1998 Legislative Session: 3rd Session, 36th 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)

MONDAY, APRIL 20, 1998

Afternoon

Volume 8, Number 20

[ Page 6969 ]

The House met at 2:04 p.m.

Prayers.

Hon. D. Streifel: Touring the precincts today are some French immersion students from Edwin S. Richards Elementary School in Mission. They are accompanied by their teacher Ms. Marie-Hèléne Gauthier. I believe they may have some exchange students from the province of Quebec with them. I wish them well. I had a very enjoyable morning touring their class a couple of weeks ago, listening to their plans for Canada. I appreciate their input; they're bright young folks. Would the House please make them welcome.

Hon. A. Petter: This is Volunteer Week, and because of that I'm very pleased to see that several volunteers who work in my community office have come to join us in the House today. I'd like to welcome Beth Rutherford, Sheila Dogue, Rebecca Sober and Angela Fischer. They're accompanied by my constituency assistant, Mara Armstrong. I'd like the House to make them and all other volunteers very, very welcome.

S. Hawkins: Hon. Speaker, in the gallery today are hepatitis C victims and their families. Earlier today we saw them on the steps of the Legislature, and they really hope their voices will be heard here. We have Ms. Tina Johnson, Mr. David Smith, Ms. Peggy Daisley and the Hubbard family -- Helen, Floyd, Kelly and Charlotte -- and I would ask the House to make them all welcome.

Hon. M. Farnworth: In the members' gallery and visiting the House today is Peter Maier-Oswald, the consul general of Germany. Would the House please make him welcome.

P. Calendino: Today in the members' gallery we have some special guests from Italy. It is with great honour that I'd like to introduce to the House His Excellency Andrea Negrotto Cambiaso, the Ambassador of Italy to Canada. He is accompanied by Dr. Arnaldo Abeti, the consul general of Italy in Vancouver; and by Yolanda McKimmie, the honorary consul of Italy in Victoria.

This afternoon, in the presence of the Minister of Education, the ambassador will be witnessing the signing of the approval of the Italian language curriculum and integrated resource packages for British Columbia schools, grades 5 to 12. Would the House please give them a warm welcome.

J. Wilson: I would like to take the opportunity today to welcome two good friends of mine from the Cariboo. Bill and Shirley Love have come to Victoria to visit friends and relatives for a few days. I ask that the House make them welcome.

E. Walsh: I am very pleased to ask the House to make a crew member from HMCS Yellowknife welcome to the House today. I had the honour of attending the commissioning of HMCS Yellowknife on the weekend here in Esquimalt. Mike Wolff, who was a crew member of HMCS Yellowknife -- who now happens to be a crew member of HMCS Whitehorse , which was also commissioned on Friday -- has joined us in the House and I would ask the House to please make him welcome.

Hon. P. Priddy: In the gallery today are 43 students from Tamanawis Secondary School, along with three teachers: Ms. Marianne McKee, Mr. James Johnson and Mr. Darrell Fast. This group of secondary students holds the rather dubious honour of coming from the high school that has the greatest number of portables in Surrey. But in a year and a half and with a new school, I will say their portables will be gone, and it's because of their and their parents' voices, which have been so strong.

G. Janssen: Visiting us today from the beautiful Alberni Valley is Rosenda Racoma. With her is her mother Ruperta and her sons Anthony, 18, and Christopher, 14. They are here with her sister, Sister Leonisa, a nun visiting us from the Philippines. I ask the House to make them welcome.

E. Gillespie: I'd ask the House to join me in welcoming today 26 grade 5 students from Miracle Beach Elementary School, who are visiting the precincts with their teacher Ms. Woodburn and a number of parents. Please join me in welcoming them.

E. Conroy: I'd like to recognize the group that's here today from Victoria in recognition of hepatitis C, a disease that afflicts many Canadians and one with which I'm all too familiar. Would the House please make these people welcome.

Oral Questions

APPOINTMENT OF COMMISSIONER OF INQUIRY

INTO LEAKY CONDOS

G. Campbell: Hon. Speaker, the powers of a commissioner of inquiry, under the commissioner-of-inquiry act, are equivalent to those of a Supreme Court judge. As such, any commissioner has to have expertise, has to be neutral and has to be fair. Equally importantly, that commissioner has got to be seen to be neutral and fair. On both of those counts, Mr. Dave Barrett fails miserably when it comes to his appointment as commissioner of inquiry into the leaky-condo question.

My question is to the Minister of Municipal Affairs. Will she fire Dave Barrett today and replace him with a commissioner who is seen to be expert, who is seen to be fair and who will be looking for solutions for these families that are in jeopardy, instead of making a political circus?

Hon. J. Kwan: Hon. Speaker, the former Premier of the province is highly respected. He comes with over 40 years of government experience both at the provincial level and at the federal level. He is known to be a fighter for the people who need representation, and that is what we need in this inquiry.

The member opposite, the Leader of the Opposition, may not understand this. Respect in this province is a great thing, and it's something that the commissioner has earned by serving the public for the last 40 years. Perhaps the member opposite will never know what it is like. I don't believe the member opposite will ever achieve the goal of getting to be the Premier of the province.

The Speaker: The Leader of the Official Opposition on a supplementary.

G. Campbell: Unfortunately, Mr. Barrett is known first and foremost as a partisan and as someone who will try to score political points as opposed to someone who will try and find solutions to this incredible problem.

On Thursday we introduced the minister to a report that was prepared in January 1996 with regard to this issue and

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asked which recommendations she had put in place. The answer was none. Today I would like to refer to a report prepared for CMHC, which was delivered less than a year later in November 1996. Will the Minister of Municipal Affairs confirm for me that not one of the 13 recommendations has been implemented? And can she tell me how many families are in jeopardy because of this government's negligence?

Hon. J. Kwan: Indeed, the commissioner is partisan for the people of British Columbia. His job is to get down and make sure that the people who are responsible for this disaster are accountable and to find the options that we need to make them accountable. Unlike the opposition leader . . . . I wonder who he got his support from during the last three years in terms of his campaign. Who does he get his support from? Perhaps he's partisan in different ways.

With respect to the report that has been done, a number of reports have been done, and I've reviewed many of those reports. We're taking further action to ensure that there is protection for future homeowners and that the current problem that exists today is being dealt with in an effective manner.

[2:15]

The Speaker: The Leader of the Official Opposition on his second supplementary.

G. Campbell: Hon. Speaker, there are families whose livelihoods are in jeopardy, whose savings are in jeopardy and whose children are in jeopardy because of this government's inaction. I asked this minister to answer the question. There are 13 recommendations in this report; not one has been carried out by this government. There are five recommendations in this report; not one has been carried out by this government. Therefore thousands of British Columbia families are now in jeopardy, and thousands of British Columbia children are looking at health problems.

The issue for the minister is to say that she will appoint someone to the commissioner's position who will look for the truth, look for solutions and look for financial options that will allow these people to build a future again in the province of British Columbia. Will the minister commit to carrying out these recommendations, to eliminating Mr. Barrett as a commissioner and to providing financial options to people so they can get on with their lives?

Hon. J. Kwan: In case the Leader of the Opposition has forgotten, when those leaky condos were being built, he was the mayor of Vancouver. A lot of the problems came from the city of Vancouver.

But what is the Liberal plan for dealing with the issue? His plan is to ensure that the taxpayers pay; his plan is to ensure that the homeowners who are now suffering pay. Why not call the people who are accountable and seek the answers to make sure that the people who are accountable pay? Who is he trying to defend?

Interjections.

The Speaker: Order, hon. members.

GOVERNMENT INACTION ON LEAKY CONDOS

G. Farrell-Collins: What the Leader of the Opposition is trying to defend is the truth, something which that member and that government are woefully uninformed about.

Hon. Speaker, my question is to . . .

Interjections.

The Speaker: Order, hon. members.

G. Farrell-Collins: . . . the Minister of Municipal Affairs. There was a report introduced . . . .

Interjections.

The Speaker: Order, hon. members.

G. Farrell-Collins: Hon. Speaker, if the Minister of Northern Development wants to partake, he's more than welcome to do that.

My question is to the Minister of Municipal Affairs. The CMHC tabled a report with a whole bunch of recommendations. They highlighted the problem, with clear recommendations. The report we gave you on Thursday highlighted the problem, with clear recommendations. Can the minister tell us how Dave Barrett is going to improve on the recommendations that were made two and a half years ago? Why has her government done nothing in two and a half years to implement these recommendations?

Hon. J. Kwan: When we mentioned all the reports and the recommendations that have been made . . . . Yes, a number of recommendations have been made. Do you know what the government has been working on? We've been trying to get the friends of the opposition across the floor to come to the table and work on these solutions. You know what? On all of these recommendations, we cannot come to an agreement on how to move forward. They say, "Yes, bring in a mandatory home warranty," and then they say: "Only three years for water penetration." Consumers say that maybe five years is more appropriate.

But what they say to me is this: "If you don't do what we ask you to do, then don't do anything at all." That's what they said to me. But what I said to them is: "This is not good enough, and I am going to appoint an inquiry." I've appointed Commissioner Barrett to get to the bottom of this and to make the people accountable so that we can find those answers for the people who want them.

The Speaker: On his first supplementary, the Opposition House Leader.

G. Farrell-Collins: What this minister has done is take the role of the commissioner, with vast powers, and appoint the most highly partisan NDP supporter to ever grace this continent -- not someone who is independent, not someone who is impartial. If this minister and this government were so intent on solving this problem instead of creating a political circus, can the minister tell me why the city of Vancouver implemented the new building code in 1985 and why this government has not? Can the minister also explain why her government has disbanded the building standards branch?

Hon. J. Kwan: The city of Vancouver did indeed, and continues to, have its own building codes. I want to know why the opposition leader, when he was mayor, did not bring in stronger measures to protect Vancouver residents on the leaky-condo issue.

I have appointed a commissioner to get to the bottom of this, to look at every option, to ensure that there is protection

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for the public in the future and to get to the problem today for the people who are faced with the issue now.

A question was asked about the standards branch. The standards branch's work is continuously being done . . . .

An Hon. Member: Sit down. You're not answering the question.

The Speaker: Order, hon. member. I hear the minister responding to part of the question.

Hon. J. Kwan: On the building standards branch issue, the work is continuously being done. The government has worked hard to find efficiency within the government and to ensure that the work within the branch is still being delivered. That is what we're doing.

APPOINTMENT OF COMMISSIONER OF INQUIRY

INTO LEAKY CONDOS

C. Clark: The National Building Code was passed by the city of Vancouver. The changes were not passed by the province of British Columbia. The problem is in the minister's office. The problem is one of political will for this government to do something about the leaky-condo issue. That's the problem.

The only thing that appears to qualify Mr. Barrett to be commissioner on this issue is that he's an NDP hack. The only thing that appears to qualify him to collect $720 a day is that he's an NDP hack, while people are struggling to make their mortgage payments and can't afford to fix their homes. To add insult to injury, Dave Barrett is also collecting his MLA pension. Can the minister tell me what she is going to do about Dave Barrett's MLA pension while he collects his $720 a day on top of that?

Hon. J. Kwan: Actually, if the member opposite knew what she was talking about, she would know that in British Columbia . . . . In fact, across the country most provinces do adopt the national standards. I have the standards right here in front of me. One piece within the building code clearly says that the responsibility in terms of water prevention and protection on leaky-condo issues rests with the people who design them. It rests with all the people who are going to construct it to make sure that the product does not leak.

Notwithstanding that, if the inquiry comes forward to say that more work needs to be done, we will indeed act on that. In the meantime, there's a consortium of people who have been working on the building code safety system, and will be bringing forward those recommendations this fall.

With respect to the commissioner's pension, it is my understanding that the commissioner intends to donate his portion of the employer's pension to a charitable organization of his choice -- not that that is an issue. But the commissioner has made a commitment to the public to ensure that he can get the work done on behalf of British Columbians and to ensure that he will also support charitable organizations in British Columbia.

The Speaker: I recognize the member for Port Moody-Burnaby Mountain on her first supplementary.

C. Clark: No matter how the minister wants to dress it up, Dave Barrett is still the consummate NDP hack. It is an insult that he would be appointed to look into this issue. It is an insult to all those first-time homebuyers. It is an insult to all those retirees who have invested their life savings in crumbling homes to appoint Dave Barrett to this position.

I want to ask the minister why she couldn't find a single qualified person in British Columbia who knew something about the building code, who knew something about the crumbling-condo issue. She had to appoint instead an NDP political fixer to do the job.

Hon. J. Kwan: It just makes a person wonder. The members opposite say, in their plan, who they want . . . . Who do they want to look at this issue? Who do they want to pay for these problems? They want the taxpayers to pay. They want the little guys, who are now faced with the problems, to pay. The opposition leader says that the homeowners who are stuck with the problem should pay for the lion's share of the problem. Nowhere does this plan call for accountability from the people who caused the problem. I want to know who they are trying to protect. Why don't we make sure that the inquiry does its job?

Let him get on with his work, which is to say who needs to be made accountable. They need to own up to their responsibility to the people of British Columbia.

Petitions

F. Gingell: I seek leave to table a petition.

Leave granted.

F. Gingell: I have a petition signed by 629 citizens concerning referendums related to Indian land claims issues in Delta.

Orders of the Day

Hon. J. MacPhail: Hon. Speaker, in Committee A, I call Committee of Supply. For the information of the members, we'll be debating the estimates of the Ministry of Agriculture and Food. In this chamber, I call second reading of Bill 2.

The Speaker: We'll take a few moments before we begin second reading debate, while members find their way to their committee meetings.

C. Clark: Hon. Speaker, I seek leave to make an introduction.

Leave granted.

C. Clark: In the precincts today is a group from Coquitlam, in my riding: the New Life Home School. They are visiting us in the Legislature to learn about how politics works. They're with their coordinator, Ms. K. Barnes. I hope the House will make them welcome.

BUDGET MEASURES

IMPLEMENTATION ACT, 1998

(second reading)

Hon. J. MacPhail: I move that Bill 2, Budget Measures Implementation Act, 1998, be read a second time. Bill 2 amends 11 provincial statutes to implement measures announced in the 1998 budget. These amendments are instrumental in protecting provincial revenues, clarifying and streamlining the tax system and making British Columbia a more attractive place for business.

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[2:30]

The Corporation Capital Tax Act is amended to reduce the tax burden for thousands of businesses in British Columbia. The government consulted extensively with various taxpayer groups during the budget process. During these consultations, one of the top priorities expressed by the business community was reducing the corporation capital tax. While completely eliminating the tax would be too costly at this time, the government is introducing measures that will reduce or eliminate the corporation capital tax for over 10,000 corporations, or 40 percent of all taxpayers.

Effective for taxation years ending on or after the following dates, the exemption threshold will be increased from $1.5 million of net paid-up capital to $2.5 million effective January 1, 1999; $3.5 million effective January 1, 2000; and $5 million effective January 1, 2001. These changes will encourage investment and job creation in small to medium-sized businesses and will help to revitalize British Columbia's economy. When fully implemented, roughly 90 percent of all businesses will be exempt from the tax.

Bill 2 also increases the threshold, above which financial institutions are required to pay the 3 percent surtax, to $1 billion of net paid-up capital from $750 million. Increasing the high-rate threshold will encourage growth in locally based financial institutions and protect jobs in this province.

Bill 2 repeals

part 6 of the Financial Administration Act to eliminate the provincial treasury operations special account, which is no longer required. Beginning in '98-99, provincial treasury operations will be funded from a $1,000 subvote in the Ministry of Finance and Corporate Relations ministry operations vote. The elimination of the account is in keeping with the government's goal of simplifying the estimates by reducing, wherever possible, the number of special accounts.

The Insurance Premium Tax Act and the Fire Services Act are amended to simplify and rationalize the tax structure that applies to insurance premiums paid by insurance companies. The 1 percent tax currently payable on property insurance premiums under the Fire Services Act is repealed. It is being replaced with the 1 percent increase in the rate of tax payable under the Insurance Premium Tax Act on premiums which are currently taxable at 3 percent. This change will not increase premium taxes on life, automobile or property insurance.

The act is also amended to extend the filing due date to March 31 to facilitate the filing of returns. This is the filing due date for insurers' annual statements under the Financial Institutions Act.

The International Financial Business (Tax Refund) Act is amended to require that all corporations that register under this act be members of the International Financial Centre in Vancouver. This will improve IFC Vancouver's ability to self-fund, since corporations will be required to pay a membership fee in order to qualify for a tax refund. Increased self-funding will allow IFC Vancouver to be more independent of government and, as such, represent its members more effectively as an industrial association.

The International Financial Business (Tax Refund) Act is also amended to allow international captive insurance and export-financing companies to be eligible to claim corporate income tax refunds generated by international business activity. This will expand IFC Vancouver's membership and help to build the international financial base of the city of Vancouver.

Bill 2 amends the Motor Fuel Tax Act to provide bona fide farmers with a tax exemption on coloured fuel purchased for use in farming operations. This tax exemption will save British Columbia farmers about $3 million in fuel costs and improve their competitiveness. Farmers producing field crops will benefit the most.

The Property Transfer Tax Act is amended to relax the mortgage pay-down provision for the first-time homebuyers exemption program and clarify the intent of various exemptions. The effective date for this amendment is retroactive one year to March 31, 1997, to ensure that the benefit is available immediately to all first-time buyers currently subject to the pay-down limitation.

The remainder of the amendments to the Property Transfer Tax Act clarify existing exemptions. The maximum value of a recreational property eligible for exemption when transferred between related individuals is clarified to apply to the value of the entire property rather than to an interest in the property, and the maximum value is increased to $275,000 from the current $200,000. The exemption for transfers of family farms, principal residences and recreational residences between related individuals is clarified to exclude transfers where the transferor is a trustee.

This will benefit the use of two separate and discrete exemptions in combination to transfer property between unrelated persons exempt from the tax. The existing exemptions for transfers from trustees of a deceased estate or an inter vivos trust are continued. The exemption for transfers from a settlor to a trustee is clarified to apply only where the settlor is the registered owner of the property immediately before the transfer. This will ensure that the exemption cannot be used to purchase property tax-free from third parties.

Finally, a definition of the term "settlor" is provided to remove any uncertainty regarding the appropriate meaning of the term for the purposes of various exemptions under the act.

Bill 2 amends the Securities Act to provide for a one-time transfer to the consolidated revenue fund during 1998-99 of up to $12 million of the approximately $17 million surplus generated by the B.C. Securities Commission. These funds will be used to help pay for tax reduction measures that benefit small businesses and others. The amount of the transfer has been determined in consultation with the commission to ensure that it will have sufficient resources to carry out its regulatory mandate efficiently and effectively.

The Social Service Tax Act is amended to provide exemptions for software source code and tangible personal property incorporated into copies or prototypes for testing purposes. These two amendments will help to encourage the growth and development of the high-technology sector in British Columbia by facilitating the purchase of source code by British Columbia-based software developers and reducing the cost of developing and testing software and other high-technology prototypes.

Chemicals used to make chlorine dioxide and sodium hydrosulphite for use in the pulp and paper industry are exempted. These compounds have replaced the use of chlorine in the pulp production process in recent years because they are less harmful to the environment. The exemption will ensure that these more environmentally friendly compounds are eligible for the same tax preference previously provided to the more harmful chemicals that they replaced.

The 1993 budget included a transitional provision to provide a refund of 1 percent of provincial sales tax paid for goods ordered prior to the 1993 tax rate increase to 7 percent from 6 percent but received after the rate increase. This provision is amended to ensure that the refund is only available to purchasers who are obligated to acquire a specific quantity of

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tangible personal property within a specific period of time. Since 1993 all businesses affected by this amendment have paid tax at the 7 percent rate, as intended under the legislation, but recently some businesses have discovered a loophole which could allow them to claim a refund of one-seventh of the tax under certain contracts dating back to 1993. For this reason, the transitional provision is amended retroactively to March 31, 1993, to ensure that the refund is only available, as intended, to those purchasers who are obligated to acquire a specific quantity of tangible personal property within a specific period of time.

The following minor amendments are also made to the Social Service Tax Act to enhance fairness, clarify the application of the tax and protect provincial revenue. First, the timing for the payment of the $1.50-per-day passenger vehicle rental tax is clarified to be the earlier of the date the lease price is paid or becomes payable, to make it consistent with the timing for the payment of tax on leases generally under the act.

Secondly, the period during which a proportional refund of tax may be obtained on the buyback of a defective motor vehicle is extended in cases where the buyback is awarded through an impartial, independent, third-party dispute resolution process. Next, the application of the tax to vehicles leased from out-of-province lessors for use in British Columbia is clarified.

The exemption for energy conservation equipment is clarified to exclude generic parts purchased to make or build such equipment, and the act generally is clarified to exclude from exemption tangible personal property used to make exempt tangible personal property. A provision is introduced to clarify that tax is payable where goods acquired exempt by reason of their use are subsequently transferred to a taxable use.

The definition of purchase price is clarified to ensure that consideration in the form of royalty payments and licence fees relating to the use of tangible personal property or knowledge required to use tangible personal property is included in the definition for tax purposes. And the exemption for purchases of fertilizer is restricted to fertilizers purchased for an agricultural purpose unless purchased by an individual or for an exempt use under the act.

The System Act is amended to allow for the orderly windup of the British Columbia Systems Corporation. The amendments permit the transfer of B.C. Systems Corporation assets and liabilities to the province along with specific debts.

The Tobacco Tax Act is amended to change the way tobacco sticks are taxed by defining tobacco sticks as cigarettes and taxing them accordingly. The tax on tobacco sticks is increased to 11 cents per stick from the equivalent of about 7.2 cents per stick. The only reason tobacco sticks were developed by tobacco manufacturers was to avoid the tobacco tax. Government is concerned that the tobacco tax base could be eroded by smokers switching from cigarettes to the lower-priced and lower-taxed tobacco sticks as more tobacco sticks requiring less to assemble come onto the market.

The Tobacco Tax Act is also amended to simplify the cigar tax rate structure and increase the maximum tax payable to $5 from $2.50 per cigar. All cigars will be taxed at 77 percent of retail price, with the highest tax constrained to $5. The seven tax rates for cigars priced less than 50 cents each are eliminated.

G. Farrell-Collins: Bill 2 does all of those things, as the minister states. Some of them are minor technical issues; others are far more sweeping and broad. I want to address in second reading debate, for the most part, some of the principles that lie behind this bill, and we will obviously be taking a much closer approach to the various sections as the committee debate takes place.

Right at the start, one of the anchor points of this piece of legislation is the government's much lauded reduction of the corporate capital tax -- a fairly small reduction, I might say. This is one of the tax cuts that this government brought in with this budget to kick-start the economy, we've been told, in an attempt to give businesses a chance to do what they do best, which is create jobs and opportunities for the people of British Columbia. But the change in the corporate capital tax is so small and so incremental that it will have next to no impact, provincewide, on kick-starting this economy.

It will have virtually no impact in changing the way business has gone on in this province for the last number of years and indeed in the last number of months.

British Columbia is in a virtual recession. British Columbia's economy is the slowest in Canada. British Columbia's economy is producing -- and in fact, in the last couple of months has actually lost jobs . . . . British Columbia's economy does indeed need a kick-start, but it needs a significant kick-start, and it needs it now. If you look at the corporate capital tax provisions, none of them take place until next year.

Here's a government that's bringing in a piece of legislation at the end of March -- now into April -- in what they say is an attempt to allow business to do what business does best, in an attempt to kick-start the economy. And not one of those provisions . . . . Well, one of them does, and I'll come back to that in a minute. But for the most part, none of these provisions take place until January 1 next year. Who knows what state the economy is going to be in in January next year?

[2:45]

The motive behind this legislation is not to actually really and truly kick-start the economy. The idea behind this legislation is to do the minimum amount possible -- forgo the minimum amount of government revenue possible -- yet still get a couple of good press releases and press conferences out of it. There has been no overall shift in the government's ideology. They're still a tax-and-spend socialist government. They haven't changed one bit. They're still trying to milk the province of British Columbia and its taxpayers for every single penny they can get.

All they're trying to do is what the Premier thinks he does best, which is govern by press conference and by press releases. Now they can put out advertisements; now they can put those big banners on the sides of buses; now they can put little leaflets under your door at home; now their caucus members can write letters to their constituents and tell about all the wonderful tax breaks this government is giving to business.

The corporate capital tax changes for small business are minuscule in the scheme of things. This government brought in this tax and has brought in hundreds and hundreds of millions of dollars in revenue from small and medium-sized businesses -- billions of dollars, quite frankly, if you were to add it all up -- since they brought this tax in in 1992. And now they are giving a tiny incremental break to some of the very smaller businesses. It is going to do nothing to change what has been put in place over the last number of years.

But let's look at what the government has done for at least one large financial institution in this province. As of the day the budget was brought in, it immediately made a change to the corporate capital tax threshold for financial institutions to save on the spot . . . at least one financial institution in this province $8 million. They don't have to wait until January next year; they get it today.

Hon. Speaker, I don't know about you, but I remember the last election. I remember the television ads that this gov-

[ Page 6974 ]

ernment ran for months and months leading up to the election. They talked about how the opposition, if it were to form government, would give million-dollar tax breaks to the banks. First of all, that wasn't true. The government hadn't read our platform, or chose not to read our platform. Second, after the election, less than two years later, here is that same government -- the same people who ran those campaigns, the same people who ran those ads, the same members sitting opposite . . . .

I can almost guarantee you that every single one of them probably stood up on a stage and ranted and raved against some false precept they had that the opposition was going to give multimillion-dollar tax breaks to the banks. And what did they do? Every single one of those members stood up about a week ago -- not even a week ago, late last week --and voted in favour of giving a multimillion-dollar tax break to at least one bank.

The minister won't even tell us what other financial institutions are going to benefit from this change. We don't know if other credit unions or other banks are going to benefit, because she refuses to tell us. She refuses to tell the public how many people are going to be affected by this tax break. She refuses to tell the taxpayers how many financial institutions are going to receive the same $8 million tax break.

Then she has the nerve and the gall to hide that fact in the budget reports. It's not even there. In the budget reports the minister goes out of her way to hide the fact that there's going to be a multimillion-dollar tax break given to at least one -- but possibly others -- major financial institution in British Columbia. If that isn't the height of hypocrisy, the height of sneakiness, the height of despicableness, I don't know what is.

You would think that the government, if they were going to change their attitude and change their tack, would at least be honest about it, at least be willing to stand up and let people know that it was happening. You would think that they'd at least be honest with the people of British Columbia. But they're not. And to this day, three weeks later, we still don't have the truth. We still don't know how many banks, how many financial institutions are going to get this deal -- or, quite frankly, already got this deal as of April 1.

So why the difference? Why the need for the government to be so secretive on this one and laud the other one from the treetops? Why the need to be so quiet about this tax change and the desire to rant and rave in public -- to run TV ads, to put out newspaper ads and to put out brochures telling everybody about that tiny incremental tax break they're going to give to small and medium-sized businesses next year, which is really going to accomplish next to nothing? I think the omission of that, in itself, should be an indication to the people of this province whose side that government is on.

In talking about the tax break for small- and medium-sized businesses -- the corporation tax threshold for small businesses -- the minister used these words, and I found it interesting. She said it was going to encourage small businesses to create jobs. Well, I guess the converse is true: if you put a $400 million or $300 million tax on small and medium-sized businesses, it's very likely to discourage businesses from creating jobs.

All along for the last six or seven years, the former Finance ministers -- one of whom is now the Premier of the province -- must have been misinformed, or at least they misinformed us. They used to tell us that this corporate capital tax wouldn't cost one job, that it wasn't keeping investment from taking place in British Columbia, that all it was doing was making people pay their fair share. That's what the government told us.

Well, now the truth's out, because the Minister of Finance has just told us today that by reducing it even that small amount of the hundreds of millions of dollars they increased it in 1992, they're going to encourage small businesses to create jobs. Well, how many thousands or tens of thousands or hundreds of thousands of new jobs would have been created in this province from 1992 to 1998 had the government not introduced that corporate capital tax on businesses in 1992? How many? Very likely thousands and thousands.

So I think the minister should think about . . . . You know, if she's going to do it, I understand that. I don't agree with it, but I understand. But the minister and the government should at least be forthright and honest with people and tell them what it is they're doing and not try to hide behind the speechwriters, not try to hide behind the ad agencies and not try to hide behind their communications experts.

They should at least be upfront and honest with the taxpayers of British Columbia and tell them precisely what they're doing this year, what they're going to do next year and, more importantly, the damage they've caused the economy for the last six years with their capital tax on small and medium-sized businesses.

There are a couple of other items in Bill 2 that I want to talk about. I know the member for Delta South is going to speak on one of them at more length. It's the $12 million that the government is taking from the Securities Commission -- more cash for the government, more ways of getting cash. Let's find as many places for revenue as we can, and let's put it into the hopper and find something to spend it on. The minister says that the $12 million that she gets from the Securities Commission is going to be used for tax breaks.

Well, they get the $12 million this year, but the tax breaks don't even add up to $12 million for small businesses, and they don't get them until next year. Again, if the government is going to do it, at least be honest and upfront about it. Tell us exactly what it is: it's a cash grab. But don't try to make it seem like you're going to turn around and use that money to give tax breaks to small and medium-sized businesses and allow them to create jobs. It's just not the case; that's not what it's about.

It's about the government going out and trying to find another source of revenue, another source of cash that they can put in the hopper and spend on other things.

I have some questions regarding the insurance premium tax that I intend to raise with the minister when we get to it in committee. It appears that there was an exemption for medical premiums that no longer exists, but we'll canvass that at greater length when we move into committee stage.

The last item in Bill 2 that I want to deal with is

section 40. Not only does

section 40 do something that isn't done very often, it's almost never done. But this government seems to do it with enthusiasm.

Section 40 retroactively changes a piece of legislation that the government brought in in 1993. Just so people are clear about what happened in 1993, in 1993 the government changed the provincial sales tax -- the PST we pay every time we go to the store or buy a car or whatever we do with our funds -- from 6 percent to 7 percent, which is a pretty significant tax increase when you think about it. But the government made a provision in that act for individuals, taxpayers, corporations, businesses, etc., which had contracts that extended beyond the date when the new tax rate was brought in to get a refund.

They'd still have to pay the 7 percent, but after the fact they could go back and apply for a refund of that extra 1 percent. It really wasn't fair for people who had entered into a contract well before that for delivery of some service or product or goods somewhere down the line, so the government put in a provision for that.

[ Page 6975 ]

Some businesses -- probably a number of businesses -- went about their way and followed the law. They believed that they understood the law; they believed that the government understood what the law said. They paid their 7 percent in good faith and then applied for a refund, only to be told by the government that there was some technical wording in the bill that meant that they didn't agree with the

interpretation of the people applying for the refund. The government had a different impression about what the law said than what the people applying for the refund had. In cases like that, what do you do? The ministry told the individuals: "Well, let's take it to court. Let's hear from a judge, and let's find out what a judge has to say. Let's take this issue to an impartial court, have the judge hear the appeal and make a decision, and then away we go." That's what was done -- a protracted process.

F. Gingell: Expensive, too.

G. Farrell-Collins: And expensive, the member for Delta South tells me.

In February of this year the judge made a decision against the government and in favour of the taxpayer. The government said: "So what. We don't care what the courts say; we're going to change it anyway." That isn't unheard of. Governments sometimes aren't particularly good, it seems, at drafting legislation. If it was different from what they'd intended, then they're well within their right to go and change it. That's what governments do. But they didn't change it as of the date of the court decision and change it forward for the future. They went back to 1993 and changed it retroactively.

So those people who believed that they had an impartial judicial process that they could go through to get a decision, to get a ruling, and that if at that point the government needed to change it, then they could, have had that pulled out from underneath them. So all the expense, the time, the energy of going through the courts -- through the process that should be there for every citizen of British Columbia to follow -- is gone.

The government acts as though that didn't even happen. This government acts as though the courts don't have any power in this province, as though they are the law. Not only do they make the laws but now they interpret the laws. Not only do they have legislation that they bring . . . . If it doesn't work the way they want it, if they lose it, they go back over the courts -- they trample on the courts -- and they go back and bring it in the way they wanted it in the first place. What's the point of having courts in British Columbia? This is a government that continually breaks the law. Then when they get caught, they go back and they change the law, time and time again.

An Hon. Member: Gamblers.

G. Farrell-Collins: Look at the gambling.

Interjections.

G. Farrell-Collins: The Minister of Women's Equality should get her head out of the sand and realize what's been happening for the last six years in this province. Her government has been breaking the law, time and time again. Her party has been breaking the law. It shows the type of people that were elected on the government side of the House. And it shows whose side they're on, if I can quote the Premier.

If the government is going to make a mistake and then go to the courts and actually give the courts the respect that they deserve, then to go back and retroactively deal with that -- well back to 1993 -- is abhorrent. It's an abrogation of justice. It shows that this government has no respect for the rights of the individuals in this province to have access to the justice system and to have it work in their favour when the courts decide that. It just shows how far this government has sunk in the last six years. It's one example out of many.

Hon. Speaker, while Bill 2 does some things and closes loopholes, if it does anything important, it heightens the awareness of the hypocrisy of this government. It heightens the awareness of the depths to which this government will sink. It shows us once and for all, yet again, what this government is made of.

[3:00]

I. Chong: I too would like to speak on second reading of Bill 2. I have to say that I agree with much of the comments made by my colleague the Opposition House Leader. This legislation does enact much of what the budget speech proclaimed a few weeks ago, which, of course, hon. Speaker, you know that this opposition opposed.

I want to speak specifically on the tax measures that were introduced at that time, because that is what this government has been trying to provide the business and investment community: some assurance that they have listened and have understood what the problem is. Of course, the problem is that the investment and business community recognize that it has not been a measure that they can absolutely support.

First of all, hon. Speaker, the corporation capital tax. My recollection of it being introduced in 1992, when I was in public practice as an accountant . . . . I remember the reintroduction of it in 1992, because it was in the eighties that it was removed. Many of us were glad that it was removed, because it was a job-killing and investment-killing tax. We saw what it did to the small business community, and we were very concerned at that time. When it was removed, there was much applause at the time.

And when it was reintroduced in 1992, there was much groaning, of course, from the business and investment community, because it was reintroduced to hurt the small business community -- one that we have said, time and time again, is the engine of our economy.

What happened in 1992 was that a number of small businesses had to consider whether they were going to expand, whether they were going to reinvest, whether they were going to hire people, because in doing so, in trying to increase their volume, increase their market share and compete globally, they had to spend dollars. They had a corresponding liability, but of course that wasn't always taken into account when calculating what taxes were due.

I know that there are a number of constituents of mine, and some in adjoining ridings, who have contacted me and said that over the last five years they have not seen a profit on their bottom line. They have only taken home wages, yet they have paid out corporation capital tax -- some to the extent of $20,000 or $25,000 a year -- purely because they wanted to expand and be innovative and diversify their businesses. When business is paying from $20,000 to $25,000 out, that removes the ability for them to hire one or one and a half additional people to fill that job market, so it is a job-killing tax.

I also recollect that this tax was to have been removed on small businesses in 1995 -- that it would only remain on financial institutions. That announcement was made by the former Premier, Mike Harcourt. At that time, the business and investment communities were quite anxious. They were quite pleased that there was a recognition of what this tax was

[ Page 6976 ]

doing to them, so, of course, they waited with much anticipation that this would come through. Well, we know, of course, that in 1995, the Premier stepped down. We had a new leadership race, we had a new election, and we had a new Premier who very quickly dismissed that he was going to do anything progressive with this tax. It has been a regressive tax, in fact, because it has made it that much more difficult for the small businesses which were already in decline because our economy was starting to decline faster than every other province. We were already sliding from the number one to the number ten economy in Canada.

It was not with any foresight that this Premier and this government, back in 1996 and now in 1998, attempted to revitalize the economy -- an economy where we so very much need to boost up our credit rating, which is another subject that I'll leave for another time. The corporation capital tax was expanded in 1992 to incorporate small businesses, and it was promised that it would be eliminated for those small businesses in 1995. All we have now is a shifting of the targets; it is now just a tax that has a threshold increase.

Although that might help some small businesses, there are many businesses which will still not take advantage of this because they're not sure what the next step is going to be. If we have another change of Premiers, that could change the whole scheme of things again. Small businesses want some assurance. They want to know that they can plan five and ten years in advance, especially when it comes to expansion, especially when they plan to create more jobs in their community -- especially in a community that has been devastated and requires more diversity.

No one will be putting those kinds of dollars into their business if there can be no assurance that this government is listening, which it has not done.

The corporation capital tax change is too little, too late. What was alarming was the fact that while there were some minor changes for the small business community in terms of the threshold limit, there was a substantial change for the financial institutions, something that had never been spoken about. Nothing had been mentioned about those kinds of changes. Changes to the threshold for the financial institutions was never mentioned by the former Premier, and it was something that was understood would stay there.

So why has this government suddenly turned again -- 180 degrees, or even 90 degrees -- to accept that there should be this kind of change for financial institutions? It has long been accepted that financial institutions should be required to pay corporation capital tax.

The next item I'd like to speak about in regard to Bill 2 relates to the personal and corporation income taxes. Once again, personal income tax changes have provided little relief, as we've heard in the budget speech responses. Many average taxpayers claiming their basic individual tax credits will see very little change in their pockets when they go to file their tax returns for the year 1999 in the year 2000, because it has been deferred for some nine months. That was not a positive step this government introduced either, because we were looking for something more substantial.

Even if the government was not able to make it more substantial, why did they not make it immediate? That would have given some assurance to the average taxpayer that this government had in fact been listening.

Since 1991 or 1992, personal income tax rates have increased. Having done a number of tax returns for individuals . . . . Every year those individuals would come in and say to me: "Why is it that I'm making the same amount?" Some of those individuals have not seen increases in their paycheques, because the economy has been doing so poorly. Yet they saw a drain on their paycheques because of the taxation and some of the surtaxes that were imposed. Some of these people were not making large sums of money. It's just that they had a large family to support.

The other final tax I want to speak about is the corporation income tax. The corporation income tax is being changed here, and again this government is attempting to take some degree of credit for it. I would have to remind the minister that in 1991, I recall the small business tax rate being 9 percent. In 1992, or shortly thereafter when they became government, that rate was increased immediately to 10 percent. Last year it was decreased back to 9 percent, and we do see that some reduction will be occurring, but, again, it is going to be occurring some nine months later.

That's a shame, because the small business community has been saying time and time again that they require some immediate tax relief. They have been hit with, in their minds, a recession, where the disposable income of taxpayers has declined. In order for these businesses to stay afloat, they were looking for some immediate tax cuts. The small business tax rate -- as you may or may not know, hon. Speaker -- is based on some $200,000 of income in a small corporation. At 1 percent for a whole year, that would mean a total of $2,000, and at 0.5 percent, that's only $1,000.

So again, as I mentioned in my budget speech response, it provides very little incentive for a small business to be able to hire an additional staffperson if they were to expand or increase. Surely, if we were able to assist small businesses so that they can move on and invest and so that they are not going to be paying everything in taxes, they would be able to use those aftertax dollars to hire more people. In turn, that would generate more taxes -- whether it be through a payroll tax or an additional corporation income tax -- because the business is doing better.

But where we have a tax such as the corporation capital tax, which has no correlation, I guess, to the net income of a business, we have a business that cannot expand appropriately.

So while there are many sections throughout Bill 2 that I would like to ask the minister questions on, I will leave that to the committee stage. Suffice it to say that Bill 2 does enact those parts of the budget speech which we do oppose and which, as my colleague said, do not bode well with the opposition.

F. Gingell: My colleagues have both spoken of the abhorrence of retroactive legislation. I think that this particular subject deserves to be mentioned once again. We as a legislative body enact legislation and expect it to be obeyed by our citizens, and we expect government, through their administration, to ensure that it is administered fairly.

For this government to come back, having lost their court case, and bring in legislation not just to deal with the issue from this point forward, which I would find acceptable or understandable, but to deal with the matter retroactively so that the decisions of the courts have been reversed or found to be of no value, I find to be abhorrent in the worst case.

The only other issue that I wish to touch on in second reading debate of Bill 2 is the issue of broken promises. This is a government that has broken promise after promise after promise. When the now Premier appointed Mr. Matkin as a one-man commission -- now, there's a thought -- they took somebody who had lots of experience in government, who'd been a very senior bureaucrat but had in fact not played any

part in partisan politics, and appointed him to an important commission. Maybe that's an example they should follow more often.

They appointed Mr. Matkin to look into issues dealing with the Vancouver Stock Exchange and the British Columbia

[ Page 6977 ]

Securities Commission. The recommendations of the Matkin commission and the acceptance by the government of certain of those recommendations -- not of them all -- left a definitive commitment that the British Columbia Securities Commission would be allowed to be run independently. They would make their own decisions. The government would continue, as is proper, to make the appointments to that commission. I think that this government has acted in a very fair and balanced manner with respect only to the appointments to the British Columbia Securities Commission.

Interjection.

F. Gingell: Thank you, ex-Finance minister, for doing that.

The commitment was there that the government would allow the surpluses that may be generated in the Securities Commission -- because they are a self-funding organization -- to be used for the further development of the technology and administration of that commission.

They have a lot of important things to do. They are just coming to the end -- I think it will be in August of this year -- of a three-year experiment in having a special fraud office with the RCMP. Quite honestly, we don't have to wait till August. It's been an absolute and dismal failure, not because of the British Columbia Securities Commission but because of the inability of the RCMP to hire the type of people with the necessary skills and to allocate those resources to the detection and prosecution of criminal fraud within the securities industry.

It's a subject and a concern that we share on both sides of this House. It's something that we all want to see done better. It was encouraging when this government gave the Securities Commission the right, the ability and the autonomy to enter into those kinds of arrangements. And it having failed, the Securities Commission has sufficient funds to move forward on the criminal fraud issue.

[3:15]

It has sufficient funds to move forward on the issues of policy development. The whole securities industry is changing rapidly. It's critically important that the Securities Commission have the resources necessary to develop policy quickly and effectively, to ensure that they can maintain their responsibilities for ensuring that there is a fair capital market.

The Securities Commission has problems because of lack of resources in being able to look after their responsibility in the new virtual national securities regulation or regulators. As members know, there has been a concerted effort in the past two to three years to come to some agreement about national securities regulation. That hasn't happened, because of political issues in provinces other than British Columbia -- British Columbia to an extent.

But it's important that the Securities Commission have the resources necessary to be able to respond to its responsibilities to ensure that securities regulation happens effectively, efficiently and with due speed.

For some years the Securities Commission has been trying to bring forward a process through which we can have what we call continual disclosure, so that there is, through an Internet-type arrangement, an ability for investors and people in the industry to quickly be updated as to the news releases and the filings of various publicly funded corporations which come under the jurisdiction of the commission.

So why have none of these things happened when the Securities Commission is reasonably well off? It has the financial resources. Well, contrary to the promises made by this government, the government has continued to put restraints onto the Securities Commission with respect to the number of full-time employees and the salaries that are paid. You can appreciate that the securities industry is very, very competitive from an employment-reward viewpoint. If the Securities Commission doesn't have the ability to pay competitive salaries, it won't get people who are capable of and competent in doing their work.

The only reason, I would suggest, that the Securities Commission has this large -- relatively, for the Securities Commission -- surplus is because it has been restrained from being able to do its job properly by restraints placed by this government.

Madam Speaker, it's all a broken promise again. This government, when portions of the Matkin commission report were accepted and adopted, agreed that the Securities Commission would be an independent Crown agency. We even went through the exercise of passing special legislation in this House to ensure that that would happen. I will go back to the committee debate and look up many of the commitments made by previous Ministers of Finance. Both the previous member for Oak Bay-Gordon Head and the member for Saanich South made commitments with respect to the independence and autonomy of the commission.

So this is an issue that we will come back to, and I hope at that time the Minister of Finance will be prepared to give some more satisfactory answers and commitments than she has done to this point relative to the ongoing autonomy of the Securities Commission.

G. Wilson: Hon. Speaker, rising to speak on the second reading of Bill 2 gives us an opportunity to outline in principle where each of the parties represented in this House come from on some of the budget measures that are being discussed under this bill. It being an omnibus bill with many issues in it, I'm going to try to limit my remarks more specifically to matters of the corporate capital tax, although I will touch on one or two other issues.

The government tried to make a great deal out of the fact that this budget, which has just been tabled in this Legislative Assembly this year, was going to provide some relief with respect to the corporate capital tax and that that relief was to be an enhancer to small business investment. I think we have to look at two issues here. First, there is a matter of principle. Do we, as a matter of principle, support the corporate capital tax as a measure of taxation? Is it a fair, sensible and good public policy to put in place? Secondly, does this government do what it says it's doing in terms of the kind of tax relief that it is providing?

Let's deal with the second issue first, because I think we can dismiss that fairly quickly. If we look at the estimated revenues in the budget that was tabled last year, the revised forecast of 1997-98 said that the corporate capital tax will bring $410 million into the treasury. This year, with these great changes that have been announced, it's going to bring $409 million into the treasury. Clearly, by their own figures and by their own admission, and looking straight at the data without putting any kind of editorial spin on it, this government is not making substantive changes with respect to corporate capital tax collection in this fiscal year.

That's really all we can deal with in this discussion and this debate today. There will be another budget next year, presumably, and that can take whatever is tabled in this bill and change it again for next year and for the subsequent years. Just because there is a promise -- and that's all it is -- for the calendar year ending December 31, 1999, and for the calendar year ending December 31, 2000, that there are to be

[ Page 6978 ]

threshold changes to $3.5 million and $5 million respectively, doesn't mean that it will in fact be done. History would tell us -- if we go back over previous budgets and look at issues contained within them -- that the norm is that these kinds of changes don't materialize. Frankly, this really doesn't provide relief.

If we were to look, as I think the member for Vancouver-Little Mountain pointed out with respect to

section 2, the $750 million to $1 billion with respect to the lending institutions and what that provides, this government really does have to account for that incredible change of heart. It is quite true that in the last campaign, they did campaign solidly against providing any kind of benefit or bonus to financial lending institutions. It's quite true that this doesn't seem to meet the mark.

That point aside, if we were to tally up all the savings that we are supposed to see in this fiscal year for small, medium-sized and big businesses in the province of British Columbia . . . . If we were to do it in the absence of any preferential political spin that we might want to put on that and do it as an accountant might do it . . . . I'm not an accountant so I don't pretend to be one, but I've certainly dealt with those who are able to crunch numbers perhaps better than I.

They tell me -- and I believe it to be true, because we've cross-referenced and cross-checked -- that this government, in loan guarantees and in direct cash support of Skeena Cellulose, has provided more to one corporation than all of the benefits to all of the companies -- small, medium-sized and large -- that are contained in this budget. One corporate bailout has been given more in terms of revenue from this government than all of the other businesses in British Columbia -- whether they're small, medium-sized or large -- as a result of this budget.

That's a pretty sad affair. This was supposed to be a business-friendly budget, and we can see quite clearly that it's not. What's also interesting about that is that we would argue, I think, the numbers. If this was to try and put in place some kind of benefit, we might have seen some kind of investment opportunities that companies doing business in British Columbia would have been able to take advantage of, if they were to take the profits for those few that may be making profits in the province at the moment and reinvest that in order to get benefit against this tax.

Even if we were to stretch the limit on the principle of the corporate capital tax -- which I'm going to talk about in just a second -- and say, "All right, by some measure we're going to say that this is a fair and sensible way to tax," presumably one of the things the government could have done is reward those companies that decide that they are going to reinvest their profit and, through that reinvestment, through job creation and through job stimulation, find some manner of reward, which would then give them some level of exemption from the corporate capital tax.

But that's not in there; it doesn't even come close to doing that. I think we have to look at the numbers and understand that the great savings to business are not there; they're just simply not there. As much as we are trying to paint this -- the government is; certainly we on this side of the House are not -- as a business-friendly bill, when we look at the numbers and we actually start to measure them out, we can see that in fact they don't add up, that they don't provide the kind of support that's necessary.

In principle we have to ask ourselves: is the corporate capital tax a fair way to gather tax in the first place? What we're doing is amending it here to provide threshold differences within the calendar years, and we are suggesting that through those amendments we are providing some relief. I take the position -- and my party, the PDA, takes the position -- that corporate capital tax is theft, pure and simple. There is no other or better way to describe it; it's theft. It is a tax on capital, whether profit is made on that capital or not.

The example that one needs to use -- in order to explain to those who may read this in Hansard or watch this through these proceedings -- is simply that of a car dealer, because I think it's the easiest one and the best that we can use. If a car dealer goes to a bank and borrows money to go to the manufacturer to buy automobiles to sit on their lot, the government will come along, add up the value of every one of those cars and tax them on that capital value -- whether the cars are sold or not.

Now, there are three ironies in this system of taxation: (1) the car dealer doesn't own those cars, because the car dealer had to borrow money in order to pay General Motors or Ford or Chrysler to buy those vehicles and put them on the lot; (2) the overall value of those vehicles is an assessed value, which the car dealer may or may not be able to realize at sale; and (3) what it does is provide to the car dealer one alternative only, and that is to pass on the corporate capital tax to the consumer -- to those of us who are going out to buy a vehicle -- and passing it on pushes up the cost of the vehicle and makes it more difficult for us to afford.

So on all three counts, corporate capital tax is a bad tax. It's theft, pure and simple. If that dealer doesn't make any money, that dealer will still have to pay the tax on those vehicles -- whether they sell or not. As the member for Oak Bay-Gordon Head pointed out in her remarks when she talked about some of the small businesses in her own community, they are forced to pay thousands of dollars in capital tax, despite the fact they cannot net a profit.

[3:30]

That's outrageous. As the member quite clearly and in a very articulate way pointed out, anybody who's getting involved in small business -- whether it's in Oak Bay-Gordon Head, Kamloops, Kelowna or any other part of this province -- has to have an opportunity to be able to make profit turn into more profit; otherwise, that business will no longer stay within that community. As those businesses fail, so does the base economy of the community itself.

Hon. Speaker, we look at this corporate capital tax, and we ask ourselves whether or not, even in principle, it is a sound and sensible way for us to be trying to generate revenue -- some $409 million worth of revenue in this budget year, $1 million less than they got last year despite all of these changes that they have made. I think that we would argue that it is not the right way to go, that we need to get rid of corporate capital tax. If we do that, then surely to goodness what we need to have in this province is a more fundamental debate about what kind of tax system really should be part of a budget measures implementation act.

[W. Hartley in the chair.]

What would we do differently if we had to come forward and if we had to table and put into this Legislative Assembly a bill that would outline how we would expend? When we get into that debate and that discussion, it seems to me that we need to really ask ourselves a very simple question: do we wish to continue to tax consumption of British Columbians as well as income, or are we finally going to say that we're going to make the choice between whether we tax income and leave consumption alone, or are we going to tax our consumption

[ Page 6979 ]

and allow us to have an untaxed income? Right now we have -- not only at the provincial level but more directly at the federal level as well -- escalating levels of tax collection, through both consumption and income taxes.

We find, even within this particular document, everything from simple things, which perhaps many who read through this wouldn't immediately look to -- a very simple little change with respect to recreational residence assessments, in terms of values and how that's going to work . . . . We also see changes with respect to property transfer tax and the financial implication that's going to be there.

Another thing we could look at is the change in definition with respect to tax provisions that this talks about in terms of the eligibility of insurance tax -- the net taxable insurance that this government quite cleverly has just pushed up by 1 percent. It's not obvious until you really read the detail of this bill. As we get into committee stage, I'm sure we will look at it in more detail. In many aspects you will find that where they've taken away the tax, they have added many other forms -- either through increased tax on services or through levies that are placed against a number of areas within this bill.

Quite clearly, we do have to start to get into this discussion in principle as to whether or not we really do have to have comprehensive tax reform.

Also, as we look at the principle of the Budget Measures Implementation Act, one of the areas that we have to at some point, somewhere -- and I don't know how one does it in the constraints of this Legislative Assembly -- really start to argue, and argue carefully, is whether or not we have to have a much broader or more comprehensive amendment to the manner in which we collect our taxes. Many British Columbians question why we who raise -- and in this budget will raise -- $20 billion off the backs of some three million British Columbians will also raise and send to Ottawa an additional $19.4 billion for federal revenues, to see only about $3 billion come back.

When we look at the amount of revenue that is generated in terms of both provincial and federal revenues, three million British Columbians generate almost $40 billion a year, and most of us are now at tax levels that we cannot afford to pay. We have a tax system that is so complicated . . . . One only has to read the Budget Measures Implementation Act to see the number of acts that are affected by very simple changes, often ineffectual changes in terms of how much money we keep at home.

It's a very complicated tax system, so complicated that many British Columbians -- in fact, I would argue, most British Columbians -- no longer feel comfortable doing their own taxes. They have to go to "tax experts," who charge them in order to have their taxes done.

It's sad that this government, above all -- which lauds itself as being a government of the people, the government that is trying to do what it can for the worker, for the "average British Columbian," the government that said it was going to give some kind of relief to small and medium-sized business, the government that said it had consulted broadly with the business community and was going to bring in that kind of relief -- has failed, and failed dismally, to do so. Their own numbers in this budget attest to that.

One doesn't need to go beyond the simple estimated revenues and expenditure sheets within this budget to recognize that much of what was said in the text of the budget is not reflected in the actual numbers when you sit down and start to crunch them out.

So who will pay? Who will pay for the increased expenditures of this government this year? Mark my word -- and again by their own numbers you can see that the government expenditure this year has gone up, not down . . . . Despite the fact that we're now pushing $32 billion in debt, despite the fact that we have a real deficit of about $949 million -- not the $95 million that's talked of -- we see that budget expenditures are up, not down, and that the government continues to spend more money.

The question is: who will pay? British Columbians will pay, especially middle- and low-income British Columbians. People who are trying to succeed as small business entrepreneurs will pay. We will pay, and we will pay not only through income tax but through consumption taxes, through property taxes, through taxes that are assessed on virtually every necessary aspect of our lives. We will be taxed when we purchase property, when we transfer property, when we sell it.

We will be taxed if we choose to consume the odd bottle of beer, if we choose to smoke the odd cigarette or if we choose, in fact, to smoke cigars now. Thank goodness I don't do that, because we've just seen a massive increase in tax on those who do smoke cigars.

We will pay through every aspect of our lives. The government fails to recognize that as they continually ratchet up the tax demand against British Columbians, as they continue to push us into greater and greater degrees of economic hardship -- as a result of the almost insatiable demand of this government for more revenue -- many British Columbians are becoming more and more economically desperate. What is the solution to this desperation in terms of additional revenue? Do we see anything in the Budget Measures Implementation Act for honest, real tax relief? No, we don't.

We see the government introduce expanded gaming so that those people who are desperate can get lured in by the thought that if they can just put out the little bit they have left, somehow they may win a whole lot. But in fact the statistics tell us that they're just going to lose the little they have when they game.

This is a shameful, shameful budget. It's shameful because what it does is fail to recognize that there is diminished revenue going to British Columbians who most need it. Then the government, having seen that revenue reduced . . . . The income that most of us are earning -- in fact, our real spending power -- is falling. This government chooses to tax it even more. Notwithstanding what the language of the bill says, I challenge British Columbians to read the numbers, to look at the actual figures in the budget. Those numbers will not lie. Those numbers will tell us exactly what it is that's going on, and they are here for us to see.

In principle, I cannot support the measures that are set out in Bill 2. We're disappointed -- I think that's putting it mildly -- that this government has not taken a bolder and more progressive vision toward how we will implement real tax reform, which would change the manner through which we fund government, would provide real tax relief to British Columbians and would provide an opportunity for all British Columbians to become owners of this economy rather than tenants in it, which we are so quickly becoming.

I thank you for this opportunity to speak to this bill and look forward to committee stage.

G. Abbott: I would like to make a few brief comments in relation to second reading of Bill 2. It was just about a year ago that we spent many hours in this chamber debating another Bill 2, another budget measures implementation act. We spent many hours in here because the government had arbitrarily and unilaterally changed the Local Government Grants Act at the cost of some $100 million to municipalities across this province. This year we're debating another Bill 2, another

[ Page 6980 ]

budget measures implementation act. Just like last year's Bill 2 was a broken-promises act, the Bill 2 we're debating this year is certainly another broken-promises act as well.

I want to speak to this Bill 2 because the corporate capital tax has had severe consequences for small and large businesses in my riding. In combination with a whole range of ill-advised tax and regulatory policies that have been put forward by this government over the past several years, it's brought many businesses -- particularly forest businesses -- to their knees, both in the riding of Shuswap and across this province. I had the good fortune last Friday to attend the Interior Logging Association trade show in Kamloops.

Of course, there's all kinds of large and small machinery that's used primarily in the logging industry. One of the largest exhibits came from the Finning corporation, which a year ago was based in British Columbia. Because of the very regressive taxation policies of this government, it has now relocated to Alberta to benefit from the more generous economic, taxation and regulatory policies associated with that province.

I think it's enormously unfortunate, and I couldn't help but wonder: by this time next year, how many more of the other corporate exhibitors will have moved on to Alberta as well in response to the continually regressive policies that are put forward by this government?

This year's Bill 2 is a broken-promises act because it's contrary to what this government said when the corporation capital tax was brought in back in 1992. The Premier of the day claimed that this was going to be a temporary measure for non-financial institutions. This government never admitted, never claimed, that the corporation capital tax was going to be something that was going to stay on indefinitely. In fact, the original corporation capital tax, as I think everyone knows, was something that was brought in, I believe, in 1987 by the former Social Credit government.

It involved the taxation of financial institutions alone. This NDP government expanded that corporation capital tax to include businesses large and small across this province which were non-financial in nature.

In the last provincial election I think everyone on this side of the House, and probably everybody on the other side, heard a remarkably consistent tune from NDP candidates about the corporation capital tax. For the NDP then . . . . Certainly this was the case with the candidate opposing me. Every night he talked about the corporation capital tax that the big bad Liberals were going to take away, and so on. Our position was entirely misrepresented, and obviously their position was misrepresented at that time too, because we see some change from what was advanced in the '96 election.

Obviously during the '96 election, when the central theme was big bad business and a kind of class-war rhetoric, the maintenance of the corporation capital tax as it existed was consistent with this government's rhetoric and plans. Now we see some slight changes to it. Regrettably, we see those modest changes to it come far too little, far too late. This government and its dangerous, rabid rhetoric has done incalculable damage to this province's economy in the past several years. The impact of that is going to last for a long time into the future.

The result, of course, is going to be more lost jobs and lost investment as a consequence of this government's very dangerous rhetoric.

[3:45]

The principal problem with the corporation capital tax is that it stands as a very powerful disincentive to new jobs and new investment in this province. Why would new or even existing businesses want to invest in this province when the first thing that this government does is tax them on that investment? That's exactly what the corporation capital tax does. It's a tax that sends all the wrong messages to potential investors in this province, whether new or existing. It's a tax which comes into play whether a company is new and struggling or well established.

Again, the first thing that this government does regardless of their condition, regardless of whether they're making any money, regardless of the kind of financial hardship they're experiencing, is tax them for the investment that they have made in this province.

This government, of course, thinks that business is going to be profoundly grateful for this modest change to the corporation capital tax. Well, I'm afraid not. This government has done far too much damage over the past several years to the business sector. This government takes away dollars from business, from individuals, and they return a few pennies and expect us to be profoundly grateful for doing that. Clearly we need much more substantial changes to see business confidence restored in this province.

This government's policies, whether they are in forests or any other sector of the economy, have done incalculable damage to the economy and to the investment climate. The minor tax relief associated with this bill will do nothing to reactivate the economy or to restore investment confidence. Frankly, there is only one measure that this government could undertake which would result in a prompt restoration of investor confidence and the creation of new jobs in this province, and that one measure would be the resignation of this government -- that's the only thing.

The resignation of this government would be the only thing at this point that would restore investor confidence in this province. They've done far too much damage in every area that they've touched. This is certainly a classic example. The pittance that they're returning through this bill is going to be insufficient to turn things around.

Deputy Speaker: Thank you, members. I recognize the Minister of Finance and Corporate Relations, to close debate.

Hon. J. MacPhail: I move that the bill be referred to the Committee of the Whole House to be considered at the next sitting after today.

Motion approved.

Bill 2, Budget Measures Implementation Act, 1998, read a second time and referred to a Committee of the Whole House for consideration at the next sitting of the House after today.

Hon. J. MacPhail: I call second reading of Bill 3.

INCOME TAX AMENDMENT ACT, 1998

(second reading)

Hon. J. MacPhail: Bill 3 provides tax relief for British Columbia taxpayers by reducing personal income taxes and corporate taxes for small business and the film industry. Tax relief is part of the government's plan to address the competitive challenges faced by British Columbia. The tax cut will increase consumers' take-home pay and spending and stimulate private sector job growth and creation.

The tax cut will be the fourth consecutive reduction in British Columbia personal income tax since 1995, for a total reduction of 6 percent for the majority of British Columbians. The reduction in personal income tax will be accomplished by reducing the provincial tax rate by one percentage point, to 49.5 percent from 50.5 percent effective January 1, 1999.

[ Page 6981 ]

Hon. Speaker, the government is also responding to concerns from many sectors of the British Columbia economy that the personal income tax system is making it difficult to attract and keep highly skilled individuals in certain occupations. In particular, concern has been expressed that the top marginal tax rate is too high. In response, the government will decrease the top marginal tax rate in stages to 49.9 percent by the year 2001.

This change will make it easier for the high-technology sector and other sectors of the new economy to attract the highly skilled individuals needed for these sectors to reach their full potential. It will help ensure that there is work in British Columbia for our best and brightest graduates.

However, British Columbia will continue to have a very progressive tax system. Even with this reduction, the top 4 percent of tax filers will pay over 28 percent of the total provincial income tax. The first stage of this reduction will take place in 1999 by reducing the British Columbia high-income surtax rate to 19 percent from 26 percent. This will reduce the top marginal rate by 1.5 percent to 52.7 percent. These measures will put an additional $37 million in taxpayer pockets in this fiscal year and $152 million when the reduction is fully implemented.

Bill 3 also provides tax relief for small businesses by reducing the small business corporate income tax rate from 9 percent to 8.5 percent effective January 1, 1999, and to 8 percent effective January 1, 2000. The opposition spoke to this in second reading of the previous bill, but it is contained in this bill.

The government recognizes the importance of small businesses to the British Columbia economy. Small businesses have been instrumental in creating new jobs in recent years. To sustain this momentum, the government is reducing the small business corporate income tax rate to the lowest rate in British Columbia since 1986. This will assist approximately 40,000 small businesses and support additional job creation in this sector.

A general anti-avoidance rule is also being introduced effective March 31, 1998. This rule, which is similar to the federal anti-avoidance provisions, will grant the authority to challenge abusive tax avoidance arrangements and protect income tax revenue.

Lastly, Bill 3 introduces Film Incentive B.C., which provides a refundable corporate income tax credit for qualifying film and television productions, with principal photography commencing after March 31, 1998.

The government has worked extensively with the film industry over the past year to develop Film Incentive B.C., a program that will increase British Columbia-owned and operated activity, encourage further investment and job creation in the industry and expand training for workers and people entering the industry. It will pursue regional expansion and will enhance British Columbia's position as a preferred shooting location for film.

Key features of Film Incentive B.C. include a base tax credit of 20 percent of qualifying British Columbia labour expenditures for B.C.-controlled productions, a regional tax credit offering 12.5 percent of qualifying British Columbia labour expenditures for shoots outside of Vancouver and a training tax credit offering up to 3 percent of qualifying British Columbia labour expenditures for providing training opportunities for workers.

The introduction of Film Incentive B.C. will ensure that this province remains Canada's most attractive movie location and one of the leading centres of film production in North America.

The tax reductions in Bill 3 are evidence that the government has listened to and acted upon the concerns expressed by business and by individuals. These personal and corporate income tax reductions implement part of the government's plan to improve competitiveness, stimulate investment and create jobs. I invite all members to support this bill.

G. Farrell-Collins: Bill 3 essentially does two main things as far as the public interest is concerned. The first

part is the tax cuts for individuals and small businesses, and the second

part is the incentives to the film and television industry in British Columbia. I want to be on the record for the opposition as saying that we do indeed support the plans for incentives to the film and television industry which put us on a competitive basis with other jurisdictions, particularly Ontario, which has been fairly aggressive in offering this type of incentive for the film industry to either stay in Ontario or move to Ontario. Unfortunately, in order to compete, we have to respond in kind.

But the first part of the bill is the one that really has an impact on British Columbians. I think that the first part . . . .

Interjection.

G. Farrell-Collins: The minister is mumbling. If she wants to get up, she gets a chance today at the end to close debate, and she can do that.

The first part of the bill is the income tax changes for individuals and small businesses. It shouldn't be called the Income Tax Amendment Act, 1998; it should be called the Too Little Too Late Act, because that's what it is. It's way, way too little, and it sure as heck is way too late.

As I talked about in Bill 2, we in this province have an economy that under the guidance -- the esteemed and wisdom-full guidance -- of the members opposite has sunk from No. 1 in Canada for economic growth to No. 10 out of ten. We lag behind every other jurisdiction in Canada in economic growth this year. That is something that British Columbians can't be proud of. It is something that this government certainly shouldn't be proud of, although they seem to be proud of it.

The income tax that British Columbians will pay once these changes are brought in will still be amongst the highest in Canada and right up there at the top as far as western Canada goes. This government is reducing the income tax for individuals from 50.5 percent of the federal rate to 49.5 percent of the federal rate. But again, they're not doing it today, when British Columbians are looking for tax relief. They're not doing it today to help those British Columbians that need to have more money in their pocket at the end of the month to pay their bills and take care of their kids.

They're not doing it today, like they did for the big financial institutions in Bill 2. They're not doing it today; they're doing it nine months from now. They're doing it way down there on January 1, 1999.

G. Wilson: Maybe.

G. Farrell-Collins: The member for Powell River-Sunshine Coast says maybe. We know what happens. The government brings in another budget next year, and they'll change back all the stuff they've promised this year. It certainly wouldn't be the first time we've seen that. We know how that happens from time to time.

So at a time when the people of this province are looking for some relief, are looking to be competitive with the people in Manitoba and Saskatchewan and Alberta, the government says: "Well, come and see me in nine months. Take two

[ Page 6982 ]

aspirins and come and see me in nine months, and we'll see what we can do for your income taxes." The government talks, and it drives me nuts. They're running television and print ads telling people about their income tax cut, like the government has just slipped a fiver into the taxpayer's pocket. The reality is that they don't get a red cent until maybe January of next year. The fact of the matter is that through fees and licences and all the other things that people have to pay for, they're actually taking more out of the people's pockets. So even if they do slip a fiver into one pocket at the end of the year, they're going to take a fifty out of the other pocket right away.

The income tax changes for next year for individuals will amount to a $25 million tax cut -- or reduction in revenue for the government; let me put it that way. We don't know the exact dollar figure that people are going to see themselves. There are other provisions in this act which increase the amount of money people have to pay for taxes. The calculation that was done by the people who do these kinds of things -- those accountants and the people who are good with the numbers -- shows that for the average family it's enough to buy dinner for two.

So here are the people of British Columbia carrying this huge burden that people in the other provinces don't carry. They've got this backpack full of stones. They're carrying this huge burden, trying to get by on a day-to-day basis, trying to pay their bills, trying to take care of their kids. The government comes along and says: "Hey, I'll buy you dinner for two on me." The people of British Columbia need a better tax break than that. The people in a province as wealthy as we have deserve to be competitive when it comes to income taxes. They shouldn't have to pay more than other jurisdictions in this country.

We have a wealthy province, a rich province -- rich in resources, rich in people, rich in talent. And there's no way that we should be burdened with a government that says: "Here's your tax break; go out and buy yourself a pizza."

[4:00]

There was an opportunity for this government to make a real change, to really change the way they do business, as they like to say in their speeches. And what did they do? A minimal incremental change. At the end of the day we will still have one of the highest tax rates in western Canada. If you look, hon. Chair, at the income tax rates, the only other one, quite frankly, that would have been higher than us would have been Saskatchewan, but they're actually reducing theirs to 48 percent. If you look at what the Saskatchewan budget did this year, they're actually going to reduce their rate to 48 percent.

While the government's patting themselves on the back for going from 50.5 to 49.5 percent, Saskatchewan -- that other NDP province, that wealthy province that can't hold a candle to British Columbia -- is reducing its tax rate to 48 percent of the federal rate.

It is way, way too little. The tax cuts in this budget and in this bill will do nothing to kick-start the economy of British Columbia, absolutely nothing. The Leader of the Opposition was talking with me about this bill today, and I don't know if he's speaking this afternoon, so I'll steal his analysis. He said: "It's sort of like taking an AAA-cell battery and saying that you're going to get the shuttle to the moon with it." There is nothing in this incremental tiny tax cut that is going to do anything to turn the economy around for nine months, and even in nine months it will not be nearly enough to do anything to turn the economy around.

The government should be honest about that. They should tell British Columbians what they're really doing. What they're really doing -- like they did in Bill 2 -- is making the smallest possible cut they can that will still allow them to say that they're giving people a tax break. That will allow them to write the press release, have the Premier do a press conference and run television, radio and newspaper ads saying that they're addressing British Columbians' taxation level. They don't tell them that every other province in Canada is reducing taxes faster than this government is.

Nova Scotia, New Brunswick, Manitoba, Saskatchewan -- even P.E.I. -- are reducing overall taxes faster than this government is. There is no significant relief in this legislation or in this budget for the hard-working taxpayers of British Columbia. We remember the ads in the 1991 election about a government that was going to be as honest and hard-working as the people that were paying for it. Well, those hard-working people have been paying for it all right; they've been paying for it since 1991.

Just to give people an idea of how insignificant these tax cuts are compared to what the government has done to them in the last six years, in the first budget the Premier brought in when he was Minister of Finance in 1992, the government increased taxes by $750 million. In the second budget he brought in, the next year, he added another $850 million on top of the $750 million that he had brought in the year before -- over $1.5 billion of new taxes. We've been paying that amount each and every year since then; every year another $1.5 billion-plus is coming out of the pockets of taxpayers.

So after seven years of NDP budgets -- multi-billions of dollars in taxes that we've paid -- guess what our income tax break is for next year. It's $25 million, less than one seventy-fifth of the amount of additional taxes we paid in the first two years alone, not to mention 1994, 1995, 1996 and 1997 and the billions of dollars in additional taxes that we paid then. So that puts in perspective just how minuscule this tax cut is.

One of the other tax cuts that's in here is a change in the marginal tax rate -- a change in the amount of the additional dollar earned that those individuals in the upper tax range will pay in taxes. The reason that's important is because most of the people at the high end are there for a number of reasons. They are there because they are highly educated, highly skilled and are producing a lot of value-added to our economy. That's why they get paid so much. We do want a progressive tax system -- nobody will argue against that.

But you have to look at what's happened to British Columbia as a result of having the highest marginal income tax rate in North America. You have to understand . . . .

I know that I've stood up in this House and said it before in years past; I know other members have said it in years past in this House. What having the highest, by far in some cases, marginal income tax rate in North America does is drive the most highly educated and highly skilled people out of British Columbia. They go elsewhere. They move to Alberta; they move to Ontario; they move to Washington State; they move to Georgia; they move to New York. They don't stay here. They move to London, England.

The reason we need to be mindful of our top marginal tax rate is because those are the people who have the new ideas. They're the highly skilled. They're the brain trust of our province. They're the people that are driving the economy in new directions. They're the people that are out there diversifying our economy. They're the people that are creating the high-tech jobs. They're the people that are creating the innovations that we can turn around and sell worldwide. They are the people that are preparing British Columbia for the economy in the next millennium, and we can't afford to lose them. The minister and the Premier have now accepted that logic.

[ Page 6983 ]

The minister said it in her speech just a few moments ago, and the Premier has said it in the past. We've got to do something to keep those highly skilled, highly educated people here in British Columbia.

This somehow came as a revelation to the Premier during his consultations with the business groups. The business groups and the tech industries have been telling the government that for years. I know that, because they've been telling us that. This is nothing new. This is nothing revolutionary. This is fact. And if it's a fact this year, it was a fact last year and the year before and the year before that.

If you look at Washington State and Oregon and what those two states, both with economies and populations comparable in size to British Columbia's have done to diversify their economy in the last decade and then look at what British Columbia has done, we are more than a decade behind them. Those economies in Washington State and Oregon have been affected by the Asian flu, just as British Columbia has, but they are way better prepared. They've been prepared for a downturn in the forest sector. They are prepared for a downturn in the mining sector. They are prepared for a downturn in the fishing sector.

Washington State and Oregon don't rely just on resource-based economies for their livelihood anymore. They have spent the last ten years -- in some cases longer than that -- preparing for the new economy, preparing for the next century, preparing for the next thousand years. They have moved away from relying on forestry and mining and fishing and have turned to relying on brain power, on inventiveness, on creativeness, on high technologies.

That's where the new economy is going. That's where the good jobs are. That's where the good family-supporting, high-paying, highly skilled, high-revenue, good-livelihood jobs are. British Columbia is being left behind, and one of the key reasons we're being left behind is because of the size and rate of our marginal income tax. You can talk to high-tech firm after high-tech firm, talk to their CEOs, talk to their workers, talk to the individuals and talk to your constituents.

There are literally hundreds of high-tech companies and high-tech individuals who have picked up and gone south of the border because of the marginal income tax rate. They can go south of the border, pay a substantially lower level of income tax and have a better standard of living than they can in British Columbia.

What happens is that these small, high-tech companies -- sometimes starting with one or two people -- grow to a point where they can't recruit new people, where they can't keep the people they've already got here in British Columbia because the economies and the businesses that are thriving in Washington State and Oregon are coming up here and stealing them. They're coming up here and recruiting them to go down there, and one of the main reasons they go is because they have a better standard of living down there. These companies reach a certain size, and then they realize that they can't grow any further.

They end up selling their technology or moving their company south of the border, and we lose that diversity in our economy. We lose those individuals, we lose their creativity and we lose their input into our new economy.

We've got a lot of work to do. When the government bashes the rich people with the highest marginal rate . . . . These are people who are earning anything over $80,000. That's a lot of money to a lot of people, but to people in that industry with those marketable skills and those abilities, that's peanuts. When they have to turn around and start paying 54 percent marginal income tax on any additional dollars they earn, they go elsewhere. They take all that opportunity -- all that spinoff, all the future opportunity for our people in our universities and colleges -- with them.

The people aren't able to find those jobs here; we're not able to create those jobs here. As a result, our economy is far less diversified than it should be right now. We are affected more greatly by the Asian flu, by a downturn in the resource sector, than those other economies are. So while they're booming, British Columbia is losing, and that's unfortunate.

Let's look at one of the other tax cuts here. It's a tax cut for small and medium-sized businesses, a small business income tax cut. Once again, it doesn't take place until next year; it starts January 1, 1999 -- if they don't change it between now and then. It may disappear by then. This small tax cut takes place on January 1, 1999. All those small businesses that the Premier refused to meet with in preparation for this budget . . . . He met with all the big guys, but he didn't meet with the little guys.

He didn't meet with the people who really produced the jobs, as the Minister of Finance said in her speech moments ago. He didn't meet with those people. Those people, the small and medium-sized businesses -- which are the ones creating the new jobs in the high-tech sector, the retail sector, the tourism industry, all those jobs providing great opportunities for our new people entering the work force, our young people -- get a tiny tax break in January and nothing now.

One big financial institution got $8 million three weeks ago. Guess how much all the small and medium-sized businesses in British Columbia get on January 1 of next year. If you take all the thousands of mom-and-pop stores, the thousands of dry cleaners, the thousands of restaurants, the thousands of hotels, the fishing lodges, the high-tech industries, the TV studios, the theatres, you name it, if you add up all those people, if you take all those businesses and put them together in one place, guess how much of a tax break they get on January 1 to split up amongst themselves. It's $5 million.

That's the relief for the job-creating engine of British Columbia. The businesses that are supposed to be out there creating jobs for young people in this province get a $5 million tax break. After paying billions and billions and billions of increased taxes for the last seven years, this minister and this Premier have the gall to say to them what a wonderful thing they're doing for them by cutting their taxes by $5 million. That should be called the whoop-de-doo tax cut, because it's going to make no difference.

[4:15]

We've got the highest youth unemployment rate west of Quebec in this country. It's gone up 5 percentage points since the Premier appointed himself -- or should I say anointed himself? -- the Minister Responsible for Youth. We have an 18 percent youth unemployment rate. I see some young people in the gallery. This issue will affect their careers. This issue will affect their ability to find a job and pay for their education when they start going to college and to university. This will affect their ability -- when they turn 16, because they don't look 16 yet -- to go out there and find that first job.

This taxation revenue we're discussing right now will impact their lives and will determine whether or not they have the opportunities that their parents had when they grew up in British Columbia. It is a disgrace that with an 18 percent youth unemployment rate, this government would have the gall to offer those small and medium-sized businesses in British Columbia, the ones the minister herself says create the jobs for young people, a $5 million tax cut to divide amongst themselves when one large financial institution in British

[ Page 6984 ]

Columbia -- one large financial institution, not all of them; they didn't have to divide it up; they got it all to themselves -- gets an $8 million tax cut three weeks ago.

That shows where the government's priorities are. They probably spent more than $5 million last month advertising their new Jobs-for-Youth program. They probably spent more than that on television ads, and yet the tax break for small businesses, the ones that create the jobs, is $5 million. If I was a young person -- if I was 16, 17, 18, up to 25 -- with that 18 percent unemployment rate, I'd be phoning the Premier's 1-800 youth hotline for sure.

I'd be phoning him all right, and I'd be telling him that what they're doing for small businesses in this province is a disgrace. They're providing no opportunity for the new sector, no opportunity for high technology, no opportunity for the tourism sector, no opportunity for small businesses, the ones that should be out there creating the jobs for young people in this province. That's what young people should be doing with that 1-800 number. They should be phoning the Premier and telling him what they think about his plan to create jobs for young people, because it's simply inadequate.

We will continue, after this tax cut for small businesses, to have one of the highest income tax rates for small businesses in western Canada. We're still right up there at the top. So while 19,000 jobs left British Columbia and went to Alberta in January alone, this government has done nothing in this piece of legislation to turn that around -- not one thing. If the government was really going to bring in, in this budget and in these pieces of legislation that implement that budget, significant tax cuts -- as the Premier liked to say in his press conferences and in his media interviews -- they should have done it.

If they were going to bring in paltry, insignificant, ineffective, marginal, teeny tax cuts that will have absolutely no impact at all and will not even come into force for another nine months, why didn't he say that? Why don't we see the TV ads with the Premier saying: "Look at the teeny, tiny, insignificant, totally inefficient, totally ineffective tax cuts we've brought in that won't create one new job for young people. Phone 1-800 and tell me what you think about it"? Why can't he at least be honest with the young people of this province and tell them what he isn't doing for them?

Why can't he be honest with the young people of this province and show them what Alberta, Manitoba and Saskatchewan are doing for young people? They have an unemployment rate for young people that's half what British Columbia's is. Why doesn't he show what the people and the governments in those provinces are doing for young people, and then show them what this government isn't doing for young people.

Then he says: "Phone 1-800 and tell me what you think of that." Does he think young people, young voters are so gullible that they don't know what this government is doing to them -- that they don't know the effect this government has on them?

The minister and the Premier talk about their tuition freeze. Well, the tuition is wonderful, but I know that when I went to college and to university, what was really important to me was whether or not I had a job to pay my tuition. My parents couldn't pay it for me, my friends couldn't pay it for me and my relatives couldn't pay it for me. I raised the money. I went out there and worked. I bused tables, I washed dishes and I served tables. I did all sorts of stuff to make enough money to go to college and to university.

That's what's important: can young people afford to get a job to send themselves to university? Or are they going to end up like many people do, coming out of university or out of college with $45,000, $50,000 or $60,000 in student loans?

It's just not practical anymore for people to pay all their living expenses, to leave town . . . . You've got to get a car or a bus pass, you've got to pay for your books, pay for your tuition and pay for your clothes. You've got to pay all your living expenses, of which tuition is a very small part, and do it with student loans. You've got to go out there and get a job. You've got to go out there and pay your way. It's the only way you can get there. So what does the Premier have to say on that 1-800 number when those young people phone and ask him? What does he say about the 18 percent unemployment rate?

An Hon. Member: "All operators are busy."

G. Farrell-Collins: Yeah: "All operators are busy," or "Press 1 for more lies."

An Hon. Member: It's 1-800-tough-luck.

G. Farrell-Collins: Yeah: "1-800-tough-luck."

The young people of this province need an opportunity. They deserve an opportunity. They deserve a government that's going to listen to them and that's going to listen to the world, a government that's going to pay attention to what's going on out there and create an economic environment in this province for them to pay their way, to work hard, to get ahead and to build a future for themselves -- hopefully, some day, for their families, the same way their parents did.

Those people deserve that. It is the height of hypocrisy and deception for a government to bring in a $5 million tax cut for small businesses and then run ads and send out mail and run radio advertisements telling young people that the government is listening to them and is creating opportunity for them. That is way too little and it's way too late. This economy is already on the skids. We're losing jobs. We're bleeding jobs to Alberta and Washington State, and nothing in here is going to do anything to turn that around.

This government missed the mark, and I think they missed the mark deliberately. They are more concerned with getting more money in their pockets. They are more concerned with more revenue than they are with more opportunity. They will talk about it. They'll run ads. They'll put it in their speeches. They'll put it in their brochures -- they'll do all of that. They'll stand up in their local communities and talk about the great things they're doing for young people in British Columbia, but the facts speak for themselves.

We have the highest unemployment rate west of Quebec -- twice the unemployment rate of the young people of Alberta. There are no summer job opportunities. The government has to get its head around that. They have to bring in significant changes to the tax system; they've got to get off the backs of small businesses and let them do what the minister said they do best, which is create jobs. Nothing in this bill is going to do any of that. It falls way, way too short, and it's way too little.

I. Chong: I'm pleased to rise again to offer second reading comments on Bill 3. I know I was overzealous in my earlier comments. I jumped into some income tax changes. I do have some comments to make on the income tax changes, and in fact they'll be different than the ones I made previously. But first I do want to mention that there is one

section of this

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particular bill -- a small portion -- which appears to be supportable in essence or in principle, and that is

section 6 in regard to the anti-avoidance rule.

All of us know that we don't want any taxpayer to gain an unfair advantage over other taxpayers who are paying their fair share of tax. If, in fact,

section 6 does adjust any tax affects of a transaction whose primary purpose is to avoid tax, then it will be a good thing. The minister stated that it is to deal with abusive tax avoidance practices. I hope, when we get into committee stage and discuss this a bit further, that there are measures to ensure that we are dealing with abusive tax avoidance practices and not aggressive tax planning measures and practices. Obviously, we know that there are people who are in the profession of providing advice on aggressive tax planning.

I am looking forward to asking the minister in committee stage what measures she has in place -- whether through an appeal or some form of cooperation with the federal government -- to ensure that where the federal government does not view it as anti-avoidance, the provincial government in its part does not become overzealous and proceed in that way -- so that we will have some commonality in anti-avoidance rules.

That is offering some measure of positiveness on this Bill 3. Now the members can say that we have offered some positive comments.

I would like to talk about the income tax amendment as well. As I mentioned earlier, the income tax changes provide too little too late. What I would like to do is go back to the income taxes in the 1990-91 years, before this NDP government came into power. Back in 1990, the British Columbia provincial income tax rate as a proportion of the federal income tax was 51.5 percent. There was no surtax at that time.

In 1991, before the government took its place in administering changes to legislation, the previous government left the basic provincial tax rate at 51.5 percent, but it introduced a surtax on the higher-income earners -- the surtax being 10 percent of the provincial tax in excess of $9,000. That was fine because it did deal with some higher surtax rates. I think a majority of people felt that it was fair: it was not substantive, and those who made those kinds of incomes and had provincial taxes of $9,000 perhaps could pay a little more and basically provide more to our social safety net.

But in 1992, when the NDP government that had been elected in the fall of 1991 came into being and the then Minister of Finance -- now Premier -- was able to bring in his budget, he introduced some changes. So for 1992, our 51.5 percent tax as a percentage of federal tax was increased to 52 percent, and the surtax was expanded. There again we have a word that this government uses quite freely. It doesn't introduce anything new, but it expands on what is currently there.

The expansion was to have a 10 percent surtax on those provincial taxes in excess of $5,300 as well as the 10 percent surtax on those dollars in excess of $9,000. I know it sounds quite confusing to some members, but believe me, when you start to add this up, it gets to be quite substantial.

In 1993, the 52 percent became 52.5 percent, and in 1994 and 1995 it was maintained at 52.5 percent. In 1993, we went back again to the surtax. Instead of 10 percent of the dollars in excess of $5,300, it increased to 20 percent for those dollars in excess of $5,300. In 1994 that surtax, again, went to 30 percent, in excess of $5,300. So what we see happening is some taxation occurring at the surtax levels, which in a sense affects what this government would call high-income earners.

But in some cases, they are not high-income earners; they are the only income earner in a family who is supporting two or three dependent children, because they only get basic tax credits applied to their high level of income. I have seen this, because I have done returns. If the Minister of Finance doesn't want to believe it, I would suggest that she prepare some more tax returns. I certainly have seen my share over the years.

What we learned in the budget speech and in the budget reports this year is that a person making around $50,000 employment income and claiming basic tax credits would see $89 in tax savings next year. I've done some calculations here, and based on that same $50,000 of employment income, what this government did when it increased its rate in 1991 from 51.5 percent to 52 percent for that $50,000 of income was that it grabbed $44.50 more. When it increased it another 0.5 percent in 1993, we saw the full $89 come into play. That same $89 was another tax grab for '94, '95 and '96.

So what we see is that the government has in fact been taking this $89 for the last four years, and only next year will we see them giving it back. Again, we don't know how long that could be for, but it's taking four years of tax grabs out of one pocket and trying to move them over into the other.

The problem with deferred tax savings is that we don't know what is going to happen between now and January 1, 1999. Will that person have a job? Will they be at that level of income where they will get back the tax grab that was there for them in 1993 and 1994?

[4:30]

Similarly, with corporations, if they cannot survive because of the economic times we are currently in and because of the way the economy is going -- and I know this government refuses to believe that we are heading into a recession . . . . If those businesses are not able to sustain themselves, how will they benefit from the tax savings that are supposedly being offered to them through this income tax amendment?

What I fear is that there are many corporations that have been suffering losses, whether it be this year or even in the past year, and what they will be doing is gaining back some of their tax costs from the previous years because the Income Tax Act allows them to do that. By the time they are able to get themselves to the standards that they were at back in the early 1990s, we don't know what this government will be doing -- if they are still in power, that is, which I hope will not be the case -- or whether those tax savings will be there for them. Defer