Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

THURSDAY, MAY 21, 1992

Volume 3, Number 10

[ Page 1691 ]

The House met at 10:02 a.m.

Prayers.

G. Farrell-Collins: I would ask the House this morning to make welcome 58 grade 7 students from Peterson Road Elementary School in Langley township. They're in Victoria today with their teachers Ms. Rempel and Mr. Erickson. Please make them welcome.

Orders of the Day

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

CORPORATION CAPITAL TAX ACT
(continued)

On the amendment.

D. Mitchell: I'm pleased to pick up the debate on the amendment to this bill at second reading stage. For the benefit of members of the House, perhaps I could read the amendment to refresh their memory as to what the amendment is addressing here.

The amendment says that this bill should not now be read a second time, because Bill 6 implements a tax that will add to the problems of companies in financial difficulty; that will be a disincentive to invest in our province; and that will be passed on to British Columbian consumers, wherever possible. It is a poorly drafted tax act that is inequitable because of a lack of consideration of the problems associated with the valuation of corporate assets. This tax will not be recognized as a deduction for determining federal tax, which effectively almost doubles its cost. That's the essence of the amendment that was moved yesterday in debate in second reading.

We've been debating the principle of this bill, which brings in a new corporate capital tax in British Columbia, and there has been some good debate in second reading by members on all sides of the House. Some members have actually suggested that perhaps the bill should be amended to take into account some of the problems and inequities that this tax introduces. Even though some of those amendments should be -- and I'm hoping will be -- considered, this bill fundamentally brings in a tax that is so wrong and so flawed that we hope the bill will not be read a second time. That's what this amendment seeks to do: to reject it in principle at this stage, because it's the wrong bill for British Columbia. We just cannot take this kind of tax at this time. It's really a tax attack on the people of British Columbia. At a time when we should be decreasing the burden of taxation, what has this government done?

There's some real hypocrisy on this, and I'll tell you where it comes from. If you look back at the election campaign platform of the New Democratic Party, there was certainly no indication that there would be a corporate capital tax levied on all companies in British Columbia, regardless of whether they're earning a profit, regardless of whether or not they're a large company. When the Premier, shortly after he assumed office, went on a trip to the Orient -- to Japan, to Hong Kong -- we applauded him for that. We said it was good that the Premier was taking messages out to our trading partners throughout the Pacific Rim. And what did he tell our trading partners in the Orient, in the Pacific Rim? He told them that he wanted them to come and invest in British Columbia, that British Columbia was open for business, and there would be no new taxes. What did he do when he came back from his trip, when he finally called the Legislature, and he finally had his Minister of Finance bring in a budget? Brought in a corporate capital tax -- a new tax, a tax on capital, a tax that is going to discourage investment in British Columbia.

That's where the hypocrisy comes in, and that's why we need to consider this amendment. That's why I hope members of this House will speak to and support this amendment to this bill: because of the hypocrisy that's been demonstrated by the government.

There are a lot of questions that have not been answered on this tax. How will it be applied? If we ever get to the point of concluding this debate, we would hope that the Minister of Finance, who is responsible for this bill, will address some of these concerns, because they must be addressed.

In 1991, the federal government brought in the GST, a much-hated tax. That tax has had a very negative effect on the economy of our country, and it has affected British Columbia businesses as well. In 1991, when the federal government brought in the GST, that tax was wrong. It was wrong for Canada; it was wrong for British Columbia. This corporate capital tax is the equivalent of that GST, and it's going to have the same effect. It's going to be a negative for British Columbia businesses, and it's going to discourage any further investment in this province. That's why we can't support this bill. That's why we can't support this tax.

It's also going to increase red tape on all the businesses in British Columbia: small businesses, medium-sized businesses, large businesses. It's going to discourage investment in our province at a time when we want to be encouraging capital to flow into British Columbia. Why would they? Why would capital flow into British Columbia when there's a corporate capital tax here that says that, regardless of whether or not you are going to be making a profit or are going to be successful, we're going to tax you?

Why would British Columbia entrepreneurs, who are wanting to develop their hopes and their dreams and their vision for developing businesses and creating employment in British Columbia, do that when they know that if they are successful they are simply going to be penalized? What this act would do if it's passed into law is discourage the very best and brightest minds in British Columbia business -- small businesses, medium-sized businesses. It's discouraging them from trying to fulfil their dreams and their visions here in this province. That's why this bill is wrong. That's why we can't support it.

There are a number of questions about the bill that we have not had answered. The bill would seek to tax capital. Any firm that would have property and equipment or capital to the level of $1 million would be taxed. 

[ Page 1692 ]

We have some questions about how the tax is going to be applied. For instance, a company comes to British Columbia that's in the transportation industry -- in the trucking industry, or running a bus line. If they bring their equipment and property into British Columbia and that reaches the target and the trigger level, would they be taxed? Would the corporate capital tax apply to them? I'm hoping that the minister can address some of these concerns and questions when he makes his closing remarks on second reading. I would encourage him as well to speak to the amendment, in particular, and speak to some of the concerns that have been raised by hon. members on all sides of the House.

Another question that's come up: yesterday we talked a little bit about the various industries that would be affected. I spoke in particular about advanced manufacturing and high-tech industries in British Columbia, and the fact that this tax is going to discourage those businesses at a time when they need to be stimulated. At a time when they perhaps need incentives, this tax provides a disincentive for them.

The minister should be asked to give an example of the types of property and equipment that would make up the mythical company referred to in the models. For instance, he should be asked to explain how a calculation would work for a major movie company -- the motion picture industry, which is now becoming important in British Columbia. More and more, British Columbia is becoming a location for international film producers who are coming to British Columbia to make films. How would this work for a movie company that utilized a piece of substantial equipment -- that is the term used in the bill -- on location in British Columbia? If they were here shooting a film for, say, two to three weeks, and they were using a piece of substantial equipment, would they be taxed? Would the corporate capital tax apply to them if the movie they were shooting was to account for 25 percent of their revenues for a year, if it was a United States motion picture company shooting a film in British Columbia, if they came from California and they had total paid-up capital of $50 million? If it was a company like Twentieth Century Fox, for instance, and that company had total paid-up capital of $100 million, how would it work?

You see, hon. Speaker, the tax is complicated. How it will be assessed and applied is complicated. We will certainly have to discuss that if this bill ever gets to committee stage. If it would serve to scare away the motion picture industry, which has created jobs and economic stimulus for our province, surely it would be wrong for that reason too. That's just one of many reasons that have been addressed by members during this debate. We need to have answers to some of these questions. You can see how complicated they can be.

[10:15]

The bill is ambiguous. It doesn't really speak to the specifics. It's not drafted well. It's sloppy. We need to know what kind of accounting headache this bill is really going to be causing businesses in British Columbia. This is really a red-tape bill. It's going to cause more red tape for small and large businesses and for large businesses that are not profitable. That's been mentioned many times.

Other members have mentioned that this bill is unfair. I believe the government knows that it's unfair. Evidence of that is that the members who have gotten up to speak in second reading debate have not spoken in favour of the bill. What have they done? They've attacked the opposition. They've made political attacks, partisan statements, but they haven't stood up to actually support the bill. Of course they haven't. They can't stand up to defend the bill; there is no defence for this bill. There's no defence for bringing a corporate capital tax to British Columbia, absolutely none.

We in the opposition have mentioned a number of amendments that could be brought and considered. We have no indication as to whether or not those amendments are going to be considered, and that's why we've brought in this larger amendment. It indicates that we cannot support this bill in principle at this time, for a variety of reasons. The government knows that this bill has no defence. The Minister of Finance, who sponsored this bill, knows that this bill has no defence.

The bill is effectively going to scare investment away from British Columbia. It will scare away the entrepreneurs who could help to build British Columbia at a time when we need to build for the future. It's going to accelerate the brain drain. The best and brightest minds are not going to be looking to build their futures, dreams and visions here. They're going to be scared away. They're going to be building their futures elsewhere. Whether they're working in the mining, resource or advanced manufacturing industries, they're going to be afraid to invest their capital here because of their certain knowledge that with this NDP government in power, they're going to be taxed to the limit.

We talked about competitive advantage yesterday. What does the government really know about competitive advantage? If they understood the term and what competitive advantage was really all about, they would not be levying this tax when our competitors don't have a similar corporate capital tax. We would not be taxing the capital, the assets, the property, the plant and the equipment of companies wanting to do business, to build their futures and to create employment in British Columbia. We wouldn't be doing it, because we know with certainty that we're scaring those people away from British Columbia. They're going to be relocating in areas where the tax structure and the tax regime are more equitable and more fair and where they will know that in years when they are not making a profit, they're not going to be taxed unfairly.

That's the real injustice of this bill, because regardless of the size of a company or the industry that it's in, in British Columbia you know that with this bill -- even in the tough years when you're not earning a profit, when you're showing a loss and having a hard time maintaining your base of employment -- you're still going to be taxed by the NDP equivalent of a GST.

This corporate capital tax is unfair; that's why this amendment should be supported. I look forward to hearing other members rise to speak on this amendment, and to seeing members of the government in particular rise to finally say something about this bill, rather than simply to attack the opposition.

[ Page 1693 ]

With those few words I'll take my seat, but I will encourage members to support this amendment.

F. Gingell: Hon. Speaker, I often hear people start their speech with the words: "It is a pleasure to rise to speak this morning...." Well, it really isn't a pleasure to rise to speak on Bill 6, because I am concerned that the government does not appreciate or understand the real consequences of this bill.

When the Premier was the leader of Her Majesty's Loyal Opposition, he made a great point of speaking to organizations like the Vancouver Board of Trade, various chambers of commerce and other meetings of British Columbia's business men and women. He said that an NDP government would consult and work with business to ensure that the economy of the province was encouraged to grow and to help in the creation of new jobs. He assured them that he wouldn't bring out any legislation that would suddenly deal them a blow that they're not expecting. There would be consultation. The Minister of Finance is surprised, and I think hurt, when he attends meetings, such as the Victoria board of trade, I think it was, and he gets a reception that is less than warm and friendly. The reason for this reaction from the business people is that there has been no consultation. They have brought forward an act that is a tax on assets, with no consultation with the business community whatsoever. Because of the way things work in government -- the act is developed by bureaucratic forces rather than business people -- there is sometimes a lack of understanding of the consequences of their proposed legislation. That is certainly true in this case. This particular act, in my opinion, is badly designed and ill conceived. There are many problems that really do need to be addressed.

One of the items, and a matter that has been brought up by speaker after speaker, is the problem of this tax being assessed to corporations that are not profitable, that are struggling, and requiring them to pay it. I am sure that the Minister of Finance -- and I would be happy to help -- could design an amendment that would allow the tax to be deferred by a corporation that is not profitable. Let's just say that your taxable amount is $150 million. You owe the government $450,000, but you aren't making any money. The $450,000 may well be the last straw.

There could be a section of the act that allows the tax to be deferred, to be moved forward to the next year and paid at a time when the company is profitable, perhaps even to be paid up to the maximum amount that the corporation does have -- profits. Certainly it would bring relief where relief is needed. It could be an amendment that allows the deferment of tax for, say, three years. If you haven't got the funds because you have no profits to pay the taxes with in year one, they get pushed forward to year two. If you are profitable in year two, you pay the tax that's assessed for both year one and year two up to the amount of your profits. If you're not profitable in year two, or you can pay only a portion of the tax, that portion would be applied to the earliest tax and would then move on to year three, where you would still have a deferred tax payable to the province of British Columbia, the unpaid portion still remaining from year one added to the portion for year two and now the new amount for year three. It could move on until the corporation is profitable.

We know that major industries in this province are cyclical. They have their ups and downs, and when they're up they can afford to pay the tax. Don't make them pay it when they're down. If it gets deferred to a fourth year, I would suggest that any tax that's still unpaid from the first year would drop off the table, because obviously the situation is getting very desperate, if the company hasn't been profitable for three years and not in a position to pay back taxes.

This is a real amendment; this isn't just a political push. It is a practical and sensible method of solving that particular problem, and I really do encourage the Minister of Finance to consider it. This is going to be where companies are profitable and are continuing. In many cases, it's going to be a pass-on tax. If it's B.C. Gas, they'll probably get it allowed in their rate base. Of course, B.C. Hydro don't have to pay it, but B.C. Gas do. I don't understand the equity of that. West Kootenay Power and Light have to pay it, but B.C. Hydro don't, so the lower mainland consumers of electricity won't have to pay an increase in their electricity rates to cover this tax, but if you live in the West Kootenays, in Trail and Cranbrook, where things are already difficult, this government is going to make it more difficult.

We accountants always like to have acronyms: we have LIFO and FIFO, which are well known; they deal with the methods of valuing inventories. I'm sure that if people don't understand them, they've certainly heard about LIFO and FIFO. Now we have a POPO matter, because this tax will be a pass-on tax or a pass-out tax. You'll either pass it on to your customers or it may cause your business to pass out.

During the course of the debate, we have spoken about specific items in this bill that are poorly drafted or poorly conceived. I'd like to suggest to the Minister of Finance -- because he is in the House now and I appreciate that, whereas unfortunately he had to leave the last time -- that we could again cover some of the specific problems that need to be dealt with in this act. We already know that the minister has announced he is bringing forward an amendment that deals with the exclusion of investment of British Columbia companies in foreign corporations. I understand and sincerely hope that he is also going to bring in an amendment that deals with credit unions and the B.C. Central Credit Union, because at the moment there's going to be double taxation. He should flip a coin, see how it comes down and decide if he's going to tax B.C. Central Credit Union or the individual credit unions -- but not tax them both. I understand that he is considering that.

He also indicated in the course of the debate, when he was here, that he understood the problem of the 180-day requirement to file a return instead of six months -- a foolish piece of drafting. Where it came from, heaven only knows. The bill should be changed to make the filing date six months and bring it into line with all the other provisions of the federal income tax and the provincial income taxes, rather than having this strange and odd exception.

[ Page 1694 ]

If you look at the provisions of paragraph 14(2), it deals with investments made in certain types of businesses that will have an exemption for one year in the first year of the tax; for one year in the second year of the tax; and for two years in the third, fourth, fifth and subsequent years of the tax. They need to look carefully and think about not what is in that list but what is not in it. For instance, the building of health care facilities by private organizations in this province is not exempt. In looking after health care facilities in the future, there may well be a greater focus on the development of private facilities. If that is done, my reading of the act is that they will not only not be exempt from the tax, but they won't even get this very temporary two-year holiday.

The act talks about the manufacturing and processing of goods; it doesn't deal with the development of intellectual property. That is an obvious matter that needs to be looked into. We are now in the 1990s. The development and sale of intellectual property is becoming more important in our province. But they've missed it out. They are back in the old days of exploring for oil and gas, drilling for petroleum, developing and extracting mineral resources and cutting standing timber. So we really do need to look at this list and broaden it.

[10:30]

When one thinks about it, why wouldn't we broaden it completely? Why wouldn't we just make an exemption for all new investment? No one is suggesting -- and I know that the minister would not consider it -- making an exemption for investments in past years. But we in this province are interested in the creation of jobs. We want to create an incentive for investment; we don't want to create a disincentive. Why doesn't the minister consider exempting from the tax all new investments made from the day of the effect of this act? It really would be an improvement. It would be a message that would in some way dampen the bad message that has already gone out; it would say that the government does understand and that they will at least exempt future investment.

I also spoke during second reading on the question of the problems in this act with valuations. There are very serious valuation problems here, where two similar corporations doing exactly the same thing with the same kind of assets will be taxed entirely differently: one perhaps exempt completely and the other paying a substantial amount of tax just because of the year their assets were acquired. A simple way to explain this is that corporations record their assets -- the things they are going to be taxed on under this tax -- at cost. If they bought land and buildings in 1960, you can appreciate that they are on their books at 1960 costs. Not only are they on their books in 1960 costs, but the buildings have been depreciated for 32 years. So what was originally bought for $1,000 now probably sits on the books for something like $30. But if they were to have bought those same assets -- 30-year-old buildings and heaven-knows-how-old land -- in 1990, just before this act came into effect, it will be on their books at 1990 costs. That land may be worth $1.5 million. There have been those kinds of differences. Just because the transaction took place in 1990 rather than 1960, one will not be taxed and the other will. But we're talking about exactly the same assets.

It also has to be recognized that it will be relatively simple to arrange a sale in subsequent years to either avoid paying the tax or to substantially reduce it. It will be done by the sale of shares rather than by the sale of assets. You will pay a high price for the shares of a corporation, but nothing will change on the corporation's books. Their assets will still be recorded at the old historical values. If somebody were to buy the business by buying all the assets from the corporation, they will appear on the new corporate books at the higher values and be subject to taxes.

Included in section 14 of this act are matters that are exemptions for expenditures made for environmental purposes. Again this exemption is only for one year if acquired in year one or year two or for two years if acquired in the third and subsequent years. It is terribly important that we in British Columbia recognize our responsibility to our children and our grandchildren and start dealing with the environmental situation in this province in a responsible manner. It's critically important. Why wouldn't the minister make a blanket forever exemption for equipment and machinery that is put in place and acquired strictly for the purposes of the environment? Let's be good citizens. Let's encourage people to do those things that we know we should. It's really important.

There is a whole series of problems with this act. Although we may not agree with the principle, we realize in the end that by the strength of numbers the wish of the Minister of Finance and the government will prevail. I'd like to suggest to the minister that they vote with us on this amendment on the understanding that the bill would be sent to a select committee of this House. There are people I would recommend from the government back benches who are experienced in business and knowledgeable as economists. There are people with those attributes and experience in our caucus and among our friends in the third party.

This committee could work quickly and immediately. I hope it would be allowed to consult outside and to look at all of the various faults -- some of which are technical and need to be fixed up -- and come back to this House with an amended bill. Although we would not agree to vote for that bill, because we clearly do not agree with a capital tax, we would agree to ensure that the bill would pass through this House with due dispatch. It really is important. This bill is bad enough; let's not make it any worse. Please, let's have the minister agree to withdraw it now and send it to a select standing committee, which would be designed specifically to be knowledgeable and competent in the areas of taxation and the effect of taxation on the economy of British Columbia. We on our side of the House would cooperate, would wish to be represented on that committee, and believe that something worthwhile would be carried out while still accepting the fact that there will be some form of a tax when we are through.

I make that offer genuinely. I really do think that it is a suggestion that is real and a means of dealing with many of the inequalities and other matters that we see need amendment in this act.

[ Page 1695 ]

W. Hurd: I'm pleased to rise in support of the amendment to Bill 6. I think it certainly would be rather interesting to listen to some of the arguments in favour of this bill that members opposite are offering to some of the companies and corporations in their own riding. Since we haven't seen a shred of defence for this particular bill in the House so far during debate, it might be interesting to find out how they're defending the idea of a corporation capital tax in which a company has to pay a tax based on the value of its assets.

I think it's worthwhile to remind the government of the situation with the corporate sector in the province of British Columbia at the moment. One of the questions we've asked the Minister of Finance during past question periods is whether he's actually read copies of the financial statements of major corporations in this province -- namely resource corporations. The Liberal opposition has had many occasions during the past few months to meet with the representatives of individual resource companies in this province. Their debt-to-equity ratios -- the formula by which they approach the banks to borrow money -- are in many cases in the worst shape they've been in the history of these companies. In fact, we've been advised by major companies in this province that if they were to approach the banks today with the kind of debt-to-equity ratios they currently possess, they would not be granted loans.

In light of the situation -- the massive losses being experienced in the forest and mining sectors -- it makes absolutely no sense at this point in the economic history of the province to levy a tax based on the assets of a corporation. They're already suffering a reduction in the value of their assets because of their deteriorating financial position. They're facing the necessity of major capital investment to remain competitive in a global marketplace. And the government, seemingly unaware of that kind of pressure, assesses a target tax based on the value of their assets. It's an economic strategy that makes absolutely no sense. It's the reason the official opposition of this province has risen to a man and to a woman to oppose this bill and to recommend that the government support the amendment and send it back for redrafting. Let's look at the real ramifications of a target tax on the assets of a corporation.

It's also significant to note that the economic situation in the province has changed, even since this bill was introduced in the budget. We have plenty of evidence of that in reports in the media this morning from the Conference Board of Canada, which has downrated the expected economic performance for the coming year, suggesting that the assessments they made two or three months ago about economic growth ago are now out of date. They list the reasons: a continued lack of consumer confidence and a continued reduction in disposable income for individual Canadians and British Columbians. Even the B.C. Central Credit Union, which initially had a very optimistic forecast for the province -- more optimistic than the rest of Canada -- has now downgraded its analysis based on the economic circumstances in the province. That's all the more reason for the government to rethink this corporation capital tax and to consider the negative and serious ramifications that it will have on the balance sheets of major B.C. corporations, which are struggling as never before to deal with the realities of global competition. They are facing pressure to improve environmental standards in the province, and at the same time are struggling to acquire capital from financial institutions and banks when their balance sheets are simply being ravaged during every quarter that they report results to shareholders.

It's also important for the government to assess what happens to the profits of corporations. I think that this issue has been missed during the corporation capital tax debate. What do companies do when they make money? Well, they reinvest in their business, they reinvest in improved pollution regulations and they improve their equipment and efficiency. It's absolutely astonishing that the government would suggest that the best way to improve or enhance that type of competitive advantage by B.C. companies is to level a target tax on their assets and to send out the message that the bigger you get, the more tax you'll pay, and it doesn't matter whether your results are up, down or even.

[10:45]

There are bills which I think define our government and its understanding of the business sector. Surely Bill 6, the Corporation Capital Tax Act, is such a bill, and it should concern the people of the province. It indicates that this government, despite all its rhetoric and claims that it understands the corporate sector and how investment works, has brought forth a bill which basically explodes that myth and which convinces people from one end of this province to the other that nothing has really changed in this party's and this government's understanding of how investment capital works in British Columbia.

It's also important for us to realize that over the past four years British Columbia has fared better than any other province. The reason they have is that the taxes corporations pay to government have been more competitive than in any other province in this country. This is the type of bill that sacrifices that advantage and that tries to compare this province to other areas of the country, such as Ontario and Manitoba, where the economies have been in reverse for the last two years.

I find it astonishing that the Minister of Finance can stand in this House and compare the corporate tax rates in British Columbia to those in Ontario, which has lost 250,000 to 500,000 jobs in the last four years, and suggest to this House that that's the kind of comparison we in British Columbia should be making. Hon. Speaker, it's absolute nonsense.

I would urge the government and the Minister of Finance, in view of the deteriorating economic situation in this province and the forecast from respected economists that the economy of British Columbia is slowing down, to reconsider this onerous bill and the impact that it will have on the corporate sector and investment in this province and to support the amendment. Let's not impose this burden on the interests of British Columbians or on the corporations of this province, when there is absolutely no chance that they can even go to the bank and borrow money at the 

[ Page 1696 ]

present time based on the value of their assets and their financial situation.

I would urge every member of this House to support the amendment. I think it's also important for us, at this time, to act as a unified group in this House, to support the amendment, and send this bill back for further reconsideration.

Let's at least eliminate the problems and the boondoggles in this bill. When you talk to corporations in this province they're totally baffled by the implications of this act. They don't understand; they're going to have to be reporting quarterly -- monthly for the GST -- on the corporation capital tax, and they've got sales taxes to remit. It's just another red-tape boondoggle that this province doesn't need at this time.

So I would urge every member of this House to go back to their ridings and talk to the major corporations. In the case of the hon. member for Nelson-Creston, I would urge him to go back and talk to Cominco -- the smelter -- about what impact the corporation capital tax will have on that company, which lost $40 million during the last fiscal year. I would urge everyone in this House to at least have canvassed the corporations in their ridings and in this province that are going to be affected by this tax so that when they rise and support this onerous bill in the House, they will have talked to the people who will be affected by it.

[E. Barnes in the chair.]

Hon. G. Clark: It's always disappointing to hear the doom and gloom from the members opposite: things are bad in British Columbia and getting worse; the sky is falling; we should be concerned about everything. Frankly, it's quite the opposite. British Columbia has tremendous prospects. We are doing well.

I would like to make an announcement, actually, to members of the House, and it's not one that really gives me much pleasure. Yesterday Moody's, the rating agency in New York, downgraded Alberta's credit rating. And the Royal Bank.... We have just confirmed that we now have the highest credit rating in Canada, which is quite historic. Alberta did have the same credit rating as British Columbia until yesterday. If we were, of course, to have that it would cost several million dollars. One of the reasons our credit rating was confirmed is the kind of fiscal responsibility that this administration has shown. I might say that, unfortunately, this tax is part of that package. Frankly, it's an extremely difficult fiscal situation the province still faces today.

Members on the opposite have not given one single, solitary, positive suggestion in terms of how we might deal with this fiscal situation, except to oppose any tax increase and to demand more spending in every area of government. Members opposite say cut spending, and that's all we hear, but they haven't said which hospital we should close or which school we should close or which university we should close. Those four ministries of government, including Social Services, count for some 75 to 80 percent of government spending. You cannot cut spending any further than we have without cutting deeply into the health care, social service and education budgets. All the members opposite talk about is how we should spend more in those areas.

Obviously we oppose this amendment, but I want to make the point that this amendment is factually incorrect. Firstly, the amendment says that this will be a disincentive to invest in British Columbia. The reality is that we have a two-year tax holiday for new investment in British Columbia, the only province in Canada with a capital tax.... There are now five, and we're the only one to recognize new investment.

Secondly, it says that the tax will be passed on to British Columbia consumers. I know that all consumers are surprised to hear the Liberals say that, because they know that when the Social Credit Party eliminated this tax everybody saw their prices drop dramatically. Isn't that right? This tax was in existence in British Columbia for some 15 years, it exists in four other provinces in Canada, and I don't notice a huge difference in pricing when it comes to British Columbia and some other parts.

It says it's a poorly drafted tax with a lack of consideration for the problem of valuation of corporate assets. What the members opposite suggest is that we should use market value, which would be enormously complex, both for the government to collect and for corporations. This parallels what existed in British Columbia. All resource companies lived under this tax for 15 years. This is a reintroduction of an existing tax, drafted to improve it for efficiency.

Finally, they say that this tax does not recognize a deduction for determining federal tax, which amounts effectively to double taxation. That's incorrect. This is fully deductible from federal income tax. That has been confirmed, and that is simply factually incorrect. It means the federal government, which is off-loading its problems onto British Columbia, will in fact pay a portion of this tax. I can't think of anything more desirable in a British Columbia context. With that, we oppose this amendment.

C. Tanner: I am, of course, opposed to the bill and in support of the amendment. The member who just spoke tried to tell us how brilliantly this act -- this great wad of paper -- is drafted. It's 50 clauses. Let me just bring to members' attention one specific clause: No. 11. If you and your drafters understand this, Mr. Minister, they should explain it to the House, because it's too complicated for the majority of these members to understand -- particularly on your side.

Now listen carefully to section 11:

"(1) There may be deducted from the total paid up capital of a corporation at the end of its taxation year (a) the corporation's negative retained earnings, if any; (b) the corporation's deferred tax debit, if any, to the extent recorded in its financial statements; (c) in the case of a corporation that is solely engaged in exploration for a mineral resource and has incurred exploration costs that have not been written off to retained earnings, those exploration costs to the extent not deducted under section 14; and (d) where the total paid up capital of the corporation, after applying the deductions under paragraphs (a) to (c) of this subsection and under section 12, is reduced to an amount that is $1 million or more but 

[ Page 1697 ]

does not exceed $1,250,000, the appropriate further deduction shown below."

Then we've got a table which explains what you can do.

"(2) Where (a) a corporation is one of two or more associated corporations; and (b) the sum of the total paid up capital of both or all, as the case may be, of the associated corporations, at the end of each corporation's taxation year ending in the same calendar year and after applying the deductions under subsection (1)(a) to (c) of this section and under section 12 is $1 million or more but does not exceed $1,250,000, the aggregate amounts of the total paid up capital for those associated corporations shall be reduced by an amount determined under subsection (1)(d) that is in the proportion that the amount for each of the associated corporations, after applying the deductions under subsection (1)(a) to (c) of this section and under section 12, bears to the aggregate amounts so determined for all of the associated corporations."

Now, if anybody can make head or tail of that nonsense they're not sitting in this House. I suspect where they're sitting is in accountants' offices just rubbing their hands with glee, knowing that hundreds of corporations are going to come from out there and need their services to interpret this great wad of paper.

That is the end of that section; I merely read one section out of it. The amendment, when it speaks to a complicated and poorly drafted bill, is illustrated by that one example. There are 49 clauses in this bill; they're all virtually the same sort of convoluted, complex nonsense.

The other assumption in this bill, which I guess comes home to me and many of the merchants -- small retailers, such as I used to be -- who practise their craft in the town that I live in.... There are approximately 125 retail businesses in the town of Sidney. I would guess that at least 25 of them fulfil the clauses of this bill; they are corporations that have more than $1 million in assets. As a consequence they will have to start paying this amount of tax in excess of what they've paid in the past. You've got to remember that the things you're counting as an asset in this bill include such things as your inventory, fixtures, furnishings, equipment, property -- be it personal, if they're in the corporation, or buildings. It might even, in some respects, include the individual's residence; many businesses are having such a tough time that they use their residences to raise capital to support their businesses and employ people.

Let me give you an example. On May 22, 1991, the member for Alberni -- who is now government Whip -- was correct when he said: "It's 20 percent cheaper on average to do business in the United States than it is Canada." That's not because of wages; it's because of the cost of taxes on business people. The member for Alberni is one of the few members on that side of the House who has a business and might readily understand how to run a business. In his case -- and these are not necessarily his figures, but I happen to have a jewelry store too, and I can give him an example -- his inventory probably runs at about $250,000, which he can't sell, incidentally, because the jewelry business is in bad shape. His fixtures are probably worth $30,000; his furnishings are probably worth about $30,000; and his equipment that he uses in his business is probably $20,000. His property -- and I'm guessing; these aren't specific figures -- is probably worth $250,000; his building may be worth $100,000; and maybe his house at $250,000 is in there to support the various loans and things he's got from the business. His retained earnings might be $70,000. That's $1 million very easily identified by the members on this side of the House, and that is a very small business.

[11:00]

What the minister is doing is taxing small business again. This party over there ran on the platform of supporting small business. They're taxing it right out of existence. This is another tax on small business. They're going to pay on those assets; he's going to have to find another $3,700 to pay this tax. That's a small business. It's not a forestry company; it's not a mining company; it's not a large chain of hotels. It's a small business -- the backbone of this country, the backbone of this province, the biggest employer in this province. You're taxing them.

How are they going to pay the tax? They're not going to pay out of profits, because you don't allow them to make profits; you're taxing that already. They're paying this because they're sitting there with those assets, which they've created for years out of their sweat, hard work and intelligence. They've accumulated some assets, and you're taxing them. Why? Because it's a soft touch, and it appears to you to be the sort of area that the public will go for. The members on that side don't understand what the minister is doing to them.

The other point the bill makes is that when you finally are assessed those taxes, you'll pay them on a quarterly basis. Here we have a situation where you pay taxes on profit, should you be lucky enough to be making any. You pay taxes on the assets you've accumulated over a number of years. You use these assets to support the bank loans that you have to take out in order to pay the wages of the very people that you're indirectly taxing. You pay these taxes quarterly, in advance. You're paying tax on something you haven't earned. This bill is making it increasingly more difficult to support small businesses in this province.

The amendment to this bill is making a very reasonable suggestion. I think the members on this side have proven the case for the facts that (1) the bill is badly constructed; (2) it's imposing a tax on business, both large and small; and (3) we're coming into a period where business is becoming more difficult. We've suggested we should amend the bill and give ourselves a chance to have another look at it in committee. That's a very reasonable argument. We ran in the election saying that we would try to make constructive comments. We're making a constructive comment. The minister has already made one amendment. I hear he's probably going to make one or two more. The fact of the matter is that it's a poorly written, ill-conceived, misunderstood bill. We should move the amendment and support it.

R. Chisholm: Unfortunately I have to rise to oppose Bill 6, the Corporation Capital Tax, but I do support the amendment. This government, during the election, came out and had some promises. It made a lot 

[ Page 1698 ]

of them. I'll quote promise No. 4: "We will make sure that large profitable corporations and the wealthy pay their fair share of income and property taxes." They did not include small businesses in that statement. I quote again, promise No. 6: "Small business is a vital part of B.C.'s free enterprise economy. It creates most of our new jobs and is the backbone of every community in the province. A New Democrat government will help small-and medium-sized businesses grow."

I'd like to know how this ill-conceived tax, which taxes the investment and capital on a farm, helps the farmer, especially when every time you pick up a newspaper these days, it says that the farmers and the fishermen are going out of business. The banks won't remortgage their farms. But what does your government do? You add another tax -- $3,000 on every $1 million invested. Like I tried to say yesterday, a million dollars to a farmer is absolutely nothing. A million dollars won't pay for his land, quota, stock, equipment, barns or any help. If you talk about the fisherman, he's in exactly the same boat. If you talk about a fishing trawler, a million dollars does not go very far. On top of the prices and all the problems they have with free trade and our economy, plus the world economy, this government decides to penalize them more.

Does the government understand what problems the farmer and the fisherman face? When this government places taxes on investment, that will reduce the number of people attracted to these industries. They are small-and medium-sized businesses. To people who are already in the industry, it is a disincentive to enlarge their operations, and they will not expand. They cannot afford to put more money into it so that it's taxed by this government.

This government has been speaking lately about value-added. How do we attract industries that are going add value to our raw materials, like fish? They are not going to come in to open a cannery or a fish-packing plant. They are definitely not going to open up a FraserVale which packs fruit and vegetables -- not when their investment is going to be taxed. When we start talking about value-added, that's a loss of jobs. How are we going to keep our people employed if we don't expand?

We need a comprehensive tax reform. We must make sure that there is provision for fair, more equitable and better taxation. Taxing their investment and capital will only drive them away and produce further deterioration in our already fragile economy. I implore this government to vote against the bill and send it to a committee to be discussed further and to come up with an equitable solution to the problem. We would be very happy to assist them in drafting this document.

Unfortunately, I think this is the straw that will break the camel's back. Hon. Speaker, even their own agency that did all of their accounting asked them: "How does the government expect the economy to grow 3 percent?" That's what Peat Marwick stated. This legislation taxes any growth and even any attempt at growth. In a few years this minister will be going home and saying: "Honey, I shrunk the economy of the province." What then, hon. minister? We need jobs; we need the economy to improve. We're not going to do it by this regressive tax.

Like I said before, unfortunately I have to vote against it. It is very badly constructed and ill-conceived. You cannot tax the investment, otherwise the investment won't be there. This bill needs adjustments; it's misunderstood. I urge this government to put it to a committee and to have the open government they keep professing. Let us do this bill right and not injure the province and the economy of this province.

J. Dalton: Hon. Speaker, I also rise to speak in favour of the amendment. There have been many things stated in this House about what's wrong with this bill. I'm certainly going to point out a few things that are clearly wrong with Bill 6, therefore I speak in favour of the amendment.

This is a very arbitrary tax. We've seen much evidence in this session of arbitrary taxes brought in by this government. I refer to the tax on legal bills and many others that we could use as examples. It would seem to me that the government obviously sits around in its caucus sessions -- the Minister of Finance and the cabinet -- and goes through various examples and says: "Who can we tax next? Which group, corporation, business or enterprise can we dip into the pockets of and extract more tax from?"

I would suggest that in Bill 6 we have another example of another pocket to pick and another group or enterprise that can be taxed in a very arbitrary manner. There's no purpose behind this tax. It simply says: "If you have assets of $1 million or more, we are going to impose a tax." It has nothing to do with profitability or with whether the enterprise is in a competitive, profit-making picture. It's strictly arbitrary.

I would ask where the tax grab ends. How do we put a stop to these tax grabs? I would suggest that here would be an excellent place to put an end to tax grabs by voting against this bill. Therefore I support the amendment. That's one point.

I would also point out to the House that all corporations in British Columbia -- and it's well known -- are in a very competitive market. They don't just exist because they operate on their own and have no competition to worry about. Corporations need to have a level playing-field on which to operate. This tax does not allow a level playing-field; it tilts the field in favour of their competitors, certainly in Canada and elsewhere in the world.

This government should realize that there are ways to generate revenue other than tax grabs like this one, such as allowing corporations to be competitive and profitable. We all know that profits are subject to tax, and we have no quarrel with that. And we all pay income tax. Corporations pay tax on profits. Corporations should not have to pay a tax on an arbitrary basis: "How much capital do you have? We are going to tax you regardless of your profit picture." There's nothing fair about this tax. It doesn't encourage competition. It tilts the playing-field, as I say, so the corporations are placed in very disadvantaged position with regard to their taxpaying ability.

[ Page 1699 ]

There's much evidence elsewhere -- we could certainly make reference to the mining and forest industries -- that many corporations are looking elsewhere to locate. Yesterday, for example, I received a telephone call from a geologist who consults in mining. He is telling me -- and this is not a deep, dark secret, by any means -- that many of his customers are relocating elsewhere. They have no confidence in doing business in British Columbia. I cannot think of any corporation that would have any confidence to continue doing business here or consider locating here with such a tax as this corporation capital tax.

Finally, I would point out that yesterday, in the debate on the principle of this bill, some of the government members even spoke with concerns about the bill. I would suggest that if members on the government side have concerns about this legislation -- and well they should, both in their ridings and in the province -- they should have the courage of their convictions and support this amendment. There are many things wrong with this bill, and the amendment will certainly help to ease some of the difficulties that are presented. So I encourage all members in this House to support the amendment and kill this bill.

D. Jarvis: I am speaking to the amendment, and I'm in favour of it. I find it incomprehensible that the Finance minister would get up and glorify how well this province is doing throughout this country when this morning's Vancouver Sun, in the financial page, and the columns across this country are saying that the economy is falling backwards. Instead of a projected growth that should have been spearheaded by B.C. and Ontario, which have the largest resources in this country, nothing has happened. We are falling backwards because of these two provinces, which are saddled with the regressive taxation of NDP governments. They cannot cope with the progressive financing required to get our economies rolling in this country.

Secondly, they are hung up on this great socialist philosophy. Socialism is a philosophy of failure, based on a creed of ignorance and a gospel of envy. They have absolutely no idea of how to make an honest dollar. I say an "honest dollar" because they are not being fair with the people of British Columbia and telling them what this tax is actually doing. All they know how to do is tax and spend. Today we see before us the epitome of a taxation bill: Bill 6, the Corporate Capital Tax Act. That is why I'm against it and why I'm supporting the amendment.

[11:15]

The corporate capital tax will be passed on to the user, the average taxpayer -- not to the supposedly big, bad business people they're talking about or to corporations, whom this bill is presumably directed at, but to consumers and small businesses. Here again it's the socialists' misunderstanding about how business is run, how to make money and how to balance your books. They do not seem to understand.

Does this government not understand the words "pass through"? Let me explain, for example, how the gas companies will react to this. The two major gas companies in this province will be faced with a corporation capital tax of approximately $3 million to $4 million, and I'm probably being conservative. It's socialist naivety to think that they won't pass that through to consumers. It's incredible to think they would expect that these gas companies, along with their shareholders, could absorb $3 million to $4 million in taxes. As I said before, it's plain naivety.

Does this government honestly think that this tax, which also applies to the Crown corporations, including B.C. Hydro.... B.C. Hydro will be faced with a minimum of $25 million, plus or minus, as a result of this tax. Who in their right mind would think that B.C. Hydro is going to absorb this and not pass it on to taxpayers throughout this province? There again, it's socialist....

M. Farnworth: You just love the "s" word, don't you?

D. Jarvis: The "s" word is socialism, and it even hurts me to say it.

Mr. Speaker, what are we to do...?

Interjections.

D. Jarvis: Can we have order, Mr. Speaker?

Deputy Speaker: Order, hon. members.

D. Jarvis: Thank you, Mr. Speaker. The puppets in the far row don't really know what they're talking about.

What are we going to do about the marginal companies that are bordering on collapse? Company after company throughout this province is ready to collapse because they're not making any money, yet this government still says that we must tax them. How can they pay a tax when they are already losing money?

Hon. Speaker, this is a regressive tax, one that sends signals of distress not only to the companies of British Columbia but to all companies considering moving into British Columbia. This tax is so regressive that, without question, it will cost jobs now and in the future.

We have fewer than 21 mineral companies -- a combination of coal and mineral companies -- left in this province, and they lost approximately $200 million last year. The figures are not in for this year, but the outlook is certainly bleak; it will not be positive. Three mineral mines in British Columbia have already closed this year. The coal industry is a shambles, with men out of work and a major coal company in the southeast that can't even pay their municipal taxes.

Here is where the irony comes in. The government is preparing legislation, Bill 20, to bail out a coal company whose assets are well over $1 million. The company will be faced with this tax, and it can't even pay its municipal taxes. This government is preparing a bill so this company can pay its municipal taxes. At the same time they're going to turn around and say: "Now that you can't pay your taxes to Elkford, Sparwood, Fernie, etc., we want you to pay this corporate tax." How can a company pay corporate tax when they're not making any money and the taxpayers have to come in, bail them out and pay their taxes for them?

[ Page 1700 ]

This is a prime example of how this government thinks -- no concept of how to balance its books except to tax and tax in the hopes that the great world global economy will come along and bail them out. Well, economists throughout the world are projecting continued growth in this world, due to a global demand; however, not in B.C. You do not see foreign investment coming into this province, let alone to the country as a whole. The money is flowing south -- every other country except British Columbia. B.C.-based money is leaving this country and going south. They have no confidence.

This government has again sent out the signal to the world -- just like during those 1,000 days of horror in 1972-75: B.C. is really not open for business. We have a taxation government here. No one invests in an economy based on a regressive and non-profit tax system.

There is nothing wrong with socialism at all, except that it doesn't work. That's why I'm against this bill, and that's why I'm proposing that the members -- especially the young fellows over there in the back row who have no idea of how to make money -- turn around and support this amendment. It's not too late to change, my friends.

J. MacPhail: I ask leave of the House to make an introduction.

Leave granted.

J. MacPhail: After that stimulating speech from the member opposite, I thought it was time to introduce 30 students in our gallery from Vancouver Technical Senior Secondary in my riding. Their teachers are Mr. Renwick and Mr. Hepting, and they will be joined in a few minutes by an additional 30 students. I'd like to ask the House to make them extremely welcome.

M. Farnworth: It's a pleasure to rise and speak to the amendment and to the comments of the opposition. I've listened to the negative Nellies on the other side, and they're talking about taxing. Well, you read the amendment, and the only thing that's taxing is the sloppiness of the wording, and the sloppiness of the research, because it's full of inconsistencies, and it's wrong in everything it states. Our Finance minister has already pointed out that the tax will be deductible. This amendment says that it won't be. Sloppy research. That's what it is: sloppy research.

The tax will be a disincentive to invest in British Columbia. What's a disincentive to invest in British Columbia is an increasing deficit. That's what you're advocating, because you want us to continually cut taxes, and you want us to continually increase spending, but you don't want to raise the revenue to pay for the programs you want.

An Hon. Member: Cut out the millions you're spending on your patronage list.

M. Farnworth: We can cut out millions and millions of dollars. We can cut out the schools that are going....

Interjections.

Deputy Speaker: Order, hon. members.

Hon. member, would you please address your remarks through the Chair, and would the members please respect the member who is speaking.

M. Farnworth: Hon. Speaker, the opposition doesn't want tax increases. They want more money spent. They want to increase the size of the deficit. They obviously want to follow the Alberta model, which has just seen their credit rating downgraded. That is a disincentive to business. That is a disincentive to the creation of wealth: increasing government deficits requiring increasing tax increases down the road. This government, with this bill, is getting its financial house in order and the finances of this province under control. It takes everybody to be involved. Everybody has to share the burden. They don't seem to recognize that, or they don't want to recognize that. They want to be all things to all people.

An Hon. Member: Who benefits from these tax increases? Single interest and special interest groups.

M. Farnworth: The province is going to benefit from a sound financial position, and our party and our budget has now resulted in this province having the highest credit rating in the country. That is something that this province can be proud of. As I said, hon. Speaker, this amendment is ill thought out from the point of view of what it would mean to the province in terms of an increasing deficit and increasing personal income taxes. That's what they're advocating if they don't want everybody to pay their fair share. They want to put it onto the backs of homeowners; they want to increase personal income taxes; they want to increase the deficit. That's what this amendment would result in; that's what they want to accomplish. Hon. member, this amendment is ill thought out and should be defeated.

J. Tyabji: I'd like to speak in favour of the amendment, and I believe that a lot of my comments yesterday with regard to the corporate capital tax will explain why I'm in favour of the amendment.

I think the bill was very quickly put together. It could use some more consideration, particularly with regard to the environment, as I had mentioned, and the impact of a company that invests in capital investment to become more environmentally responsible and then ends up getting taxed on that two years down the road. The comments that I was making with regard to the corporate capital tax and the impact that it would have on corporations definitely lend credence to the amendment. We must consider this bill further. This bill will have far-reaching consequences. We all know that once a tax gets introduced, it's very difficult to change it. Once it's implemented, it more or less becomes standard practice for industry to act in a certain way. We then forget about it as we're very busy and have other things to do. We don't go and polish it up, and it stays on the papers as is.

This bill could use a lot of polishing. I think many things could be clarified and certain amendments could 

[ Page 1701 ]

be introduced. For example -- and I mentioned this yesterday -- we could have an amendment to allow a 50 percent depreciation per year for capital investment with regard to increasing environmental standards, so that by the time the two-year tax holiday comes about for capital investment, the environmental investment would be off the books. Then they're not being taxed on capital investment being made for stricter environmental regulations.

It's very important for us to realize that a bill is a very serious situation when it's with regard to a corporate capital tax and is being perceived internationally as to whether or not a company should invest in B.C. We have heard from various sources that the corporate capital tax is going to be a disincentive to investment in B.C. from overseas, so what we are going to have to look at is how we could make more responsive to this bill investors from all around the province and those who are overseas looking at the bill. What sort of amendments could be made to the bill to polish it up before it becomes an act, before we implement it and are stuck with it in the form it's in right now?

I would say that all of us in opposition realize we don't have enough votes to defeat this bill, so we do recognize the political imperative of having a majority government with regard to this bill. It will end up becoming an act, and all we can do is urge the government side to take the bill back into committee for consideration and reintroduce it in a polished form. Our finance critic is very well versed in how this will impact corporations. His own familiarity with corporations -- Mohawk Oil in this case -- gives him a lot of background with which to approach this bill and offer the kind of constructive opposition that we promised.

In fact, I would put to you that the opposition has a mandate to be participating in these bills in a constructive way. When we have constructive criticism to offer, we should have the opportunity to take it to a committee and sit in that committee with the government. As things stand, because this bill didn't go through committee stage, we are faced with a bill in which we had no constructive input in terms of its drafting. I would say that rather than going to committee stage here in the whole House, we should have the select standing committee review the bill, polish it and bring it back to the House in final form.

[11:30]

As I said before, we have a lot of expertise on this side -- the Minister of Finance has now joined us, and he missed the comments that I made to that effect -- and a mandate to offer constructive criticism. We campaigned with regard to being a constructive opposition -- to not be criticizing for the sake of criticism, but to actually put forward ideas we thought would benefit the minister.

Interjection.

J. Tyabji: I believe the minister agrees with me on the environmental depreciation suggestion that I made yesterday and that I would like to see put into the bill. I would like to see the bill in a situation where it's not being presented to us in a form where everything has already been typed out and we haven't had any input into the layout of the bill, but where we can actually go to committee stage on it and bring it to the House in a final form that we can all be very comfortable with.

Hon. Speaker, I'd like to conclude with regard to seeing this go to committee stage. I think it's very important for us to distinguish between the select standing committees, in which we can bring forward all parties of the House to draft a bill, and the Committee of the Whole, where something is being presented to us and we're being asked for input at that stage. There's a very important distinction to be made. If we bring a bill after the fact and ask for input, it's a very different situation, as opposed to all of us collectively putting our heads together and coming up with legislation that we believe is in the best interests of the people of B.C.

D. Schreck: Hon. Speaker, I find it disturbing that the opposition would move an amendment to delay bringing financial stability to the province of British Columbia and that would result in increasing the deficit to over the $2 billion point. But I find it particularly disturbing that the opposition, through the last spokesperson, would actually claim to be fulfilling the role of constructive criticism. We on this side are still waiting for any positive alternative to come from those opposition benches.

I know that when the last hon. member spoke, she did not mean to imply that any one particular company is being lobbied for by any one critic on the opposition benches. We know that all of us in this House want all companies in British Columbia to thrive and to create wealth. The best way we can have them do so is to make British Columbia a sound economy, to make it financially stable and to get the deficit off the backs of British Columbians.

The amendment is predicated on false assumptions. The amendment states that the bill will be a disincentive to invest in British Columbia. If the members opposite had read the act, they would see that unlike other capital tax provisions elsewhere in this country, there is a specific exemption for new investment.

The amendment states that there are drafting problems with the legislation, that it is somehow awkward. This province had a capital tax in this form for well over a decade in substantially the same language with no problems of administration. I just don't know what to say every time I walk past that sign that indicates an oxymoron of "Liberal Research." Anyone could have looked at this statute and seen, by simple reference to the previous legislation, that it is based on legislation that existed in this province, that worked for well over a decade, that wasn't weakened until -- at the hands of that third party -- the legislation was gutted following their unfortunate 1983 restraint program. We saw what restraint under that third party led to: restraint so that they could eliminate the tax provisions and get us to the financial disaster that we face today.

Now we are reinstating a tax measure that functioned in this province for well over a decade. We are doing it with considerable regret, but we are doing it out of an act of responsibility, for failure to do so would 

[ Page 1702 ]

either mean a deficit in excess of $2 billion or increased taxation directly on consumers and low-income people. This amendment clearly states where that opposition stands, if anyone can clearly state where that opposition stands. We don't know from one day to the next whether we are dealing with a well-defined position put forward as an alternative or a glorified city council, where we have 17 people each voting their individual mind. But in this chamber it is incumbent on all of us to offer clear alternatives for the people of British Columbia. I have not seen a clear alternative from those opposition benches. But I know the choices before us, and I know that the passage of this act is an essential move for financial stability for British Columbia.

L. Fox: Unlike the last speaker, I rise to support the amendment. My purpose for supporting the amendment is that at no point could I support this kind of legislation going through this House. One thing that the amendment does is allow this minister and this government to understand the full impact of this legislation, so at the very least he might know what he's doing to the economy of British Columbia.

The previous speaker talked about the fact that at one point, and for a decade, there was this kind of taxation in this province. I think we all know that. I'm pleased to see that an economist finally understands that. But as an economist, he should also have understood that the government of the day recognized the difficulties that industry and business were having in this province and the importance of a healthy industry and a healthy business sector to create jobs and opportunity. For nearly three years B.C. has created over half the jobs in this great country of ours. That kind of action is related to today's low interest rates, which we as a province presently enjoy.

I'm extremely concerned that this bill does not relate whatsoever to any ability to pay. Mention has been made of specific industries that are in an extreme deficit position right now. The Westar operation in Elkford is an excellent example of the negative impact that this taxation will have on an industry that is already in extreme trouble. The mining industry as a whole has extreme problems. I hope that passing this amendment will allow this minister and this government to examine what the impacts will be on that industry. From a phone call this morning to Placer Dome, I can tell you what the impact will be on them. This year they are spending $60 million to $70 million of their exploration dollars to find future opportunities outside of British Columbia. They have already lost interest in developing and investing in this province.

We've spoken before, and others have spoken, about the fact that we have 24 major mines still operating. By the year 2000, three-quarters of those will be shut down. I suggest to you that along with Bill 32, the Resource Compensation Interim Measures Act, and this bill, we're doing our best to shut them down a whole lot earlier than the year 2000. Until this year, B.C. has enjoyed the lowest taxes in Canada; we have enjoyed and still enjoy the highest credit rating. We enjoy the lowest debt per capita of any province in Canada. We have enjoyed the highest rate of growth of any province in Canada. We have the fastest-growing economy of any province in Canada and the largest growth of capital investment of any province. We're rated number one in terms of new corporations. Value-added exports were growing at twice the rate of our overall exports.

All those facts have been mentioned before, but I think it serves a purpose to mention them again. It appears that this government does not understand the importance of that history. If there is one concept that has gained universal approval in this House over the last decade, it has been the need to diversify our economy. Mr. Speaker, I submit to you that this taxation will be a major hindrance in achieving that diversification. We will not find that we will feel the impact of this bill tomorrow. We know, when we look back at '72 and '75, that that impact was not felt immediately, with perhaps the exception of the petroleum industry, which found it very easy to move their corporate offices out of British Columbia into Alberta -- something that we're still feeling the impact of. But we will feel in future years the impact of this bill if it should go forward.

I only hope that the amendment, when passed.... I look to the member for Port Coquitlam and some of his comments earlier, and I understand that he does not have a lot of industry. Perhaps the biggest effect he might feel is that a bottle of wine would increase within his area. I understand why he should argue the way he does, because he and his constituents will not directly feel the impact of this bill. But I want to tell that member that he will feel it indirectly, because a lot of the economy in his area is directly related to how well the resource sector does in the rural parts of this province. I can tell you and that member, Mr. Speaker, that he will feel the impact of this bill, and so will his constituents.

The minister talks about the two-year tax holiday this bill incorporates. I hope the amendment will give him an opportunity to examine exactly what that impact is. It's not the great saving instrument which will help instil credibility and encourage new development in this province. Indeed, in most cases many of the industrial sectors will take more than two years to get up and running. It will take another two to three years before they're running efficiently, specifically when we're dealing with new technology.

I speak now of one case in particular: the BCTMP mill at Taylor, owned by Fibreco. There, for instance, is an industry which is having extreme difficulties. It's new technology. They've had a lot of problems getting it up and running. Only recently this government recognized that by helping it along with a $10 million loan. That's great, but immediately upon giving them that, they're going to tax their capital holdings. If I use the same kind of assessment value a similar corporation has, the impact of that will be approximately $250,000 a year. Yet they're still not making money.

[11:45]

I look at a Westar corporation.... A good one is Carnaby, at Hazelton. There's a very good indicator. The impact of this bill on that corporation will be $135,000. We all know that that corporation is in huge trouble. The people of that area are extremely concerned about 

[ Page 1703 ]

the future of their economy and the impact this government will have on that company.

I submit to you, hopefully throughout this review, that this particular amendment will give the minister and his government the opportunity to review. He and his government could look very closely at those kinds of issues, and at the very least make sure that this bill reflects the concerns of those particular constituents and companies in terms of providing job opportunities in the future.

As I said in my opening statement, and I'll repeat: I would never support this kind of taxation. It is extremely crippling; it is hurting the economy; it will hurt job opportunities; and it will definitely stop us from the diversification that we so badly need.

K. Jones: It's also with regret that we have to speak further on this bill, but certainly it is a pleasure to speak on behalf of this amendment. This amendment tries to provide some guidance to the government and the Minister of Finance in order that he can bring forward much better methods of taxation than this one, which is very regressive -- this one that's going to have such a devastating impact on our major industries and utilities in the province. Because they are unable to pass the costs onto their customers, it's going to impact upon their employees, their workers and their staff.

[The Speaker in the chair.]

I would like to give you an indication of just how many industries are going to be impacted this year. Just going through some of the contracts that are coming up, this approximate 11 percent increase in costs, aside from the income tax and the increase in the tax costs, to these industries will have.... It's going to be a serious factor in the ability of the unions to be able to negotiate, because the companies are not going to have that kind of funds available for giving benefits and giving increases in pay which we would hope they would deserve. This government is taking from the workers the opportunity for pay increases and benefits by this type of legislation.

Interjection.

K. Jones: I'm in favour of the union people getting better breaks, and not being hampered by legislation such as this.

I'd like to indicate some of the companies: the Prince Rupert Fishermen's Co-op, with the UFAW: 81 workers. Seafood Products, UFAW: 100 workers. Versacold Canada, UFAW: 100 workers. Fording Coal, steelworkers: 939 involved in that. Metal Industries Association, the operating engineers: 240 workers involved. The pulp and paper industry, Canadian pulpworkers and the paperworkers: that is in the range of about 11,000 workers. Crows Nest Resources, Lynn Creek Mine, operating engineers: 373 workers. Quintette Coal, steelworkers: 1,126 workers. Scott Paper, OTEU: 72 workers.

Interjection.

K. Jones: The minister says it's boring. He doesn't care about the workers' interests being impacted here.

White Spot Commissary, KMAW: 150 workers. Forest industries, sawmill construction section, IWA: 800 workers. Domtar Industries in my community of Surrey, with the boilermakers: 69 workers. Air Canada and their machinists: 633 workers. The flagging contractors in the IBEW: 70 workers. Lilydale Co-operative, in the food industry, food and commercial workers: 140 workers. MacMillan Bathurst, the PPWC: 140 workers. Tree Island Industries, and the Teamsters: 254 workers.

I could go on and on. There are major contracts coming up here. The Hotel Vancouver and the Hilton, CBRT: 450 workers. Stolberg Mill Construction, northern division, IWA: 35 workers, Allied Shipbuilders Ltd., shipyard workers: 113 workers, Vancouver Shipyards Co., multiple unions involved: 350 workers. All these workers are not going to get a fair break in their contract negotiations as a result of the type of legislation that this minister is bringing before us.

As people who are concerned about the working people of British Columbia, we are the ones who are standing up to give them a better break and an opportunity to be able to negotiate fairly in their collective bargaining process without the interference of government. This taxation on the capital assets of the corporations that these people are working for is an interference in the collective bargaining process. It will restrict the opportunity for these workers to have fair negotiations.

The Cominco workers at Kimberley and Trail, with the steelworkers -- 3,508 workers have negotiations coming up this year. Chemainus Forest Products and the IWA have contracts coming due; Air Canada and CUPE -- 456 workers involved; Chatterton Petrochemical Corp. and the PPWC -- 80 workers; Coast Hotels and the hotel and restaurant workers -- 271 workers involved; Canadian Newspapers Co., the parent company of our local paper the Times-Colonist, and the communication workers, the graphic communication workers and the Newspaper Guild -- 295 workers involved; and the B.C. Maritime Employers' Association and the longshoremen -- 4,475 workers.

This is just how devastating this type of legislation will be upon the working people in their attempts to negotiate a fair and equitable contract, one that is going to try to bring gender equity and wage equity to the people in the working class of this province. This government is working against their best interests. We must have the support of all those union workers that are here in the House who have been standing up for the interests of the workers in the past. It's about time now that you vote not in support of this bill, but in support of this amendment. This amendment will give you the opportunity to show your support for the working people of British Columbia.

V. Anderson: I too rise to vote and to speak in favour of the amendment. There are many concerns that have already been raised in the House concerning this bill. I know it's of concern also to the many new and longstanding commercial and industrial businesses that are in my own riding of Vancouver-Langara, because 

[ Page 1704 ]

many of these are struggling companies who are on the brink of success or failure. This is one of the other clauses that will make difficulties for them.

An hon. member, a moment ago, was speaking of the effect it will have upon unions in their negotiations, but it will also have a direct effect upon the non-union persons who are having to negotiate individually on their particular wages and salaries and benefits, and the pressures that these companies feel falls even more heavily upon them, because they don't have the collective bargaining arrangement that others have. This is usually in the smaller companies where there has been a close-knit relationship between the owner and the workers in which the pressure upon the owner falls even more directly upon that owner's staff. On their behalf I have to speak in favour of this amendment, so thus against the bill.

The hon. member across the way was saying on a number of occasions that he was not able to hear any good suggestions or amendments. He didn't say that there weren't any; he just said that he wasn't able to hear them. I can understand that he can't hear, because if you're not listening -- if you're listening with a set of earmuffs on you -- then, of course, you are only going to hear the ones that fit into your particular range of thinking. I understand that.

However, I have some other concerns about this particular one, and one concern is about the growing lack of confidence that people have in the government in British Columbia. That affects all of us -- the growing lack of trust which we have all acknowledged was there even before we came together in this particular sitting of the House. They see these kinds of actions coming again and again without consultation or opportunity to prepare or plan for them. They are being implemented as of the date the bill is presented, and sometimes even retroactively. The companies who are planning on one scale -- planning their futures and prospects -- suddenly discover that the government which should be supportive of them has cut the ground from under their planning and has not given them the time required to plan and prepare. The government should be working with the businesses, not, in these facts, working against the businesses.

I know the hour is just about 12, and perhaps I should move adjournment of the debate at this time until the next sitting.

V. Anderson moved adjournment of the debate.

Motion approved.

Hon. G. Clark moved adjournment of the House.

Motion approved.

The House adjourned at 11:58 a.m.

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