1992 Legislative Session: 1st Session, 35th Parliament
HANSARD
(Hansard)
WEDNESDAY, MAY 20, 1992
Afternoon Sitting
Volume 3, Number 9
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The House met at 2:02 p.m.
Prayers.
N. Lortie: I'm pleased to have 80 students from Seaquam Secondary School in North Delta here today -- a very great high school in my constituency. They're a grade 11 class led by Mr. McLeod. Would the House please make them welcome.
Hon. A. Petter: I'm pleased to introduce today a delegation visiting from my constituency of Saanich South. I have the pleasure of introducing students from the Ozanam Sheltered Workshop of the St. Vincent de Paul Society and their teacher, Cecile Thomson. I think the House might be interested to know that Miss Thompson's grandfather, Frank Harry Mobley, was Liberal MLA for Atlin from 1916 until he died in office in 1920. The group are visiting us today as part of their academic upgrading unit on government. I would like the House to please join me in making them very welcome.
L. Fox: I'd like the House to recognize five very good students who have excelled and, in fact, won the National Stock Market Competition for Canada. They will be travelling very shortly to Toronto to Sir Wilfrid Laurier University to pick up their trophy and $1,000 scholarship. These five students are from Fraser Lake Elementary Secondary School. Their names are John Brise, Joanna Kelly, Dan Gammond, Louise Hebert and Sarah Baker. Would the House please congratulate these individuals.
With the cooperation of the House, could I ask if the Speaker would write a letter recognizing this great accomplishment of that school?
The Speaker: Is it the wish of the House that the Speaker do so?
Hon. Members: Aye.
H. De Jong: With us today in the House is Mr. Steve Greenwood, a reporter for the Abbotsford-Matsqui News. I ask the House to give him a hearty welcome.
G. Farrell-Collins: I would ask the members of the House to make welcome today Dr. Robert Bence from North Adams State College in North Adams, Massachusetts. He is spending the summer at Simon Fraser University and has ventured over here today to do a little bit of research on our parliamentary system -- in a comparative sense, I suppose. He has been meeting with members of our caucus, and I understand he will be meeting with members of the government caucus later on. I ask the House to make him welcome.
MISCELLANEOUS REGISTRATIONS ACT, 1992
Hon. G. Clark presented a message from His Honour the Lieutenant-Governor: a bill intituled Miscellaneous Registrations Act, 1992.
Hon. G. Clark: The Miscellaneous Registrations Act allows more information to be made available to the general public. It achieves this objective by providing authority to register prescribed types of claims at the personal property registry. The personal property registry is an established system which already registers security interests on personal property.
Hon. Speaker, I move that the bill be introduced and read a first time now.
Bill 41 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.
SOFTWOOD LUMBER TARIFF
G. Wilson: My question is to the Premier, and it comes in light of the visit today of the Prime Minister of Canada to the President of the United States. Would the Premier tell us if he has been in contact with the Prime Minister of Canada in the last 48 hours to indicate that the bottom line of British Columbians is that there must be a complete reduction of the tariff on softwood lumber exports, and that British Columbians will accept nothing less in the discussions that are taking place in Washington today?
Hon. M. Harcourt: We have to do far more than see a reduction of this unfair, hypocritical countervail; I think we have to see a complete elimination of this countervail. The Prime Minister is completely aware of my feelings on this. The feelings of all British Columbians, I'm sure, were unanimous that we want to see this unfair, hypocritical action by the United States Department of Commerce eliminated entirely. I communicated that in the strongest possible terms when I spoke with the Prime Minister last Friday. I can assure you that our Minister of Trade has had exactly the same conversations with the federal Minister of Trade, Mr. Wilson. We are backing the Prime Minister 100 percent to eliminate, as soon as possible, this unfair action by the United States.
G. Wilson: I think it is not a partisan issue that the elimination of this unfair tariff is necessary. However, the Canadian Embassy in Washington has confirmed that British Columbia has no representatives with the Prime Minister or the Deputy Minister of Trade that is with him or the delegation from the External Affairs department in Washington. Can the Premier then tell the House: if we're going to insist that there be a complete elimination, why does British Columbia not have any government representatives with the Prime
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Minister now, making sure that B.C.'s position is carried out?
Hon. M. Harcourt: I appreciate that question from the Leader of the Opposition. I'm sure he'll join with us in a non-partisan way to make sure the constitutional round that we're going through right now includes a formal position for the province, particularly on natural resources under our jurisdiction, in the making of treaties and in dealing with trade disputes like this. Right now we are explicitly excluded from those meetings. We have been told so and were pulled out of those meetings by the federal government. They say that this is their jurisdiction. That's why I'm sure that the Leader of the Opposition is going to back our requirement that British Columbia be at the table before, during and after treaties being signed with the United States.
The Speaker: Final supplemental.
G. Wilson: In fact, the response leads me directly into the final supplemental. The minister responsible for constitutional reform argues today in Montreal that we should have inclusion in these meetings. However, further consultation with the Canadian Embassy in Washington suggests that not only are there formal meetings taking place, but there are also informal meetings taking place in Washington, in which there is a great deal of discussion happening and at which no members representing this government are present. It is unacceptable to simply say that we're excluded from formal meetings, when we have the opportunity to have direct discussion and influence in making sure that the countervail is removed in its entirety. Yet this government fails to have anybody there.
The question to the Premier is this: if the Premier believes in what his minister is saying in Montreal, why is he not demonstrating so in kind by having representatives in Washington today, to make sure that in both the informal and formal meetings the B.C. position is clearly articulated and maintained?
Hon. M. Harcourt: It was B.C. that led the way in stiffening the spine of the federal government on this matter and that has had representations in Washington for many months now -- unanimous representations by the industry, by workers in the industry and by this government. We have been the most aggressive and assertive ones in this unfair, vexatious misuse of the countervail provision. We have people representing us in Washington extremely well. If the Leader of the Opposition wants us to be flying all over the world, when we have good representation.... If he wants us to be here to answer questions and conduct the business of the Legislature, we're prepared to be here to do that. We have a very clear position. I'm pleased to see that the Leader of the Opposition backs our position and is changing his mind from a reduction of tariff to agreeing with us that there should be an elimination of this unfair action, that B.C. has led the way in pushing for the total elimination of this tariff and that we should be represented during treaty negotiations. We are making headway in this Legislature, hon. Speaker.
[2:15]
NATIVE POLICE
J. Weisgerber: My question today is to the Attorney General. Over the past three months the Attorney General has received three petitions from some 493 residents in Lillooet regarding a very serious and potentially explosive situation in that community with the Stl'atl'imx tribal police unit allegedly harassing residents off-reserve. I'm wondering if the Attorney General has received these petitions, and if he can advise the House what actions he has taken in response to them.
Hon. C. Gabelmann: Yes, I have received some correspondence on the issue. I'm not certain of the extent of the petitions. I have asked staff for a report on the issue. I had a preliminary report, but I think it would serve the interests of the issue better if I were to report to the House on another day when I can give a fuller report.
J. Weisgerber: I think the Attorney General recognizes that the previous government was supportive of the notion of encouraging Indian people to have tribal peacekeepers whose domain was the reserve lands. We didn't anticipate tribal peacekeepers -- tribal police -- armed with 9-mm handguns and carrying shotguns in their vehicles, patrolling off-reserve and stopping residents who were not on reserve lands.
Has the Attorney General taken -- or does he intend to take -- any action to inform British Columbians as to the jurisdiction the tribal peacekeepers have? In other words, British Columbians should know what jurisdiction and what rights they have if they are stopped off-reserve by Indian police. Has the Attorney General decided to make that information available?
Hon. C. Gabelmann: Hon. Speaker, I indicated earlier that I would give a fuller report later. But given the second question, perhaps I should say -- in a preliminary way -- that the policing on-reserve is carried out in an appropriate manner. On occasion, the neighbouring RCMP detachment has required assistance, and they have sought the assistance of the band police. That assistance has been provided, and to the best of my knowledge, it is only when the RCMP have asked for the assistance of the band police that that has actually happened off-reserve.
As I said to the member, I want to give a fuller and more complete answer, and I will still do that on another occasion. But by way of preliminary report, I can give you that information.
The Speaker: A final, brief supplemental.
J. Weisgerber: The situation that the Attorney-General describes is not the one that the residents of Lillooet appear to be concerned with. It is my understanding that it's no request from the RCMP; it is an
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action taken by the Indian police themselves. The program itself is a good one, and I wouldn't for a minute want to leave the impression that it isn't. Over the last few months the federal government has committed about $117 million to this program, and since it's a cost-shared program, I'm wondering if the Attorney-General has committed any new funds to assist Indian bands with police action and, if he has entered into negotiations with any specific bands, if he could advise us which those might be.
Hon. C. Gabelmann: I think, given the series of questions, the complexity of the issue and the preciseness of the answer required, that I would prefer to come back another day with a full answer.
SOFTWOOD LUMBER TARIFF
W. Hurd: A question today for the Minister of Economic Development, Small Business and Trade. My question pertains to remarks he made in this House yesterday regarding the work of high-priced U.S. lobbyists for the B.C. government in the countervail case. The minister noted yesterday:
"...the money we've spent on Neil Goldschmidt has been well worth it. We have raised the issue of log exports, which is clearly on the agenda. While they have penalized us for log export controls, I assure you this government will do everything in its power to ensure that we never export more logs than we already have."
A question to the minister: was Mr. Goldschmidt's major role in this trade dispute to explain B.C.'s log export policies?
Hon. D. Zirnhelt: There's no problem with the amount we've spent. The answer to your question yesterday should have been just yes, the money is well spent. Mr. Goldschmidt's role was to advise us on some of the, shall we say, tactics and strategy we should take in terms of getting our message out. You need to know that Mr. Goldschmidt was well aware of our legislation with respect to restrictions of log exports. In fact, when he was Governor of that state he lobbied to have the federal government bring in log export controls that covered the state of Oregon, based on our 1906 law.
W. Hurd: A supplemental question to the Minister of Forests. The opposition understands that Mr. Goldschmidt was asked to focus on one aspect of this case during his lobbying efforts; namely, the B.C. ban on raw log exports as a potential subsidy for our softwood lumber. What exactly was this ban that Mr. Goldschmidt was being paid $36,000 to explain to the U.S. Senators?
Hon. D. Miller: Clearly the member fails to understand the issue. In 1986 the softwood countervail was led by forces in the Pacific Northwest, particularly by Senator Packwood. It was clear that in this countervail, the forces driving it came from the southern U.S., Georgia-Pacific Corp. In our view, people in the Pacific Northwest -- Washington and Oregon -- were being deceived into thinking that if the countervail was imposed, it would help those states. We hired Mr. Goldschmidt, who did a very effective job, in our view, in getting the word out in Washington State and Oregon that their interests would be compromised if the countervail went through.
As a result of hiring Mr. Goldschmidt, we've got former Governors of both those states, the current Governor and the Governor of Idaho all writing letters to the U.S. administration saying: "Get the export issue off the countervail." Mr. Goldschidt -- Goldschmidt; I apologize for mispronouncing his name -- did a very effective job in getting the necessary allies for British Columbia in Washington, Oregon and Idaho and perhaps indirectly led to the reduction in the countervail that was finally issued.
W. Hurd: I hope that the mispronunciation of his name isn't a commentary on the quality of his lobbying efforts.
We are led to understand that the Americans have levied a 6.6 percent tariff because in the opinion of the U.S. Department of Commerce, B.C. log export restrictions provide an even greater subsidy than do our stumpage rates. Did Mr. Goldschmidt even understand the log export restrictions of British Columbia before he took our case to the U.S. politicians? Does the minister understand them?
Hon. D. Miller: For the benefit of the Liberal opposition, let me first of all explain that the preliminary subsidy of 14.48 percent has been reduced to 6.51 percent. Perhaps Mr. Goldschmidt played a prominent role in having that amount reduced. Nonetheless, B.C.'s position is that no matter what the figure, there is no basis for a subsidy. There is no basis for a countervailing duty. As the Premier has outlined, we will continue to fight this issue to the fullest extent of our ability.
I think it has been acknowledged by the industry in B.C. and by other players in Canada that until British Columbia became very aggressive on the export issue, we were not making inroads in the United States. I would be happy to share the press coverage from the United States that we have now received since we hired the former Governor of Oregon to work on our behalf, in order to illustrate to the member that right across the United States, there is not support for this countervailing duty.
We will continue our aggressive efforts. With luck, we will be successful in having it eliminated. Hon. member, we are prepared to hire anyone who can be effective in delivering British Columbia's message to the United States.
HIRING OF CONSULTANT
Hon. G. Clark: Hon. Speaker, I rise to answer a question taken on notice by the Premier on my behalf yesterday.
The question was regarding Mr. Alistair Crerar. I have his curriculum vitae here, which I would be delighted to share with the members. He graduated from the University of British Columbia in 1950 with a master's degree in economics and geography. From 1950 to 1962 he was research planner for the Lower
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Mainland Regional Planning Board; '62 to '65, director of long-range planning for the city of Toronto planning board; '65 to '70, economist for the Atlantic Development Board; '70 to '73, manager of Atlantic region planning with the Department of Regional Economic Expansion; '73 to '77, director of Environment Land Use Committee Secretariat in Victoria; '77 to '88, chief executive officer of the Environment Council of Alberta; '88 to '90, coordinator for the development of a national conservation strategy for the government of Pakistan. He is currently assistant secretary of strategic planning.
Members on this side of the House and the government are delighted to have someone of this outstanding quality working for the government of British Columbia in a very challenging role looking at the question of Crown corporations of British Columbia. His salary is roughly equivalent to an assistant deputy minister's.
INQUIRY INTO POLICING
Hon. C. Gabelmann: Hon. Speaker, I understand the opposition parties were given a copy of this earlier. I trust it was in time. I'm sure it's never early enough, but we tried our best this morning.
Over the past several months I have heard expressions of concern from various individuals and groups with respect to policing in our province. Some have been general expressions of concern; others have arisen from specific incidents. I share those concerns, and I have consulted with senior officials in my ministry, with people involved in law enforcement, with community representatives and with individual British Columbians. I rise today to advise the House of the course of action that will be taken.
First, however, I am sure that members of the House will want to join me in recognizing that the men and women responsible for law enforcement in our province have, for many years, served our communities with professional integrity. I would also remind members of the House that British Columbia is in the vanguard with respect to the implementation of modern alternatives to the use of force, such as the use of the pepper spray commonly known as Cap-Stun, and the training of police officers in methods for verbally defusing violent or potentially violent situations. Our Police Commission has also established a set of professional standards for municipal police forces throughout the province, the first such set of standards in Canada.
[2:30]
It is also important to recognize the range of procedures currently operative with respect to incidents involving the use of force by police. Civilian oversight of police action is carried out by municipal police boards, the B.C. Police Commission and the complaints commissioner for municipal forces, and the federal public complaint commission for the RCMP. In addition to these means of review, specific cases will be the subject of police investigations, and where deaths have occurred, actions by the coroner's office. Crown counsel will review investigation reports, and the Assistant Deputy Attorney General for criminal justice will be involved in decisions with respect to any criminal charges.
These procedures are currently underway with respect to recent incidents, and as Attorney General I cannot, of course, comment on any of the incidents currently under investigation. Notwithstanding my strong belief that British Columbians can have full confidence in law enforcement in our province, the fact is that it has been almost 20 years since the last independent review, and our communities have undergone very significant changes since that time.
Accordingly, I wish to advise the House today that I will be establishing an independent commission of inquiry into policing and the governance of our municipal police. Specific terms of reference will be finalized shortly, as will the name of the person chosen to conduct the inquiry. I can advise the House that the commission will be headed by a highly respected individual. The commission will be asked to give priority to providing an interim report on the issue of police investigating police, and whether the present structure of civilian oversight of police is adequate.
Beyond these issues of immediate concern, the scope of the inquiry will be broad, covering such diverse matters as the process for obtaining search warrants, community-police relations and police training. The commission will provide an opportunity for all British Columbians, including aboriginal peoples and multicultural communities, to have their concerns heard.
I'm sure all members of the House will join me in reassuring British Columbians of the integrity of the administration of law enforcement in our province, and will support the efforts of the commission of inquiry to identify areas that require improvement and to make recommendations for such improvements.
A. Warnke: I want to extend to the Attorney General our support for the statements he has made.
I believe that there are a couple of other points that need to made. Indeed, a point that has been made several times already this session is that the laws form the basis of a free, democratic society and that one of the purposes of democratic government is that the laws remain the cornerstone of civil society. We often think of the laws as reinforced by the threat of force. But a civil society, based on the rule of law, actually rests on something else: public confidence and respect for the laws and the police force. A wise government is one that understands this. If the recent tragedy was an isolated incident, it might be tempting to slough it off, although I think the confusing stories do generate the kind of action that has been taken by this government, and for that I applaud.
Given that a pattern of similar incidents has arisen recently -- indeed, some of these questions have been raised earlier this session, perhaps in a different forum than the one we are in right now -- such a review is certainly timely. To establish an independent commission of inquiry at this particular time is certainly a wise move, and it is to be supported.
There are several issues, some of which have been described by the Attorney General. Perhaps I could
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even add one more: the role of informants in police investigation.
We must ensure that our police forces have public respect and support. Fortunately, for the time being, I happen to believe the police forces have that respect, but it could easily be eroded, and we would not want that respect and confidence eroded. We do not want to see our police force become so defensive to the point that they form some sort of a subculture from the rest of society. This is what we have to avoid. We are especially sensitive, given some of the events recently in the United States and here in Canada as well -- in the city of Toronto. We want to see justice prevail at all times.
For the benefit of the public, for the benefit of the police and especially for those aggrieved by recent tragedies, especially the one last week, we support this initiative of the Attorney General.
C. Serwa: We in the third party also support the independent commission of inquiry that the Attorney General has initiated with his announcement. In the police force there will always be concerns and criticisms from the public. Certainly, specific incidents where split-second decisions must be made will always be controversial: sometimes they'll be made appropriately and sometimes not. I think that's just part of the nature of their job. On the whole, I think the citizens of British Columbia and Canada have been well served by the law enforcement agencies. The RCM Police, as well as the municipal police forces throughout the province, have served the people very well. The Victoria city police, for example, not only do an outstanding job of policing, they're also outstanding community citizens with a variety of non-policing activities to, again, strive to win the respect of the citizens that they serve.
It is most appropriate that the commission of inquiry be broad-ranging. Society has changed a great deal in the past 20 years. Certainly, we're finding problems in education. We're finding problems in policing as well. It is imperative that the commission of inquiry recognizes that the matter is not simply a police matter; it is a matter that involves all of society. If that is looked at as well.... Surely the respect for the enforcement agencies must be understood, and also the responsibility accepted by society to work alongside and support our law enforcement agencies.
All in all, I applaud the independent review that the Attorney General has set forward. We will look with interest at the comprehensive recommendations of that independent review.
J. Weisgerber: I request leave to table two documents.
Leave granted.
Hon. G. Clark: I'd like to call second reading of Bill 6, the Corporation Capital Tax Act.
CORPORATION CAPITAL TAX ACT
(continued)
G. Wilson: As I rise to speak to Bill 6, let there be no doubt that the Liberal official opposition in British Columbia is opposed to this bill. We believe that this bill is regressive in terms of its intent and can only serve to further undermine the economy of this province and retard the much-needed economic growth and development that all British Columbians want to see come forward. There are many reasons why this bill is ill-conceived. It is poorly drafted. It is one that we believe can only serve to help to undermine the economy of British Columbia. There are many reasons why this opposition is opposed to this bill. Over the next while we will be introducing those reasons through members of the opposition speaking against it with respect to industry, the banking community and the general philosophical difficulties we have with what this government is attempting to communicate through this bill.
To put the capital tax that is being proposed in place -- I have said before, and I would say again now -- is really tantamount to theft. I say that because what they are taxing here is not profits. We're not simply putting a tax against profits earned through investment in the province. What is being attempted here is a tax on capital. Whether a company earns a profit or not, they are now going to be subject to paying very high amounts of dollars in terms of the tax demand that will be made on them.
We believe that if we're to have the kind of stimulation and growth of the economy that is required to provide for the social services, the health care system and the educational system that we all need, require and desire, it is important to have a government that recognizes the importance of investment capital and allowing that investment capital to flourish, and of developing the wealth in our communities so that all communities in the province are able to prosper and succeed.
Each of our members will be taking issue with this bill from a specific point of view. Let me, for the time that is available to me, simply point out what this is likely to do in terms of the banking community and the credit unions in British Columbia. Let me focus on those areas specifically. Let me suggest that this government and this minister -- who I trust is listening to my remarks today -- are going to be in a position where they would likely want to at least provide an amendment to this bill, if not a complete retraction. I will be speaking to those amendments. If this bill should move to committee stage, through the failure of the members opposite to recognize how important it is for us to stop it in second reading, then we may be forced to implement amendments to at least try to make it as palatable and as harmless as possible.
Let me say it is our preference that the members opposite read carefully the contents of this bill so that they understand the negative impact it is going to have upon the economy of B.C.
I would say that if we look at the banking community, we see three levels at which this tax is going to
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have a negative impact upon that sector of our economy, and how that will be handed down to those -- and, I would argue, all -- British Columbians who must pay for the services that banks provide, and, through the payment of those services, cost additional dollars to the average British Columbian.
This is not a tax that is simply going to go after the wealthy, big corporations that somehow aren't paying any tax at all. That is a myth which has been perpetrated in British Columbia by members opposite. It is a myth that is part of the election rhetoric of the NDP -- and has been both federally and provincially. It is a myth, because if we look at what is proposed here, profit is not a question. What is in question is the capital that exists within the organization itself. If we look at what this means in terms of the punitive, regressive tax on our banking community, we will see that not only will this affect the large chartered banks in the province, but also the smaller chartered banks. As well, it will have a serious negative impact on credit unions, which are a different lending organization.
[D. Streifel in the chair.]
Let me for a moment turn my attention to the question of the credit unions. Credit unions are put in a particularly interesting position with respect to this tax. It's one that I don't believe this government has given serious consideration to, and they should think a little more clearly about what they are doing. I don't know if this government is aware that B.C. credit unions are the prime resource of personal banking services in this province. There are 107 credit unions, with 281 locals serving over 1.1 million members in 125 communities throughout British Columbia. In 27 of those communities they are the only financial institution available to the people who are seeking to have their investment maintained through their deposits.
[2:45]
This current legislation is to a large extent going to provide for taxation not only on the independent credit unions -- the credit unions as they exist -- but also on the B.C. Central Credit Union. If that isn't an inconsistency with respect to the moneys on deposit in the individual credit unions, we see that they will also be taxed through B.C. Central. Insofar as the vast majority are members, I would suggest that this bill brings about, in its first instance, a double taxing authority. I would seriously suggest that if this bill is to pass second reading -- and I hope that it would not -- at the very least.... If I can get the attention of the Minister of Finance at least on this point, there should not be a tax levied against the credit unions as individual members as well as on B.C. Central. There should at least be an amendment to recognize that there should not be double taxation there. Hopefully we can get that message across to the government and see that kind of amendment put forward, if this bill has to pass at all.
Let us also recognize that the credit unions have a role in protecting the public and members' interests through the responsibilities they have with deposit insurance fees. They pay higher deposit insurance fees than federally-insured institutions. Through these fees and prudent management, they have been able to build an insurance fund that has no taxpayer support. We've also seen that the cost of regulating credit unions has been moved from a cost-share arrangement between governments and general revenue and credit union assessments to one that is fully funded by industry assessments. This has substantially reduced the cost to the provincial treasury. This government still intends to bring forward this punitive measure against the credit unions.
Similarly we would see that, practically speaking, the B.C. credit unions have no access to the traditional capital markets, yet they will still be a part of this bill, with no exemption provided. Credit unions are capitalized by member-owners, either through their retained earnings generated from the usage of services by members or through equity shares purchased by members. Credit unions have built capital, almost exclusively from members forgoing dividends and buying equity shares, from approximately $131 million in 1987 to $460 million in 1991.
This is an organization that is deserving of the support of government and is not deserving of the punitive taxation measures that this government is now bringing in in the form of a capital tax. I would suggest that the application of this corporate capital tax to credit unions will have a seriously detrimental effect on the credit union system in British Columbia. It will discourage the building of capital. It could encourage the maximum distribution of members through the patronage allocation of dividends. First of all, that will in turn restrict the ability of credit unions to grow, since capital requirements increase proportionately with assets. Secondly, it will encourage credit unions to hold the minimum capital required by legislation. This will also minimize their cushion against hard times, with possible consequences to the deposit guaranty fund and the government's optional backstopping of that fund.
We would say that that's a very important measure for this minister to understand. With the measures that have been brought down in this budget, it would seem that the hard times in the province are going to continue, because this government has no foresight, no economic strategy, no plan to try and deliver the people from ever-increasing taxation without the potential for expanding revenue generation. We would say that that point alone is reason for this bill to be hoisted and not brought forward and passed through this second stage.
We would also say that it will minimize the credit unions' willingness to consider loans for small businesses, as such loans require higher levels of capital. Small businesses, which are the engine that drives the economy of the province, as I mentioned earlier, depend upon the credit union system in many communities outside the lower mainland and outside areas where the larger chartered banks have facilities. Those small businesses will find it more difficult to get the capital financing that is required for them to do business in the province, because this government has not had the foresight to understand what it is doing with respect to this bill. I would suggest that it will also hamper credit unions' ability to participate in the economic development of the province, because there
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will be no incentive for the provision and development of the capital required in order to have this proposition go forward.
It is clear that this government has not clearly thought through what it intends to do with Bill 6. It is clear that this government is stepping forward with an ideological position that is based and steeped in a socialist ideological concept that if people involved in finance, in large corporate business and in small business and people who are entrepreneurs and who seek to see economic growth and wealth occur should see profit emerge, they have somehow been villains in our society rather than those who develop and help build our society.
It has become even more insidious in Bill 6, because they have now allowed this philosophy to go one step further to say that whether or not they make a profit, they ought to be taxed, and the government should essentially be able to put its hands into the pockets of these corporations, banks and credit unions to take taxation off the capital that is accrued by these corporations. It is no wonder that this government has received the nickname "N-Dipper" -- one more example of how the NDP will be dipping into the pockets of taxpayers, whether they are a credit union, a chartered bank or a corporation and whether or not that corporation has made a profit in British Columbia.
Let me say that a cushion of capital investment is critically important to the survival of credit unions, because those who have close ties to the community they serve cannot diversify to the extent that other financial institutions can. Nor is it possible for credit unions to simply abandon a community that is experiencing difficult economic times. Those credit unions must be there to provide support. In the 27 communities that I alluded to earlier, where those credit unions are effectively the only financial institution.... I certainly hope that this government will recognize that this punitive measure is going to make it extremely difficult for those credit unions to maintain a strong and effective role in terms of the provision of service to those communities.
As it is presented, Bill 6 will set a negative precedent for all credit unions across Canada. As a result of their unique structure, credit unions across the country have been exempted from capital tax. Only Alberta and Ontario subject credit unions to capital tax. There is a flat rate of $100 per credit union.
Quite clearly, we in B.C. are again leading the way in taxation, but it is not progressive taxation. It is not tax reform, which is so desperately needed. This is simply a cash grab. I reiterate that it is tantamount to nothing more than theft that this government should go after not only the profits that are generated from capital invested, where profits are earned, but also the capital that essentially is on deposit. That is a shameful thing for this government to do. I would argue that if the passion of those who are involved in trying to maintain, protect and push the credit union as a major service to communities -- because they are, after all, cooperative institutions that have their membership deeply involved in the development and maintenance of their financial organization.... If this government sees no sympathy with that, I say that that is shame indeed.
Let me say this. We do not just single out the credit union as an example -- although it is one that is clearly an important retrogressive step, because in other provinces right across this country and in other jurisdictions they have been exempted. Let us also look at some of the smaller chartered banks that are not going to be able to withstand those issues. I have a letter with me that is provided by the Canadian Western Bank, which has outlined their position in terms of what this punitive and regressive tax will cost their bank: roughly a quarter of a million dollars over a 12-month period ending April 1993. Of course, that will increase by 1 percent any capital increase the bank raises during that period. That is not only regressive; that is punitive, to the extent that this bank itself cannot support -- should not be put in a position to support -- that kind of tax increase without having some major revision to their investment portfolio and to their ability to provide service to members of that banking organization.
Let me say that while the credit union movement is now putting forward a strong and active lobby, it is difficult for the smaller chartered banks -- the Canadian Bankers' Association -- to essentially advocate for the same level and the same kind of sympathy from this government. We have seen this government's response in the past to those people who are involved in this most necessary financial industry in the province. We have seen, as we looked through the countless material that has come into the offices of the official opposition on banking alone....
Let me tell you that this isn't the only information we get. We also see recognition of the punitive tax on small business, and we'll be speaking to that; we'll be talking about the punitive tax on our forest sector; we'll be addressing the kind of onerous and punitive tax on other corporate sectors and new investment sectors, especially with respect to new industry in the development of new technologies in British Columbia.
Let me tell you that if you look at the annualized estimated cost in terms of this tax, you can see that the banking institutions in this province will have no choice whatsoever but to pass on this tax to those whose services they are dependent upon. Those people who depend upon the banking services in the province will find themselves having to absorb higher service costs. The payment of those higher service costs is going to -- once again; we cannot reiterate this more strongly -- diminish the competitive advantage that people in British Columbia have to look for when they start to go up against people whose investment capital in British Columbia is done on borrowed money, where they are not only dealing with lower interest rates but lower banking costs -- service costs -- and they're looking at far less restriction on the mobility and development of that investment capital in British Columbia.
I stand today to speak against this, not simply because it is a good thing for the Liberal Party to be doing in the province, not simply because we're trying to oppose this bill for the sake of opposition, but because we are convinced by the data that we have seen that a thorough and complete review of the impact of
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Bill 6.... We are convinced that this will have a serious dilatory effect on the ability of British Columbia to maintain its competitive economic advantage over its trading partners.
I find it interesting that, as we debate this bill alone, the Minister of Finance seems not to be listening to the kind of amendments that we were talking about earlier on with respect to the credit union, and not to be listening to what kind of punitive taxation this measure of Bill 6 will bring against the people of British Columbia. How is it possible that we can have effective opposition? How is it possible that we can put forward constructive opposition? When we decide how we're going to be dealing with these kinds of issues, it falls upon deaf ears or no ears at all.
Hon. Speaker, it is critically important that this government understands that this is not a question of political rhetoric; this is not a question of grandstanding; this is not a question of simply trying to go out and buy votes at election time. This is an important bill. It will have a serious and dilatory effect on the financial institutions of British Columbia, on major corporations and through the transfer of those costs down to every single British Columbia taxpayer. This is the most insidious bill that has yet come before this House, and I urge all members in this House, whether they are on the government side or on the opposition benches, to review it carefully and with wisdom. When they do, I don't believe they will allow this bill to pass second reading.
[3:00]
Hon. Speaker, let me also say that in this bill and what this bill requires, there is not a proposition that is availed that will recognize clearly that where institutions are not earning profit, they cannot essentially defer taxes, not pay taxes or somehow allow themselves to be maintained in a competitive position, as a result of their inability to pay. Let me tell you that in the representations that we have had from virtually every single group, including the Canadian Bankers' Association, we have found that of the amount of revenue that this government is attempting to develop and to increase in this proposition, the amount of revenue that this government intends to try to steal from the people of British Columbia, the banks alone will contribute between one-quarter and one-third of the $268 million that will be raised from corporations in increased taxes, while the banks are already paying an estimated 8 percent of provincial income and capital tax revenues.
The capital tax rate levied on financial institutions is ten times higher than that applied to the general corporations. These are not mystical numbers that have been dragged from the air; these are facts. And when you look at these facts, when you understand these facts, when the members opposite understand these facts, they will understand that if you are to be there as government for all of the people of British Columbia, you will recognize that it is foolhardy in the extreme to assume that it is possible to put forward such a punitive tax on the financial corporations of this province and to expect that those financial corporations will not somehow pass down that cost to those that use them. They will be passed on, and not just to the small investors.
I am always amused by those that hold the belief -- and it seems that there are many members opposite that hold the belief, perhaps because of their lack of understanding of how the finances of the province work -- that when they go there and they put their money in the bank, the money is not simply tucked in a drawer until they're ready to come and take it out, that that money is essentially going to be invested, and that we need to have that capital that is in a bank so that that bank can make investment a possibility for people who are engaged in the economy of B.C. I'm amazed when I hear frequently from members opposite that they think there is a proposition whereby taxing on capital is going to provide necessary revenue for this province to be able to put money into the programs that all of us want: health care, education, social services.
Let's be clear: we on this side, the Liberal opposition, want comprehensive tax reform. We on the Liberal side of the House want to make sure that there is a provision for fairer, more equitable and better taxation. But taxing on capital is not the answer. Expecting the financial institutions of the province to essentially put forward this kind of revenue for government on the basis of capital tax is not a solution. This will mean that this taxation will deter capital investment, and that can only be a negative for British Columbia. All members of this House would have to agree that to deter capital investment in British Columbia is a negative. Secondly, it will retard the financial institutions from developing a strong capital base that could ultimately be extended in terms of investment into the communities, especially those in the interior, the north and the Kootenays, to offset some of the problems we face with a shrinking economy as a result of the mining or forestry policies of this government.
Surely members opposite must agree that it's a positive for us to see those kinds of investment occur. Surely members must understand and at least have enough rudimentary understanding of the way the economy of British Columbia works to recognize that this kind of investment is necessary in the development of the economy of British Columbia. Even if we are, for some short moment, to buy into the rhetoric that we hear constantly from the opposite benches in government that somehow there are a lot of fat cats out there who aren't paying their fair share of tax -- if only the fat cats would pay tax, there would be all kinds of medical and educational services and all kinds of social service dollars -- doesn't this government understand that all British Columbians use banks or credit unions? By putting this corporate capital tax against the capital that the banks have accrued, the cost of that institution essentially rises. Therefore if their cost of doing business rises, the way they will offset that is to pass it down to the ordinary British Columbians whom this government purports to represent.
There is no virtue in what is being proposed here. Not only is it ideologically unsound, but it is also economically unfounded in any measure or by any way that you try to assess that this kind of taxation should be available. I have pointed out already, with respect to the banking institutions and credit unions in particular, that there is one glaring obvious oversight in this bill. It
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is the proposition that tax will be assessed not only against the member credit unions but also against B.C. Central. Surely this government can at the very least see the wisdom of changing that portion of the act so that there will only be capital tax assessed against B.C. Central -- if they don't see the ultimate wisdom in getting rid of this altogether. What this government should do is get rid of this capital corporate tax in its entirety.
Let me say in closing that this opposition took up the gauntlet that was thrown down by this Minister of Finance with respect to this punitive and regressive tax. We sought to find out from British Columbians, not just from those who are chairmen of the boards of large corporations, who sit in the Canadian Bankers' Association, or who are involved with the B.C. Central Credit Union. We went to talk to all British Columbians. We went out into the province, and we had our 17 members communicating, consulting and discussing with British Columbians. We asked British Columbians: "What do you think about a capital tax?" We explained to them what this tax will do.
Let me say that all British Columbians understand that government needs revenue to provide the services we require -- all of us understand that. We all understand that there are increased costs of health care, that there are increased costs of social services and there are increased costs to our education dollar. All British Columbians understand that. And British Columbians, almost to an individual, communicated to me as Leader of the Official Opposition and to the members of my caucus, and said -- and let me paraphrase as closely as I can for the majority opinion -- that we do not mind paying tax to government if the tax is fair, if it is an open tax, if it is honest and if it will provide the services we demand. We don't mind paying our share of taxes, because we understand that government needs revenue.
The people are not foolish, they are not ignorant, they are not without eyes and ears, they can read and they can hear. But to an individual, they said that if you are going to put in a taxation system, then let it be levied upon those who have the ability to pay tax when the taxation is going to be put upon them. Let tax be upon those who have profit, and if that profit is substantial, then let there be a percentage tax on that profit. Let the government recognize what that percentage of tax will be.
But how is it fair when there is a tax assessed against a company that may not even make a profit? And what happens in this instance in this bill, this Bill 6 that we are supposed to be passing and which we are going to vote against, if a corporation makes no profit in year one? They will still have to pay tax. What if they make no profit in year two? Now they have to pay tax for year one and year two. And what if they don't make profit in year three? How many years will this government allow corporations that are seeking to try to maintain at least a level of development and service...? How many years will this government allow to be accrued before they finally lower the boom on these corporations?
How are these corporations supposed to pay the tax? If they can't even pay dividends to their shareholders, if they can't even make profit, if they can't even show to their banker -- who incidentally is also going to be paying the same tax -- an ability to pay off what it is they have in their normal financing situation, if they are having to borrow capital to try to bridge themselves over the time when the economy of the province is at a low, then how on earth is this government going to try and collect that money? Well, there's nothing in here that tells anything about that.
How is this government going to be able to collect when in year four perhaps they're lucky enough to show profit? By what measure is profit defined? There is nothing in here that says anything about that. Does it mean a 1 percent profit, a 4 percent profit, an 8 percent profit, a 20 percent profit? And what if they finally do show a 15 or 20 percent return? Is this government going to come along and simply take it all so once again they're back in the situation they were when the economy was down?
How on earth can this government expect there to be any faith or confidence in its policy and its position on taxation when it has such a ridiculous bill as Bill 6 with respect to the provision of taxation and this corporate capital tax. Hon. Speaker, it is ridiculous. If this bill has to pass.... And let's be quite clear that the members opposite have 51 members. I wonder how many will have an understanding -- hopefully all will have read in detail and understand the impact this will have on their riding associations, on their communities and on their constituencies. I hope they're prepared to carry the weight of this bill home to their constituents who are in small business. I hope they are prepared to take responsibility for what this government has done.
How is this government going to put a tax on those that don't have profit? How many years will they allow it to accrue? If this bill is to pass, then why don't they consider an amendment that would allow a proposition whereby a corporation that makes no profit can defer; where there is a limit to the number of years that can it have accrual; where there is a margin of profit that needs to be maintained prior to payment against that accrual; and where only a proportion of the payment will be demanded in those years where profits are shown, so this government doesn't simply tax people right back into the red and so it doesn't tax a corporation that is finally in a position to show some dollars in profit and finds itself back once again in a loss situation?
There is no provision for any of that in this bill. Who drafted this legislation? Did the individual who drafted this legislation have any knowledge at all about the current state of the finances of this province with respect to the corporations that are doing business, the banking institutions and the credit unions? Or was this crafted by somebody sitting in the Ministry of Finance and looking at a large deficit, thinking: who can we go after now?
[3:15]
Hon. Speaker, I tell you that this Minister of Finance is just like a well-trained pointer who's sniffing out profits. When he sees one he goes rigid on the leash and points, while this government drafts another bill to go out and bag them. Only this time, this well-trained
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pointer has pointed at those whose profits aren't even there. They've drafted a bill to go out and bag the capital assets that have been accrued by the corporations and the banks.
Hon. Speaker, I find this to be a regressive bill. I find it unfortunate that, as we try to put our attention to some progressive, positive and constructive ideas as to what they can do with this -- if in fact they have to pass it -- we find that my comments are falling upon deaf ears or no ears, as the case may be. If this government really is interested in trying to do something positive for the province of British Columbia, then this government has to realize there is a tax limit beyond which people cannot pay. This is such a regressive bill with respect to the banking institutions and the credit unions that if the Minister of Finance is going to force this bill through, then he does so at the peril not of this government, because they've got four years until their day of accountability.... In four years their accountability will come because of this kind of regressive legislation. Unfortunately the people who will have to carry the can for this are the people of British Columbia, who will find themselves now faced with an increased demand upon their bank accounts, their service costs and their corporations, which will no longer be able to do effective business in the province as a result of this kind of punitive legislation.
Let me summarize in closing with respect to the banking institution itself. I find it quite incredible that this government -- indeed this Minister of Finance, wherever he may be -- has not the wisdom and foresight to understand that this is going to be a serious impediment to the credit union system in British Columbia. Furthermore, there is a huge and major flaw in that there is a double taxation against the credit unions, and that has to be addressed. There cannot be a double taxation against the credit union movement.
With respect to the chartered banks, this minister clearly doesn't understand that not all of the banks that operate in the province are large chartered banks such as the Royal, the Commerce and the Toronto-Dominion. Other much smaller chartered banks do not have the leverage that the larger banks have. They have been encouraged by former administrations and by this administration in its first six months to have on hand large capital that they're now going to be paying tax on. This has got to be the most dishonest way of taxing that I have witnessed yet in any bill that has come before this House.
I hope that my words have been listened to by this government. Wherever the Minister of Finance may be today, I suspect that we may see his presence in this House as soon as I sit down and refrain from my comments. The Minister of Finance does not come in to hear me speak because he knows that what I speak of is true. He cannot face the comments that he hears from me. When I speak of the credit unions, he knows that what I say is true. Those who work behind the scenes in this province, those who really are the string pullers of this government.... That Darth Vader who drifts down the halls of this Legislature, the individual who makes financial policy -- I think all British Columbians know of whom I refer -- that eminence grise of the NDP, is only too familiar with the credit union system, because he's been actively involved in it. I believe that in a private moment in the hallway -- if you could ever find him -- you would know that he would say that what we have said about the credit union itself is true. That is why the Minister of Finance can't be here to face these comments right now. He knows that this is punitive legislation that will negatively impact on the credit union movement.
Believe me, we will have members rise and talk about the forest industry, which is going to be seriously affected. We will have members rise with respect to the small business sector and virtually every other economic sector of investment in the province.
With respect to banking institutions, a tax is going to be levied that will require that roughly one-quarter to one-third of the $268 million demanded of this tax bill will be picked up by these institutions. You have to understand, Hon. Speaker, that this is indeed a punitive piece of legislation and one that will simply be handed down to those average British Columbians who have their moneys deposited and invested in the banks of B.C.
The official opposition in British Columbia wants tax reform. We are advocates of comprehensive tax reform. We recognize that government needs money to operate. But this bill, Bill 6, is not the way to get it. Hon. Speaker, I can tell you that we will launch a campaign, and we will use every measure at our disposal to block the passage of this bill through this stage.
If the government should invoke its power of 51 representatives here, we will recognize that this bill must, at the very least, go through amendments. I've already raised one amendment with respect to the credit unions, and there will be other amendments that will come forward with respect to the corporations.
Bill 6 is the most regressive, punitive taxation method the NDP have brought against the people of British Columbia to date. I hope that all members of this Legislature, be they government members, opposition members or members of the third party, will recognize the folly that this bill invokes upon British Columbians and will vote it down.
We would be happy to sit with government to redraft propositions for a comprehensive, fair tax reform. We would be happy to work with government to find a more sensible way to provide those kinds of taxation services. We would be happy to use whatever powers and knowledge we have to assist this government in putting in place a fair taxation measure. But this is not the way to do it.
W. Hurd: It's a privilege for me to rise today in debate on Bill 6, the Corporation Capital Tax Act. It was interesting to listen to the magnanimous way in which the Minister of Finance introduced this bill into the House. He pointed out to us that Treasury Board had agonized over the implications of this tax, and had thought about raising the sales tax as an alternative. He pointed out that he felt that 80 percent of the corporations in this province wouldn't even pay the tax, and that it was a measure that introduced fairness and
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equity to corporate taxation in this province. That was his message when the bill was introduced.
But if we want to know the real intent of the minister in introducing this bill to the House, I think we have to go back to the remarks he made when he closed the budget debate in this House, when he talked about the need to redress the balance, to ensure that the greedy corporations paid their fair share. He sketched a scenario of widows and children paying an unfair burden of taxation while greedy corporate executives snubbed their nose at the government and failed to pay their fair share. I believe that's the kind of philosophy behind this bill, the philosophy of the Minister of Finance when he closed budget debate in this House.
It's important for us to note that the NDP government promised that there would be a tax only on profitable corporations, when they took their message to the polls during the last election -- only on profitable corporations -- and that equity and fairness would reign supreme in corporate taxation. Hon. Speaker, what we see in this bill is a complete abandonment of that type of commitment made during the election campaign.
It's important for us to point out some of the corporations in this province that will be paying the corporation capital tax -- companies like MacMillan Bloedel, which in this province during the last fiscal year lost $94 million. Yet if this tax were in place during the upcoming fiscal year, they would pay an additional $4 million to $5 million in corporation capital tax, in addition to losses they've already sustained. Westmin Resources, which lost $15 million, will also pay the corporation capital tax. Westar Resources, and Westar Mining -- of which the Minister of Forests is certainly aware -- is under the corporations review procedure in the courts, the Canadian equivalent of chapter 11 bankruptcy, and they will pay the corporation capital tax. Marks and Spencer, which closed stores in Nanaimo, Port Coquitlam, Kelowna, and even in the Pacific Centre, would have paid the corporation capital tax on their B.C. assets. It isn't just corporations. It's also, we understand, B.C. Crown corporations, Air Canada, B.C. Rail, CN Railways. And we understand that on the basis of the corporation capital tax, Hydro's rates alone could increase by 1 percent to consumers in British Columbia.
Interjections.
W. Hurd: Thank you for those interesting remarks from the member for Nelson-Creston, who understands taxation very well, I'm sure.
As I recall the remarks of the Minister of Finance, he debunked the idea of the trickle-down effect, the idea that somehow if corporations were competitive and had fair taxes, the benefits would move down through the system and benefit all British Columbians. It's interesting to note that Stats Canada came out with some very intriguing statistics during the past week which would seem to give a great deal of credence to the idea that if the corporate sector is competitive in the province of British Columbia, the benefits do trickle down, or flow down, to British Columbians as a whole. Stats Canada noted that British Columbia has fared better during the current recession than any other province in this country.
An Hon. Member: Until now.
W. Hurd: Until now, absolutely.
As I look through some of these statistics, we note that British Columbia's good fortunes were mostly due to us emerging relatively unscathed from the recession because of strong investment and trade links with Pacific Rim countries. And while families lost ground to the economy and the tax collector, British Columbians managed to hold their own.
It's interesting that British Columbia, because of its taxation policies and encouragement of capital investment, has fared better than any other province in this country. Statistics Canada notes that British Columbia was the only province to buck the nationwide trend set by hard economic times and the tax collector's grab. Income taxes have soared, but in British Columbia they remain very competitive with what we've seen in the province in the past four or five years. What we're seeing is an abandonment of the idea that investment in corporations is beneficial to the wealth of the province. We look at the companies that will be paying this tax; it's going to rob them of investment capital that they need to create wealth.
The Minister of Environment has introduced legislation in this House that would require massive capital investment -- in particular, the pulp and paper industry -- to meet new environmental regulations. The money they spend on meeting environmental improvements will eventually be taxed in this province. Not only is this a tax on profits but also it's a tax on corporations attempting to meet improved environmental standards in this province. It makes absolutely no sense. Pure and simple, the corporation capital tax is a tax on wealth; it's payable whether your business is profitable or not. There is no doubt that this new tax will cost the province existing jobs and prospects for future jobs.
It's difficult to believe that the Minister of Finance, having assessed where the province has been over the past five years and its prospect for the future, would introduce such a regressive tax in the form of a corporation capital tax. It sends out one of the most negative signals to the investment community that the government has sent out in the past twenty years in this province. It doesn't matter how much you make or what situation your company is in. If you've got $1 million in paid-up share capital, you're going to pay a tax, and your balance sheet is going to be reduced. It's an indefensible bill, and I hope that the Liberal opposition and other members of this House will join in rejecting it, or as a more constructive alternative, will join in amending and changing it, so that we continue to see the flow of investment into this province that we need to protect our standard of living.
D. Symons: I'm concerned about this bill. The government should assess the full implication of the corporate capital tax. The tendency of this government
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is to increase taxes that bear no relationship whatsoever to a company's capacity to remain competitive and earn a fair return on their investments. This tax is going to be taxing companies on their capital assets, and it will not necessarily mean the company is making money, as has been pointed out by previous members here today. My concern is that in doing this we are going to slow down the economy at a time when we must be stimulating the economy to bring more investment into the province. We must be creating jobs, not destroying jobs. This bill seems to be doing the latter.
In my riding there are some rather large transportation and equipment companies -- large trucks, cranes and light building equipment that you see on the streets in building large buildings. By this bill, if they expand by buying new equipment, they're going to be taxed on these new assets. By this bill, if they replace old equipment with new, they're going to be taxed. This does not encourage a business to invest money or expand; rather it discourages it. Companies are going to be penalized for any capital expansion.
[3:30]
This is not going to create jobs in the province at a time when we desperately need them. It's not going to create the wealth to pay for health care, social services and education that your government has put as priority items. By putting them as priority items and neglecting other fields of economic development in the province, you are not going to be able to create the money to pay for those priority items. This government is not addressing that issue.
Is this what the Premier meant, in doing this sort of business here, when he went around the world saying: "B.C. is open for business"? This act will change that slogan to "B.C. is open for taxes." This is not an increase in tax on profits; it is an increased tax on doing business in British Columbia. The Liberals on this side of the House believe in encouraging business, to stimulate the economy, not in discouraging business as your government appears to be doing.
Bill 6 will not attract business; it will discourage it. Bill 6 will not encourage the expansion of existing businesses; it will discourage it. It will encourage businesses, such as the companies in my riding, to look elsewhere and to locate outside the province to avoid this tax and to simply come into the province to do business. It will encourage businesses to lease equipment rather than purchasing it, thus avoiding the tax.
Earlier last month Mr. Robert Stewart, president of the Vancouver Board of Trade, stated: "The effect for virtually all business will be higher costs, higher prices, lower growth prospects and lower profits." Who is going to pay those higher costs and prices? It will be the people of British Columbia.
An. Hon. Member: ...who voted NDP for the last time.
D. Symons: Yes, they made a little mistake.
This will also tax Crown corporations. It will tax B.C. Rail and B.C. Ferries. Where will the corporations get the money to pay those taxes? Out of our pockets, again. I need not hold up my credit card, as the Premier did. Basically, we're going to be nibbled away at everywhere we go because of this tax.
Mr. Stewart went on to say: "There are businesses for which this will be the last straw that breaks their back. For others this will be the trigger that moves them across the border." The business community is probably well aware of that.
This tax is not in the best interests of British Columbians. It will raise a few taxes for the government in the way it's planned. But unfortunately it will be a regressive tax, and it will not help to increase business in the communities, which is going to be needed to pay the other expenses in operating this government. We must, therefore, defeat this bill. We must not have this bill go through as it is currently written.
C. Tanner: I rise to address the House on Bill 6, the Corporation Capital Tax Act. During earlier debate on other bills I asked the minister why he wasn't taxing all professions instead of just raising a tax on the legal profession to pay for legal costs. I realize now why he wasn't. This great wad of paper of 50 clauses, which calls itself a bill, is his way of taxing business in another fashion altogether. He's in league with the accountants, because the accountants of the world are the only ones who will be able to interpret this act. They're going to charge business through their pocketbooks in order to put into effect the convoluted, complex and difficult acts in this bill, which are going to be impossible to implement. The minister has already made one withdrawal and one amendment, and I suspect he will make others which, to me, only admit that either he or his department officials who drew up this bill are incompetent.
My particular interest today is the effect on assets that this bill is going to have on the hotel industry, which is the backbone of the tourism business in this province. It might be well for every member from those rural districts to keep in mind that in many cases the largest municipal taxpayer in their towns and smaller cities is a hotel. Those hotels are now going to be expected to pay further tax not on profits, but on the hotel building itself, the land it sits on, the assets within the hotel, the crockery it uses to serve its meals on, the glasses it uses to serve its wines and liquors, and the beds, sheets and implements. All the assets of the hotel are now going to be taxed, not whether they make a profit -- which incidentally most of them aren't -- but whether or not they're just standing there.
If a hotel in a small town is not making a profit, it makes no difference to this minister; he's going to hit them again. He's going to lift some more money out of their pockets. He will say, when he's replying to the addresses from this side of the House, that he has given hotels an exemption of two years before they pay the tax. In my view, that's merely an admission of the fact that hotels in particular are going to be hit more radically than any other small business, for the simple reason that most hotels, as every member knows, do not buy and sell merchandise. All they've got to sell are the very assets he's going to tax.
The hotel industry in this province survived the last year in spite of very stiff competition from the United
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States, where an overbuilding of hotels has meant a massive reduction in prices. In spite of the rest of Canada experiencing a very difficult year, B.C. held on by the skin of its teeth. This minister has introduced more taxes on business and more fees for doing business, and now it's introducing another tax on standing assets; this is not profit. This is a very retrograde tax, and it's going to impinge on the very parts of the province that this minister and that side of the House supposedly represent: the smaller towns, villages and cities of the province.
Mr. Speaker, the hotel industry cannot stand any more tax. The fact that the minister has allowed a two-year moratorium on the assets of the hotels that are already in existence merely gives emphasis to the fact that he knows that what he's attempting here is incorrect.
On behalf of the tourism industry, the hotel industry and the food industry, I plead with the minister to at the very least give this bill a six-month hoist, so that he can sit down with a committee and thoroughly discuss with experts in his department and the members from this side the shortcomings of this bill, and so that he won't further jeopardize a vital industry that generates so much revenue for this province.
R. Chisholm: Bill 6, otherwise known as the corporate capital tax, is nothing more than a tax grab. Substantial numbers of farms are limited companies and are subject to this tax grab.
I wonder if this government realizes what it costs to buy the land, barns, equipment and quota. This tax is applied on every $1 million worth of investment. A million dollars does not go very far in the farming community. Farmers are operating very close to the margin, and this tax will cost every farmer $3,000 for every $1 million invested every year, at a time when they can ill afford it. This tax applies even if the farm is not profitable. This tax is very unfair, at a time when our farmers are barely surviving and are not sure of their survival because of GATT article 11 and free trade problems. Farmers in the Peace River area are in jeopardy. In the Saanich area they're going out of business. In Cloverdale they are not sure whether to plant a crop or not. And still they are subject to this tax of $3,000 on every $1 million invested.
Another area where this tax is unfair is that if a farmer bought a piece of property 25 years ago for $150,000, he would not pay the tax; if another farmer bought the same piece of property two years ago for $1 million, he would pay the tax. The first is not subject to it because of the price of the property. It's very discretionary and a very unfair practice.
The NDP promised a better way -- this was to tax profitable corporations -- in their election platform. When are the NDP going to keep their promise and show British Columbia farmers the better way? This is a punitive tax against assets, not on profit or on wealth. This plan of the government is only going to force farmers out of business and cost this province existing jobs and future jobs.
If we look at the fishing industry, it is in exactly the same position and has exactly the same problems with GATT, free trade and this tax. They are very marginal businesses. If we look at the small business areas in places like Chilliwack, they have the same problems.
This tax is a regressive tax. It will only do more harm in an economy which is already reeling in this recession. When is the government going to listen to its citizens and businesses and react to what they're trying to say to them, that we cannot take any more, and we want a comprehensive tax reform.
It is really too bad that there is no one across the floor in the cabinet seats here listening to this debate, especially the Agriculture minister, whose duty it is to speak for these people, the fishermen and the farmers, who cannot afford any more abuse from this government.
J. Dalton: Hon. Speaker, there are many things that other members have pointed out that are wrong with this bill, and we don't want to go over old ground. I'm going to make some particular references that the Minister of Finance commented on when he introduced this legislation -- this pending legislation. Hopefully it will never be legislation. We'll certainly do our best to ensure that that never comes to be.
The Minister of Finance, in his opening remarks of last week, made reference to the fact that even some large corporations will be adversely affected by this pending legislation -- even large corporations. He's obviously indicating by that comment that he doesn't care much about the small corporations, so perhaps we can pick on the large ones, who will be the ultimate taxpayers coming out of this Bill 6.
The particular comment that I want to read into the record from the minister's comments last week, particularly referring to large corporations, is: "...some of which are not doing well this year." So the minister has admitted that even some large corporations are not doing well financially, and yet he is obviously prepared to go ahead and tax those corporations. Well, it doesn't take a financial genius to figure out that he's going to adversely affect their competitive position, and in a moment I'm going to refer to one particular example of a large corporation that will, without question, be adversely affected.
One other comment or observation as well that the Minister of Finance continuously makes in this House is that the government has been forced to make choices when it introduces its proposed legislation. The question I might pose to the minister and to the government in general is: why is it that this government continually makes the wrong choices? Are they incapable of making right choices? I think it's very clear that Bill 6 is, without question, a wrong choice. It's a piece of legislation badly thought out. It has no real purpose behind it other than another tax grab, and B.C. business at this time does not need more tax grabs. It needs some incentive to establish itself and grow.
[3:45]
However, putting that aside, the particular example that I want to refer to today about a large corporation that will be adversely affected by Bill 6 is Vancouver Wharves, which is located on the north shore of greater Vancouver, east of the Lions Gate Bridge. Some of the
[ Page 1676 ]
members will know where Vancouver Wharves is located. It's the operation where all the sulphur is shipped to other destinations in the world.
We have been advised by the administrators of Vancouver Wharves that this proposed capital corporation tax will cost Vancouver Wharves at least $250,000 per year in taxes, and I can assure you that Vancouver Wharves -- even though I suppose the minister would say: "Well, it's just one of those large corporations that may be in difficulty, but so what, we're going to tax it anyway." -- is in a difficult competitive picture right now in the world situation. In particular, I would also point out, with regard to competing with other shipping companies and operations in the Vancouver port area, that many of these other operations are within the jurisdiction of the Vancouver Port Corporation, such as Vanterm and Lynnterm. Those corporations may not even be affected by this tax. It may be that because of jurisdiction those companies will not have this tax imposed upon them. We're not clear on that particular point, but the fact is that Vancouver Wharves certainly will be affected by this tax, and in comparison with the other local companies in similar operations, it will be quite likely adversely affected.
I would point out as well -- going outside of the Vancouver port area and jurisdiction -- that Vancouver Wharves also, of course, has to compete with U.S. port operations, and there's no question whatsoever that Vancouver Wharves will be adversely affected with regard to its position with the U.S. ports, in particular in the Seattle area.
If this government was in any way interested in allowing British Columbia companies to remain competitive, the last thing it would do is introduce such an insidious tax as this one contained in Bill 6. It is quite clear that many corporations, such as Vancouver Wharves, are in a difficult position with regard to both local and world economies, and the last thing these companies need is the imposition of an unfair and unwarranted tax.
I would point out that this tax does not reflect economic reality. It doesn't reflect the profit-making picture of these corporations. It simply says, as many other speakers have pointed out, that we are going to tax according to a certain paid-up capital base. That reflects nothing. You may have companies that on a year-to-year basis are losing money, yet they will still have to pay the capital tax according to this bill. It makes no sense to simply impose a tax on such a basis. If a tax cannot reflect some profit-making or income-earning picture, then there can be no justification whatsoever for its implementation. This tax has no correlation to reality. It has anything but a correlation to reality. We measure the paid-up capital of the corporation, send out the bill and the money has to be forthcoming whether that company is earning money and in a profit-making picture or not.
If this government's intention is to place corporations in an even more adverse economic situation -- and I would like to think not -- then this bill will certainly accomplish that. If that's the intention of the government, I would certainly encourage them to vote in favour of it. I don't think that any right-minded member, including members of the New Democratic Party, would be thinking along those lines.
I would invite this government to give serious consideration to the implications of Bill 6. As I said before, this bill makes no economic or taxing sense. It is a piece of legislation that is going to adversely affect our economy. It's going to pick on corporations, large or small, that are not necessarily in an economic picture to even afford the tax, let alone consider being able to pay it. It's going to affect our competitive picture vis-�-vis both local corporations and international corporations.
I would direct a question across the floor to the government side. Why are you imposing a tax of this nature when the government should be contemplating providing incentives to our economy? This tax is a disincentive, and it must be defeated.
K. Jones: I rise to speak to Bill 6 as the most unfortunate piece of legislation that's come before this House so far. I'm sure there may be a few others that will be even worse, but so far this has got to be the worst type of legislation we could possibly have. It's shifting a major portion of the tax base to capital-intensive companies. Those are the resource-based companies and the utilities of our province. These are the backbone of the province. These companies are the creators of permanent jobs in this province.
I'll give you an example of one that we've researched. When you exclude income tax, the impact of increasing provincial taxation will be an increase of 11 percent, which this company will have to pay. Now in one year that 11 percent represents $11 million that is coming out of that company. That company has some choices. This is a business expense; and therefore this is an expense that the company will have to pass on to the people that receive their services.
If they have certain restrictions on their ability to increase their prices, then they will have only one choice: they will have to turn to an internal cost-cutting process, which in many of these resource-based and utility companies is made primarily out of the major cost factor in their operations, and that is labour; that's the cost of their employees. In order to make those cost cuts, it now puts a threat upon those people who work in that company. In many of these companies it gives their employees a feeling of uncertainty about their future. This type of taxation has directly affected the union workers in these companies, because their jobs are now on the line. If the company is going to reduce the costs of operation, they're going to have to cut the employees and make their operation more efficient.
Is that the kind of approach this government wants to take? Do they realize the impact that they are making when they make such an attack on the capital of the major companies in this province? I think they have not thought this out very well. I think they need to take it back and reconsider it. They should take it back and scrap the whole bill, because it's of no value to the province. It only means that there will be more unemployed people, and there will be no revenue coming in as a result of that, because it'll cost more to pay for those people who have been laid off from their jobs.
[ Page 1677 ]
I understand that there's quite a concern in Ottawa with regard to the types of taxation that this province is doing. The Minister of Finance, Mazankowski, has expressed a great deal of concern about the fact that when they were trying to stimulate the economy of British Columbia and all of Canada, they gave a tax reduction, and now the provinces, like British Columbia, are increasing the taxation on our businesses, thereby making that attempt to stimulate the economy have no effect, because this government has taken away that stimulus to the industry to create new jobs.
I really ask the government to reconsider this. Withdraw this bill. Use your sense, and get rid of a bill that is absolutely unfair to the working people of British Columbia.
L. Stephens: It is my pleasure to rise today in the second reading debate of Bill 6, the Corporation Capital Tax Act.
First of all, let's be very clear on the fact that this is a regressive tax in the extreme. To tax profitable enterprises is one thing, but this capital tax has nothing to do with profits. This is a tax on assets and wealth. It reduces the incentive for economic development in this province.
There is no magic to business investment. Money will be invested where it can make more money. Whether this government likes it or not, that's what makes our world go round. In the current, very difficult recession, the retail industry, as one example, has been very hard hit. Cross-border shopping is a classic Canadian revolt against taxation, and cross-border shopping is having a direct impact on B.C. retailers. Consumers are travelling in record numbers to the U.S. and spending record amounts. It is estimated that cross-border shopping in Canada will continue to grow by as much as 10 percent per annum, potentially amounting to $7.7 billion in 1992. Since British Columbia represents 27.7 percent of all trips to the United States, cross-border shopping will continue to represent a major problem for retailers.
Hon. Speaker, I cannot stress too strongly my opposition to Bill 6. I encourage all members of this House to vote against this truly regressive tax.
L. Fox: I, too, as have the others who spoke before me, rise to oppose this bill and its intent. I find it totally regressive. It hits industry and the business sector at a time when the economy is in an extreme downturn and when we should be encouraging, not discouraging, development. I find it rather difficult to understand how we spend so many dollars to send the Premier around the world, saying that B.C. is open for business and that we want and encourage investment, and in the other vein we tax the corporations and the business community right out of business.
The previous speaker spoke briefly on the fact that this would add to the cross-border shopping problems we presently have along the 49th parallel. I concur that any fixed costs placed on the business sector will indeed lessen their opportunity to retain any kind of competitive edge with our friendly neighbours to the south.
[4:00]
In the last five years the business sector has generated most of the new jobs within this province. I think the fact that it has done that is that prior to this administration there was a positive climate for investment. There was known to be a consistent climate to do business in. What we've done with this budget, and particularly with this bill, is to say: "Look, businesses, you've made a little money; you've got the ability to pay; even though some of you may not have made a profit, you have huge capital assets, and we want a part of them." I'm extremely concerned that investors outside of as well as inside of this province really did not want to hear that message.
As I mentioned earlier, the Premier travelled over to Asia in order to sell B.C. as a positive investment, a positive future and a great opportunity. We find now that people come into this country looking to find out where those opportunities are. They find that the opportunities in British Columbia are really to put more dollars into the provincial government.
This government and this minister have consistently said that they have had no choice -- that in order to deal with the deficit, they must have these kinds of taxation measures. I submit to you that there were choices. As I said before, and as other members of my caucus have stated before, one clear choice has been the fair wage, or fixed-wage, policy, which will cost the taxpayers of this province in the vicinity of $200 million a year. I would suggest to you that that is one choice this government made. Another choice that this government made was to increase the size of government. I submit to you that while we're in the present pattern of economics in this province, it is not the time that we should be increasing government. We should, in fact, be decreasing government and providing less need for these tax dollars.
Let's talk a brief moment or two on the impact of this particular bill on the industrial sector. We've heard the Premier earlier today in question period. We've heard the Forests minister in the past suggest how seriously the forest sector is in trouble in this province. This particular bill will add $40 million worth of impact on that industry, which is already, in many sectors of this province, having an extremely difficult time to stay in business. In this Corporation Capital Tax Act we will be taxing road networks capitalized within the forest sector, logging camps and the fixed assets of the respective sawmills to the tune of $40 million. It's something this sector cannot afford at this time.
With respect to the mining industry, we have already passed on huge costs through other acts and through other actions of this budget. The mining industry is already feeling a 15 percent increase in water rates. It has been hit -- as has the sawmill sector -- with a 6 percent non-residential school tax increase. It's faced with as high as a 5 percent increase in some other rural areas. Now we add an additional cost to a mining sector that I know has told the government -- as it has told our caucus -- that if this continues and the climate does not change within this province, they will be out of business by the year 2000. I submit to you that this bill is trying to put them out of business before the year 2000. I'm really concerned that we are once again
[ Page 1678 ]
sending that industry to other parts of the world where they're wanted and encouraged -- and not discouraged, as this government has been doing.
The tourism industry is another one. Here we are marketing for tourists, going out into California and the western parts of the U.S. and selling B.C. as a place to come to. This particular tax will have the effect of increasing the gasoline prices, because the capital tax will affect directly the corporations that have those assets. It's going to increase the cost of hotel rooms and the services provided through B.C. Hydro, B.C. Tel and all those agencies connected with the tourism industry. Every one of them is going to increase. I submit that this surely combats a lot of the dollars that are spent by this province trying to promote it as a place to visit. They may come once, but they won't come back again.
With respect to how it affects the banking industry.... I heard the leader of the official opposition articulate very well the impact this will have on the credit union movement. I had the privilege of being president of a credit union for six years, and I understand that the earlier government encouraged these credit unions to increase their reserves with B.C. Central. As the leader of the official opposition pointed out, this particular act has an impact on both those reserves, because they show up on B.C. Central's balance sheet as well as on the respective credit union's balance sheet as a capital asset. There will be double taxation on the credit union movement, something that I'm sure was not understood by this minister. I really believe that this minister drafted this with closed eyes; he was not looking at the overall well-being of this province when he drafted this document.
As other speakers have suggested, this is probably the most regressive piece of legislation that we'll see come before this House. It bears no resemblance at all to the ability of the corporations or the business sector to pay. It does not understand that. It merely says: "Here's a chunk. Here's an asset. Let's grab some taxation dollars out of it; whether they can pay or not, we really don't care." I submit to you once again that that's not the message that we want to get out there. If we want to build confidence in the investment world, if we want to see more new jobs provided by the business sector and the industrial sector, this is the wrong kind of legislation to bring forward. I will be voting against it.
A. Cowie: I too will be speaking against the Corporation Capital Tax Act, which conflicts, oddly enough, with some other objectives that the government has. I'm going to speak very briefly on this and give just one example to prove my point. In Vancouver, for example, the Vancouver Land Corp. was set up to provide affordable housing. The builders' union contributes to that and is a shareholder in the corporation; the banks are shareholders; and so are some individuals. It is a profit-making corporation. What this modest tax will do is make it more difficult to provide housing. The Vancouver Land Corp. had to be very innovative in the first place looking at very long-term money in order to achieve their ability to put housing projects together. What this bill does is just add a tax on capital. In fact, what that means is that there will be a tax on buildings that they build and rent out. I assure you that the tax will simply be passed on to the renters. To that extent, this bill is regressive, just one further example of why it should be withdrawn. I encourage this government to do that.
R. Neufeld: I also rise to oppose the Corporation Capital Tax Act, Bill 6.
I am of the opinion that this is a negative tax to all of the corporations in British Columbia, in fact one of the more insidious ones that this government is bringing forward. It's regressive; it does not encourage any kind of growth in British Columbia at all. In fact, it continues along with the thoughts on the Mineral Land Tax Amendment Act, 1992, that we just spoke about recently to where mining corporations specifically are taxed on land held, not on profits. If we are to have a province that is going to be able to continue to provide the services to people that they have become accustomed to, the NDP government is at some point going to have to encourage corporations in some way to stay in British Columbia. We cannot continue to milk all of them as a cash cow.
The idea of having corporations and businesses in British Columbia is to have them grow, to make the economy grow, and that way you get more revenue for the government to provide those services that we sorely need and the ones that we've come to enjoy. By continuing to apply flat taxes that have nothing to do with profit -- they're not profit-generated in any way -- we are not going to encourage corporations, businesses, mining, petroleum or any type of economic development in this province.
It's interesting to note that this government states they are concerned about the average person working for these rich corporations that have all this money flowing around. It's obvious that this government feels that if you own your own home or have a corporation or a business, you're rich. That's just the simple philosophy over there. That is far from true.
We cannot continue down this road, or soon there is going to be no one to tax. Then it'll be interesting to see just where the revenue is going to come from to supply the schools, hospitals and the social services that we all enjoy. If corporations and business do not grow in British Columbia to a point where we receive more revenue, there will be a lot of people who do not have jobs. Those jobs will go by the wayside.
[4:15]
I can't quite understand how the NDP feel that they are looking after the ordinary worker. They are concerned about that person, yet they want to tax totally out of existence the corporations that provide those jobs for those people. How are we going to do it? Where is it going to come from? If we continue to tax, continue to drive the corporations out of the province of British Columbia.... In fact, it's called something like "room to move," and the corporations are getting more room to move out of British Columbia. I think the Minister of Finance stated, when the Peat Marwick report was done, that there was room to move for taxation. I can assure the Minister of Finance that there is room to move for corporations, and the room to move is out of
[ Page 1679 ]
British Columbia into a more hospitable environment. Those environments, I might add, are very close to our borders -- in Alberta and just south of the border -- and we see it happening all the time.
[E. Barnes in the chair.]
Jobs are very important to all of us; it doesn't matter on which side of the House you sit. In the community of Fort St. John, where I live, and in the communities I represent -- Hudson Hope, Fort Nelson and Taylor -- all the jobs that those people who work for corporations have are important jobs. They are jobs that are needed, and they bring revenue to the province through taxation. Those people spend their money within the province and it comes back to the government in some form or another.
If we continue to tax those corporations so that they want to move, we will not have that, and I am afraid that at some point in time we won't have anybody left to tax. I can understand that there are demands on government. There are always demands on government for more; it continues all the time. Everybody wants more, and when we go through estimates, everyone stands here and questions every minister as to why they didn't do this or that in their areas. I understand that.
There are only so many dollars, but there is a way of distributing those dollars, and it comes with priorities. But the priorities of this government are not to try and stretch the dollar as far as they can or to make wise use of that dollar, which they campaigned on but has not been evident since then. It is a government that is determined to employ more people within the government -- 1,500 FTEs, I believe, in this next year. We cannot continue to support that type of growth as an economy. It will just not happen.
The taxing of Crown corporations with this corporation capital tax will have a negative effect also. B.C. Hydro will not be taxed, as I understand, but other corporations will be taxed. BCDC -- massive holdings. It will apply to them. B.C. Rail -- massive holdings, and it will apply to them. Where do you think B.C. Rail is going to get its share of money to pay the government? It's going to get it by increasing freight rates. That's the only way it can. Or else it's going to cut jobs -- one or the other. I doubt whether it will cut jobs, but it will probably try to increase its freight rates so that it can afford to pay the government what the government requires.
This is not all that this government is asking B.C. Rail to contribute to. They want a fairly healthy dividend at the end of the year, too. That's to help pay for some of the programs they're instituting. It all comes back to passing this on, to trickling down through the economy, and it all impacts very heavily on the average person in British Columbia.
ICBC is another one. We recently witnessed an increase in ICBC rates of some 19 percent. We witnessed the government firing everyone on the ICBC board and telling us that they're going to increase ICBC rates by another 15 percent. I tell you, this is just absolutely amazing: a corporation that made money the year before is now imposing increases on ordinary British Columbians. When ICBC is required to pay the corporation capital tax on its assets, which is in the bill before us, they are just going to increase what they're going to charge each person. That person who drives from his house to work every day is slowly going to have to quit driving to work. Either that or he's going to have to get a bicycle, because as we continue to see the income tax rates increase, and corporation capital taxes increase, which increases the cost of these corporations.... There's only one way that these corporations pass on those costs, and that's to every British Columbian.
It's the same for any corporation that's going to have to pay this tax. Where do you think the mining industry and forest industry, both facing some massive problems -- not all of their own making, but the making of some governments, of foreign investment, of mineral prices around the world.... Here they're faced with another tax. We just lay on a little more tax, and soon we won't have any mining corporations left in British Columbia. They will be gone. They tell us that if we do not change how government handles mining and the corporation capital tax, by the year 2000 we are not going to have any mining companies. Then what are we going to do? All those jobs will be gone, and there we'll be. Then we'll be going to the Minister of Finance -- by that time he'll be back on this side of the House, if he's still around -- asking him: "What do you expect to do now? How are you going to look after the people of British Columbia?"
Our leader, the member for Peace River South, spoke at length about the impact this double taxation will have on credit unions. I see that most members on the other side of the House just smile when they say: "Tax the corporations more. Double-tax the corporations. Tax that rich person. Take a little bit out of that person because he's got a job. My goodness, he owns a car, so let's increase it a bit more." That seems to be the attitude on that side of the House.
I can tell you, hon. Speaker, that at some point the people of British Columbia are going to say enough is enough. They have almost come to that point already. This government has only been in and had to perform for five and a half or six months, and they have already angered almost every section of British Columbia, right down to their own supporters, through increases in taxation on all their own corporations, which pass it on and trickle it on down to the ordinary person. Hon. Speaker, for those reasons I cannot support the corporation capital tax, and I will be voting against it.
D. Schreck: I find it interesting to listen to some of the misuse of economic language on the opposite side of the House. While it is extremely important that we have informed debate on public taxation policy, it does a disservice to understanding that debate when the parties misuse the language. I heard repeatedly from the members opposite the use of the term "regressive taxation" to discuss the concept of the capital tax. I've always understood -- and I think most economists in this world have always understood -- the concept of regressive taxation to be one that applies to individuals. If an individual pays a proportionately higher share of his or her income as income decreases, then we call that
[ Page 1680 ]
tax regressive, as opposed to a tax which is proportionate if we all pay the same percentage or progressive if the percentage goes down as income goes down.
We have the members opposite taking a tax on capital and saying by implication that it somehow has a disproportionate impact on lower-income people, for which there is no evidence; it's not true. What we have the members opposite doing is protecting those who will be paying taxes as a result of this but who are not the lowest income tax payers, on the backs of the lowest income tax payers. That invites a challenge. No politician on any side of this House favours any tax. By definition, it would be nice if everything were free and no one had to pay the bill. Unfortunately, it's necessary to have a few taxes if we are going to have things like medicare, education and social services. So at some point, if we are to be honest, all of us have to say where that money is going to come from, and in what form of taxation. My government has had to make some very difficult choices. My government has had the problem of inheriting a financial mess and the biggest deficit that this province has ever faced.
Interjections.
D. Schreck: If we were to follow the advice of the members opposite, hon. Speaker....
Interjections.
Deputy Speaker: Order, hon. members.
D. Schreck: If we were to follow the advice of the members opposite and not have this tax, it would push the deficit of this province this year alone over the $2 billion point. Are these members saying that they would like to increase the deficit of this province and get us into the financial problems that Alberta has? Are these members saying that instead they would do as their predecessors did and systematically change the tax burden to a truly regressive form? What the governments prior to my government have done is to systematically shift the tax burden down the ladder to those least able to pay.
We had the choice, hon. Speaker. We could have increased the sales tax. If we had increased the sales tax, it could be truly described as proportionate at best and, in all likelihood, truly regressive. But we have these members opposite essentially advocating by implication that we should increase tax on consumption and on lower-income people and continue the pattern of the past governments by shifting the burden in order to avoid the painful decision of tax reform and implementing the corporation capital tax.
Hon. Speaker, it is not with great joy that any of us implement a tax measure, but it's with considerable responsibility that we bite the bullet, make the painful decisions and say where we are going to get the money. We don't want to see any of those corporations that my friend from West Vancouver-Capilano described in my riding -- that's North Vancouver-Lonsdale, the industrial heart of the North Shore -- having to bear those increased taxes. But my constituents want to have access to the health, education and social services that those tax revenues are needed for. My constituents want to see the fiscal responsibility of bringing this budget deficit under control. My constituents want to see an end to the pattern of the previous governments of continually shifting the tax burden, through increased consumption taxes or through what is basically a head tax in the form of the medicare premium, onto those least able to pay.
What really is the difference between a medicare premium and a capital tax? Well, I'll tell you. A medicare premium is a flat tax that virtually everyone must pay as an individual....
An Hon. Member: Depending on your income.
D. Schreck: Irrespective of level of income.
Interjection.
D. Schreck: When those at the lowest level begged for temporary premium assistance, what they were more likely to do was not to pay the premium at all and have some difficulty getting coverage backdated. By contrast, what we're talking about here is the best the province can do within its tax jurisdiction to bring about a little more corporate tax fairness -- not that any of us would like to tax any corporation, but at some point we have to make a choice. Hon. Speaker, my choice is clear. Given a choice between an increase in the sales tax or the medicare premium, and an unfortunate capital tax, I will take the responsible road and choose the capital tax. That is why I support Bill 6. I support my constituents.
[4:30]
F. Randall: I have some concerns that I'd like addressed by the minister. First of all, I don't like this bill, and I don't think anybody in this House does. Unfortunately, all we hear is "scrap the bill." It's important to offer some alternatives. If there is some revenue needed, you have to, in effect.... The opposition should put forward some suggestions and say: "This is where we think we should get the money." The bill is necessary because the money is needed. I don't have to repeat the mess that was inherited, because that has been mentioned numerous times.
A member of the official opposition raised the matter of a tax on the Vancouver Land Corp. and on pension plans. I've got a concern about that myself. I would like to get clarification from the Minister of Finance with regard to pension investments. As you're aware, all pension plans are exempt; they're a non-taxable entity in Canada. You pay tax when the money comes out. A lot of pension plans are investing in real estate. They maybe own a hotel or a shopping mall, or do development, as was mentioned with regard to the Vancouver Land Corp. I would certainly be concerned if this capital tax actually applied to investments by pension plans. I would appreciate a comment from the minister regarding that.
[ Page 1681 ]
G. Farrell-Collins: We'll hopefully get those answers from the minister sometime in the future -- I assume in committee stage. It's nice of you to give him advance notice so he can go back and do a bit of work on this and see if he can find somebody with some of those answers.
It's always intriguing and entertaining when the member for North Vancouver-Lonsdale blesses us with his intelligence and gives us a little lecture on words and definitions, pulls out the books and falls into his professorial mode and tries to educate the members of this House. I wish he would spend an equal amount of time educating his own Finance minister about the implications of this tax and what it's going to do to the businesses and eventually to the consumers and taxpayers of this province.
This government doesn't seem to understand what a capital tax does. Our economy in British Columbia has built up a base of working capital over the years that's there to invest, to act as seed money, to further build our economy, to broaden the tax base and to make our economy strong, so that we can then implement a fair tax system to raise revenues to ensure that we have funds for education, health care and social services -- three of the priorities we're always hearing about from government members.
With a corporate capital tax, the government is dipping into the collected wealth and spending it. That money has been built up by the hard-working people of this province, by the corporations and workers. It's capital wealth that benefits this province.
The member from whatever -- Trail, I think -- is snickering. I noticed him snicker once before in the debate when we talked the wealth in B.C. Hydro that is going to be taxed.
Interjection.
G. Farrell-Collins: I'm sure you do, in your caucus.
The member laughed when he talked about B.C. Hydro. What does he think is going to happen when B.C. Hydro is taxed? Who is going to pay for that tax? Who is going to pay for the tax on the infrastructure that the ratepayers of this province have paid into to build up? It won't be B.C. Hydro. They're going to pass that tax on to the consumers, the businesses and, yes, the people who scrape every month to pay their hydro bills. Those are the people who are going to be paying for this capital tax.
The government is dipping into the heritage of the people of this province and using that money to spend on their pet programs. The fair wage policy is a great example. Education, health and social services are wonderful things. They all need to be done, and we do have to have the money to invest in those programs. What this government fails to understand is that you cannot steal from the heritage of this province, from our capital infrastructure, and use that to pay this off. Eventually you're going to run out. You're going to put these corporations out of business. The capital is going to leave this province, period. There won't be anything left to tax. That's exactly the direction that we're headed in with this government.
It's almost like having a house on a piece of land. You've got a fireplace. Instead of going out, chopping down a tree, spending the time to build a woodshed and then going out in the winter to bring that wood in and put it in the fireplace, it's like walking over to the door, ripping it off its hinges, shoving it in the fireplace, pulling the wall panelling off and putting it in the fireplace. It's going to the foundations of the very building that you're living in, and starting to burn it in order to get heat. This government is using the capital wealth, the investments that hard-working people have built into this province, on an ongoing, ad hoc basis to pay for programs.
The Leader of the Opposition talked at some length today about the fact that people in this province don't mind paying taxes. People do not mind paying taxes if they think the money is being gathered fairly and is being spent in an efficient and cost-effective way.
We've seen this government deal with health care. Instead of trying to find a better way to deliver health care, they go in and put an across-the-board cap on doctors' salaries. That doesn't do anything to the structure of health care. It doesn't improve the way we deliver health care; it doesn't find new and creative and inventive ways to deliver health care. All it does is put an artificial cap -- and not a very creative cap, I might add -- on a cost and hope that that's going to solve the problem. That's not what we need to be doing in this province.
This corporation capital tax is going to be handed down to the people of the province. When they're asked to pay taxes again in increased hydro rates, they're going to wonder what the government is doing with that money. Are they spending it fairly? Are they spending it wisely? They look at the government and at the budget that this government tabled and the throne speech we had, and they see that the government has no new plans or ways of spending this money in more efficient ways. How can you not expect the people of this province to be upset when they get this type of tax imposed on them? The NDP has a hard time grasping the concept that when you tax a corporation, you're not just taxing the corporation. The corporation is not going to just suddenly create money and fork it over to pay the taxes. They're going to turn around and pass it down to the people who pay for the services that that corporation provides. Eventually it's the people in this province who pay the taxes; it's not the corporations. You're taxing the people. You're constantly doing this, time and time again.
All you're doing by bringing in taxes like this corporation capital tax is causing the corporations of this province to go elsewhere. It's dipping into the resources and infrastructure of this province and spending it now. What's going to be left for my children? What's going to be left for your children and their children if we tax the heck out of B.C. Hydro and use that money to pay for programs today? If we want this economy to become more vibrant, and if we want this economy to be built, and if we want people to come to this country and to this province and build up British
[ Page 1682 ]
Columbia, we have to ensure that the investments we put into infrastructure and capital remain there for the next generation to use, to invest and to build, so we have a better economy and a broader tax base for the things that this government speaks so strongly about, like education, health care and social services.
We heard the Premier. I love to refer to this commercial. It sticks in my mind every time this government comes in with another tax. During the campaign we had this Premier sit there with a little piggy bank. We all saw this nice, little, pink, round, robust piggy bank and a penny in his hand as he talked about how frugal he is and how frugal he was as the mayor of Vancouver. If people remember, when he was the mayor of Vancouver, he raised commercial taxes 52 percent. Now that he is the mayor of British Columbia, is he going to do exactly the same thing? Is he going to increase the taxes on corporations and the commercial sector in this province by 52 percent? That's not a very good record to run on. I always find it interesting when the Premier stands up in this House and talks about being the mayor of Vancouver and all the wonderful things he did for Vancouver.
An Hon. Member: He says he balanced the budget.
G. Farrell-Collins: Yes, he balanced the budget as the mayor of Vancouver, but how did he do it? He did it by raising taxes. He didn't do it by becoming more efficient. He didn't do it by finding creative ways to deliver programs to the people of Vancouver. He did it by raising taxes. We have another instance of this government doing exactly the same thing; it's the same thing all over again. The Premier stood there on that nice television commercial that they spent millions of dollars blasting around this province on television, and he looked straight into the eyes of the people of B.C. and said: "If we don't have it, we won't spend it." What he didn't tell us was that if they didn't have it, they were going to tax you more so that they would have it to spend. He said absolutely nothing in any of those commercials about an economic plan or an industrial strategy for this province. He said nothing about a plan. In this budget tabled by his Finance minister, he doesn't even tell us how he intends to reduce the deficit to zero.
The press quoted him saying last week that in five years B.C. will be debt-free. How the heck is he going to do that? There won't be anything left to pay taxes in five years. How can he possibly do that? The Premier and the Finance minister talk a mean streak, but there is absolutely no substance behind the things that they say.
This corporate capital tax bill that we have in front of us today is probably the worst piece of legislation this government has brought in -- so far; we still have a month or two left, and we'll see what happens yet. This legislation does nothing to create an industrial strategy or to build the economy in this province. It does everything to destroy the economy. In fact, it's spending the money that the past generations, your parents and my parents, have built up as a reserve and which is held in infrastructure and capital in this province. It's the money that's going to be invested in the future to build this economy even further. This government is dipping into it to spend it. What's going to be left for the people to work with ten years and 50 years down the road? Everything that we've built up is going to be spent.
Numerous flaws in this bill have been brought up by various members. New Democratic members in this House must have accounts and loans at credit unions and must do their banking with credit unions, as I have at times. Some of them may even have sat on boards of credit unions. Members of credit unions seem to be prominent in the list of patronage appointments that this government is dealing out. How is it that we have a fundamental flaw in this piece of legislation that not only taxes the capital of the individual credit unions but also turns around and taxes the capital of the Central Credit Union a second time? There are fundamental flaws in this bill, and that's one of them.
The member for Burnaby-Edmonds stood up a few moments ago and said to the minister: "Gee, now that I look at this bill...." It's interesting that some NDP backbenchers actually read the bills in front of them, because normally they don't. He actually read this bill, and I commend him for doing that. He has a background in the administration of pension funds in this province, and he told the minister that he had a concern about this bill and that he had some questions he'd like answers to. I commend him for doing that. It's a brave thing to do in this House. The minister got up and walked out. We haven't heard an answer, and I don't know if we will ever hear an answer when he sums up second reading on this bill. I don't think the minister understands this bill or the implications of this bill.
I think what this minister did -- and it is becoming plainly evident as in bill after bill, tax after tax is levied on the people of this province -- when he put together his budget is he got a big spreadsheet and laid it out on a big, long table in the Ministry of Finance. He asked his staff to go out and find all the different taxes that are levied at the federal and provincial levels across this province and list them for him by province and category and tell him how much they were. Then he took three or four steps back -- maybe he pinned it on the wall late at night -- and he looked at it and said: "Let me see, there's a corporate capital tax in some of these provinces. Well gee, that's something we don't have; we could do that." Then if it was brought up and people started to complain about it, he could say: "Gee, you know in Ontario they have a corporate capital tax. In Alberta they have a corporate capital tax, and therefore in B.C., if we do it, we're just being like everybody else, and it's not a problem."
[4:45]
We've seen him do that time and time again; in fact, that was the whole foundation of his Peat-Marwick review that was done on taxes. All it talked about, essentially, was this tax room that there was in British Columbia -- this room for the government to move in and impose new taxes. That must have been music to the ears of the Minister of Finance, because that was exactly what he wanted to do. That was exactly what his Premier had a record of doing in the city of Vancouver. He sat there, and he looked across at this board and said: "Gee, a corporate capital tax is one we can do. Gee,
[ Page 1683 ]
here's another tax we can do; here's another tax we can impose. Gee, we haven't hit the lawyers lately, but there's a tax on legal services in Quebec; let's do that here in British Columbia. Here's another type of tax that's in New Brunswick; let's try and bring that in here." He has raised all the taxes in British Columbia that he possibly can to the seventy-fifth or the eighty-fifth percentile of the average across this country. That's the whole strategy behind this government; that's the whole strategy that's evident in the bill that we're looking at now. It was evident in the budget that this government tabled in this house.
There is no industrial strategy. This corporate capital tax is not an integral part of some grand scheme to increase the wealth in British Columbia and to build British Columbia; it's merely a cynical way for this government to justify dipping into the welfare, the past equity in this province that the people have built up, and use that money to pay for their priorities.
It's interesting to look at the priorities of this government. For the last month or so, we've just been through probably one of the worst sessions of patronage that this province has ever seen. Here we have the government dipping into the wealth of this province that was created by our parents and using that money to pay untendered contracts to the friends of the NDP. Are those priorities? Is that the industrial strategy of this province? Is it to have the Minister of Tourism take the money that is going to be generated by this capital corporate tax, pass it off to her deputy minister, and then he can grant a contract to a company in Manitoba? That does an awful lot to build up the economy in British Columbia, doesn't it? Where is the economic strategy in that? The worst part of it is that it's an untendered contract. If it was a $40,000 contract.... That is what we were told was paid -- or is it $50,000? I can't remember. If that contract had been tendered, perhaps instead of the $50,000, it would have gone for $47,000, $42,000, $40,000 or $45,000, and she would have saved the taxpayers of B.C. anywhere from $7,000 to $5,000 or $2,000. What does it matter? It's $1,000 that she would have saved in a ministry that's under severe budget restrictions. Where is the plan for that? How can the government go in and dip into the capital reserves of this province and use that money to give untendered contracts to its friends? Are those priorities? Is that an industrial strategy? I don't think so.
In closing, I would like to just say that we've listed a huge litany of errors with this bill of the wrong direction that this government is headed in, if it's headed in any direction at all. Given that the hour is late, I will finish my comments, and the opposition will resume it at a later date.
F. Garden: I rise in support of this bill. I'm a little bit surprised at the pious platitudes I'm hearing from the opposition benches. They're going to have to get their story straight. Only within the last couple of weeks their leader was saying that we should cut spending and not raise taxes; the same day, members of the opposition were on the steps of this Legislature telling students that we should spend more money so they could have summer employment, and we were telling the teachers they should have $85 million now. They're going to have to get their stories straight if they want anybody to listen to what they have to say on this bill.
[D. Schreck in the chair.]
The New Democratic Party went across this province prior to the election telling the people that we were going to bring in a corporate tax. We put before the people that we were going to bring in a corporate tax. All this tax is doing is bringing a shift back to the levels where they were in 1987, when it was shifted from the corporations to the individuals. That's all this tax is doing. With that move, strangely enough, the sky is not falling. The financiers in New York looked at our budget and said that it's all right, so now we have the best credit rating because of our budget, and because of the use of this kind of taxation, they're saying: "That's okay, we'll give you the rating," and we're leading the country in that respect.
I would suggest, as one of the previous speakers had mentioned, that this opposition party stand up and tell us which of these important services we're continuing to fund and increase funding on -- health, education and the social services -- they want us to cut.
Interjection.
F. Garden: No, but they'll stand up before the public and say cut spending and in the same breath increase it somewhere else. They're being kind of Houdini with this thing. You don't know what they're going to do next; just wait and see. But I would suggest to the member who just said that we picked a cap on doctors' salaries out of the air: that is just not something that was plucked out of midair.
The previous government -- and with all due credit to the previous government -- set up the Seaton commission in this province to look at health care costs. In November that commission came in with their report to this government. We've looked at it, and we've already followed some of the recommendations. One of the main recommendations to be implemented immediately was to put a cap on doctors' salaries. That commission visited 51 communities, listened to submissions from the whole spectrum....
Interjections.
The Chair: Order!
F. Garden: They listened to....
J. Tyabji: A point of order. I don't think we're here to debate the merits or flaws -- I would say flaws emphatically -- of either the capping of doctors' salaries or the process that was used to determine that.
The Chair: I believe the member has gotten at the importance of staying to the topic of Bill 6 on second reading.
[ Page 1684 ]
F. Garden: The point is well taken. I know that the previous speaker takes quite a bit of largesse in his comments, and we appreciate that on this side of the House. But I'll be guided by you, hon. Speaker, on that. I was responding to a statement that he made.
Again I will say that based on consultation started by the previous administration, a recommendation came forth on capping these salaries; we implemented that. It wasn't taken out of midair; it was done responsibly, based on that commission's report.
Interjections.
F. Garden: I hear a bunch of chickens clucking in the background here, and I'm having difficulty getting on with....
I just want to say that they keep saying that the sky is falling; we're going to ruin the economy. I don't think that's going to happen. Because of this budget and the responsible way we've brought in the taxation, this country is going to start to grow. We're going to see the basis of these fine qualities, and four years from now they're going to be standing up and saying: "Gee, did we criticize that government? We should have been supporting them and voting for this bill."
G. Farrell-Collins: Hon. Speaker, I beg leave of the House for an introduction.
Leave granted.
G. Farrell-Collins: We have with us today Valorie Lakusta, a teacher at Fraser Valley Adventist Academy school in the Langley-Aldergrove area, with approximately 13 grade 4 students and several chaperons. I'd ask the House to make them welcome.
L. Hanson: It's my pleasure to rise and speak in opposition to Bill 6, which I'm sure comes as not much of a surprise to most members of the House. British Columbia over the last number of years has really been the outstanding province in Canada, as to its economy, its creation of jobs and through that the creation of the wealth that has allowed the social programs we have all come to enjoy and feel our right to have.
The biggest opposition I have to this bill is the principle behind it. The principle says to people who might be considering investment in British Columbia and to people who already have an investment in British Columbia and may be considering expansion of that investment: don't come here, because this jurisdiction taxes not on the basis of the profitability of the operation but simply on the basis that you exist.
I know that the economist from North Vancouver-Lonsdale who spoke earlier seemed to have some misunderstanding about where corporations faced with this tax are going to acquire the money to pay for it. It seems to me that it's pretty simple that B.C. Gas, as an example under this umbrella, will look to the people who purchase the gas from them. To suggest that the people who purchase gas from them are all high-income-earners and profitable corporations is a little bit misleading. Almost everyone in British Columbia, particularly those who enjoy natural gas for their homes and residences, will pay a premium for that.
I note in the bill that B.C. Hydro is exempted. But ICBC is a corporation that we've heard an awful lot about in the last six months or so. Someone mentioned earlier that there was a 19 percent increase in fees for automobile insurance. I'd like to point out to the House that this 19 percent increase was before this capital tax we're talking about. I see a member telling me that they are exempt. Maybe I haven't read the act correctly, but I didn't see that they were exempt. I suspect that ICBC rates, which will increase.... Here we are. The following corporations are exempt. My apologies.
[The Speaker in the chair.]
What I'm trying to point out to this House is the principle behind the bill. The principle is that it is a hidden tax that is going to be passed on to the consumer. It is a tax on corporations. While it has just been pointed out to me that it does not apply to ICBC, I'd like to point out to the House -- and I know somebody will correct me in a moment -- that the 6 percent tax on legal fees does apply to ICBC, which is another tax that will also be passed on to the consumer. Anyone who would suggest that it is not going to end up coming out of the pocket of the consumer is maybe not a consumer. In any case, the government, without any question, is continually looking for revenue sources. It was asked several times: where do you suggest that you might get the money that we need? I have a pretty simple suggestion: if they cancelled the fixed-wage policy, they wouldn't need this corporate capital tax, because the two balance.
F. Garden: Tell us where the money is.
L. Hanson: Someone asked me to tell them where the money is. I think it's been fairly well documented that the fixed-wage program is going to cost the taxpayer in excess of $200 million. This is providing $200 million worth of revenue to the government. The two cancel each other, in simple terms -- although I'm not an economist or an accountant.
Again I go back to the issue of the atmosphere that we are creating when we try to attract new investment to British Columbia. We are trying to attract businesses or encourage businesses to put more investment into British Columbia so that there is the creation of jobs and wealth, and so that we can then, on the basis of wealth, provide taxation or at least have taxation that gives us the ability to support the social programs that we all know we need and have come to expect. I think that in this sense it will have a very detrimental effect. People who have already invested in British Columbia may be stuck because they already have that investment here. I suggest to this House that for those who are considering further investment or who have an option of where they might invest, this tax will have a negative effect, and therein decrease the anticipated wealth that this province needs to be able to provide the social programs that we all expect.
[5:00]
[ Page 1685 ]
I am thoroughly and very adamantly opposed to the bill, not because of the bill itself, but because of the principle behind it. It is in fact a regressive tax. It is a negative tax that will discourage our province from growing the way it could and should.
J. Tyabji: I rise to speak to this bill with regard to the impact on the environment. I know we've already covered many things with regard to why this bill should not be passed and why we should not vote on it. I'd like us to look at the potential impact on the environment and the corporation's commitment to the environment from a financial perspective.
In the last few years, since the rise of the environmental movement and a resurgence in the 1990s, we've seen a lot of corporations move in the direction of becoming more environmentally responsible. A lot of those corporations have started to make capital investment to bring about the necessary changes to become more environmentally responsible. What this tax does is provide a great disincentive to further investment in any kind of capital to further upgrade environmental standards, because any investment then becomes an asset that can be taxed by this.
We keep talking about the rate of tax. Granted it's 0.3 percent, but 0.3 percent is still something that will appear to a corporation as an added cost of doing business in an environmentally responsible way. I will give you an idea of the way that the current accounting system is set up, the deductions and the form in which they are put together. Obviously no corporation can afford to put all its capital investment for environmental upgrading into one year, so let's take it over a five-year period where there are good years and bad years. The corporation is going to organize its capital investment based on whether it's having a good year or a poor year financially. Let's say for argument's sake that you had a fiscal year-end of June 30 in 1992-93, and during that fiscal year you'd put $1 million into capital investment for environmental upgrading. Let's say that the following year you had put in half a million dollars, because it hadn't been a good year. So under this act you've got two years where you can have $1.5 million in deductions that you don't have to pay taxes on. Let's say you had a good year in the third year and could afford a higher capital investment, and you put in $10 million of capital investment. Well, you could deduct that $10 million that year. Two years down the road that deduction is gone.
So let's say in the following two years you start off with $2 million, and then in the last year, '96-97, you do $1 million. Well, in that last year, because the previous year you put in $1 million of capital investment and the next year you put in $2 million, you can only deduct $3 million from what you have to pay your corporation capital tax on, which means that you are now paying the corporation capital tax on the $10 million you put in. So the previous three years of environmental investment, which would amount to $11.5 million, are now subject to the corporation capital tax.
That's a great disincentive for business. If anything, this bill should be amended so that there's a 50 percent depreciation of any capital investment that's put in for environmental standards, so that by the time the corporation capital cost comes onto the books for paying the corporation capital tax, it's in effect been depreciated off the books. You've made the investment, but you're not paying taxes on it.
You know, I think it's very interesting that with regard to the impact of the corporation capital tax, we haven't heard any members from the other side of the House standing up to defend the bill. They've been criticizing the opposition for not laying out a whole different strategy with regard to the budget. Well, hon. Speaker, it's not the purpose of the opposition to write the budget. I can assure you that we would have done it if that had been our responsibility. What we feel we are responsible for is being caretakers. We're caretakers of the government; we're the landlords, if you will, of the House. With regard to being caretakers, it's our responsibility to point out the flaws.
This corporation capital tax is regressive. It's particularly regressive in these years of environmental responsibility. We should be looking at incentives for investing in environmental regulations and upgrading, to go beyond the standards necessitated by legislation -- for example, incentives that would allow a 150 percent write-off, so that if you put in a $1 million investment you can write off more than that. In that way a corporation will say: well, this is a very positive thing.
As legislators we should recognize the need for moving toward a more environmentally responsible corporate responsibility. As a group we should be in partnership with the corporations. We should be recognizing that most corporations want to become more environmentally responsible, but the reality is that the economy is tough. When the economy is tough, you have to provide incentives for corporations. This is not an incentive; this is a deterrent.
The corporation capital tax will, if anything, force.... Any corporation that's looking at investing in B.C., for example, is going to look elsewhere. They're going to look at the environmental regulations, which are absolutely essential, and the corporation capital tax. And they'll say: "Based on the two of those, we can't go there." If we at least had a signal to industry that if they abided by our very necessary environmental regulations we would give them some kind of break on this corporation capital tax, we would see a lot more businesses wanting to locate in B.C.
There have been a lot of claims by the opposite side of the House that we can be competitive with the U.S. northwest in terms of our taxation, our land values and our environmental regulations. The bottom line is that we can't; we know we can't. The thing that we have to keep is the environmental regulations. Where we do have some ability to manoeuvre is on things like the corporation capital tax, yet we don't see that.
This bill should definitely be amended, at the very least. I would urge the other side of the House to reconsider it altogether, just to look at it and say: well, we made a mistake; we obviously want corporations to invest in B.C.; we want to increase their assets; we want them to be healthy, and we don't want them to pay regressive taxes on their investment in environmental
[ Page 1686 ]
cleanup. I think it's very unfair that at a time when we're bringing in more and more legislation to become environmentally responsible, we're also hitting corporations with an increased tax on investments. Bill 29 is going to result in a great investment by corporations to upgrade their facilities so that they can meet the regulations brought in with the bill. Those new investments are now going to be taxed.
Hon. G. Clark: There's a two-year tax holiday.
J. Tyabji: It's unfortunate that the Minister of Finance wasn't here when I was addressing the two-year tax holiday. I recommended to him in very strong terms that the bill be amended to allow a 50 percent depreciation for environmental investment if a corporation is investing with regard to upgrading for environmental standards. Then when it finally gets off the tax holiday, it doesn't appear on the books. That's specifically with regard to environmental regulations.
Interjection.
J. Tyabji: No, but I might buy you a coffee. As the Environment critic, I'd almost be tempted if he would depreciate them 50 percent. I'll have to get back to him on that.
It's very important for us to recognize that this economy is very difficult for a lot of corporations. We do have Bill 29 on the books. Bill 29 is commendable in that the objective is to close the loop with regard to waste production. But that's a very expensive and an enormous undertaking, and there's no way we can do it with one bill in one session. In that respect it is too ambitious; however, I commend it in terms of the good things, because we want to close the loop.
If we go to corporations and say, "From now on, you are 100 percent responsible for any waste that you produce," it's going to cost them a lot of money. It's going to cost them money to provide the kind of environmental life-cycle profiles that the bill calls for. That's going to be taxed. It's going to cost them money to change the content and the size of packaging, which the bill calls for. That's a capital investment that will be taxed within two years. The corporate capital tax will impact on all kinds of things that haven't been considered by the bill. I think the Finance minister was in such a hurry to get the budget together that he put the bill together without having addressed all the necessary features of it. I think we have to.
A two-year tax holiday is commendable. Perhaps there should be an indefinite tax holiday on any kind of new investment that has to do with the environment. That's why I recommend 50 percent depreciation per year. If we amended it to send out a signal like that, showing corporations that we recognize they have a commitment to the environment and should be encouraged to invest in their company in an environmentally sensitive way, they would then be able to swallow the bitter pill of Bill 6 much more easily, because we're at least recognizing that it costs money to do business in an environmentally sensitive way. We're changing the rules of the game with Bill 29, with the corporate capital tax, with many of the budget initiatives and the legislative initiatives before the House.
With a lot of those rules changing, we should be recognizing that it's not only going to cost business. As the member for Fort Langley-Aldergrove pointed out, it's going to cost consumers a lot. The bottom line is that businesses aren't in business for their own purposes; they're here to meet the demands of the free enterprise system. That includes market demands. When it's market demands, the consumers are on the receiving end. Eventually we're going to end up consuming this corporate capital tax, which will be passed down to us in many other forms, in addition to the other taxes that have been brought in and the 1 percent increases brought in with the budget.
To close my remarks with regard to the corporate capital tax, I would encourage the members on the other side of the House, when they stand in defence of this bill.... I believe it is an indefensible bill. However, if they want to stand up in defence of regressive taxation, then they should stop criticizing the opposition for doing its job. We are the caretakers of the people, and we are here to look at the bill and say what's wrong with it.
Interjection.
J. Tyabji: That's right. We're on a crusade to save the people from the measures this government has brought forward.
They should stop criticizing the opposition and start defending their own positions and stand up and actually say why they feel this corporate capital tax is not regressive. If it actually makes B.C. a more favourable place to do business, they can make the argument as to why they think it will bring investment to the province. Why do they think it will encourage environmental investment? I say it won't. Hon. Speaker, I say that this bill is not defensible. They could perhaps stand up and say that they want to bring this in so that the deficit doesn't get any bigger. That's about the only argument they can make. It's an old argument that doesn't hold up, because they could have cut expenditures instead.
For my last remarks I would like to put the challenge out to the members opposite that they stand up and actually say something about the contents of the bill, that they actually refute what we've been trying to say in terms of the cost of doing business in B.C. I would encourage the Finance minister to consider an amendment to the bill that would take into account a 50 percent depreciation for any investment that results in environmental upgrading necessitated by new legislation.
D. Mitchell: I'm pleased to rise in debate on Bill 6. I'm especially pleased to follow the member for Okanagan East, because I concur with her comments, especially those comments with respect to the environmental regulations and aspects of this bill.
I also agree with her that this has been an interesting debate, hon. Speaker. It has been a healthy debate. In particular, it has been interesting to see members on the
[ Page 1687 ]
government side get up and speak to this bill. It is unfortunate that they haven't spoken in favour of the bill in any explicit way. It's interesting to note that they have risen in this House on second reading debate on this bill to attack the opposition. Of course, that's out of order, as it stood, but it was entertaining. But they haven't risen in the House to defend this bill. Of course, we know why: there is no defence for Bill 6, the Corporation Capital Tax Act.
[5:15]
This bill brings in a tax that does one thing for British Columbia: it drives business out of British Columbia. This bill fits well within the budget strategy of the government, which is to tax and spend. They need to tax so that they can continue to spend with the budget that they brought in. This bill is passed pursuant to the budget that was brought in by the Minister of Finance almost two months ago now. It pays for the promises that have yet to be fulfilled, and it also fulfils a broken promise of this government. Let me refer to that promise. The NDP election manifesto, "A Better Way," 48 points, refers to the fact that they plan to keep taxes fair. Let me quote from their platform. It says: "We will make sure that large profitable corporations and the wealthy pay their fair share of income and property taxes." Does this bill fulfil that platform, hon. Speaker? Does this bill tax the wealthy? No, it doesn't tax the wealthy. In fact, it taxes small business in British Columbia; it taxes entrepreneurs who are trying to develop businesses and develop jobs and employment in British Columbia. It's a regressive tax. It's unfortunate that the government would bring in a tax like the corporate capital tax at this time in our economy. It's unfortunate that bringing in this tax would ever have to be considered in British Columbia.
I'd like to address one particular impact that this bill is going to have in British Columbia, and that is the impact it's going to have on technology-based industries. I don't know if the government has really thought about it and considered all of the impacts of this legislation and this tax, and the negative impact that it's going to have on the economy of British Columbia. When we turn to the high-technology industries in British Columbia, the minister, interestingly enough, has talked about his two-year tax holiday. Investment in high-technology industry often takes many years to show a return. The two-year tax holiday really doesn't solve the problem there. During the time that technology-based industries will be paying this tax on their capital, they will also have to be marketing their products and waiting for their products to hit the market. They will have to be developing those products, and it takes time. Research and development costs take time.
Of course, the tax kicks in when a company has $1 million tied up in assets. Now $1 million is not a lot, when you consider the fact that it relates to property, plant, equipment and all investments. These are not large corporate giants or huge corporations with thousands of employees. These are small and medium-sized British Columbia businesses that are adversely affected by this tax.
British Columbia is trying hard to develop and promote technology-based industries. In fact, it's interesting to note that the Ministry of Economic Development recently issued a report that was commissioned. In the report they used the example of a high-technology electronics manufacturer as the basis for its comparison of the costs of doing business in various jurisdictions.
We are rightfully trying to sell British Columbia as a home for high technology, but I'm not convinced that the government has really thought through this bill and the impact it's going to have on various sectors in our economy, such as the high-tech advanced manufacturing sector.
It's interesting that the report issued by the Ministry of Economic Development, Small Business and Trade is called "Competitive Advantage in Advanced Manufacturing." I wonder if the government really understands the meaning of the term "competitive advantage." They used a comparison which I don't think really makes sense. In the table at the very back of their study, they refer to the corporation capital tax: "British Columbia -- 0.3. Washington state -- N/A. Oregon -- N/A. California -- N/A." I wonder what "N/A" stands for, hon. Speaker. I think it stands for "no advantage." It stands for no advantage for British Columbia, because none of the states in this comparison -- Washington, Oregon or California -- have a corporation capital tax. British Columbia does.
What is that going to do for British Columbia's competitive advantage in advanced manufacturing in high-tech industries? It's not going to do very much at all except scare away businesses. It's going to encourage some of the very best and brightest minds in British Columbia who are working in that industry to leave the province.
British Columbia does have a future in high-tech industries. It does have a future in advanced manufacturing. British Columbia does have a future in electronics industries. It has an industry in undersea technology. British Columbia does have a future in knowledge-based industries. But this odious corporate capital tax serves only to scare away people who want to invest in these industries in British Columbia. This tax is regressive. This tax is wrong for British Columbia. It's wrong for technology-based industries. It's wrong for the resource sector. Even companies that are losing money, that are having negative revenue and showing no profits at all are going to have to pay this tax. That's a major reason why it's wrong, and the bill must be amended.
Any company that has assets in British Columbia in the form of equipment -- capital that's tied up in the range that triggers this tax -- is going to have to pay it, and that's going to create red tape. That's going to be negative for small business. Red tape is bad. It's a disincentive for small business.
We cannot support the bill, and we are going to have to discuss it further. In fact, we're not going to be drawing to a close on it this evening, I fear, because there is much more that has to be said on this bill. There has been some discussion about the need to amend this bill. When we move on to committee stage, we are
[ Page 1688 ]
going to discuss some specific amendments, because we are concerned about the draftsmanship and the quality of the bill. In fact, it would appear that the bill has been rushed in unnecessarily.
For all those reasons, given all that has been said on this bill, given all the remarks of all the hon. members who have contributed to the debate on second reading of this bill, I believe it's necessary to further consider it. Therefore I am going to propose an amendment at this second reading stage, and I would like to read my amendment into the record right now. The motion before the House, of course, is that this bill be now read a second time. I would like to amend that motion by deleting all of the words after "that" and substituting therefor: "...Bill 6 not be read a second time now, because this tax will add to the problem of companies in financial difficulty; it will be a disincentive to invest in British Columbia; it is a tax that will be passed on to British Columbian consumers wherever possible; it is a poorly drafted tax act that is inequitable because of lack of consideration of the problems of valuation of corporate assets; and this tax will not be recognized as a deduction for determining federal tax, which effectively almost doubles its cost."
That is the amendment I would like to move, and I would like to put that right now.
The Speaker: I have received the amendment, and I will dispense with re-reading the amendment, hon. member.
D. Mitchell: Thank you, hon. Speaker.
The Speaker: Please continue debate on the amendment.
On the amendment.
D. Mitchell: The amendment, having been found in order, I know that many members will want to engage in debate on it. But seeing that the hour is getting late and we have other business to continue with, I would move that we now adjourn this debate until the next sitting.
Motion approved unanimously on a division.
Hon. G. Clark: That's the first nemine contradicente we've had this session. We'll have to have more of those.
I would call upon the House's indulgence here. By agreement, Committee A heard the estimates of the Minister of Economic Development, Small Business and Trade. We did not have the wrap-up speeches by the spokespersons for the two parties or the minister, so I would call upon the Liberal Party spokesperson on that area to conclude their wrap-up statement.
[5:30]
The Speaker: Hon. members, in reviewing the sessional order, I will need to call on the member of the third party for five minutes' response.
R. Neufeld: The Ministry of Economic Development, Small Business and Trade must play a significant role in British Columbia's future. In fact, it is a ministry that must create a climate in British Columbia for businesses and corporations to survive. This ministry's mandate must be to make B.C. a hospitable province for investment by all types of business and trade. Its mandate must be to create the environment necessary to enlarge the economic base, to allow industry and business to grow, and to thus provide more revenue to the government. This larger revenue base must be encouraged simply to provide the residents of British Columbia with excellent services: the health care system, which is the best in the world; the education system, which is second to none; highways; ferries; and social services.
Social Credit, the past administration, is proud to be the administration that championed all of the above services for all British Columbians. Social Credit is proud that the climate its administration created left B.C. at year-end with the second-lowest taxes in Canada. We had the highest credit rating, the lowest per capita debt, the highest rate of interprovincial migration, the fastest-growing economy, the best rate of capital investment, the highest rate of incorporations and the lowest rate of business bankruptcies. We had the highest average hourly wages, and the second-highest average weekly earnings of all provinces. Value-added exports were growing at twice the rate of overall exports. Work stoppages were at their lowest level in 20 years. Despite the global recession, B.C. businesses were making money. Many companies were re-investing record profits. For nearly three years British Columbia had been creating almost half the new jobs in Canada. Virtually every bank and credit rating agency concluded that British Columbia's economy was stronger, more diversified and more conducive to long-term growth than any other in the country. The past Social Credit administration created an environment that allowed businesses to prosper, allowed corporations to make a profit for their shareholders and allowed those who applied themselves, by and large, to succeed.
This ministry must look to the business and corporate community and help them to survive and encourage growth and provide the jobs that go with continued success if we are to continue the services we have all become accustomed to. Overregulating and imposing unreasonable environmental rules and increased taxation on industries and businesses that are already having financial problems will not -- and I stress, will not -- encourage economic growth in the province. It will continue to encourage corporations to maintain their present level of involvement in British Columbia, and it will encourage some of them to move.
I encourage the minister to see his mandate as one that encourages growth and that encourages corporations to be successful and to provide the jobs necessary to provide all the amenities that all of us have come to enjoy.
L. Stephens: I would like to thank the minister for his frank and open discussions on the estimates of his
[ Page 1689 ]
Ministry of Economic Development, Small Business and Trade. I would also like to thank the officials of the ministry for their cooperation, in particular Ian McKinnon, the deputy minister; Chris Nelson, the assistant deputy minister of the business division; Lorne Sivertson, assistant deputy minister of the economic development division; Colin Smith; Brian Dolsen; Ardath Paxton Mann; Barry Smith; and Kathleen Costello, the ministry advocate for businesswomen. I appreciate the extensive amount of work involved in preparing for estimates, and again I would like to thank those officials and the minister.
The minister said: "...the government's overall economic policy objective is to promote a dynamic economy which would create stable, well-paying jobs within healthy communities, and a superior standard of living and quality of life, within the context of a sustainable natural environment throughout the province." These are noble ambitions, but with the tax increases in this budget and cuts to this ministry, members on this side of this House will be watching closely the economic development of this province.
We will also be waiting and watching for the ministry's strategy to guide its economic development initiatives on cross-border shopping, international trade barriers and procurement practices, loans and loan guarantees, the Job Protection Commission, community economic development commissions and services for small businesses.
As critic for Economic Development, Small Business and Trade, I believe the success of economic growth in British Columbia lies in our ability to attract capital and investment and to be competitive with the United States, other Canadian provinces and the Asia-Pacific Rim. Members on this side of the House expect the minister and this government to develop and implement policies to create a more prosperous British Columbia for all its citizens.
Hon. D. Zirnhelt: I appreciate....
Interjection.
Hon. D. Zirnhelt: They'll vote for it. Don't worry.
I'm happy to wrap up this discussion. In reviewing the Hansard transcripts on the discussion, I was impressed by a number of things, such as the zeroing in on economic strategy and what's involved in it, and also the issue of what has happened as a result of the budget in terms of our competitiveness or the attractiveness of B.C. as a place to invest. There's been a lot of talk with regard to the capital tax, and so on, as to whether or not this negatively affects investment. Of course, we'll be monitoring that carefully, because it is not in this government's interests to tax business out of the province.
I think it's also important to remember -- and all members have to realize this -- that there should not be too shrill a cry in terms of B.C. not being a good place, because it has to be proven in the end. If we don't prove it, it's rhetoric. What's important is that we create some confidence. One of the concerns that I have, as we proceed over the next fews years, is that we look very carefully at the future of the province. The governing party notwithstanding, it's important for us in the end to be able to say that while we argue a bit around the edges as to what would be a more desirable economic policy or industrial strategy, we don't forget the very point that we all are B.C. boosters. It's very important to present a unified voice whenever we're travelling. I'm sure that members opposite from both parties, if they were part of an across-government committee that was travelling, investigating international trade, wouldn't be saying in Japan that B.C. is a bad place to invest. Of course not -- we set aside our differences. So it's just important that when we read things into the record, we not overstate the case.
I know it's the job of the opposition to point out weaknesses. I think we can learn from that constructive criticism. When I make speeches around the province, there's no question that I can say that our budget and the budget of this ministry are directed to the strengths of the economy and of the pieces of the economic strategy we inherited from the other government, and that we are pursuing those things.
There are some very good studies on the shelf. I mentioned the copper smelter, for one. Setting up a steel industry is another. These are pieces of work that cost hundreds of thousands of dollars and that we take when we travel. When people come to visit us, they are taken as feasibility studies, showing that these are some sectors in which the British Columbia economy can excel. We're cognizant of that and building on that.
We will, as we learn more about the transition in the world economy, be adapting and refining our approach to economic development. But there are two parts to it. One is understanding very clearly what is happening in world trends. A lot of the trends are not all that clear right now. At the invitation of the Premier, we are going to sit down with 60 or 80 people in business, labour and government to look at where we are in the world economy, so that we can then inform the processes of community and regional economic development planning with the best information that's available. It will take us a bit of time to get a feel for that. In those discussions there will be feedback from different sectors of the business community.
I would like to remind the House that it's important to recognize that well before we were government, there were serious problems in the mining industry because of world competitiveness and a much higher return on capital, which we can't replicate here no matter what we do. If we took all taxes off mining, we couldn't replicate the competitive advantage that some other countries have in the southern hemisphere; that's just a reality of geography. So we have to look very carefully at where Canada and British Columbia have a competitive advantage.
I can remind the House that in a speech the Minister of Finance made recently at Whistler, he reiterated the point that our credit rating is sitting in a good spot; that we have had the international financial community....
R. Neufeld: It's a good past administration.
[ Page 1690 ]
Hon. D. Zirnhelt: Yes, and it's a good present administration -- a confirmation that this government is proceeding down the right path.
Interjections.
Hon. D. Zirnhelt: Oh, the heckling is really hard to take.
I think that as we look ahead, though, the prospects are great. None other than the Royal Bank, in briefing us, has suggested the growth rate looks good for this year and even better for next year. I think we'll find that those industries that are having a little bit of trouble right now will be in a position to more than pay their fair share. In spite of some marginal increases in tax rates, we still are the second-lowest-taxes jurisdiction, and we have a lot of other advantages that we have to remember.
I like the positive speech we get from the third party, because they would like to take credit for the continued success. We have to give some credit where credit's due. We intend to continue with the good things, but we also have to reverse the bad trend, which was the deficit that was creeping in there because of some high spending. Reducing the growth rate in expenses to about 7 percent was a major accomplishment in the short period we had.
I would like to challenge members of the opposition in engaging in a positive process, to be specific about what areas of economic and industrial development they think we can excel in. And I give you the undertaking that we will not leave any stone unturned. If there's a good idea out there, we will be pursuing it. When it comes down to it, strategies are ideas and intentions, and they're backed up by basic taxation policies or policies of providing information and backup. But in the end, it is the private sector investments that will drive most of the economic development. And those decisions by the private sector are very important in assessing viability. There will be areas where we feel that government capital will be available, as we've already indicated in the B.C. Endowment Fund, to match up with the decision-making skills and the vision of people in the private sector to generate the growth.
[5:45]
However, the role for public sector decision-making is such that we are very conscious of the need to refine our tools, to look at possible impacts of decisions on infrastructure and to look at the return on the investment that we make. If there is a partnering with the private sector on projects, we need to be much better at projecting the impact and cost. What has happened is that we inherited a number of projects. As you know, we've had to book a provision for possible bad debts. A lot of the major projects were given what were, in effect, grants and not loans. They were made perhaps for the wrong reasons and perhaps were not as upfront. The risks were not clearly articulated. We need to refine those guidelines. In due course you will be seeing some of that done. It will be done with a view to making the operation of the public sector much more businesslike in its approach to the investment of tax dollars. I look forward to that work. I look forward to the positive suggestions as to the areas where we may be remiss.
As you know, as minister, my door is open to members on both sides of the House. If they have a project, let's look at it and see if we can't make that project feasible.
Hon. G. Clark moved adjournment of the House.
Motion approved.
The Speaker: Hon. members, you should have had a notice on your desks that the Commonwealth Parliamentary Association branch meeting will begin in the Ned DeBeck Lounge immediately upon adjournment.
The House adjourned at 5:47 p.m.
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