1988 Legislative Session: 2nd Session, 34th Parliament

HANSARD

The following electronic version is for informational purposes only.

The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

TUESDAY, MAY 10, 1988

Afternoon Sitting

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The House met at 2:06 p.m.

HON. MR. VEITCH : In the gallery today we have a very important visitor:

His Excellency Per Fergo, the Ambassador of Denmark to Canada. He is accompanied

by Mr. Finn Petersen, the consul of Denmark at Vancouver. I would ask the House

to bid him welcome.

HON. MR. DUECK : It is a pleasure for me to introduce someone to this

House whom I just met a few minutes ago. His name is Peter Dueck; he is from

West Germany and apparently his grandfather is my dad's cousin. After much effort

six years ago, this young man's father and family were able to leave the Soviet

Union and go to West Germany. The young fellow is studying law in West Germany,

things that he wants to know about — the Canadian way of life and, in particular,

the health system. He can't believe how good we are treating people in this

country. He has joined my wife this afternoon in the members' gallery. Would

the House please wish him welcome.

MR. CLARK : I have the honour today of introducing to the House a group

of students from Templeton Secondary School in the north end of my riding. I'd

ask the House to give them a warm welcome.

MR. VANT : I am very pleased to introduce to the House this afternoon

Ed and Nettie Koppelman of Los Angeles, California, who are in the members'

gallery. I first met Mr. Koppelman in Williams Lake a number of months ago,

in the great Cariboo constituency. We welcome him and his good wife to Victoria

and to this Legislature.

MR. DAVIDSON : Earlier this morning the Cabinet Committee on Economic

Development received a presentation from the Delta Chamber of Commerce and the

municipality of the corporation of Delta. Visiting us this afternoon are Mayor

Doug Husband, Ald. Doug Brown, Ald. Ann Claggett, Ald. Rick Green and Ald. Bruce

MacDonald; and, from the chamber of commerce, Mr. Glen Buckley, president; Mr.

Michael Owen, vice-president, Mr. Peter Podovinikoff, the second vice-president;

and Ms. Roslyn Castleden. I would ask the House to make these visitors welcome.

MS. SMALLWOOD : I'd like to make welcome today a friend and constituent,

Miss Lily Karpoff.

MR. JANSEN : Visiting Victoria today, and in the precincts, from the

constituency of Chilliwack — a wonderful place, as you all know —

are Robert and Doris Sperling. Will you make them welcome, please.

MR. PELTON : Hon. members, early this morning at Lions Gate Hospital

in North Vancouver, a 6-pound, 1-ounce baby girl came into this world. She has

a very illustrious grandfather: our Speaker. I wonder if this House could congratulate

not only Mr. Speaker on this birth, but also his son and daughter-in-law.

While I'm on my feet, Mr. Speaker, if I may I'd like to ask the House to welcome

to the gallery today Mrs. Marie Hyland from Vancouver-Howe Sound. Mrs. Hyland

is the mother of one of our interns, Randall Hyland.

MR. MICHAEL : A constituent visiting the precincts today is Oona McKinstry

from the great alpine city of Revelstoke.

HON. MR. STRACHAN : Mr. Speaker, you're going to remember this

day for many years, I'm sure. Also, some of us in this assembly

remember this day because May 10 is the ninth anniversary of the class

of '79, who were elected May 10, 1979. There has been some attrition in

the last nine years, but I'd like the House to send out a big, warm

round of applause or whatever — condolences — to those of us

of the class of '79 who are left: the first member for Victoria (Mr. G.

Hanson) — granted, he's not here today; our government Whip (Mr.

Ree); the Attorney-General (Hon. B.R. Smith); the Minister of Education

(Hon. Mr. Brummet); and, of course, the first member for Prince George

South (Hon. Mr. Strachan).

HON. MR. COUVELIER : In the gallery this afternoon are four gentlemen

who are currently visiting Victoria on business. I'm pleased to introduce Mr.

Nigel Kent-Lemon and Mr. Martin Graham, both from London, England, and Mr. John

Kadlubowski, formerly of London; they're here this afternoon with Mr. Austin

Fraser from Duncan. Would the House please welcome them.

Oral Questions

BUSINESS IMMIGRATION

MR. CLARK : On the advice of the Minister of Economic Development (Hon.

Mrs. McCarthy), I address these questions to the Premier. At the first July

1987 meeting of your Premier's Economic Advisory Council, you outlined for the

council the broad areas that you felt should be discussed. Will you confirm

that one of those areas was development of a means to promote more business

immigrants to British Columbia?

HON. MR. VANDER ZALM : I think that might have been discussed in broad

terms.

MR. CLARK : At the conclusion of the second meeting of the Premier's

Economic Advisory Council, you issued a press release dated January 8 which

announced that "a key decision" made at the meeting was the "development

of a business immigration plan that will attract foreign investors to the province."

Will the Premier advise the House whether Mr. Peter Toigo attended the discussions

surrounding this decision?

HON. MR. VANDER ZALM : First of all, I don't know if a record is kept

of the attendance all the time, nor do we keep minutes of the meeting. We do

keep broad notes. The purpose of the Economic Advisory Council is to have people

representative of the various areas of the country and the continent, and for

that matter, we have people from different places in the world who also bring

with them all types of expertise. They certainly are people who are very successful

in their own right, and they give us a lot of information. They serve on this

committee and give of their time freely, and their

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input is very valuable, particularly as they provide us with this perspective

from other areas of the globe and also from their own experiences. Any number

of topics might be discussed.

I appreciate that much of what we are doing through the Premier's Economic

Advisory Council is also to try and develop opportunities for economic investment

and to seek new industries that might want to be established in one of the regions

of the province. Much of this of course might be foreign, particularly to the

members from Vancouver East, who are too centred in on one area only and don't

realize that there is another part of the province, the rest of B.C.; it's not

all centred in Vancouver East.

[2:15]

One of the members, the first member from Vancouver East (Mr. Williams), took

exception to someone serving on that particular committee because of his nationality.

The second member is taking exception — I gather from the comments already

made and from what I've heard yesterday — to the fact that people bring

a particular expertise. I'm sure that as far as the socialists are concerned,

they don't want successful people involved in anything; they would much prefer

that they could rule the roost without that outside advice. Frankly, economic

development would never be what we see in the province today if it were left

to the socialists; we'd be down in the dumps.

Mr. Speaker, we welcome all sorts of people from all over that provide all

types of expertise freely to government.

Interjection.

HON. MR. VANDER ZALM : Someone shouts across again — the member

for Victoria, who knows little better to do than shout and insult people.

If in fact it is again an attempt to insult or by innuendo to charge someone

right here in the Legislature, I would suggest that those members for Vancouver

East, who don't know the rest of the province — those socialists —

go out and say that outside of the House, and ask that someone be charged. Let

them have the courage of standing for what they're asking about.

MR. CLARK : The Premier has lapsed into an auto-rant, as he's wont to

do in this House.

Is the Premier aware that every legitimate fund that has been formed to promote

business immigration is opposed to the direction the government is taking in

promoting the fact that there should be guaranteed investment? Is he aware that

that's the direction that we see in briefs from legitimate entrepreneurs who

want to assist real business initiatives from real wealthy immigrants, and not

simply guaranteeing the investment? If he's not aware, he should be aware.

I have a question. Did Mr. Toigo declare at the second meeting that he was

a major shareholder and director of a company; that he joined that company one

month after the first meeting of the Premier's Economic Advisory Council, where

the Premier indicates this was discussed; that the company's name was Tang Peacock;

and that it stood to benefit from decisions made by the council? Did Mr. Toigo

declare that he had this interest, at the second meeting?

HON. MR. VANDER ZALM : Again, Mr. Speaker, we do not have conflict-of-interest

guidelines for members serving on that committee. They are there to give advice.

On this particular issue, again I say it was discussed, as I understand it,

in general terms; nothing specific. The name that's been mentioned by the member

I hadn't heard before yesterday, so this is the first I've heard.... The

name was not mentioned.

The government of British Columbia did not lobby the federal government to

change in order to bring about a means by which these investments could be guaranteed.

We did not lobby the government. Perhaps Quebec did; maybe Alberta did; we did

not. But the change came from the federal government.

Again, if the socialists across the way want to accuse people by innuendo,

go outside and do it. Have some courage. Don't sit in here and try and smear

people that serve this government in some capacity.

MR. CLARK : The question is a simple one, Mr. Speaker, to the Premier.

Did Mr. Toigo declare an interest in a company that stood to benefit by decisions

made by the Premier's Economic Advisory Council?

HON. MR. VANDER ZALM : All the people who serve on the commission discuss

in generalities any number of things that might be of benefit to the province,

and they provide on all of those issues.… We do not ask that they declare

their involvements. All these people, incidentally — bar none — are

successful and involved in a variety of activities, the type of people who give

of their time, who travel here and participate freely in all this, the type

of people whom the NDP socialists could never hope to attract.

MR. CLARK : The question is really a very simple one. Did Mr. Toigo indicate

to the Premier or to the members of the Premier's Economic Advisory Council

that he owned or partially owned a company named Tang Peacock Investments Ltd.

and that that company stood to benefit by a relaxation of the rules regarding

wealthy, entrepreneurial immigration?

HON. MR. VANDER ZALM : Mr. Speaker, I repeat: when people serve on committees,

as they do on that committee, they are not asked to declare anything with respect

to their involvements. There are no conflict-of-interest guidelines for these

people who provide advice freely. They are not required or requested....

I don't recall anyone saying: "I have an involvement here," "I'm

an investment expert," "I'm an expert in a particular industry or

a particular type of technology, and therefore I can't give you advice."

No, I don't recall anyone, including Mr. Toigo, having said that at any of the

meetings.

I'm very pleased that they're not constrained in any way to provide advice

to government, that they can provide advice to the people of this province at

no cost to them, that they're willing to participate because we have in this

province a good free-enterprise government that's getting things done in spite

of the socialists.

MR. CLARK : A supplementary to the Premier. It has now come to light

that Mr. Toigo joined a company one month after the first Premier's Economic

Advisory Council. We now know that decisions were made to support initiatives

from which he would benefit personally. How long will the Premier tolerate this

blatant conflict of interest between members of his council advising the government

on initiatives from which they stood to personally benefit? How long

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will he tolerate this conflict of interest? Will the Premier agree now to impose

some kind of conflict-of-interest guidelines on these businessmen so this kind

of permeation of conflict of interest that we are seeing on that side of the

House with this government comes to an end and people know there's a sense of

fairness in British Columbia?

HON. MR. VANDER ZALM : We will not impose on people who serve this province

in a variety of capacities the sorts of restraint that these members are asking

for. Certainly most people recognize that we need people to advise and to provide

their expertise to government. I well appreciate that the socialist philosophy

is very different and that you wouldn't seek successful people to be involved

in any way. But that's why free-enterprisers are governing the province and

not socialists.

MR. WILLIAMS : To the Minister of Economic Development. In view of the

obvious problems in this circumstance as, co-Chair is the minister comfortable

with this lack of requirement in terms of exposing conflict of interest?

HON. MRS. McCARTHY : I am perfectly comfortable with the actions of the

council and our involvement with the council, but I am particularly comfortable

with the kinds of service that these people give to us. It has been outstanding

and we have appreciated it more than we can tell you.

NEIGHBOURHOOD PUB REFERENDUM

MS. A. HAGEN : To the Minister of Labour and Consumer Services regarding

the application for a pub at 57th and Knight in Vancouver. There are now about

50 residents who say that their opinions were not counted in the referendum.

Has the minister responded to the public complaints about what appears to be

a faulty plebiscite?

HON. L. HANSON : That's an interesting question. We hold referendums

in almost every pub application, and there are very few where we don't get the

odd concern that people were not home. We have audited the referendum in the

Toigo realtor/land-owner/McRobbie pub application — which is what you're

suggesting — and we found absolutely no evidence of malpractice or undue

influence, or of an unfair referendum being held. The process was the same process

that is done in every one of them. A representative of the consulting firm doing

the referendum calls at the house. If there is no answer they leave a message

that says: "We have called at your house. The issue was this. If you send

in this card, which is self-addressed and stamped, we will mail you back the

ballot to give you an opportunity to vote on the issue of the pub."

That was done with, as far as we are concerned, everything above-board and

completed properly, and the results are as accurate as they are in any referendum

held in that manner.

MS. A. HAGEN : A further question to the Minister of Labour and Consumer

Affairs. Pub referenda are, in fact, a measure of public opinion, and the circumstances

regarding this particular pub application have raised many questions in the

public's mind. If these referenda are to be open and fair, the applicant must

not be allowed to hand-pick a survey firm that might present a biased or unreliable

report. Is the minister now ready to establish a new approach to pub plebiscites,

where the survey firm is contracted by the government and the pub applicant

pays the bill?

HON. L. HANSON : First of all, we are looking at a different system,

but not because the system that we're using now is in question. Quite frankly,

a number of firms in British Columbia are recognized as certified firms for

the conduct of a referendum. Just for the information of the member opposite,

there were about 4,000 people in the area surveyed, and 3,200 ballots were distributed.

I believe that 719 messages were left where there was no one home. Of the 3,200

ballots distributed, about 66 percent were returned. None of those percentages

are any aberration from the norm in an urban community.

If the member wishes to make some charges that the firm doing the referendum

was doing it with something other than above-board practice, then the member

certainly has that opportunity outside the House; and it would be dealt with

in the courts, as those sorts of things should be.

Ministerial Statement

AMBULANCE DISPATCH SERVICE

HON. MR. DUECK : I would like to make a ministerial statement at this

time in respect to questions I have taken on notice and many other questions

I have had on this particular issue. I thought it only fair that I make a statement

to clear the air and see exactly where we are. The opposition has once again

tried to create unwarranted fear among citizens of this province about our provincial

ambulance service, with questions fabricated without any substance whatsoever.

I wish to reply to the hon. member for Prince George North (Mrs. Boone), and

I sincerely hope the professional media will report my response as they have

dutifully reported the erroneous allegations of the opposition. To the statement

that portions of the emergency service will be privatized on May 1, 1988, I

categorically deny for the fifth time in question period that it is the government's

intention to privatize emergency ambulance service in the province. May 1, 1988,

has come and gone, and the opposition should apologize to the public for raising

unwarranted fears.

To the allegation that ambulance dispatch has deteriorated following centralization

of dispatch, each and every case brought to this House to date by the opposition

has been proven wrong — wrong, wrong, wrong, Mr. Speaker. I have investigated

each case, and the response time and service provided by the men and women of

emergency health services has been exemplary. In fact, the level of verifiable

complaints surrounding dispatch has fallen from 0.4 to 0.3 percent since the

introduction of centralization.

[2:30]

To the allegation of the member for Prince Rupert (Mr. Miller) that all the

dispatchers in Kamloops wanted to do was jawbone — this was a statement

made in the House — this is an affront to the professionalism of our staff

with respect to the incident he raised. I reported to the Legislature previously

that from the time of the initial call to our attendants arriving on the scene

was 11 minutes, not 20 minutes. Certainly there was no time to jawbone, and

I demand an apology from the hon. member to our staff.

By the way, the hon. member for Prince Rupert still has not brought to my attention

the specifics of the other two

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incidents he raised in the House. I believe if someone raises a question in

the House and I take it on notice, the only decent thing to do is to give me

that information so that I can, in fact, check it out and bring back that information.

I can only speculate that he is afraid that upon investigation he will be proven

wrong again.

To the allegation that priority 3 and 4 ambulance calls will be privatized,

all I can say is that the member from Prince George has received very unreliable

information. The current and future policy of emergency health service is that

when the provincial ambulance service is required to transport a patient, regardless

of the nature of the call, such requests will be honoured. With respect to private,

nonemergency transfer, should a doctor or nurse or facility feel emergency health

service ambulance is not necessary and wishes to call a private service, they

will be able to do so.

I strongly feel that alternative transportation service has proven to be invaluable

in these circumstances. In reply to the question with respect to standards of

alternate transport services, very specific and stringent criteria are being

formulated. The chairman of the Emergency Health Services Commission, Mr. Stan

Dubas, and two senior emergency health service officials are meeting with the

ambulance managers and paramedics to review methods that may improve the delivery

of emergency health services to the lower mainland. Patient transfers are being

considered in this review.

This House may rest assured that any new direction in the area of health care

will have high standards and controls to ensure patient care will be maintained

and service improved. I am totally fed up with the irresponsible behaviour of

the opposition....

MR. SPEAKER : Order, please. The opposition House Leader on a point of

order.

MR. ROSE : Mr. Speaker, certainly whether the minister is fed up or not

has nothing to do with a ministerial statement. Any authority you care to cite

will underline that a ministerial statement is for policy or changes in policy.

It's not to argue a particular case one way or the other. Not only has the minister

exceeded the patience of the House and of the Speaker, but he's flatly out of

order, and I don't think he should be allowed to proceed with that kind of partisan

argument during a ministerial statement.

HON. MR. STRACHAN : To respond to the point of order. Mr. Speaker, a

ministerial statement contains comments that a minister can make about policy

and his opinion about policy. The fact that he happens to be fed up with some

reporting is not partisan; it's just a statement being made by the minister,

and I feel that it's totally in order.

MR. ROSE : I'll cite the relevant citation from page 51 of that great

expert on parliamentary procedure in British Columbia, the reasonably honourable

George MacMinn. On page 51 he says: "When a minister makes a statement

on government policy or ministerial administration, either under routine proceedings,

between two orders of the day or shortly before the adjournment of the House,

it is now firmly established that the Leader of the Opposition...."

or other groups can reply.

Here is subsection (2) and the pertinent argument: "General arguments

or observations beyond the fair bounds of explanation" — not to engage

in partisan arguments or to take cheap shots at the opposition — "or

too distinct a reference to previous debates are out of order."

HON. MR. STRACHAN : On a final point of order, I'll advise you, Mr. Speaker,

that we'll bow to the learned authority, maybe just this once. Thank you for

your comments.

MR. SPEAKER : I thank both hon. members for their points of order. I

would bring out a point to the hon. opposition House Leader: the quotes were

made out of the book, but are actually from Beauchesne in that book — so

that members understand that.

HON. MR. DUECK : Mr. Speaker, I did not think that I had made cheap shots,

although I did say I was fed up. I would like to change that: I am very tired

of the behaviour that has been shown in the House. In question period after

question period I've categorically denied their allegations, yet they persist

in attempting to create fear among our clients. This is not taking a cheap shot;

this is a fact.

When I was appointed Health minister I pledged to myself and my ministry staff

that we would not play politics with health care, and I would respect it if

the opposition side would do the same.

MRS. BOONE : Mr. Minister, we are not trying to create any unwarranted

fear; we are trying to awaken the minister to some very real problems out there.

That is our role in the opposition.

We have asked the minister to review our concern regarding centralized dispatch.

The minister consistently says that the incidents were human error, points to

us and says that we are saying it is a people problem. The problem is not with

the dispatch, not with the people in the dispatch, not with the ambulance attendants;

the problem is with the communication system that this government put in place.

It is entirely wrong to consistently say that it is human error, and that is

what the minister has constantly said with regard to this.

Interjections.

MRS. BOONE : The minister has said that. I do not believe for one minute

that this human error would have taken place without some of the problems that

are there.

The member for Prince Rupert (Mr. Miller) was quoted as saying "jawboning,"

but he was quoting what was said to him. Therefore he does not owe you an apology;

you owe an apology to the people out there.

We are saying that there are some very real problems, not with the staff but

with the communication system; incidents, problems out there with the length

of time it takes, not for people to respond but for people to get their message

to the dispatch. It is the communication system, Mr. Minister, not the people

and the breakdown there; it is due to the breakdown in the communications system.

When you centralized, you promised us top-notch communications. You said there

would never be a time when we would be without a communication system. Yet lines

have been down; pagers aren't working. All those things are a problem, and we

want some action in those areas, Mr. Minister.

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The issues we have raised in this House are just one or two of many, and I

do mean many. We've received letters and calls from individuals who are concerned.

We've only brought a couple of them to you.

The minister seems to have changed his mind about privatization. In this House

we have constantly questioned the minister on the privatization aspect of the

priority 3 and 4, and not once has the minister quoted his policy here, which

says: "When the provincial ambulance service is required to transport a

patient, regardless of the nature...." You never once quoted that.

You told us that privatization on the priority 3 and 4 was going to take place.

You stated that. We asked you time and time again. Your own memo here that went

out states: "Phase 2: initiate the subcontracting of all priority 4 transfers,

May 1." "All" priority 4 transfers. We want top-notch service

for our people and we demand that we have that service.

When we asked you in the House, Mr. Minister, about the standards to be supplied

for the staffing and the vehicles that were to be supplied, you told us that

you had no standards. You said: "I have no standards for the staffing of

those areas. I have no standards for the vehicles." Now you are telling

us that you do have standards.

If you want to say that these things aren't true, then we are impressed that

you have taken us at our word and you are not going to privatize priority 3

and 4, if that's what the minister is saying. We have been calling for that

for a long time.

If the minister wants to argue as to what's happening with the communications

system out there, by all means, but do not attack the service out there that

is given to us by the people. Our people are providing a good service but they

need to have the communications system out there to back them up so they can

give that system. And they don't have it.

MR. SPEAKER : Government House Leader on a point of order.

HON. MR. STRACHAN : I have two points of order actually. I wonder if

the member for Prince George North would be so kind as to review the remarks

made by her House Leader earlier with respect to argumentative statements.

Secondly, the member has referred to an official document. I wonder if the

member would have the courtesy to table it.

MR. ROSE : I would like to on behalf of the opposition welcome the Minister

of Health's cousin to the Legislature.

CYANIDE-LEACHING PERMIT APPEAL

HON. MR. STRACHAN : Yesterday, I took two questions on notice. I have

the material available now to answer one, and I will advise the House that I

will have the material available by adjournment time this evening to answer

the other.

The question I am prepared to answer now has to do with a ministry decision

to overrule one factor of an Environmental Appeal Board decision of 1986, which

is why it has taken some time to get this material available.

[2:45]

The question posed to me and the question I took as notice yesterday was from

the hon. member for Surrey Guildford-Whalley (Ms. Smallwood), and it said, in

essence: "Can the minister tell us whether it is his policy now to overrule

the Environmental Appeal Board, and if so, what's the point of having an Environmental

Appeal Board in the first place?"

Is it my policy to overrule the general policy? No. However, to give you some

details of the process here, the question posed to the Environmental Appeal

Board had to do with a cyanide leaching gold-mining process in the Grand Forks

area. In 1985 a waste management permit was granted to a Grand Forks mining

company, to discharge gold process, leach liquor and storm water to a recycle

pond with excess to an evaporation pond. In 1986 the Grand Forks Watershed Coalition

appealed the permit to the Environmental Appeal Board, and in their decision

of July 17, 1986, the Environmental Appeal Board ruled that the various plans

required under the waste management permit issued to Sumac Resources —

those are the people undertaking the activity — should be circulated to

the various government agencies as well as to the appellant, the Grand Forks

Watershed Coalition.

The appeal board instructed that consideration be given to the comments from

these agencies and the groups before the plans were approved by the director

of the waste management branch. It then became known to the Ministry of Environment,

through counsel employed by Sumac Resources, that information dealing with their

process was, in their opinion, proprietary information and should be available

to them only. On that basis, we asked the permittee to submit his proprietary

plans — secret plans, if you will — to the director of the waste management

branch, and we would keep that process confidential but examine it ourselves.

We did that and then informed the permittee that he could go ahead.

However, as the member has indicated, we did overrule one part of the decision

by the Environmental Appeal Board; and we did that, we think for good reasons,

in terms of protecting the public of British Columbia against private lawsuit.

Donald Pharand of the Grand Forks Watershed Coalition was advised of this by

a letter from me on April 8, 1988.

That's the end of that statement.

MR. WILLIAMS : Mr. Speaker, I ask leave of the House to make an introduction.

Leave granted.

MR. WILLIAMS : I'd like to welcome the second group of Templeton high

school students here today. They've had a good taste of how the Premier enjoys

the members from Vancouver East today.

Orders of the Day

HON. MR. STRACHAN : Mr. Speaker, I call committee on Bill 14.

BUDGET STABILIZATION FUND ACT

(continued)

The House in committee on Bill 14; Mr. Rabbitt in the chair.

section 6.

MR. STUPICH : The opposition is opposed to this section, which gives

the government the authority to transfer the

[ Page

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funds from the lottery fund to general revenue, in effect. It says they'll

go to general revenue first and then they'll go into the BS fund, but they can

come out of that just as easily as they go in. So in effect we're authorizing

the government to take $79 million out of the lottery fund and dump it into

the $4 billion deficit that we now have in the general account.

Mr. Chairman, a lot of people buy lottery tickets. We were told earlier today

that the market for them is decreasing to some extent. One of the things I hear

from time to time from people buying lottery tickets — and from those that

aren't, I guess — is that they wish that the money were going into some

special program of some kind, where they could recognize that when they were

buying these lottery tickets, a part of the price they were paying was going

into some particular government service. They often mention hospitals, but other

services are mentioned as well.

In this case the lottery fund was set up for very specific.... At least,

the money was supposed to be going to very specific purposes. The legislation

currently reads, in

section 7(b): "paid out for cultural or recreational

purposes or for preserving the cultural heritage of the Province or for any

other purpose consistent with the objects of the Western Canada Lottery Foundation."

HON. MR. VEITCH : You're looking at an old one.

MR. STUPICH : The Provincial Secretary — from his seat — is

telling me I'm looking at an old version. Well, I'm looking at the most recent

one we have in this chamber. It does make reference to an amendment that has

never been proclaimed and is not yet in effect, according to the information

I have. The Provincial Secretary may shake his head, but maybe later on he'll

get up and speak. That's the information I have to go on.

In any case, that's what it was supposed to be used for and that's what people

buying the tickets think it's being used for. As I say, they would like to have

it used for some specific purpose.

This legislation we're dealing with now allows the government to raid the Lottery

Fund and take out everything that was left over. They had a very good year of

paying out in election year. They went into a deficit position that year. Last

year they had a net income; they didn't pay nearly as much out in grants. They

expect to have $79 million left over in the year we're in right now. The Provincial

Secretary is wrinkling his nose, but I'm reading from the estimates. I don't

have anything else to go on. It's the same with legislation: all I've got to

go on is the most updated version available.

The estimates say that the Lottery Fund expects to have $79 million left over

after it meets all of the requirements from various organizations all over the

province — at least in Socred ridings. You can say that; I won't. Whatever

requirements the Provincial Secretary endorses, after they meet all of those,

there will be $79 million left over. It's going to be dumped into general revenue,

the sinkhole that had $11 billion in expenditures this year. We're going to

dump in $79 million out of the Lottery Fund to try to make it up.

As I say, the bill goes on to say that it'll go into the BS fund eventually.

If it were hard cash, it would be the only hard cash in there. We all know —

the minister told us time after time this morning — that there's no hard

cash there. There's a $4 billion deficit, and this is part of it. It's not a

case of transferring cash. It's just inflating a phony figure, a figure that

says only — again, as I said this morning — that some year down the

road we're going to recognize this revenue as having been earned this year.

It's the same with the Lottery Fund. We're transferring it into the BS fund,

and saying that some year down the road we'll recognize the money we expect

to make on lotteries in '88-89 as actually existing. In that year, when we want

to make things look good, we'll change the figures around accordingly.

In any case, that lottery money should be used for some specific purpose or

purposes, not just dumped into the general revenue pot. It should not be revenue

that the government depends upon for maintaining services in the province. It

should be used for purposes outside the general business of government. We are

opposed to seeing it disappear into the great pond of general revenue.

MS. EDWARDS : I would hate to let this opportunity go past without applauding

everything that has been said by the first member for Nanaimo and questioning

this whole business which comes up on this fund of there being, as it said in

the throne speech, "surplus lottery funds" to go into the budget stabilization

or BS fund. I don't know how the minister decides what are surplus lottery funds.

What is surplus to our recreational, cultural and artistic needs in this province,

if not the other needs that lottery funds have been used on up until now? If

the minister could explain how one decides what is surplus to those needs, perhaps

we could at least argue that. Right now we're talking about some foolish phrase

that means absolutely nothing. Many communities in British Columbia have had

inadequate funds to address their recreational needs, since the recreational

facilities fund hasn't operated for about six years now or perhaps a little

longer. Those needs are also included here. To suggest that there is such a

thing as surplus.... To what, I would like to know. Is it surplus to our

needs? It certainly isn't surplus to our needs. Has the minister any answer?

What are surplus lottery funds?

HON. MR. COUVELIER : As exhibited again, hon. members opposite

seem to be taking both sides of the coin and trying to argue them at

different times. I heard earlier complaints that this Lottery Fund was

being abused — erroneous complaints, I might add — and

directed to Social Credit ridings only. Of course, that's not true. The

hon. members all know that. It's designed to serve a variety of

cultural and recreational needs in the community. To argue, on the one

hand, that it's used for Social Credit political purposes and then, on

the other hand, to decry the fact that more expenditures aren't being

made.... I find myself faced with what appears to be a contradiction.

However, the Lottery Fund has traditionally been used for many desirable social

purposes, and it will continue to be so used. The Lottery Fund has been used

to retire the Expo debt; large sums of money were directed to that purpose.

The surplus-to-needs issue is addressed by virtue of traditional spending patterns

being maintained. The government's position is that we are doing that. It's

entirely appropriate, in our judgment, that surplus revenue from the lottery

fund would be diverted to the budget stabilization fund as we propose to do

with this legislation.

MS. A. HAGEN : I want to speak very strongly against this particular

clause in Bill 14 for a number of reasons. First of all, we are being asked

to deal with funds that the public clearly understands are to be directed to

recreational, cultural

[ Page

4371 ]

and charitable activities. When they participate in lotteries, one of the things

they recognize is that that's the goal, the reason these funds were established.

The minister has just indicated to us he has absolutely no guidelines that

he can provide for us on what would be deemed surplus to the needs of those

particular categories. If he asked any member in this House who works with constituent

groups, he would find that there is a colossal unmet need based on criteria

arbitrarily decided on by the Provincial Secretary in respect to the number

of grants that will be available.

For example, one of the criteria that the minister uses is that up to one-third

of capital costs will be available to groups, and he then sets a maximum limit

on that activity, which de facto means that most groups are looking at something

in the order of a quarter — 20, 15 or 10 percent — of that capital

cost actually coming out of the Lottery Fund.

Given that the Lottery Fund operates on the ad hockery of the

Provincial Secretary, that we are not accorded regular reports of the

expenditures of that Lottery Fund, that the rules vary each year

according to the criteria of government.... Even with the Lottery Fund

staying as a special account, we have enough difficulty ensuring that

it is being used for the purposes it was designed to serve and in the

way that the public, in supporting lotteries, expects.

With this absolutely loose arrangement that says that some amount to be specified

by someone, without any kind of guideline, will be declared surplus and become

part of the BS fund, it certainly is small comfort for those groups that every

single member of this House is working with trying to achieve their goals in

a cooperative way through their own fund-raising initiatives and the contributions

that come from the Lottery Fund.

If we look at this year and the proposal under special account of the Lottery

Fund, it appears that what is deemed to be surplus, with no indication of the

basis for that decision, is a full 50 percent of the earnings of the Lottery

Fund. The projected revenue is $159,470,000, and no fewer than $79 million —

half of that amount — is to be siphoned off to the budget stabilization

fund.

Tell that to the seniors groups trying to put together the dollars to add to

their recreation facilities in order to enhance the wellness of seniors —

the goal of the Minister of Health, as he has said in discussions. Tell that

to the groups attempting to put into place recreational facilities that will

keep young people off the streets and give them productive activities in their

communities. Tell that to the arts and cultural groups that are a very major

component of the economic well-being of the province.

[3:00]

They won't buy that this skullduggery in terms of financial arrangements is

in any way fair to the intent of the Lottery Fund and to the support that they

developed in cooperation with the dollars that come from the Lottery Fund. This

is a very shoddy move on the part of the Minister of Finance and the government,

to siphon off dollars aimed at community activities that are a part of the cooperative

enterprise between government and communities. It's a slap in the face to those

groups which goes along with the inconsistency of guidelines and funding that

has become the hallmark of how the fund is distributed. I am dismayed to think

we're going to be looking at 50 percent fewer dollars from the lottery proceeds

this year, and heaven knows, since there's no guideline, whether it's going

to be 70 percent or 80 percent another year. We have nothing at all to give

us any indication of what the minister might have in mind, except that it's

at his discretion. Once again he has funds that he can use to serve his political

agendas instead of the cooperative and planned activities of community groups

that see this as a legitimate complement to their efforts in the projects that

they plan.

I would urge that we all soundly represent our constituencies in calling this

particular move the most cynical of the things that go with the budget stabilization

fund. It's not something the Minister of Finance can take any pride in presenting

to this House.

HON. MR. COUVELIER : I can tell the hon. member categorically that I

do take considerable pride from the fact that surplus lottery funds will be

diverted to the budget stabilization fund. The point the member.... She

rambled over a number of points, but the key issue, it does seem to me, is this

question of whether we honour traditional spending patterns. We intend to do

that, and therefore her claim is not valid. Once again I must point out that

lottery funds were used to retire the Expo deficit of some $337 million, so

it is traditional that the proceeds from the Lottery Fund not be spent frivolously

and that they be diverted to other essential public purposes. The Expo deficit

diversion is an excellent illustration of that. I don't believe it is accurate

for the hon. member to claim that the government is in any way abandoning the

initiative exhibited by the Lottery Fund philosophy.

The hon. member also mentioned that these disbursements are not reported. That

is not so. The Provincial Secretary reports these disbursements on an annual

basis. He is not required to do that. There's nothing in the legislation that

says he must do that, but this government believes it's public information and

is happy to share it. It would be useful, I think, if we could at least be accurate

when we make these comments against the various acts before us.

MS. EDWARDS : The minister has referred several times to traditional

spending patterns, and then mentions that lottery funds were used to pay off

the Expo debt. Does this mean that he perceives traditional spending patterns

to be a pattern whereby the government uses lottery funds to pay off the exorbitant

price of the government's megaprojects?

HON. MR. COUVELIER : Do I take it that the hon. member is describing

Expo as an exorbitantly priced megaproject? Is that the thrust of her comment?

Section 6 approved on the following division:

YEAS — 36

Brummet

Rogers

Reid

Dueck

Richmond

Parker

Michael

Pelton

Crandall

De Jong

Dirks

Mercier

Long

Veitch

McCarthy

Strachan

Vander Zalm

B.R. Smith

Couvelier

Davis

Johnston

R. Fraser

Jansen

Gran

Chalmers

Mowat

Ree

Bruce

Serwa

Vant

Campbell

S.D. Smith

Jacobsen

Davidson

Messmer

Peterson

[ Page

4372 ]

NAYS — 16

Marzari

Rose

Stupich

Boone

D'Arcy

Gabelmann

Cashore

Guno

Lovick

Williams

Sihota

Miller

A. Hagen

Jones

Clark

Edwards

Sections 7 and 8 approved.

Title approved.

HON. MR. COUVELIER : Mr. Chairman, I move the committee rise and report

the bill complete without amendment.

Motion approved.

The House resumed; Mr. Speaker in the chair.

Bill 14, Budget Stabilization Fund Act, reported complete without amendment,

read a third time and passed on division.

[3:15]

HON. MR. STRACHAN : Committee on Bill 22, Mr. Speaker.

INTERNATIONAL FINANCIAL BUSINESS

(TAX REFUND) ACT

The House in committee on Bill 22; Mr. Rabbitt in the chair.

Section 1 approved.

section 2.

MR. STUPICH : I was looking for the best place to ask this. During second

reading of this bill I put some questions to the minister as to just how much

revenue would be forgone by way of income tax from individuals, corporation

tax from corporations, and what financial benefits there will be. I just wondered

if he could try to give us some cost-benefit analysis of this legislation, and

he said that was something he could deal with in committee stage. I am giving

him the opportunity, Mr. Chairman.

HON. MR. COUVELIER : Well, I'm pleased to have the opportunity to respond;

the member is most generous in providing that opportunity and I am indebted.

The fact of the matter is, as the hon. member well knows, that until we get

some experience with this legislation and see the interest exhibited, it will

be very difficult to quantify those figures. We do have two firms that to date

have expressed an interest in pursuing and taking advantage of the legislation.

We do expect there will be more; but I am sorry, until we get some experience

we will not be able to tell how much extra income to the province the initiative

provides in terms of expanded economic activity, nor will we be able to quantify

the cost of the tax exemptions.

MR. STUPICH : I understand one organization is already in the field,

and I gather from the minister another one is coming. Do we have any idea how

many of their employees would be designated as working solely in this field,

and hence for leaving their personal income tax? Do we have any idea how many

of the employees of the organization currently in the field will be designated

as not having to pay personal income tax?

HON. MR. COUVELIER : No, we do not.

MR. STUPICH : I understand that when the federal government was bringing

in legislation on this subject, they felt it would be too rich to give the kind

of encouragement that we're giving in this: that is, no income tax for a number

of individuals, no income tax for corporations, with respect to these activities.

The federal government argued that that would be too rich.

Does the minister have anything at all to go on in saying that while it may

be too rich for Ottawa, it is not too rich for B.C., that we are prepared to

pay this price for getting something, the worth of which we have absolutely

no idea but nevertheless are prepared to pay the price? Have you anything at

all to go on?

HON. MR. COUVELIER : Well, I think we discussed this matter in the past

when we first introduced the legislation last session. I think the philosophy

behind this has been pretty well thoroughly discussed.

For the hon. member's information, the province of Quebec has similar tax exemption

provisions, so in terms of that aspect we're no different from the province

of Quebec.

In dealing with the philosophical intent of the legislation, it is to create

an infrastructure, a network if you like, of financial community participants

in the city of Vancouver, so that we can further develop our Pacific Rim economic

thrust and hopefully, by the variety of devices that we've brought forward in

the last year and a half through the Legislature, tend to build that expertise

resident in Vancouver. I am referring here to the captive insurance legislation

that we passed previously, and this legislation has the same philosophical intent.

MR. STUPICH : The opposition will not be opposing this legislation. Right

now we think to do so would be almost as irresponsible as the minister in bringing

in this legislation, because while we know very little about it, unfortunately

the minister doesn't seem to know much more. We are really flying blind on this

one. We're offering tax escape for individuals and corporations. We don't know

how many of each are going to apply, and of course, as the minister says, until

it gets going we won't know the cost. We don't know whether there'll be any

benefits; but, as I say, it would be just as irresponsible to vote against something

that might produce some benefits as it would to bring in a proposal one knows

nothing at all about.

MR. WILLIAMS : I note that Royal Trust has brought in a man from Jersey,

which is the tax haven in the Channel Islands, with semi-independent status

from the United Kingdom. Have you carried out any analysis of what the Jersey

and Guernsey circumstances cost the United Kingdom through recent decades in

terms of legitimate revenues for that country?

HON. MR. COUVELIER : Well, I am surprised that the hon. member seems

to be not aware of the very successful

[ Page

4373 ]

Jersey financial centre initiative. It's been in place now, as I understand

it, for something better than 20 years. As a matter of fact, the growth of the

financial activity being conducted in that centre has had the consequence of

almost a saturation point, and it has prompted the Royal Trust firm to look

for another location in the world where they might start to build similarly.

I think that's a matter of record. If the hon. member would like me to send

over to him copies of the press releases and all of that good, marvellous, exciting

news, I'd be happy to. But suffice it to say, for the record at least, that

Jersey has been preeminently successful and well recognized for creating an

international financial centre out of virtually nothing.

MR. WILLIAMS : Mr. Chairman, I wonder if the minister ever, ever listens

to questions. The question was clear; the question was simple. The question

was: did you carry out any analysis of the cost of that tax haven to the United

Kingdom? That was the question, pure and simple. Can you answer it? Yes or no.

HON. MR. COUVELIER : I have some trouble with the terminology, Mr. Chairman.

I suppose that comes because of our different philosophical biases. You see,

I don't see this as a cost. I see it as a new business activity that we're presently

not enjoying, and the effort to attract that level of expertise of necessity

requires the government to make some indication to the trade that it is in business

and desiring to build business. So I view it not as a cost at all. We haven't

attempted to quantify what the tax will be, in the sense that until we learn

the success rate, you can't quantify it. I think that should be self-evident.

MR. WILLIAMS : Well, the world will never know, because they never report — at least, to the outside world. If the minister can't measure the cost,

but talks about the benefits, maybe he can give us the measurements of the benefits

that he perceives.

HON. MR. COUVELIER : The benefits will be fantastic.

MR. WILLIAMS : Do we have to give you a lecture, Mr. Minister, on the

most modest, minimal obligations to the House? You're bringing forth legislation

here that is saying that these outfits can arrive here, free and easy, and pay

no income tax; they can have employees that pay no income tax; there will not

be public reporting of what their activities are and what they're up to. Then

you have the gall to say: "And it'll be fantastic. I don't have to tell

you any more than that." Well, that's not good enough. It is simply not

good enough. If you want to take the time of the House the way you continue

to do with this kind of vapid nonsense that we get from you again and again,

then you'd better be prepared to sit in that chair for one long time today.

You'd just better be prepared.

What studies have you carried out, Mr. Minister? There's surely to God got

to be some kind of analysis from your myriad staff, your Treasury Board officers,

your analysts and all the rest of them, in terms of some projections of likely

benefits and costs.

MR. SIHOTA : It's not going to be that easy. Look, Mr. Chairman, we're

simply trying to ask some very basic questions here. It seems to me that whenever

a government undertakes an activity, it must have some understanding of what

the costs and benefits are going to be. Presumably, for the minister to come

to the conclusion that it is going to be a benefit.... I'll pause until

the minister starts to listen. If the minister's listening now, I'll continue.

If the minister is saying that there's to be a benefit to this province, presumably

he must have arrived at that conclusion....

MR. CHAIRMAN: Will the member

please continue.

MR. SIHOTA : I expect to have the attention of the minister. If the minister

is not prepared to listen, I'll just wait until he's finished taking his notes.

Now that the minister is seated again, I'll continue and ask him the question.

If the minister has come to the conclusion that there is going to be a benefit,

presumably that must be founded on something other than simply a thought on

the part of the minister. Could the minister explain then on what basis he comes

to the conclusion that this would be a benefit — not in philosophical terms,

in terms of saying, look, we're going to have a financial centre, but in terms

of real hard dollars? What type of analysis was done by his ministry which would

lead the minister to state in this House that this would be a net financial

benefit to the province? Once the minister has explained that calculation, could

he also give us a figure on what he and his department conclude would be the

benefit in real dollar terms?

I think it's unacceptable that the minister asks this House to vote one way

or the other on a piece of legislation which has tax implications, without figuring

out what those implications are going to be one way or the other. Any time a

government wants to give a tax concession, surely it must know mathematically

what its projections are with respect to how much it's going to cost the taxpayer

or, alternatively, how much it's going to benefit the taxpayer. It would be

folly for a Minister of Finance not to have made those types of considerations.

I'm sure the minister has, and I'm asking if he's prepared to share that with

us and to tell us in numbers what the benefit is to the province.

MR. CLARK : Can the minister give us some understanding of how many jobs

will be created in the next two or three years when this act is passed?

MR. SIHOTA : Can the minister give an indication as to how many jobs

he thinks will be created by this?

[3:30]

MR. CLARK : Can the minister give us some understanding as to how many

jobs will be created in Vancouver in the first year as a result of the passage

of this act?

MR. BLENCOE : Can the minister give us some indication of the financial

benefits to the province and the costs to the taxpayers of B.C.?

MR. SIHOTA : Mr. Minister, this is a democracy. One would expect an answer

from the minister in this Legislature. I ask the minister again: can he indicate

in this House how many jobs he thinks will be created in British Columbia under

the first year of this financial centre?

MR. BLENCOE : I'd like to ask a question of the minister. There obviously

are some costs to the taxpayer for setting up this institution. Perhaps the

minister could tell us the costs, the benefits, and the jobs that would be created

by this

[ Page

4374 ]

institution. The people of British Columbia are entitled to that. We're entitled

to answers in this chamber. The minister perhaps feels he's so arrogant that

he knows automatically what is best for the people of B.C., but this is where

we get the information. Perhaps through you, Mr. Chairman, the people could

be entitled to the information.

MR. WILLIAMS : Everybody else pays taxes. This is legislation that eliminates

taxes for these privileged few. It's reasonable that we should have some numbers.

How many jobs? What's the trade-off? It's a standard exercise that you go through

with respect to any legislation. You can level with us if it's just a classic

leap of faith. Take us off into the stratosphere with your leader.

You do have some obligations, Mr. Minister, and the most basic, reasonable

ones are that you should give us some numbers and justify this dramatic change

that you're proposing, and which is sweeter than what the feds are talking about.

The feds were not overly impressed by this proposal. Committees of the House

were not overly impressed in terms of the number of jobs. You have an obligation

to respond to that kind of legitimate criticism. You have a job to respond in

this House.

We really have had a dismal performance out of you over the last several months.

We get these windbag answers that say nothing, and now we get absolute silence,

which is maybe a plus. Your staff do carry out studies. You have your chief

staff person beside you, who can provide you with all of the advice you need.

We've provided you with time to get that. There's written material there beside

you. We think you should make the House privy to that information.

HON. MR. COUVELIER : Of all of the members opposite to be talking in

such derogatory terms about a failure of a minister of the Crown to answer questions

put to him in the House or during debate on a bill, the hon. first member for

Vancouver East (Mr. Williams) is the last one I ever would have thought would

have made such a comment. He was notorious during his term as a minister of

the Crown for failing to answer questions put to him. It's marvellous how sitting

across the floor results in a totally different attitude.

I have said before, and I don't know how often I have to say it, that the hon.

members seem to think that if a different face jumps up and asks the same question,

I will jump up and respond with the same answer ad infinitum — or maybe

that should be ad nauseam. I say again that there is nothing that we are losing.

We are benefiting, in the sense that we are building a financial community infrastructure

in Vancouver. To the extent that there may be some exemptions of tax, it's tax

we're not now getting, hon. member. So we're not losing. It's not costing us

anything. I said it before and I say it again.

The second member for Victoria (Mr. Blencoe) made some sort of reference which

I had some trouble understanding. We're talking about the International Financial

Business (Tax Refund) Act. As a consequence of that, as I say, we will be enticing

and attracting businesses that we presently do not have located in Vancouver.

Through that process, we will be building up an infrastructure in the financial

community of Vancouver and thereby, we hope, be able to compete more effectively

with other jurisdictions in the Pacific Rim area who have similar incentive

programs.

The fact of the matter is that in this rapidly changing economic and financial

world we're attempting to enter, it is very important that we have at least

the same level of attractions that are in place elsewhere. Even within our own

country, hon. member, the jurisdiction of Quebec has this kind of legislation

in place and is competing with us for Canadian firms for the location of their

international business in Quebec. Would the hon. member have us not enter this

field? I suspect that had we not brought forward legislation, we'd have had

to listen to speeches ad nauseam criticizing us for failing to capture or attempt

to capture this market niche.

Here we are moving in that area, and we've had successes. You could even wax

eloquent if we hadn't produced results. We produced results on the day we introduced

the act. Royal Trust announced that this was a very worthwhile, innovative thing,

and because they exceeded their capacity in Jersey they were looking elsewhere

in the world and chose Vancouver, hon. member, because we brought forward the

act. Since that time, the Canadian Imperial Bank of Commerce has joined Royal

Trust. So you can't even claim we're not successful.

What are you left to argue? You're left to argue the same question time after

time and expect me to jump to my feet and give you the same answer time after

time. Surely, if you genuinely wanted the answer, you would have listened the

first time it was put, and then all of you would have had it. I understand that

this is described as the democratic process; I have some trouble understanding

its logic from time to time.

Will it benefit B.C.? Yes, it will benefit B.C. Will it help preserve our opportunities

to capture business in the Pacific Rim? Yes, it will serve that purpose. Is

it done elsewhere in the world? Yes, it is done elsewhere in the world. Is there

a cost factor associated with this? No, there's no cost factor associated with

this. This is new business. Would you rather us not have the business, hon.

member? Is that what you're saying? Would you rather Vancouver lose this opportunity

to relate more effectively with the Pacific Rim? Is that what you'd like?

I know that from Vancouver East you're the expert on forests, but I didn't

also realize you were the expert on finances. The House is grateful for your

advice in this respect, but the fact of the matter is that there's no negative

downside to this legislation and you know it as well as I do.

MR. SIHOTA : The other half of the equation, simply put to the minister,

is could he tell us what he calculates out the benefit to be in dollar terms,

if any, to the province? Like I said before, if you don't see it as a downside,

that's fair enough, but we'd like to know what your own ministry projections

are.

As I understand the debate, and I stand to be corrected and I invite the minister

to correct me — because I'm sure that if I'm wrong the minister will be

the first one to come out and try to correct me on it — the first member

for Nanaimo (Mr. Stupich), our critic in this area, asked the minister a question

during second reading on this debate as to what the cost implications were,

positive or negative. There was no answer forthcoming. We were told that that

answer would be provided during this stage of debate on the bill. I assume that

no answer has been forthcoming and we're simply asking the minister to provide

us with that answer. If he's done it in the past, then he can say he's already

given the number and I don't think it'll take him more than 30 seconds to repeat

it. We'd like to know what he calculates the benefit to be to the province in

dollar terms. It's not a skill-testing question, Mr. Chairman. It's a very basic

question to a minister who, if he's done his homework, will be able to quickly

tell us.

[ Page

4375 ]

HON. MR. COUVELIER : I will say it one more time. We are unable to quantify

the benefits until we've had some experience. Until that experience is obtained,

the hon. members know full well that I cannot provide figures. I suppose it

would suit your purpose to have us give you some sort of flimflam on the issue,

but I refuse to do that. Given your financial expertise in this area, I would

assume that you above all others would know the inability for us to quantify

something that doesn't exist at the moment. All we've done is provide the enabling

legislation to allow some things to happen. Until they happen, I'm at a loss

to understand how you would expect us to quantify it.

MR. SIHOTA : To the minister again. I was going to call him the Minister

of Flimflam, but I guess I shouldn't.

The question to the minister is this: what is the experience elsewhere then?

The minister talks about Quebec; I'm sure he's done his homework on this matter.

I'm sure the minister can then tell us: what is the level of benefit that accrues

to the province of Quebec? I don't need the figure right down to the last cent,

Mr. Minister, but we need to have some idea of what you're looking at.

HON. MR. COUVELIER : I understand that that information is not yet available

from Quebec, insofar as they also are introducing new initiatives and therefore

can't be quantified for the same reason we can't quantify it.

MR. SIHOTA : It's my understanding that the federal government had come

to the conclusion that this type of legislation was too rich. I'm wondering

if the minister could advise the House to what extent the provincial government

consulted with the federal government, and to what extent and in which way the

changes reflect the federal concern, in that if it was too rich at the federal

level, I'm sure it would be a concern at the provincial level. That being the

case, I'm wondering if there was a change in the delineation or drafting of

this legislation to make it a little less rich.

HON. MR. COUVELIER : Mr. Chairman, the province's desires to create an

international financial centre in Vancouver go back to the early eighties. They

relate to a public statement made, as I understand it, by the Prime Minister

of the country at that time, and it was repeated by successive Premiers of British

Columbia. As the initiative moved closer to a resolution, the hon. member should

be aware that some jurisdictions in central Canada became almost paranoid in

their concerns that this would adversely affect their existing level of business

and their future ambitions for business growth. As a consequence, the federal

government found itself in a debate with the provinces of Canada. B.C. was an

active participant in that debate.

I was quoted publicly in many business and daily publications as that debate

unfolded. If the hon. member would like. I can provide clippings of those quotes

and public differences of opinion between the governments of British Columbia,

Ontario and Canada. All that is history, and it's history during our term here;

the hon. member was a member opposite when all this occurred. I shouldn't have

to read the history books to him; it's so recent.

The issue in terms of our relationship with the federal government has been

difficult. They did not give us all we wanted; they did not give Quebec all

they wanted: they gave too much, in the opinion of the province of Ontario.

Indeed, I would hope that as the future unfolds, we will be able to get further

concessions out of Ottawa, so that we are truly competitive with the other international

financial centres in the Pacific. At the moment, we're not truly competitive.

We have some natural advantages which, I think, were the reason we were able

to attract the two firms which have so far indicated their interest in this

bill. But at the moment, we're still not able to compete head-on with financial

firms operating out of Tokyo, Hong Kong or Singapore, because we're not in the

position of providing the same incentives. To do so would require federal government

changes. Certainly the issue of this matter vis--vis the federal government

is well known and a matter of public record.

[3:45]

MR. CHAIRMAN : Before we continue, I would like to remind the members

that we are on

section 2, entitled `Application for registration." Although

the Chair has been lenient, maybe if we deal with the items as they come up

under the bill, we may progress a little faster.

MR. CLARK : The minister said this isn't a tax loss because it's forgone

future tax revenue, which is kind of interesting for this kind of voodoo economics.

It is interesting from the other side, because if we took it to its logical

conclusion, and every new business didn't pay any taxes, then we'd have no tax

revenue. It's quite clear that these kinds of tax expenditures, as the federal

government does, take.... I am quite confident that the bureaucracy here

is aware of the tax expenditures that this will entail, and it would be nice

of the minister would be forthcoming with some of that information.

On this side of the House, as you may know, we are not wildly opposed to this

legislation. We are simply asking specific questions so that we can get some

handle on what the magnitude of the tax loss will be, how many jobs it will

create — those kinds of factual questions, so that when it goes through

we've got some understanding of what we're voting on. It's really not an attempt

to discredit the program or otherwise. It's really an attempt simply to get

information.

Mr. Blenkam, a Conservative Member of Parliament from Ontario and the Chair

of the federal House of Commons committee that looked at this question, recommended

against designating Vancouver and Montreal as international financial centres.

HON. MRS. JOHNSTON : Are you surprised?

MR. CLARK : Well, I have a great deal of respect for Mr. Blenkam. I

don't know about the members opposite, but I think he is a very astute Conservative

member who has a good sense of . . . It was a unanimous decision of all parties

of the committee. I am not saying it was the right decision, but Mr. Blenkam

came up with some numbers and he said the tax loss was significant — in

the millions — and that the employment benefits to Vancouver would be about

three jobs, if I recall correctly. I think it was $20 million and three jobs.

Maybe the minister can tell us, if we are to support this legislation in the

face of this report from the federal government, what ammunition he can give

us to defend the legislation. I am sure your staff has the federal report on

this matter; I am sure you don't come into the House with two major pieces of

legislation without having a folder that contains the

[ Page

4376 ]

major criticism from the federal government on this question. Maybe the minister,

with the help of his staff, could tell us where Mr. Blenkam went wrong. How

is he wrong in his assumptions? If we agreed with his assumptions, I too would

have to oppose this legislation. Maybe he could give us some understanding as

to where Mr. Blenkam was wrong, whether there are more than three jobs or less,

or where he was faulty. Or are we simply to take this as a leap of faith, like

the free trade deal or something? We're just to take a leap of faith and say

we're in favour of the concept, we know it's going to be good for British Columbia

and we should support it.

It would help if we had some analysis of Mr. Blenkam's report and at least

some specific and pointed critique of it, and we could say....

MR. CHAIRMAN : Hon. member, I have been listening with much interest.

Could you please bring your discussion back to

section 2.

MR. CLARK : Certainly. I am looking at

section 2(b), where it says: "carries

on or proposes to carry on those international financial activities from a designated

branch or office within the Greater Vancouver Regional District...."

We're discussing now a clause which deals with registration of international

activities in Vancouver, and I am asking questions regarding the federal government's,

or Mr. Blenkam's committee's, position on the designation of international

financial activity in Vancouver. I think it's in order.

I wonder if the minister could give us some help in terms of this critique

of Mr. Blenkam's report I am suggesting.

HON. MR. COUVELIER : With respect, I believe the member and his question

are out of order. We're not discussing the federal legislation that was studied

by Mr. Blenkam. He made no comment about this B.C. legislation. It's absolutely

irrelevant. Why should I be expected to comment on a Member of Parliament's

critique of a federal government initiative? My goodness, we are, as you pointed

out, Mr. Chairman, dealing with

section 2, I thought, which is a B.C. bill.

I heard a comment earlier that you are basically supporting this bill —

it was something that was going to be supported. Why we now want to get diverted

into a discussion of Blenkam's critique of federal legislation is beyond me.

MR. CLARK : As we have said, it's not a question of support. It's a question

that we don't want to blindly support detailed legislation of this nature.

I noticed in

section 1, which we have now passed, there is a definition of

an international financial activity.

Section 1(m), under "international

financial activity," says: "any activity designated as an international

financial activity by regulation of the Lieutenant Governor in Council."

It's quite interesting, because that seems to me to be wide open. In respect

to identifying how that fits in with

section 2, which is what we are discussing

now,

section 2(1)(

b) says: "carries on or proposes to carry on those international

financial activities from a designated branch...." Given the definition

that we have adopted in

section 1, which allows the Lieutenant Governor to designate

any activity as an international financial activity, is that a correct

interpretation

section 1 as it applies to

section 2?

HON. MR. COUVELIER : Yes.

MR. CLARK : I have some difficulty on this side of the House supporting

legislation which is so wide open that it allows the Lieutenant-Governor to

designate anything as an international financial activity. That may not be the

intent of the minister....

MR. WILLIAMS : What firms do you think may want that designation?

MR. CLARK : Yes, I wonder who will get the advantages of that? Maybe

the minister could give us some undertaking, in a detailed bill like this, why

you would have this clause and all this other detail that allows you to designate

any activity as international financial activity. Is it in fact a correct

interpretation

that you can designate any activity as an international financial activity?

If it is, what purpose do you need that for, particularly in light of

section

2(b), which covers that point?

HON. MR. COUVELIER : Maybe I'll just refer the hon. member to

section

7 when we get there.

Section 2 approved.

section 3.

MR. SIHOTA : I was going to ask the minister a question on

section 3. I guess it relates to the public interest.

Section 3(1)(

b) says: "...granting the registration is not contrary to the public

interest." Again, keeping in mind the comment that the second member

made with respect to any type of financial activity, is the minister

saying that the registrar, or whoever it is that makes these decisions

of public interest, is supposed to decide that certain activities will

not be in the public interest and is that not overriding your power

under your orders-in-council? Does it deem certain types of activity to

be acceptable? Yet you are saying to someone else that you can turn

something down on the basis of public interest. In other words, your

order-in-council, which may allow something to be registered, could be

struck down by a bureaucrat, saying it is not in the public interest.

Or am I reading that properly?

It seems obtuse to me that you would allow a bureaucrat to override a regulation

made by cabinet. It seems peculiar to me, unless the minister can give me an

example of what type of public interest argument would not allow for it to be

registered.

HON. MR. COUVELIER : No.

MR. SIHOTA : No to what? It wasn't a yes or no question. It just seems

to me that on one hand you've got the cabinet saying that this type of activity

is okay, because you've deemed it an international activity, and then you are

saying that in the public interest it can be rejected. I'm trying to think of

a public interest example where a bureaucrat could say it is contrary to public

interest and won't be accepted for registration when the government itself has

deemed it to be appropriate. You can't have a bureaucrat overriding an order-incouncil

made by cabinet. It seems to me that the activity, once it's approved by cabinet,

forces the registration to take place. So I'm not too sure why you have to deal

with the public interest aspect of it — unless you can give me an example.

[ Page

4377 ]

MR. CLARK : Could the minister tell us who the superintendent is for

the purposes of interpreting this act?

HON. MR. COUVELIER : The superintendent referred to here is the superintendent

of financial institutions.

MR. CLARK : Given the complexity of this bill and the second bill, is

it to be assumed that there will need to be more staff in the superintendent's

office specifically to deal with the implementation of this bill?

HON. MR. COUVELIER : No, we don't anticipate having to add any staff

in the first year, although we have provided for some extra expense. I am advised

that there is $150,000 in the account for that purpose. But in terms of FTEs,

we don't anticipate any extra need in the first year.

MR. CLARK : Under this section, then, maybe the minister could explain

how it would work. We have two companies that want to come here and open this

thing, and this is the

section on registration. What's the process for becoming

registered to qualify for the tax exemptions, etc.? You prescribe a number of

things here. It seems to me that the superintendent is really who these people

deal with. Maybe you could tell me just briefly the sequence of events that

an offshore business would utilize in order to get registered and start rolling

in British Columbia under this act.

HON. MR. COUVELIER : I am very pleased to publicly state the process

so that others may be attracted to it. First of all, an application is made

to the superintendent of financial institutions. He would review it and assess

it, and he would make recommendations to me as deemed appropriate. So the superintendent

of financial institutions receives the applications and reviews them and, as

I have said, critiques them and decides whether to further them on to my attention

or not.

MR. BLENCOE : On a point of clarification, is it just offshore companies

that can apply for registration?

HON. MR. COUVELIER : Canadian companies can apply, but it's offshore

business that has to be conducted in order to qualify for these tax breaks.

That's contained in

section 7, when we get there.

[4:00]

MR. WILLIAMS : Corporations are being established working on Hong Kong

investments that might be tied to future immigration. Is it possible that these

outfits might qualify under this legislation?

Maybe the minister can consider that. Clearly, there are a lot of new institutions

flowering around this issue of potential immigration to British Columbia. Might

some of these be tied to or make use of this legislation?

HON. MR. COUVELIER : I am a little bit surprised by the thrust of the

question. Once someone is a resident of Canada, there would be no reason why

they couldn't become involved in this kind of activity. The point is, it's offshore

activity, and both legs of the transaction are offshore. I fail to understand

why anyone would be concerned about a resident — whether just recently

a resident or a long-time resident — being involved in this activity. Is

the hon. member suggesting that we should deny newly arrived residents or new

residents this activity? I heard a speech about democratic rights about half

an hour ago. I'm just trying to understand the thrust of the hon. member's interest.

MR. CLARK : As I understand it, and as the minister has said, both legs

of the transaction have to be offshore. So essentially it's kind of looped through

Vancouver. What I'm intrigued by is, what's the real benefit to British Columbia?

I don't want to belabour it, but it just strikes me that the money simply flows

through. It is essentially like a tax-free address. No money stays in British

Columbia because it has to be invested offshore. The money has to be got offshore

and invested offshore.

Is it correct that the money has to be raised offshore and then invested offshore,

and that it goes through Vancouver, so there is no investment potential in British

Columbia? And then they don't pay tax on that, because it's a kind of paper

transaction: that's really all that takes place. But I guess there are accountants

and the like in British Columbia who essentially make sure that that money is

funnelled through. The benefit to British Columbia is, in fact, that little

banks with some chartered accountants and the like.... I won't use the word

"launder" — I don't mean it in a derogatory way — but the

money just comes through like that. No money actually stays here, except in

wages and benefits to a few people and rent on the building. Is that actually

how it works? The benefit is presumably that those people don't have to pay

income tax, but they spend their money here in British Columbia. Is that an

unfair analysis?

HON. MR. COUVELIER : It is eminently fair.

MR. CLARK : I appreciate that. I thought that's how it worked.

It does seem to me then that it's really not a major initiative,

other than in the psychological sense, I guess, of us becoming the

funnel for Pacific Rim money whooshing through. I don't mean to sound

facetious. But is that essentially…? The benefit is then that we become

the kind of entrepreneurial.... Is this what you envisage? Essentially

we will have entrepreneurs who go out and make arrangements with

Pacific Rim — presumably Hong Kong or something — money to come through and invest, say, in some other part of the world.

When it comes through here, the transaction place is listed as a box office

or an address in Vancouver. Then it becomes exempt for tax purposes, and that

really becomes the point of these transactions. The bulk of the money is not

left behind, just a little bit of it. We become a focal point for this kind

of paper transaction. Anybody who's been to Bermuda would say that's essentially

what Bermuda does. It's a big industry there — pushing paper and funnelling

money around the world. Is that the kind of thing the minister envisages? It's

not Bermuda or Grand Cayman but a smaller version of that, using the great capital

that exists in Japan and Hong Kong, and coming through Vancouver as a tax-free

venture. Is that sort of fair?

HON. MR. COUVELIER : I wouldn't call that as eminently fair as the previous

comment, because there are a few more inhibitions it.

As I said when we talked about it an hour or so ago, we see economic benefits

flowing from this. Our objective is to build some expertise in terms of human

beings with background in a financial community, but resident in Vancouver;

[ Page

4378 ]

they must be resident in British Columbia. Through that device we expect we

will build the level of expertise. That will attract more work for lawyers,

accountants and financial advisers, more work for banks, insurance companies

and all the ancillary services that are attracted to large, significant financial

activity. As I say, in communities where financial centres have been created,

that is the effect.

We don't anticipate there being a large increase in jobs. We never

sold this.... I never once described this as creating lots of jobs

initially. I do see it having the potential to create more and more

jobs in the future, as more and more firms take advantage of our offer.

To that extent maybe, I support the hon. member's comments; but I don't

put it quite as harshly as he might like.

MR. CLARK : Is it fair to say to the minister that this attempts to put

us on a more equal footing with some of the places like Jersey, Grand Cayman

and so on, in terms of the tax advantages for locating here? You're hoping that

the attraction to Vancouver will be essentially the amenities, so that decision-makers

may move here as a result of the combination of our amenities in Vancouver and

the tax advantages which put us on a more equal footing with some of our competition

in this field. Is it really the amenities that help to drive this?

HON. MR. COUVELIER : I'm not sure I'm happy with the reference to Grand

Cayman. So I'm not going to support the hon. member in comparing us to that

jurisdiction. I'd feel more comfortable comparing us to Jersey or Hong Kong

or Tokyo or Singapore. I think those are more relevant comparisons, given the

fact that they are comparable — potential infrastructure already existing

in telecommunications — in terms of established trading patterns. Grand

Cayman is truly, as I understand it, an in-and-out kind of experience.

By this requirement that people have to be residents of B.C. and by the fact

that we've already got extensive trading patterns.... As you know, the port

of Vancouver is one of the busiest ports in North America. We have a lot of

things to build on in terms of economic activity, and this legislation will

further enhance that.

MR. CLARK : I appreciate that we're sort of getting a handle on the project — or at least I am, better than I was. The only thing that concerns me

about the minister's last answer is this notion that if it's building on existing

trade patterns, there might be a tendency for these companies to funnel some

of the existing trade pattern through this vehicle in order to escape the taxation

which would have been paid today or in the last few years. Can the minister

give us some assurance that this is truly only for future ventures, and that

we won't see a funnelling of any of the existing trading that we do through

this to escape taxation? Because that's a concern, I think.

If the minister has indicated that we shouldn't look at it as a tax loss because

it's money that wouldn't come here anyway, I can understand the argument. But

we'd like some assurance that if we're building on existing patterns of trade,

there won't be the possibility of funnelling through that; or if it is a possibility,

that you've got a handle on what that might entail and if there is any cost

involved.

HON. MR. COUVELIER : It is not our intention, Mr. Chairman. I suspect

that were it to be the result, other jurisdictions in Canada would have something

to say about that.

Sections 3 and 4 approved.

section 5.

MR. CLARK : Maybe I'll just ask a very broad question, for the minister

to give us an explanation of this

section and how it would work.

HON. MR. COUVELIER : Mr. Chairman, subsection 5(1) provides that tax

refunds are calculated in accordance with the regulations, and subsection

(2) limits the refund to the amount of tax paid in a taxation year. Three types

of taxpayers are eligible for a tax refund in respect of tax paid on income

earned from international financial business. Paragraph (

a) provides a tax refund

for registered financial institutions, paragraph (

b) provides a 100 percent

tax refund for a non-resident specialist employed by a registered financial

institution, and paragraph (

c) provides a partial tax refund for a full-time

employee engaged exclusively in international financial business.

Subsection (2) allows an income-averaging basis for determining a tax refund

to be established by regulation. This will provide flexibility in calculating

tax liability, similar to that provided in that in the Income Tax Act of Canada.

Subsection (3) stipulates that this

section applies to the taxation year that

commences after the act is proclaimed, and subsection (4) restricts the number

of specialists designated by a registered financial institution to no more than

five.

MR. CLARK : Just so I've got it right.... A financial institution

that's a going concern in British Columbia would apply to be designated as an

international financial business. But what in fact happens is that that is only

a very small component.... In this case, say, the Canadian Imperial Bank

of Commerce sets up a separate incorporated business that is then registered

under the act with the superintendent as an international financial business.

So that becomes in a sense a separate and distinct business. Then specialists

in this field who work for the CIBC are paid out by the separate business, and

presumably a portion of the rent paid for that desk and that person could be

written off under this

section by the CIBC. Or is it that they actually have

to set up a separate place of business with separate tax specialists working

out of separate books, etc.? Or can they prorate their business in accordance

with this in order to take advantage of it? How does that work?

HON. MR. COUVELIER : Your last example was the correct one.

MR. CLARK : Just so I've got it right, because I wasn't very clear, it

has to be a separate place of business. No, sorry; I was giving you the former.

The latter was that CIBC has their regular business; they hire one person who

is, say, a tax specialist. That person then incorporates and they qualify under

this act, and that person's rent and overhead, etc., which CIBC pays, is attributed

to international financial activities for the purposes of this act. If that's

correct — I think it is — would the minister give me some understanding

as to why only five specialists in a taxation year would qualify?

[ Page

4379 ]

[4:15]

HON. MR. COUVELIER : We are not completely sure how popular this initiative

will be. We are reluctant to find ourselves in the position of giving away too

much. On the other hand, we wanted to make the initiative popular enough so

that there was an interest and some serious intent exhibited. So that's a judgment

call, limiting it to five. We will read the experience as it unfolds.

MR. CLARK : I can't help pointing out the inconsistency of the minister's

last remark. He has repeatedly stated that it's not going to cost us anything,

and then he said: "Well, we've put a cap on it at five because we don't

want it to cost us too much." I agree with the latter comments, rather

than his previous remarks that it's not going to cost us anything. You really

capped it at five just in case there's an explosion of people applying to be

specialists for the purpose of this act to take advantage of it. That seems

quite reasonable to me.

Given that the CIBC is the first bank, and given that this

section deals with

financial institutions, can the minister give us some understanding? I would

assume that almost all the banks would try to qualify in order to have one person

who might be that kind of elbow-joint in the transaction, or to take advantage

of what you're attempting to create, which is essentially a new business in

British Columbia. Can you give us some understanding that that's probably going

to take place? The minister is shaking his head. I'm not trying to make this

complicated, I'm just trying to get a sense of where you see it going. We were

getting there, until the last answer.

I'm a little intrigued by the different categories of tax refund that could

be paid out. Just so I've got it right, if the CIBC have qualified and are registered,

and they hire a financial specialist as defined in the act, which qualifies

them, that person would pay tax in the normal manner and then apply for a refund

rather than be exempt from any taxation. Is that how it would work?

HON. MR. COUVELIER : Yes.

Section 5 approved.

section 6.

MR. CLARK : I'd like the minister to briefly explain the purpose of this

section.

MR. COUVELIER :

Section 6 contains certain interpretive rules which apply

to situations between related persons. Subsection (1) specifies that a tax refund

is only to be paid to a registered financial institution in respect of income

earned from international financial activity that is derived from arm's-length

transactions.

Subsection (2) provides an exemption from subsection (1) when the activity

is conducted by a person who is acting for another non-resident person with

whom it deals at arm's length. The first non-arm's-length person would still

have to be non-resident — that is, a foreign subsidiary.

Subsection (3) provides the interpretive rules for identifying arm's-length

situations. Paragraph (

a) refers to the definition of arm's length contained

in the Income Tax Act of Canada, which states that persons related to each other

shall be deemed not to deal with each other at arm's length. Paragraph (

b) treats

a partnership and a person as not dealing at arm's length where a member of

the partnership and the person do not deal with each other at arm's length.

Paragraph (

c) treats a partner as not dealing at arm's length with the partnership

or another partner in the enterprise.

Section 6 approved.

section 7.

MR. CLARK : The minister has alluded to this

section several times, so

I'll give him a chance, if he could, to address some of the concerns we raised

earlier in his explanation of the intent and purpose of

section 7.

HON. MR. COUVELIER : I'm grateful to the hon. member for providing me

this opportunity.

Section 7(1) stipulates that before a tax refund is payable to a registered

financial institution, the institution is required to verify the non-resident

status of the person for whom the international financial activity is being

conducted. The registered financial institution must obtain a declaration from

the person stating that the person is a non-resident and make reasonable inquiries.

After inquiring, the financial institution should not have any reasonable grounds

to believe the person is a resident.

Subsection (2) contains two exemptions from subsection (1). Paragraph (

a) provides

an exemption for loan and deposit activities with non-residents. This activity

will already be fully tax-exempt under the federal international banking measure.

Paragraph (

b) provides an exemption for the participation of residents in eligible

security dealings with one leg offshore.

Subsection (3), by deeming the person to be a nonresident when the financial

institution has obtained a declaration, has made reasonable inquiries and has

no reasonable grounds to believe the person is a resident, ensures that the

institution is not held liable to repay any tax refund to the province if a

person is later discovered to be a resident.

Subsection (4) says that the financial institution shall immediately cease

to account for any activity as an international financial activity if the institution

has reasonable grounds to believe that the person is or has become a resident.

No tax refund will be paid in respect of any activity carried on with the person

after the date on which the institution has reasonable grounds to believe that

the person is or has become a resident.

MR. CLARK : Just a couple of questions. With respect to the first section,

you indicate that a declaration is required. Is it the minister's intent that

the office of the superintendent of financial institutions, who is responsible

for implementing this act, is where the declaration would be deposited? And

is that where any investigations that might be prompted by the declaration would

be reviewed? Do you anticipate a small investigations unit to ensure that these

are non-resident and these declarations are bona fide, or are you going to rely

on the financial institution to ensure that it is in fact a legitimate non-resident,

and that the superintendent, then, really deals with the bank and doesn't deal

with investigating the bona fides of the declaration?

HON. MR. COUVELIER : The institution will keep the declarations on file,

and they'll be subject to audit by the superintendent and his staff.

[ Page

4380 ]

MR. CLARK : It seems to me that you're really saying it's.... I guess

you can't protect for false declarations, in any real way. But it seems to me,

if you're going to say that the bank is responsible for collecting the declaration,

and the bank is responsible for having reasonable grounds to assume that the

person is in fact a non-resident, then I'm a bit uncomfortable with their not

having any liability with respect to that. If you have a superintendent whose

job is not to investigate the declarations of offshore investors but simply

to review from time to time the institution's deposited declarations, etc.,

and has no investigative powers, and then you say that really the bank is responsible

for that, but then you say the bank has no liability.... It seems to me

that there may be a little inconsistency there, and it's a bit vague. Can the

minister give me any assurance that I'm wrong on that?

HON. MR. COUVELIER : It's true that we are expecting the financial institutions

to be responsible for their actions. Certainly they are expected to maintain

high standards. Through the audit process, we'll be monitoring that situation

closely.

MR. CLARK : I appreciate that. The problem, of course, is that if you

do find through the audit that there's something wrong, there's no penalty.

In fact, they're not even liable. Then you can't refund the tax under this section.

It would seem to me that you have to put a little tougher onus on the banks

to ensure that if there are found to be fraudulent declarations, there is some

liability with respect to the bank, or some obligation on the bank's part; in

the absence of that, it seems to me, it leaves it a little bit open.

I have two other little questions on

section 2 that you referred to. With respect

section 2(a), the minister said: "Well, it doesn't really apply because

...." The reason you've changed that is that deposits and loans from

foreign investors are exempted from income tax under the federal act, and therefore

we can exempt them from our provisions of exemption, so to speak, because they're

already not paying any tax. I understand that, but it seems to me, then, you

don't need to specifically identify that they are exempted from this act, because

they're not paying tax anyway. What this does is allow that should there be

a federal change that makes them pay tax, you will also make them pay tax, when

it may be the intention to be captured by provincial legislation. Do you understand

what I'm saying? You said that the federal legislation exempts them from tax

anyway, therefore we don't have to exempt them. But it would seem more prudent

that if you wanted to exempt them from tax, you'd simply leave them under the

rubric of the act, and then there's no change. You've specifically singled them

out. I don't understand why you've done that.

With respect to

section 2(b), the minister said that one leg of the transaction

is offshore. Maybe the minister could tell me if he's saying one leg offshore

is not good enough and therefore they have to pay tax, and that's why we specifically

included

section 2(b). Is that correct?

HON. MR. COUVELIER : The hon. member made a number of comments that give

me a little bit of trouble, Mr. Chairman. First of all, if the institution fails

to show due care and attention, there is a penalty, and it can be up to $100,000

in the act, as I understand it.

MR. CLARK : In the act?

HON. MR. COUVELIER : I believe it is in a later section. Yes, it's in

section 22.

Dealing with the question of the federal exemption with non-residents, this

requirement is to exempt the activity from the requirement for a declaration.

That's the intent.

MR. CLARK : There is just one question the minister didn't deal with

in the series of questions that I asked, and that's with respect to (2)(b) —

the one leg being offshore. Is it correct to say that one leg offshore is not

good enough for the purposes of this act? Is that what section (2)(

b) really

says?

HON. MR. COUVELIER : This is to complement the legislation extant in

Quebec; we wanted to be similar in that respect.

MR. CLARK : Am I correct, then, that you're saying that one leg offshore

is not good enough to qualify for the tax refund? You're saying it's similar

to Quebec, and I appreciate that. But is that a fair categorization of what

this section (2)(

b) is intended for?

HON. MR. COUVELIER : One leg offshore is good enough in the case of securities

only.

MR. CLARK : I'm sorry. I appreciate that. Is this section, like section

(2)(a), dealing only with loans and deposits? Is that correct?

HON. MR. COUVELIER : It's dealing with securities transactions.

Sections 7 to 10 inclusive approved.

section 11.

MR. CLARK : We were moving on quite quickly there, so I thought I'd ask

the minister to deal a little with this question. It is important that we deal

with how the determination is made for the tax refund for the purposes of this

act.

[4:30]

HON. MR. COUVELIER : Subsection (1) requires the commissioner to examine

the return of claim and determine the amount of the tax refund within 60 days

of the receipt of the claimant's return of claim. Subsection (2) requires the

commissioner to promptly serve a notice of refund on the claimant. Subsection

(3) specifies the conditions when the commissioner may reassess the amount of

a refund to a claimant. Paragraph (

a) permits reassessment of a tax refund without

any time limitation if the claimant has made a false statement. Paragraph (

b) permits reassessment of a tax refund in any other case within three years of

serving a notice of refund or within three years of mailing a notice of assessment

or reassessment under the Income Tax Act.

[Mr. Pelton in the chair.]

Under subsection (4), the commissioner is free to use any information in determining

or redetermining the amount of a tax refund. Subsection (5) requires the claimant

to provide information requested by the commissioner within a specified time.

Subsection (6) stipulates that a commissioner's decision made under this

section

cannot be changed by a

[ Page

4381 ]

court because of a mistake on the part of a person in the observation of a

directory provision. In other words, a decision that is technically correct

cannot be reversed because the procedures followed by the commissioner, his

employees or the claimant were incorrect.

Sections 11 to 13 inclusive approved.

section 14.

MR. CLARK : I have some concern about this section, and I would like

the minister to deal with it if he could. This

section deals with an appeal

to the minister regarding mostly

section 11, as I see it, which is the determination

of the tax refund. I have some concerns, because presumably it means that the

commissioner, defined in the act as the commissioner for the purposes of the

Income Tax Act, determines — after getting all the information — the

appropriate level of refund. It seems to be quite a technical matter that the

commissioner deals with all the time. I could be wrong, but I can't recall an

appeal to a political person — essentially, to a lay person, a minister

of the Crown — regarding a technical determination that has taken place

under

section 11. It gives me some cause for concern, and I would like to know

how the minister sees this

section working, given the complexity of this bill

and of, I can assume, the tax refund that will be calculated by the commissioner.

How does he see handling appeals in this matter?

HON. MR. COUVELIER : I see it working very well.

MR. CLARK : Well, that's not very good, Mr. Chairman. Maybe the minister

can start off by reading his notes on

section 14 and giving us a sense of what

the purpose of the

section is.

MR. CHAIRMAN : Just before the minister proceeds, the member for South

Peace River has asked leave to make an introduction.

Leave granted.

MR. WEISGERBER : It is my pleasure today to introduce the regional development

liaison officer for the Northeast region, Mr. Dave Pankratz, who is in the members'

gallery to watch the activities of the House. Please make him welcome.

HON. MR. COUVELIER : The hon. member seems to think this is some unusual

legislation. It is consistent with other taxation legislation. There is nothing

new or different about it at all; it is standard income tax legislation.

Furthermore, if there is an appeal required from the minister's decision, it

is provided in

section 20. There can be an appeal to the courts if the minister's

decision is not deemed satisfactory.

MR. CLARK : Well, that's fair enough. If the minister says it is existent

in other acts, I'll defer to him and hope that's correct, because I haven't

reviewed it.

I would assume — maybe the minister can clarify this, though — that

appeals to the minister on taxation questions will deal with policy determinations

made by the commissioner, not with technical matters. In all of these questions

there are a great many policy considerations as to what might qualify for the

refund under the provisions of the International Financial Business Act. Is

it correct that the appeals will be made on the basis of the unhappiness of

claimants with the policy decisions made by the commissioner?

HON. MR. COUVELIER : The hon. member is correct.

Section 14 approved.

section 15.

MR. CLARK : Once again this deals with the powers of the minister to

suspend or cancel registration, as opposed to the powers of the commissioner

or the superintendent to suspend or cancel. So I wonder whether this is in fact

simply a pro forma matter — the superintendent can in fact suspend or cancel

a registration that he, as I understand it, is allowed to issue — or whether

it is a real ministerial decision that he will have to undertake regularly.

What I am really asking is whether you envisage your ministry having to have

staff to deal with this, or whether you see this really being handled by the

superintendent; and if the superintendent determines that there's a breach,

as defined in (a), (b), (c), (

d) or (e), then in fact the minister will cancel.

HON. MR. COUVELIER : The superintendent is part of my staff, in the sense

that I am responsible for him, but he would be making recommendations to me,

and I would consider those recommendations in dealing with this matter.

Sections

15 to 17 inclusive approved.

section 18.

MR. CLARK : I understand that this is delegation of the superintendent's

powers by the Lieutenant-Governor-in-Council by regulation. Does the minister

see the possibility, for example, that an officer or an individual might end

up having to do the regulation regarding Bills 22 and 23? In other words, if

it becomes a going concern, as I am sure the minister wants it to be, it certainly

seems to me that it's going to require more staff in the superintendent's office.

It's not in the act, but it seems to me that it might be prudent to set up a

separate individual or superintendent who would be responsible for reviewing

what appears to me to be a reasonably complex act and reasonably complex arrangements

that will be undertaken by these financial institutions in order to take advantage

of the tax benefit. So is it contemplated by this

section that the Lieutenant-Governor-in-Council — I am sure, through the minister — might down the road view a separate

individual or superintendent for the purposes of administering this act? Is

that really what is intended here?

HON. MR. COUVELIER : The intention, as the hon. member states, is to

allow for that eventuality if it is deemed necessary in the future.

Sections 18 to 22 inclusive approved.

section 23.

MR. CLARK : Just briefly, can the minister give us his

interpretation

of the purposes of this section?

[ Page

4382 ]

HON. MR. COUVELIER : This allows the Lieutenant Governor-in-Council to

make regulations.

Sections 23 to 25 inclusive approved.

Title approved.

HON. MR. COUVELIER : Mr. Chairman, I move the committee rise and report

the bill complete without amendment.

Motion approved.

The House resumed; Mr. Speaker in the chair.

Bill 22, International Financial Business (Tax Refund) Act, reported complete

without amendment, read a third time and passed.

HON. L. HANSON : I call committee on Bill 23.

INTERNATIONAL FINANCIAL BUSINESS ACT

The House in committee on Bill 23; Mr. Pelton in the chair.

section 1.

MR. CLARK : Just in a broad sense, because this is really companion legislation,

maybe the minister could give us a brief explanation — at least in the

first

section — as to the fit between this bill and the one we've just

passed. Then we can get on with passing the various sections. I'm intrigued,

because as a lay person I'm not sure how this fits with the previous bill. Maybe

in this broad debate that occurs on the definition stage, the minister can give

us some understanding.

HON. MR. COUVELIER : Mr. Chairman, I have a little trouble here.

Section

1 deals only with

definitions, and it's pretty simple. I can read it for the

hon. member, but I'm sure that's not really what he intended. Each of the sections

has a different rationale, and I'm happy to go through those when we get to

them.

Section 1 approved.

section 2.

MR. CLARK : I was hoping to expedite the House business and get a brief

explanation of the whole bill, and we wouldn't have to go through this. But

if the minister wants to go through each

section the way we did the last one,

then I guess we'll have to do it. I'd rather not do that

Maybe the minister could explain

section 2 of the bill, and the rationale for

it.

HON. MR. COUVELIER : I'm happy to go back. If we're being offered a deal

here, let's examine the merits of the deal.

This legislation is designed to work with Bill 22; it's complementary. It is

to provide a complementary regulatory environment for international financial

business in Vancouver. The government's role in making Vancouver an international

financial centre is to ensure that, as far as possible, the costs of doing business

in Vancouver compare favourably with alternatives. In addition to the costs

imposed by taxation, which are addressed by Bill 22, compliance with regulations

can impose significant burdens. The purpose of Bill 23 is to establish a regulatory

regime which imposes a relatively inexpensive burden of compliance on institutions

while effectively maintaining a credible and efficient financial marketplace.

Bill 23 allows subsidiaries of regulated financial institutions to be formed

to carry on business with non-residents, subject to a specially designed regulatory

framework.

Government regulation of financial institutions is necessary for two reasons.

First, regulation protects the public from the losses, disruption and fraud

which could more easily flourish in an unregulated environment. Second, regulation

establishes and enforces the rules for the operation of financial markets. Financial

markets are the bearings and lubricant which keep the economic machinery running

efficiently.

In the case of international financial business, which by definition in Bill

23 involves only non-residents, the consumer protection requirement is softened.

However, the need to maintain an efficient and credible marketplace remains.

Bill 23 is designed to ensure that the institutions which participate in Vancouver's

IFC are reputable, that they behave appropriately and that adequate safeguards

are in place to monitor activity and to effectively deal with offenders. Although

the cost of compliance under Bill 23 will be reduced, it should not be interpreted

as an unregulated environment. The legislation is powerful, and it will be administered

fairly and effectively.

Companies licensed under Bill 23 and their employees will qualify for the full

benefit of tax measures established by Bill 22. These companies will have the

ability to participate in the full range of international financial activities

as long as they are licensed for the activity and the transactions are strictly

with non-residents. While Bill 22 provides some exceptions to the requirement

that transactions must be only with non-residents, Bill 23 is strict, hon. member.

This is necessary to maintain the integrity of our domestic financial system

and to preserve the full benefit of the consumer protection apparatus where

Canadians might be involved as clients or customers.

Some have asked about the use of the two pieces of legislation, which share

so many concepts. The reason is to highlight the fact that by addressing both

the regulatory and taxation aspects of government-imposed costs, British Columbia

has done everything within its power to create a favourable environment in British

Columbia. It will now be up to the private sector to make the best use they

can of these measures.

The hon. members will remember that an earlier version of Bill 23 was originally

introduced and given first reading in July 1987. The intervening months have

given us an opportunity to consult with interested parties on the legislation.

The bill before you today incorporates several improvements suggested during

those consultations.

[4:45]

MR. LOVICK : Just a very direct question to the minister. You state in

justification for this measure that we want to ensure that British Columbia

"compares favourably with alternatives." I'm wondering if you could

elucidate just what those alternatives are and where they are.

[ Page

4383 ]

HON. MR. COUVELIER : Most specifically, the province of Quebec, in Canada.

MR. LOVICK : Is there evidence to suggest that we in British Columbia

are losing particular financial institutions' operations because they are deliberately

not choosing us in favour of Quebec? Is there that demonstrated evidence? Is

Quebec suddenly the main financial player in the country?

HON. MR. COUVELIER : I'm aware that this type of question should have

been put during second reading, but I'm trying to be sensitive to the needs

of the hon. member's curiosity. Quebec, as I stated about an hour and a half

ago, and we ourselves are embarked in this international financial centre institution

chase. To the extent that we're both offering similar incentives, then they

are our immediate national competitors.

Sections 2 to 26 inclusive approved.

Title approved.

HON. MR. COUVELIER : Mr. Chairman, I move that the committee rise and

report the bill complete without amendment.

Motion approved.

The House resumed; Mr. Speaker in the chair.

Bill 23, International Financial Business Act, reported complete without amendment,

read a third time and passed.

HON. MR. STRACHAN : Mr. Speaker, I call committee on Bill 2.

HOME OWNER GRANT AMENDMENT ACT, 1988

The House in committee on Bill 2; Mr. Pelton in the chair.

section 1.

HON. MR. STRACHAN : Let me tell you about this, Mr. Chairman. We are

dealing with Bill 2 in the committee stage, the Home Owner Grant Amendment Act,

1988, printed in the name of the hon. Minister of Municipal Affairs, who will

be here shortly.

MR. CLARK : I could speak at length on this, but as we are awaiting our

debate leader, maybe I'll simply ask the minister to give us an explanation

of this clause.

HON. MRS. JOHNSTON : I thought I had given the explanation so recently

that I didn't want to take the time in the House to do it again. This homeowner's

grant amendment ensures that renters do not receive a homeowner grant in the

rural areas of the province. The intent of the legislation is that the owner-occupier

only receives the homeowner's grant.

This amendment eliminates the situation in which the landlord, who is assessed

and liable for the tax, is able to enter into a lease arrangement whereby the

renter-occupier becomes an eligible occupant and claims the homeowner grant

for the benefit of the landlord.

The bill is very clear, and I will take my seat and answer any questions.

MR. ROSE : It's quite obvious now that our municipal affairs critic is

not with us, and we've sent for him.

HON. MRS. JOHNSTON : I'll wait.

MR. ROSE : I guess we will, but there will be a lot of silence around

here unless we fill it with something. We could stand this for now, until we

check it out. It sounds reasonably innocuous to me, because the minister just

said that what this does is extend the right of an owner-occupier or lessee

to the homeowner grant in lieu of the owner who is not domestic in that establishment.

Is that right? The owner isn't living there; therefore, the lessee is entitled

to the homeowner grant. What is it then? Now you've got me curious.

HON. MRS. JOHNSTON : The intent of the legislation is that

only the owner-occupier.... The owner must occupy the premises in order

to be eligible for the homeowner grant, as is the case with your

residence.

MR. ROSE : I take it, then, that the minister is actually taking something

away from a lessee. What the Lord giveth she taketh away. I'd like to know how

big a problem this has been. How much money in total amounts of homeowner's

grants is now available to the Crown that hasn't been available before this

legislation was introduced? Once that question is answered, we'll accept the

offer and stand the clause and go on to Education, until we can check it out

with the critic.

HON. MRS. JOHNSTON : I don't have the dollars, but what we are doing

is having the criteria for grant eligibility in the rural areas parallel closely

those in municipal areas, and that was not previously the case. Previously it

appears that renters were for some reason able to make application for the homeowner's

grant, and that is no longer going to be the case.

MR. ROSE : The minister confirms that for some people who are renters

in rural areas, this is in effect a tax increase.

HON. MRS. JOHNSTON : It is a clarification, in my opinion, of the act.

The recipient for the homeowner's grant must be the owner-ocupier.

MR. ROSE : I don't want to parallel or mimic the speech from the former

member from Columbia River, who used to say that we were once again up attacking

rural parts of British Columbia. The minister could fulfil that definition by

this reordering of the homeowner's grant amendment. I wish that we could have

passed this immediately. If the minister had brought in an increase, even covering

the inflation for the last six or seven years, there would be an increase in

the homeowner's grant of $175. Then the Minister of Education (Hon. Mr. Brummet)

wouldn't have all that trouble with school costs being heaped on urban taxpayers.

The House resumed; Mr. Speaker in the chair.

The committee, having reported progress, was granted leave to sit again.

HON. MR. STRACHAN : Mr. Speaker, I call Committee of Supply.

The House in Committee of Supply; Mr. Pelton in the chair.

[ Page

4384 ]

ESTIMATES: MINISTRY OF EDUCATION

(continued)

On vote 23: minister's office, $211,618.

MR. JONES : It's always a pleasure to see the member for Dewdney in the

chair.

This afternoon I would like to raise some questions and concerns with respect

to our Royal Commission on Education. The minister is aware that that commission

received some 180 submissions after their March deadline. They have been working

very hard and diligently under difficult circumstances, and they are experiencing

some difficulty in meeting the June 1 deadline. I'd like to ask the minist