tax act.

During the minister's remarks, he kept talking about paid-up capital. In fact, this is an asset tax -- and an acid one too, I might mention. It is all of the liability side of the balance sheet, with the exception of some clearly defined current liabilities.

When Michelangelo was designing accounting systems back in the Middle Ages, he came up with the term "balance sheet," because you do the accounts in such a fashion that you record revenues and expenditures, assets and liabilities, and when you have done them properly and correctly, the assets and the liabilities balance. That's where the word balance in balance sheet comes from. Most of our corporations have capital and borrowings. They've borrowed from their bank; they've borrowed from mortgage companies and other forms of lenders. We have to recognize that all those forms of borrowing are included in the amount that is taxed.

It's not a capital tax; it is a debt tax. There is going to be a greater portion of the amounts included in the calculations to arrive at the amount taxable that is debt than is capital. To be in charge of the financial and corporate affairs of this province is no small task. It's an important job. I'm sure the minister has worked long and hard in trying to develop a plan for increasing the revenues of the province. Because he's not in favour of decreasing the expenditures, he had to develop a plan for increasing the revenues of this province to slow down the increasing rate of provincial debt. It's probably the most difficult job that he will ever have -- a very difficult job. But the Corporation Capital Tax Act is not the way to reduce our deficit. A capital tax, or a debt tax, is the most regressive form of business taxation there is. It is a quiet eating away of the assets. It's really an asset tax, and every year the government is going to carve off a little bit more and a little bit more. It shows, to my mind, the NDP government's lack of understanding of business.

The Premier and other important and visible members of this government, in the spring and summer of 1991, were going around talking to the business people of this province and telling them that this government, the NDP, understands business, recognizes the important role that it has in this province and would be helpful and understanding of their problems. I'm sure that the minister and the Premier have been inundated by letters and telephone calls and by individuals from the business community trying to see them -- people who are talking to them and writing to them about their concerns over this act.

The Premier went to Japan. He went to the Far East, Hong Kong, and he said that there would be no new taxes. He went to the people of New York, and he said that there would be no new taxes. I would like to know who's in charge here? Who made the decision?

Hon. G. Clark: It's the restoration of an old tax.

F. Gingell: Restoration? This is a real tax grab, and it is one that I know is going to do a lot of economic harm.

The NDP promised a better way to tax profitable corporations in "A Better Way," their little election booklet. For those on the government side who don't understand these terms, profitable means corporations that are making money. This bill takes no cognizance whatsoever of whether a corporation is profitable or unprofitable. It just taxes them all. I provide that definition for them, because I'm really beginning to believe that they don't understand what it means. This capital and debt tax has nothing whatsoever to do with profits; it's a tax on wealth. Wealth is an unfortunate word, but I'm not sure that I can come up with a better one. It's a tax on assets. If you have a building, a business, trucks -- all those things are going to pay this annual tax.

There is little doubt that this new tax will cost this province existing jobs and prospects for future jobs. There is a new Peat Marwick report. My goodness me! 

[ Page 1546 ]

The amount of coverage that Peat Marwick gets in this House is unbelievable.

An Hon. Member: Who paid for this one? The taxpayer?

[4:30]

F. Gingell: No, this was done by Peat Marwick Thorne, as I understand it, on their own, not for any particular organization. They have been talking to established corporations in British Columbia that are foreign owned. They talked to them about the things that are important to them in making those decisions.

When you get to the end of the report, what is the most important item? "Issues of concern." It is taxation. Taxation is the number one concern. Actually, they have interest rates as No. 1, but No. 2 and No. 3 are both taxes; you add those two together and they become the number one issue. It is entitled "1991-92 British Columbia Inbound Investment Study," and I recommend it as bedtime reading to all members of this Legislature, particularly those on the other side of the House, who perhaps can have some influence on what kind of taxes this government brings forward.

During the minister's opening remarks he made comparisons of this corporate capital tax to other provinces'. But as we continually say in this House -- and we really try and impress this point on our friends across the Legislature -- the people that British Columbia competes with are not the people in Saskatchewan and Manitoba. For job opportunities and new business opportunities we compete with the province of Alberta and the states of Washington and Oregon, and none of those has a corporate capital tax.

I am also concerned with the unfairness of this act -- the way it has been put together. People are going to be treated differently just because of the way their businesses have been organized. If you own real estate and you own it in a corporation and have $1 million worth of real estate subject to mortgages, it isn't particularly large. But if you hold it in a corporation, you will be taxed, and if you hold it as an individual, you won't be taxed. So you have two equivalent taxpayers, both owning exactly the same value in rental buildings; one is taxed and one is not taxed. That simply isn't logical.

The next problem that runs right through this act from beginning to end is the question of valuation. This act puts the calculations of the manner in which the taxable capital, as they call it.... It is calculated based on book values. So if you have a business, say a hardware or a book business, and you've been in business for 30 years, and you bought your property -- the land and building that houses your business -- 30 years ago, it's probably on your accounts for a nominal sum. It's probably on your books for $50,000 or $60,000, whereas the real value of that property may be $1 million or $1.5 million.

The business that has recently bought the assets gets taxed. The business that has owned these assets for many years doesn't get taxed. A typical example is a building supply business in Ladner which has operated for 20 years. The real estate which they bought 20 years ago was worth $300,000. It was recently sold in the fall of 1991, and the real estate was worth, say, $1.5 million. The new owners come in and all of a sudden they have a balance sheet that adds up to $2.4 million. They are taxed. Immediately prior to the sale, when the business is exactly the same, they aren't taxed.

The other side of this coin is that you can have a corporation which has spent a lot of money without a great deal of success. The cost of the expenditures that they've made, whether it be in the electronics industry or writing computer programs, all of those research costs sitting on their balance sheets -- say, maybe $5 million -- may in fact be worth very little. But the fact that they're sitting on the balance sheet means they will be taxed. There is no relation, in this act, between fair market values and the amount that is taxed. It is obviously illogical and unfair when people in similar circumstances are treated in different fashions. It just doesn't seem fair.

The whole act, when you go through it, seems to have been poorly put together. The Minister of Finance already announced one amendment back on April 26. Today in his opening remarks he spoke to tell us that more amendments are going to be made. How can we properly debate this bill when amendments are proposed which we don't know anything about? It sounded to me -- the way that the minister spoke -- as if there are amendments going to be made that even the minister doesn't know anything about yet.

Businesses are coming to the minister, to the Premier, to the government caucus and, I'm sure, to members of cabinet pointing out the flaws in this bill. It is full of flaws. I've pointed out one to do with valuation. I can assure you that I will have an opportunity as I speak this afternoon to point out more flaws. The bill isn't ready. They should withdraw it, take it back, make the amendments and listen to what opposition members of this House have to say -- to consider more amendments. One of the problems of this kind of legislation is that there are enumerable corporations, large ones particularly, that operate in different provinces. They operate in Ontario, Saskatchewan, Manitoba, British Columbia and Alberta. But the province of British Columbia can only tax the assets that are used in the province of British Columbia.

Because all of the provinces also have an income tax, and you have to work out a method by which income can be allocated to each different province that the corporation operates in, they have what are called "attribution rules." Attribution rules that relate to how you would divide income as the result of sales, wages, labour and those kinds of inputs are much more easily and clearly definable. You can produce a set of attribution rules so that the taxable income of a corporation can be fairly allocated to the various provinces.

To try to produce a fair and equitable set of attribution rules for a corporate capital tax is a very different matter. It's a very difficult and complex question, and I see that the solution this government has come forward with is clearly set out in section 13 of the bill, which says that "after applying," etc., we will do it by "prescribed rules."

They have not been prescribed. We don't know what the attribution rules are. Here is a critically important 

[ Page 1547 ]

piece of legislation, and the rules aren't even in there for how the taxes of the majority of the large taxpayers will be assessed. We really shouldn't debate this, hon. Speaker, until these rules have been prescribed. I take it that this hasn't been done yet; otherwise surely the minister would have mentioned it in his opening remarks.

That's section 13. If you just move on two more sections -- just to point out some of the flaws -- section 15 requires the corporation to file a return annually within 180 days of their year end. We have had income taxes in Canada since 1917, as we all know. The requirement to file annual returns has always been based on a number of months. Corporations are required to file their returns within six months.

Individuals are required to file their returns on April 30, because individuals don't have any choice. They all report their income for the year on a calendar year basis; they have to file an income tax return by April 30, which is four months. Now it's April 30 every year; even when it is a leap year, it is still April 30. They don't say: "You file your tax returns on April 30 except on a leap year, in which case you file them on April 29."

But this act, in section 15, requires them to file their returns in 180 days. Now the accountants and the people who work there will all be hard at work to get their income tax returns filed before the deadline. They will have a six-month deadline for the corporation, but for Bill 6, the Corporation Capital Tax Act, they will have to get out their calendar and add up all of the numbered days and file two or three or four days -- depending on which particular months are involved -- earlier than they file their income tax returns. It's absolutely asinine. I cannot believe that anybody would write a bill requiring that. If the minister is going to come in with some amendments, that is one amendment we really should have.

I draw your attention, Mr. Minister, to section 15, which requires you to file your returns in 180 days. Every other corporate tax return is filed within six months. People are going to be filing two and three days late because this act requires you to carefully calculate and file three or four days before you file your corporation income tax forms. If you don't file, there's a 10 percent penalty. It's ridiculous. Just change section 15 requiring the returns to be filed on the same day.

Hon. G. Clark: Will you vote for it then?

F. Gingell: I'll vote for that amendment and that amendment only.

The whole bill has been poorly put together. Corporations are allowed to change year-ends. It's a simple process: they go to the federal government and file an application explaining why they want to do it, the federal government considers it and normally, if everything is fine, it agrees. The provincial government accepts that. The provincial government doesn't say: for the purposes of provincial corporation income taxes you have to come and deal with us. They accept what the federal government does. But not Bill 6. In Bill 6 if you want to change your year-end, you've got to advise the administrator within 30 days. People won't do it. They won't think about it. They've gone through a process that the province accepts for corporate income tax purposes, and surely they can accept it for corporation capital tax purposes.

[4:45]

Hon. Speaker, we also have a bill that I'm sure many members of the cabinet and government have not read. I'm really disappointed that there aren't more of them here and a lot more of them listening. A question was asked in this House of a member of this government about the application of this tax to the Insurance Corporation of British Columbia. The Minister of Labour in this province, hon. Speaker, hasn't even read it. He gave the wrong answer when he said that the Insurance Corporation of British Columbia was subject to this act. But section 4(3) says: "The following corporations are exempt from the tax under this act: (a)the Insurance Corporation of British Columbia...." And the Minister of Labour doesn't even know it. I don't think that any members of cabinet have read it. If they had read it, they would have seen that it was so full of flaws and mistakes that they'd take it away and think about it and come back with something that's a lot better later on.

It's just like what happened in the province of Ontario. The NDP in Ontario, before they won the election, had clearly stated that they were going to come in with a minimum corporation tax. There were discussions about how it was going to be done, but clearly, in everybody's mind, they thought that they were talking about a corporation capital tax similar to this one. Well, the government in Ontario set up a commission called, I think, the Fair Tax Commission, because they had been talking about fair taxes. That committee, after sitting down and thinking about it for a year, has come to the conclusion that a minimum tax and a corporation capital tax is not fair tax. So they have changed their proposed legislation.

Hon. Speaker, this government, in Bill 6, is acting just like Big Brother. Section 16(12) gives the government the ability to charge interest on unpaid taxes. We understand that. All income tax legislation requires a taxpayer to pay interest if they don't pay their taxes, but this one is something absolutely new. I'm sure that this will go down in history as the first time that such a provision has been made. "Interest chargeable or creditable under this Act shall be at the prescribed rate, and different rates of interest may be prescribed for different purposes."

Two minutes is all I've got left?

An Hon. Member: You're the designated speaker, you can take as long as you want -- two hours if you want.

F. Gingell: Two hours?

The Speaker: If the hon. member can confirm that you are the designated speaker on this bill, then Hansard can change the light. My apology for the interruption, hon. member.

[ Page 1548 ]

F. Gingell: Thank you, hon. Speaker. We don't know how and we don't know why, but there can be different interest rates prescribed for different reasons.

Also something new, section 16(13). If a corporation's estimated tax payable determined under this section exceeds a prescribed amount, the corporation can be required, they can be ordered by the administrator, to enter into an arrangement whereby instalment payments shall be made by electronic means. So the administrator comes in in the morning, presses a button and your instalment is whipped out of your bank account. It's just a very unusual and very strange way of handling things.

This Big Brother concern that I have with respect to this act even comes in in the circumstances where there are liens created against a corporation's assets. If the administrator of the act doesn't do it properly, doesn't get his lien registered properly, registers his lien in some faulty fashion, you'd think it would fail. But, oh no, under section 33 of this act, even if the administrator mixes it up and does it incorrectly, the act will determine that the lien is valid and it will sit in front of any liens that might have been registered afterwards.

Section 31 says that if the minister improperly assesses, mixes up, screws up, then the penalty is zero. If a taxpayer does, if a taxpayer files an incorrect return, the minister, through the administrator, has the ability to charge a penalty of 25 percent. That really is.... Again, no other act has those kinds of things.

This act is also going to be very difficult for the government to enforce. There are circumstances where business organizations come into the province, have a permanent establishment here that would qualify under, I think, paragraph 5, and they are here with a lot of assets, but for a very short duration, maybe making a movie. How do we manage to deal with that? They aren't going to be taxed, because they'll be here and they will be gone. But if they come and use the services of suppliers and studios in the province, those people will be paying the taxes.

Before Bill 6, the corporation capital tax that existed in this province only applied to banks. This new bill increases the rate of tax charged to the banks by 50 percent. Another major change has been made: there is no longer creditability. I know the government doesn't have any credibility, but the banks used to have creditability. They were allowed to deduct their provincial income taxes against their corporate capital tax, so if they had a corporate capital tax to pay of, say, $6 million and their provincial income taxes were $3 million, they only paid the $6 million; otherwise they would be taxed twice. The government admitted that the purpose of this tax on the banks was really to replace income taxes. The provinces didn't feel that they were getting their fair share of corporation income taxes that are paid by banks. They had this Corporation Capital Tax Act, and there was an arrangement made that they would only pay corporation capital tax that was in excess of the amount of income taxes that were calculated. The creditability provisions of the old act have been wiped out. That no longer applies, so the national banks that operate in this province will now pay income taxes, as well as a corporation capital tax that has been increased by 50 percent.

The Canadian Bankers' Association has advised me that that is going to amount to an average of 26 basis points. Interest rates in the province are going to be increased by 26 basis points for the banks to remain in the position they were in before. Each bank's calculation is a little different. In the worst-case scenario, I understand that it is 60 basis points.

Now the Minister of Finance of this province is very proud of the fact that B.C. has the best credit rating by the bond-rating agencies of any province in this country. We on our side of the House applaud that. We don't applaud him, but we applaud that fact. The provincial credit rating is critically important to us. The work that has been done by the past government, and by this government too, in talking to the credit rating agencies has really worked out very well. For us to have an AA-plus rating, which I think is what our standard is, is something that is very good.

Now what's the use of a good provincial credit rating? The most important factor is that it affects interest rates: the province is able to borrow at fractionally better interest rates. The businesses of this province, because of the effect of the corporate capital tax and the now non-creditability of corporate income taxes.... It is going to increase interest rates for British Columbia businesses. The word that I get from the Canadian Bankers' Association is that it simply is impractical for them to try and spread that cost across the rest of Canada. It is clearly a British Columbia cost, and it's clearly going to affect us here.

[5:00]

Again, dealing with the inequities of this act, you appreciate that up to this point the corporation capital tax in British Columbia only taxed banks with capital, in the manner by which it is calculated, in excess of $500 million. If the amount was less than $500 million, they were not taxed. This new act brings into the Corporation Capital Tax Act all those financial institutions who have capital, as defined, in excess of $1 million but less than $500 million, and they will pay a tax at the rate of 1 percent. If you're over $500 million, the tax rate will be 3 percent.

Each corporation is taxed separately. They're taxed on their own. So if you have two associated financial institutions both with capital in the amount of, say, $499 million, just under the amount of the cap, they will each pay a tax rate of 1 percent, and the tax of the two of them together will be just under $10 million. If you have one financial institution that is the same size as the two of them who are brother and sister -- they have a capital of double that amount, $998 million -- they will pay a tax of $30 million. Here are two organizations, in the end the same size, doing the same kind of things; one pays a tax of $10 million and the other pays a tax of $30 million.

How can this be equitable? Surely the answer has to be that the cabinet, in considering this bill, don't understand it. They haven't thought it through. Why on earth would they allow this bill to come forward with such a ridiculous and unfair situation? Any financial institution with capital of $1 billion operating in British 

[ Page 1549 ]

Columbia will simply cut itself in two and have two corporations associated and owned by the same parent. They will have reduced their tax bill from $30 million to $10 million.

What this new bill does for financial institutions with capital of less than $500 million but more than $1 million, is that it brings into taxation virtually all of British Columbia's credit unions. I would doubt that there is a credit union in the province with capital, as defined, of less than $1 million. Credit unions in this province to this point have not been subject to the corporation capital tax. They were specifically excluded, because credit unions were seen to have a different function. They are a cooperative arrangement. All of their customers -- their depositors and borrowers -- are members. They joined together with joint financial resources to make the credit union work. The credit union movement in British Columbia has been one of the real success stories. They live in the communities and are part of them. The directors live in, and understand the concerns of, the community. As a resident of Delta, I'm pleased, happy and proud to be a member of the Delta Credit Union. They do a fine job and have a much better understanding of the needs of our community than do our chartered banks, as I recently discovered during the financing of a seniors' congregate home housing project I was involved in.

The previous government, recognizing the good things that credit unions do in this province, encouraged them to expand. They encouraged them to reinvest their earnings, to reduce their dividend payments to their members, and to reinvest those funds to increase their capital base. The credit unions in this province responded. They did increase their capital base. They reacted to the encouragement from government.

Now, all of a sudden, they are going to be taxed. They are going to be taxed on these reinvested earnings they haven't paid out. I can assure you that the credit unions in British Columbia are very upset about this. They feel they reacted to the needs identified to them by the government, and now they have been let down.

There's another subject that I'd like to deal with. It's the question of Crown corporations. There is a provision in this act that by regulation, Crown corporations that will be subject to this act will be identified. Hon. Speaker, I have questions in my own mind about whether the province of British Columbia has the ability to tax federal Crown corporations. Clearly certain federal Crown corporations can be taxed, but I'm not sure this will apply to all of them. It would have been a good thing if this government had done their homework and had been able to find out all those things; if they had produced the regulations, the rules, so that in debating this bill we would know whether federal Crown corporations are going to be taxed and whether British Columbia businesses will always be at a disadvantage. Many British Columbia businesses compete with the federal government and with corporations that are in partnership-type arrangements with federal government agencies and corporations, such as the Vancouver Port Corporation. We will be speaking on that subject later on in this debate.

[R. Kasper in the chair.]

Dealing with the federal government brings us to another question. This tax is clearly not deductible for corporation income tax purposes. Instead of it being a 0.3 percent tax if a corporation happens to be profitable.... We've already dealt with the problems of those corporations that are having to pay this tax and that aren't making any money. But if they are profitable, instead of the tax being 0.3 percent, it is going to be effectively 0.5 percent. That's what it is going to cost them. They are going to have to pay out 0.3 percent to the province. It's not going to be deductible. They have to make 0.5 percent in profits to have the necessary funds to pay the corporate taxes first and this capital tax second.

I was speaking earlier on the question of the inequities; these revolve around the question of valuations. The records of a company don't pretend or purport to show the fair market value of certain fixed assets, long-term assets: land, buildings, etc. Those amounts are recorded on the accounts at original cost. It doesn't matter whether you bought them two years ago or last week and paid current value, or 30 years ago and paid the value applicable in the early 1960s; that is the amount that is in your accounts. If it's land and buildings, which is the obvious example to use, and you have been depreciating the building for 30 years -- you bought it for $100,000, and you've probably written it down to about $10,000 -- that is the amount that appears in your accounts and is going to be taxed.

Then we come to the problem of businesses changing hands, and how that transaction can take place. There are many ways, as you can appreciate, of businesses being sold, but the two obvious and fairly simple ones are the choice between the sale of assets and the sale of shares. If the business changes hands by the sale of shares, those book values on the accounts from the old corporation now move to the new owners. The corporation doesn't change. Those values will move on through. The fact that the shares, according to the company's records -- by taking the capital and the retained earnings -- have only a value of, say $100,000, but in fact are worth $2 million, and that's what they've sold for, will not affect the way the accounts are recorded. Will this company pay corporation capital tax? No, it won't. But if they sell assets, and the land and buildings are sold for their fair value, the transaction won't change -- the amount of money won't change, but the way it is handled will change, and the consequences will be that the corporation will now be subject to tax.

So in this case, if you sell shares, you won't be taxable; if you sell assets, you will be taxable. You'll be taxable every year, year after year, exactly the way we have spoken of. So people are going to be taxed or not taxed based not on what the corporation is worth or what the fair market value of the assets are; they're going to be taxed on the basis of how they are recorded on the books. That is clearly unfair and clearly inequitable.

Earlier we spoke about this tax being regressive. We talked about it being unfair. Many British Columbia 

[ Page 1550 ]

companies are struggling. They are just trying to hold their heads above water. That fact is of no interest to the administrators and designers of this bill. They're going to tax them anyway, and in many cases it is going to be the final straw that breaks the camel's back.

I was talking to a businessman last night. They have been struggling for three or four years. It's not their fault; it's all to do with the recession in world trade and not with the circumstances in Canada. Their additional tax, their tax coming from this Corporation Capital Tax Act, is going to be around $250,000 a year. It doesn't sound much if you say it awfully fast, but they're at the point where they don't say it very quickly. He was really quite sad about it. The company has been in business for many, many years, with a lot of long-time employees, and he is struggling with the problem of where is he going to find the $250,000. He's afraid that one of his only choices is to make some cuts in his staffing.

[5:15]

There is a definition in this act of current liabilities. There is an allowance: you deduct the amount of current liabilities when you are calculating the amount that is to be taxed. They have specifically excluded any account payable that's more than 120 days old.

I can assure you that there are lots of businesses in this province that are struggling from month to month and that are something like 75 days slow in paying their accounts. Because they are slow, because they are having a hard time, because the government's going to add on this tax and make it even more difficult for them to pay their accounts on a current basis, it's going to increase the amount of taxes that they pay. If a company really is in trouble, goes to the courts and makes an arrangement with its creditors so that the accounts payable are not going to be paid now, are put on one side and the administrator or trustee in bankruptcy -- whatever the particular arrangement is -- is allowed to carry on to try to salvage the company, they're still subject to the corporation capital tax, and all their accounts payable now deferred and delayed are going to be taxed. In effect, they will lose the deduction: section 9(1)(f).

If you have a bank overdraft, you know how it is. You don't really have a bank overdraft; what you've got is a drawer full of cheques. The accountant writes the cheques out every month to pay the bills. They leave them in the drawer, and when there's some money in the account they go through the drawer and take some out and mail them. Small businesses and struggling businesses have to do those kinds of things.

An overdraft -- or the liability that is a book overdraft, but the cheques haven't been sent out -- is allowable under this. But if they formalize that and do it in a businesslike fashion -- go to the bank and get a bank loan -- it's not deductible. If you leave the cheques in the drawer and you run a book overdraft, it's deductible; if you get a bank loan and do it properly, and are honest, straightforward and open about it, you pay more tax. That simply isn't logical.

There may be circumstances where the bank loan may be allowable as a deduction. But if your bank loan -- although it is a demand loan -- is relatively permanent, in that you're not able to pay it down, then it's not allowed as a deduction. It just doesn't make sense, Mr. Speaker, and I believe it points out many of the weaknesses of this act.

There's also, in Bill 6, a lack of clarity. It's very hard to understand clearly what the rules are -- particularly in the area of section 14 that deals with the various deductions.

Section 14 defines things that qualify, as the Ministry of Finance described them, as a "tax holiday." It's not much of a holiday, and it doesn't last very long. If it's in the first year, you get the holiday for that year only. If it's when you pay your taxes in the second year, you get it for that year only. And for some strange reason, if it's in the third year, you get a holiday on both the expenditures of the third year and expenditures of the second year. To me it doesn't have any logic, but that's the way they have decided to do it.

A more logical and sensible way would be that you get a two-year exemption. What you spend in the first year, you get an exemption for in year one, and you get it again in year two. When you get to year three, you get year two and year three. Then it would have some logic to it, but this doesn't.

In this act there are terms like in section 11(c) that there will be a deduction from the total paid-up capital "in the case of a corporation that is solely engaged in exploration for a mineral resource and has incurred exploration costs...." What do the words "solely engaged" mean? Why would we put in "solely engaged"? Why would you treat a corporation that's only in the exploration business -- probably on the Vancouver Stock Exchange -- differently from some other corporation that is in business that has profits and assets and uses some of these assets to develop a resource property? It doesn't make sense that you would treat them differently. It simply isn't logical.

What's going to happen, once again, is that people are going to find their way around it. They're going to go to their lawyers.... They won't go to their lawyers, because they'll have to pay a 6 percent tax. They will go to their accountants, and their accountants will work out a scheme whereby you take the resource properties, put them in a separate corporation so that the corporation is solely engaged, and then you won't be subject to the corporate capital tax. It may complicate your life, but you're getting around some rather strange and inexplicable section of this act, which discriminates against one person who is doing exactly the same thing as a second person.

When we come to the question of developing mines, a really important subject, the prognosis for the development of mines in this province is not particularly bright, as we keep hearing, but if you are in that business and find the right kind of property.... It takes a lot of time: you go through an exploratory stage; there are feasibility study stages. It all moves along in a fairly slow process.

What happens here? The first year you get a deduction for your exploration costs. In fact, you will always get a deduction for them, but that's only the starting point. Long before you have built a mine or you're producing minerals, long before you have con-

[ Page 1551 ]

centrate to sell, you have done all kinds of other things. You've had feasibility studies and development work done. You have built roads. You have done all kinds of things. In the space of five or ten years, between starting and getting to this point, you will be paying a corporate capital tax on the costs that you've expended on these things when you haven't even started business yet. You're still in the exploration and the feasibility stage, and you're being charged a corporate capital tax. It just doesn't seem to be logical.

The act defines a whole series of exemptions, particularly the exemptions for the year of the exploration and development costs. But there are all kinds of other costs that are not included. If you're developing a mine in a remote area, you become responsible for things that we call social costs: the construction of housing, roads, an airport perhaps. All of these things are not allowable. As you develop them, and as you're spending these funds, you are being taxed the corporate capital tax before one pound of ore is processed through your mill, before one ton of concentrate has gone to the ship and your customer. Before the company has received one dollar in revenue from the operation of the mine, you are being taxed under this Corporation Capital Tax Act in a very substantial and meaningful way.

There are a whole series of errors in this act, which I sincerely hope are the ones that the Minister of Finance stated will be amended when this bill reaches committee stage. The Minister of Finance, as I said earlier, has already announced one change, because they forgot or didn't appreciate or didn't understand the consequences of not giving an exemption for foreign corporate investments the same way they provided for non-provincial-resident Canadian investments of the same kind.

We on this side of the House have a great deal more to say about this bill as it goes through debate in this House. At this point I am not going to deal with the specifics of the concerns that are created for different types of businesses. I just wanted to try and point out to the House that the bill is badly crafted, is poorly thought out and is clearly not understood by the members of cabinet. I really believe that this province and this Legislature would be well served if the minister were to retract this bill, rework it, do the assignment again and re-present it to this House in an attempt to get a passing grade, because he certainly doesn't get a passing grade on this particular bill.

J. Weisgerber: It's a pleasure for me to rise and speak to Bill 6, the Corporation Capital Tax Act. I want to confine my comments to the intent of the legislation. We'll deal at great length, I suspect, with the specifics of the bill in committee stage.

The intent of this legislation is first and foremost an attempt to make a substantial tax grab on the corporate community. That's the intent of the legislation and can almost be spelled out in one sentence. The government decided before it ever got to power that it was going to tax corporations in British Columbia more heavily, and this bill sets out to do that. It sets out to take about $225 million a year from our business community, and that takes at least that much money away from the reinvestment opportunities in this province. If provinces choose to tax corporations more heavily, the net result is that the corporations are less able to reinvest in that jurisdiction.

[5:30]

We've enjoyed some pretty good years in British Columbia. For the last few years we've been able to escape the effects of the recession that have hit hard in the United States, that have been difficult for eastern Canada and that have been very, very difficult in Ontario. British Columbia, for the most part, has been able to escape the real hurting kind of recession that's been prevalent in North America. One of the reasons is that we've had a strong competitive business community unburdened with a whole range of taxes. In fact, it's no coincidence that the business community in British Columbia was the least taxed of any jurisdiction in the country, and the most vibrant of any jurisdiction in the country. The government is unwilling to recognize the linkage between those two, but clearly when you move away from direct taxation on corporations, you allow them to create jobs, to create wealth, to expand, and to stimulate the economy. That's what's been happening in British Columbia over the last three or four years, and that's why tax receipts in government were able to grow substantially while tax rates were frozen. This government seems unwilling to understand that. It seems incapable of understanding the basic concept that you make the economy grow and your revenue will flow from that.

The effect of this kind of legislation is to slow down economic growth, to be a burden on corporations. Ultimately we've got to recognize that there aren't many corporations that simply pay taxes. If they find themselves burdened with taxes, they attempt to find ways to collect more income. If you tax a landholding corporation, then the net result is an increase in rents. The consumer, at the end of the day, always pays for tax increases. So not only do you slow the economy down, you start to drive prices up. You start an inflationary spiral that can be tracked to this kind of tax.

I believe first of all that when you decide you're going to tax, you have to have decided that you've exhausted every opportunity to cut costs. That should be -- if it isn't -- a basic, fundamental process that government goes through.

The minister, in his opening remarks, said: "We considered this tax, that we could increase sales tax, or we could increase this tax, or we could increase that tax." I didn't hear him say much about how they had examined ways to control expenditures, so I think that basic to this is the mistake the government makes in not looking for ways to cut spending and to avoid having to bring in this kind of tax or any other kind of tax. The ministers across the way are quick to say to us: "Well, tell us which hospital you want to close, or which school you want to shut down." The reality is that this is coming from the same government that introduced a so-called fair wage policy that's going to cost taxpayers at least $200 million a year -- an amount almost exactly the same as what the Minister of Finance predicts he will realize from this capital tax. So if you wanted to 

[ Page 1552 ]

look for ways to cut spending, I suggest the first one would be to throw into the trash basket, where it belonged, the so-called fair wage policy, which the government still hasn't worked up enough courage to bring to this House in the form of legislation. It has dealt with it by regulation, because it doesn't want to get into the debate about what the costs of the so-called fair wage or fixed wage policy would be.

[The Speaker in the chair.]

My suggestion is that there are alternatives to taxation. But if there were no alternatives to taxation, this would still be the worst kind of tax that the government could entertain. I am concerned with the kind of tax measures that the government has decided on. The elimination of the property purchase tax...is clearly a flat tax that doesn't deal with income or with the taxpayers' ability to pay. This is my argument as it relates to this particular piece of legislation. This legislation fails to give any recognition at all to the corporations' ability to pay.

If taxes are profit-based, then you can at least identify those who have the capacity to pay taxes. Surely it should be basic and fundamental, when government sets out to find new tax sources, that it should look to corporations and individuals that have the capacity to pay.

I think we are going to see situations in British Columbia where corporations that have been hanging on, that are facing bankruptcy and that are barely making ends meet -- not necessarily huge corporations, but mid-size corporations that employ a number of British Columbians -- are going to find that this is the last straw. This is going to be the tax that pushes them over the brink, because it has absolutely no regard for the corporations' ability to pay.

I think about the forest corporations in this province. The Minister of Forests is here. I don't know how the Minister of Forests will be able to support this piece of legislation, knowing the effect it's going to have on the forest industry of this province. The forest industry is faced with some tough times. The minister rises regularly to make ministerial statements and tell us how difficult things are in the forest industry, but his government introduces a tax that taxes the assets of those companies, regardless of whether or not they're profitable, borderline profitable or losing huge amounts of money.

I say to the government: if you must tax, go to profit-based taxes or income-based taxes, and stay away from these flat, regressive taxes that are the worst form of taxation you can have in any jurisdiction. I think we should be working to eliminate these, rather than introducing new taxes, or reintroducing old taxes that were introduced by the last NDP government.

I guess it's part of the 20-year cycle we go through in this province. Every 20 years or so we slip off to the left and make a three-year mistake, and we let governments introduce this kind of legislation, which ultimately sees them move back to the other side of the House.

An Hon. Member: A six-year cycle.

J. Weisgerber: Well, they hope it's a six-year cycle. They'd like to be here twice in government. They'd like to set a record for this province and actually get re-elected once. I don't think there's much danger of that. I think their best hope is to hang on for five years, and then at least they will have been there for a while. Don't get in a big rush going to the polls, guys. Hang on. Take your little cushy jobs over there for as long as you can get them, because this kind of legislation is exactly the kind of thing that will see you flop back where you belong and where you can do the thing you do best, and that's criticize. Because you surely can't draft legislation, you surely don't know anything about controlling spending and you surely don't know much about taxation.

The ministers responsible for the wealth-creating industries -- the Minister of Forests, the Minister of Energy and the Minister of Tourism -- have to think very carefully about their support for this legislation. Perhaps when we get down to the vote they'll simply take the day off and not be there when the vote is recorded. I suspect it's going to be very difficult for them to go back to industry and again tell them how concerned they are about them and how they're in there plugging away day after day fighting for them, when in fact they're developing taxes like this that are detrimental; that are not sensitive to the concerns that industry faces; that tend to slow down industry; and that tend to reduce industry's ability to reinvest, modernize and update. It's disappointing that the government chose to repeat 1973 and reintroduce a capital tax to British Columbia. When this government was in opposition it was interesting how they cried when the GST was introduced, how opposed they were to the GST -- it was a flat tax, it was a regressive tax; it hit the people who could least afford it. They were colourful in their criticism of that tax even though it had nothing to do with the province. It was federal, but it gave them a platform. But now we see them bringing in a tax in British Columbia, and the members across the way, I suspect, will be silent on this issue. They were pretty hard to find a little while ago. They didn't even want to sit in and listen to the criticism of the bill, because it hurts them. They feel badly about it; they're a little bit of ashamed of it.

The government not only chooses to tax weak corporations as well as strong ones, but it has decided it will also use it as a roundabout way of getting more revenue from the Crown corporations. It exempts Hydro from this tax, but it doesn't exempt ICBC, and here's a corporation that had a 19 percent increase this year; we are told it will have a 15 percent increase next year, and the government's going to sniggle a few more dollars out of the motorists by taxing ICBC and taking the money in as revenue. They're going to tax B.C. Rail; they're going to raise substantial amounts of money from the assets of B.C. Rail, and they're going to drive freight rates up.

An Hon. Member: What would you cut?

[ Page 1553 ]

J. Weisgerber: I'd cut the fixed-wage policy. If you were paying any attention at all, you would have known that.

One of the most unfortunate decisions that the government made in introducing this legislation was that it chose to ignore what has happened in every jurisdiction in the country. It has decided that credit unions should be taxed under this act. Members should know that there's no other jurisdiction that imposes a capital tax on credit unions. What that does is erode the basis of the only western financial institution that we have -- the only local financial institution -- and it is destructive toward the expansion of credit unions. I think they can afford to pay the tax that would flow from this, but there's a principle behind the notion to tax credit unions that I find particularly disturbing.

Over the last five years the previous government went to considerable length to encourage credit unions to increase the amount of their capital, to increase the amount of retained earnings they have, if you like, and to discourage them from paying out all of their earnings in the form of dividends. We wanted to ensure that there was strength in the credit union movement that would allow for downturns in the economy. The credit unions responded. They in fact substantially increased their capital, and they increased their retained profits. These now will be taxed.

The message you're sending to the credit unions, it seems to me, is: don't retain capital; allow your profits to be returned to the credit union members, pay down your capital and reduce the amount of tax that you pay. I really believe that the government should look long and hard at its decision to tax credit unions as part of the umbrella of organizations that are being attacked by this act.

[5:45]

I think that credit unions provide British Columbians with an alternative. Instead of going to the eastern banking organizations, large numbers of individuals in particular have put their savings into credit unions, and when they need individual loans, they go many times to credit unions. Many of the mortgages in British Columbia are carried by credit unions, and in a competitive, attractive way that is, I think, acceptable to most British Columbians. There is broad support in British Columbia for the whole notion of credit unions. In fact, a million-plus British Columbians are members of credit unions in their own communities. There's very little rationale, it seems to me, for the government to say to them: "We're going to treat you just like we treat everybody else. We're going to treat you just like an eastern-based bank. We're going to go after your retained earnings, your retained capital." When the Finance minister talks about bringing in amendments, I hope this is one he's considering, because it doesn't make any sense.

The previous member talked about sections of the bill that don't seem to have been given any substantive thought. There seems to have been a rush to raise $225 million for the budget, and the vehicle chosen was to tax the capital of corporations. And it doesn't just tax the owned capital of a corporation; it taxes the assets and for the most part turns a blind eye to the liabilities. A company may have very little wealth -- a large number of assets offset by a large number of liabilities. Any number of organizations that buy and trade and finance their inventories will be affected by this tax in an inordinately large measure that's not consistent with the actual capital or retained earnings of the corporation.

The number of errors and poorly-thought-out sections in this bill are legion, and I suspect we're going to spend a good length of time going through committee stage. What we have to spend a little time thinking about today is the intent of the legislation. First of all, it is clearly an attempt to.... It's more than an attempt; in fact, it's going to be successful in taking almost a quarter of a billion dollars out of the business community, out of the investment capital of this province. It's going to take a quarter of a billion dollars from corporations whether they have any ability to pay or not. That, to me, is the greatest and most serious flaw in this legislation, in that it does not give any consideration to the corporation's ability to pay.

If there were no alternative but to raise taxes, I would rather see the government look to income-based and profit-based taxes. That's been the direction of taxing jurisdictions all across the free world, except this government, which seems to be stuck back in the 1970s with legislation that they introduced once. People who saw the flaws in it threw it out. They are introducing it again in the 1990s as if it were still relevant. This legislation sends exactly the wrong message to British Columbians and particularly to the investment community in British Columbia. I can't think of any bill that would more clearly send the message to British Columbians that this government hasn't changed its philosophy an iota since it was in power last. It is intent on making all the same mistakes that it made in 1972 and 1973 and 1974. Finally it was so deeply enmeshed in its own problems that it had to go to the polls early.

This kind of regressive activity, this kind of thinking, is not at all sensitive to the economic realities of British Columbia and Canada and North America. This legislation doesn't at all recognize the realities in the business community. It's a piece of legislation that should be withdrawn at the earliest opportunity. I suspect the government is so far down the road with this flawed bit of legislation that it will be very hard for it to do what it should do, and that is to throw the whole thing out and see if it can't find a more equitable way of raising the money that it has already committed to spend this year. I suspect that the Minister of Finance won't do that.

Our only hope is that the government will look seriously at the legislation and decide that it can amend it to recognize, for example, the importance of fostering and supporting credit union growth in this province. It can look at this legislation and find a way to deal with corporations that simply cannot afford to pay the taxes this year, and I suspect we will bring forward suggestions in committee stage on a number of ways that the government might be able to do that. It's important to recognize that the minister at least recognized, as soon as he got to second reading, that the legislation was flawed and that they would be bringing in amendments.

[ Page 1554 ]

It's unfortunate that they chose not to advise us of the amendments that they were considering. It would save us a great deal of time in this Legislature, and it would save businesses and business people around this province a great deal of anguish if they were simply to take this legislation back, say they'd made a mistake with it, are not going to present it until they've had an opportunity to think it through carefully and that they'll bring back an amended act.

First of all, why does the government want to debate second reading, only setting out the notion that: "We know it's not perfect, and we know we're going to bring in some amendments, but we're not going to tell you exactly what they are. So you can look at all 30- or 40-odd sections of the bill, and you guess which ones we're going to amend, because we're not going to tell you ahead of time." The members from the government side seem to think that's funny. I think it's an abuse of the system. I think responsible government doesn't introduce legislation until it at least is satisfied that it's proper legislation, that it's not flawed legislation.

If, after the bill has gone through second reading, and if, as we did with Bill 19, the opposition are able to convince the government that there are flaws in the legislation, it's absolutely appropriate, and I commend the government for bringing amendments in at that time. But I don't think it's appropriate for the government to call legislation when it has already decided to amend it, and not advise the Legislature as to what those amendments are going to be. It seems to put us in the position where we can only assume that everything in the bill is going to pass -- and everything in this bill should not pass. The reality is that most of this bill should not pass. Most of it should be amended. Most of it should be struck down; that would be the appropriate thing for the government to do.

J. Weisgerber moved adjournment of the debate.

Motion approved.

Hon. D. Miller: It was a fascinating debate, and I commend the members on their excellent work.

Hon. D. Miller moved adjournment of the House.

Motion approved.

The House adjourned at 5:55 p.m.

[ Return to Legislative Assembly Home Page ]

Copyright © 1992, 2001: Queen's Printer, Victoria, B.C., Canada