1994 Legislative Session: 3rd Session, 35th 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, MAY 2, 1994

Afternoon Sitting

Volume 14, Number 21

[ Page 10423 ]

The House met at 2:07 p.m.

Prayers.

J. Dalton: This morning at 5:30, when most of you were probably still in bed, I had the pleasure of climbing on a bus with 25 students from my son's school, Handsworth, in North Vancouver; their teacher, Mr. Jim Adams; and two of my constituents, Dr. Len Hendrickson and Mr. John Geeling. I would like the House to make all of them welcome.

G. Brewin: Hon. Speaker, at this time, if I may, I would like to make a suggestion -- inasmuch as this is entirely in order -- that you or the Clerk's office send congratulatory messages from this government to the government of South Africa regarding its new elections and the election of President Nelson Mandela. I think it would be appropriate for this House to do that, and I would like to have that happen.

The Speaker: Thank you, hon. member. The Chair, of course, would be extremely happy to convey those congratulatory comments to the new government of South Africa on behalf of all members of the Legislature. If permitted, I would like to embellish somewhat on this most special historic occasion, inasmuch as I can recall that in my first years as a member in this House, I stood up and demanded that we delist some of the South African products in the British Columbia liquor distribution system. Mind you, that was a long time ago. This is a story we have all been waiting and praying for.

I will be more than happy to convey those good wishes to the new government and to the people of South Africa.

Oral Questions

CONFLICT-OF-INTEREST STANDARDS FOR CABINET MINISTERS

G. Campbell: My question is for the Premier. When the Premier was in opposition, he constantly derided the former government for their inability to separate personal interests from public interests. Last Thursday the Premier informed this House that it was perfectly satisfactory for a member of his cabinet to pursue personal interests without regard to the public interest. Indeed, he said that if someone did not belong to the constituency of an MLA, then it was perfectly acceptable for that MLA to pursue personal interests.

Can the Premier tell us in this House how the public is to determine when MLAs are pursuing public business and when they are doing personal business in their constituency offices?

Hon. M. Harcourt: The Leader of the Opposition, I think, is referring to a matter that he referred to the conflict-of-interest commissioner, and instead of letting the due process of law take place, he is carrying on an investigation here in the Legislature, too. He can't have it both ways, hon. Speaker.

The Speaker: Supplementary by the Leader of the Official Opposition.

G. Campbell: Hon. Speaker, the conflict-of-interest commissioner certainly did not try to redefine the role of a publicly elected official in British Columbia, as the Premier did last Thursday. I can only assume -- and I must admit that in view of his performance in the House in the last few weeks, it is a fairly broad assumption -- that the Premier is aware of the brochure that he has put out, called "Standards of Conduct for Public Service Employees" in British Columbia. I would like to quote from that.

"Conflict of interest includes situations where employees' private affairs or financial interests are in conflict with their duties, responsibilities and obligations, or result in a public perception" -- of conflict of interest. Can the Premier tell me when he decided that in his government the standards for cabinet ministers would be below those for others in our public service?

Hon. M. Harcourt: I find it a bit hypocritical to have the Leader of the Opposition standing up here talking to a government that has introduced the toughest conflict laws in Canada, with an independent conflicts commissioner. I would like to have the approach that this government has taken to bring in these tough new statutes, and then see how the Leader of the Opposition, who lectures us, would stack up against these conflict laws. When he was mayor, he was involved with contracts to a very good friend and voted on those contracts. That wouldn't stack up very well, hon. Speaker.

The Speaker: Final supplementary, hon. member.

G. Campbell: It's always interesting to watch the Premier squirm about as he acts differently than he talks. The fact of the matter is, the Premier who tells us about his tough conflict-of-interest laws constantly ignores them. He does not even hold his cabinet ministers to the same level of accountability as he holds the public service. When will the Premier put aside his double standard and start acting in the best interests of the public in British Columbia, and stop protecting those ministers who pursue their private interests on public time and on the public payroll?

[2:15]

Hon. M. Harcourt: Once again, I say to the Leader of the Opposition: look at your own track record. The way he was dealing with conflicts when he was the mayor of Vancouver leaves a lot to be desired. The opposition can't have it both ways. They cannot send a matter to the conflict commissioner, have that independent officer carry out an investigation they triggered, and then carry on that investigation here in the Legislature.

ABSENCE OF AGRICULTURE MINISTER

W. Hurd: My question is for the Minister of Agriculture. Last week the Minister of Agriculture cut and ran from proceedings in this House, abandoning a ministerial statement. Could the minister tell the House what was so urgent that he had to miss making an important ministerial statement to this House?

Hon. D. Zirnhelt: The opposition laid some charges, and I wanted to find out the nature of those charges. I issued the contents of the ministerial statement in a press release. It dealt with the very serious matter of the international salmon commission. If you wish another copy of the statement that was released, I would be happy to provide you with one.

The Speaker: Supplementary, hon. member?

[ Page 10424 ]

LAND PURCHASE BY AGRICULTURE MINISTER

W. Hurd: I have another question for the Minister of Agriculture, who has been making a lot of comments lately about the controversy at Opheim Lake. Could the minister tell the House if he agrees with the Premier that sometimes it's all right for an MLA to act as a private citizen in his own office rather than an MLA?

Hon. D. Zirnhelt: In this matter, one set of facts has been provided by the opposition in laying their charge under the Members' Conflict of Interest Act. Mr. Hughes is interested in hearing all sides of the matter. Mr. Hughes has interviewed me.

Interjections.

The Speaker: Please proceed, hon. minister.

Hon. D. Zirnhelt: He has been to the Cariboo; he will be back to the Cariboo. I will be talking to him again later this week. He will consider all the matters that he has. All the information has been provided. Any comment about the matter before him will be left for his consideration.

The Speaker: Final supplementary, hon. member.

W. Hurd: The minister has been very busy making comments in public about this controversy, even though it's under investigation. He has advised the Williams Lake Tribune that he considers the road along Opheim Lake to be private, even though it was paid for by public money. Why would the taxpayers, whether it be 50 years ago or 50 years from now, not be able to benefit from money spent on their behalf? How is this attitude acceptable from the minister, who is supposed to be acting on behalf of the taxpayers of the province?

Hon. D. Zirnhelt: I have to repeat that there is a set of facts provided by the opposition and some of their Liberal informants in the Cariboo. They read information from the paper, and they provide those as facts. I suggest that the matter is before Mr. Hughes, and he will examine all the facts and come to an appropriate decision.

REVIEW OF BAMBERTON PROJECT

L. Fox: My question this afternoon is for the Minister of Municipal Affairs. The former minister promised that there would be a comprehensive review of the Bamberton project if it passed third reading. He was turfed out of his post because of a conflict of interest, and now the province is reneging on that commitment. Why is the minister refusing to honour the government's commitment to conduct a social, economic and environmental impact assessment of the Bamberton project?

Hon. D. Marzari: I'm glad to address the Bamberton project in the House. Just before Christmas last year I issued, after an eight-week period of developing a process by which we could bring to the public eye the nature of the processes around decision-making on such projects.... Just before Christmas that process was outlined in full detail for everyone up and down the east coast of the Island -- in fact for the whole province -- to understand. Basically, the process involves a natural and normal process that has been used in this province since zoning, regional mandates and city mandates came into being.

Interjection.

The Speaker: In deference to the limited time period, I ask the hon. minister to please conclude her remarks.

Hon. D. Marzari: Basically, this process outlines a concrete and very transparent methodology by which the decision around Bamberton will be made. I must advise the member that the process is unfolding as it should and that the decision will be made promptly -- within the next month.

L. Fox: The minister knows well that the review she has appointed Mr. MacKay to undertake will be a bogus, Mickey Mouse study; the minister knows full well it will not be sufficient. It will not address the liquid waste, the water supply, the geotechnical information or the road design.

Why is she allowing this debate over the Bamberton project to rip apart the local communities in the CVRD? Why doesn't she muster her courage, use the authority she has to throw this back to the first reading stage and allow this process to go through a meaningful process, so that the people of that region have an opportunity to support or disagree with the project as we now see it?

Hon. D. Marzari: Actually, the member should know that the ball was in the court of the regional district involved. Just a week or so ago, that regional district decided that it would not take the process back to first reading stage and would leave it at third reading stage, thus putting into motion the process of decision-making I outlined in my previous answer. As I say, since the ball was in the court of the regional district -- to decide whether it wanted to go back to first reading or stay at the third reading stage -- it was very important that I pay attention to that regional district. Hence the decision will be made within the month.

L. Fox: I'm disappointed in the minister. She knows full well that the vote to keep this at third reading stage was split. Four supported it and four were opposed, and therefore it became an affirmative vote. The minister should be well aware that normally....

The Speaker: Order, please. The member has a question?

L. Fox: Yes, I do, hon. Speaker.

The Speaker: Please state your question.

L. Fox: Will the minister not respect the director who has been elected by that region in his concern that the impacts have not been studied sufficiently for this project to go forward? Will she not respect that and turn the bylaw back so it can go through the process?

Hon. D. Marzari: There is nothing more important in this whole process than the democratic decision-making of the regional district involved. And the democratic decision-making of the regional district involved said, two weeks ago, that the process should proceed as it stands. It would accept third reading. Hence this government will be making a decision within the month.

[ Page 10425 ]

RENT SUBSIDY TO FORMER CHAIR OF B.C. TRANSIT

G. Farrell-Collins: My question is to the minister responsible for B.C. Transit -- and I know he'll be pleased. When Eric Denhoff was appointed chair of B.C. Transit, the government agreed to pay $1,500 a month in rent on his False Creek condominium while he tried to sell his house in Victoria. It appears that he wasn't trying very hard to sell that house. In fact, he listed it at $549,000 -- 150 percent of its assessed value of $360,000. Why were taxpayers paying for his digs in Vancouver while he was not trying at all to sell his house in Victoria?

Hon. G. Clark: It's a slow news day, I assume. I have no idea what Mr. Denhoff listed his house in Victoria for.

But I am delighted to take this opportunity to talk about the changes at B.C. Transit under Derek Corrigan, who has been made chair. We're very excited by the opportunities at B.C. Transit.

The Speaker: Order, hon. minister. With the greatest of respect, is the minister declining to respond to the specific question?

Hon. G. Clark: No, I'm trying to give a full and complete response.

The Speaker: Thank you, hon. minister. The hon. member has a supplementary question?

G. Farrell-Collins: I know the minister isn't aware, but I'll be glad to make him aware. It appears that over the period of a year, Mr. Denhoff listed his house first at $549,000, then at $529,000 and then at $500,000 -- still 140 percent of the assessed value. Was there no responsibility for the government to ensure that while they were paying out $1,500 a month of taxpayers' money, Mr. Denhoff was doing everything possible to sell his property? If he wasn't, shouldn't he have admitted that and given up his $1,500-a-month subsidy?

Hon. G. Clark: Mr. Denhoff is obviously a capable private sector individual who is seeking to make a rate of return on his property investment here. Mr. Denhoff was temporarily assigned to B.C. Transit for a two-year term, which expired in June. He was undertaking to assist the government in transition, and he has done a superb job with that transition. We're now well poised for some significant announcements at B.C. Transit. Mr. Denhoff has chosen to pursue work in the private sector. I assume he'll dispose of his house then, if he so desires.

The Speaker: The bell terminates question period.

G. Wilson: I rise today under standing order 35 to ask leave to make a motion for the adjournment of the House on a matter of urgent public importance -- namely, the comments that were made in British Columbia this morning by the Leader of the Official Opposition in Ottawa. Today, for the first time in the history of Canada, the leader of Her Majesty's Loyal Opposition is travelling this country and advocating the secession of one province from every other.

Interjections.

The Speaker: Order, hon. members. The hon. member is stating the matter to determine whether or not it is a matter that can be addressed. He does not require permission to rise on this matter. Let's hear what he has to say and make the determination afterward.

G. Wilson: The comments made today by the Leader of the Official Opposition on both CBC-Radio and CKNW were heard by literally tens of thousands of British Columbians and made a direct attack on the people of British Columbia and the people of Canada with respect to the intention of that member, in representing all Canadians as the Leader of the Official Opposition, to separate the province of Quebec from Canada.

I believe that British Columbians wish to know the position of this government and of every elected member of this House with respect to those comments. It is urgent that we respond, because those comments were made in British Columbia today and should have a response from the elected members of this province today. I believe there is no matter more pressing and more urgent for the people of British Columbia with respect to this province as a strong and equal partner of a united Canada. I urge that we enter this debate now.

The Speaker: Thank you, hon. member. I appreciate the hon. member's notice.

The hon. member for Fort Langley-Aldergrove rises on what matter?

G. Farrell-Collins: I'd like to make a submission on the standing order 35 request. I think all British Columbians -- indeed, all Canadians -- take all those types of comments made by the Leader of the Opposition in Ottawa, or whoever it is, very, very seriously. We all know how interested and how concerned British Columbians were a year and a half ago when we debated the Charlottetown accord. I think they were all amazed at how important people thought that issue was.

But I think what's more germane to this House -- if there's going to be an emergency debate -- are the treasonous comments that were made by the member who just spoke in demanding an independent British Columbia in this country. I think what British Columbians really want to know is not the position of the Leader of the Opposition in Ottawa, but where this member got his ideas and where he plans to take British Columbia in the future.

The Speaker: Thank you for your submission, hon. member. The Chair will be pleased to take the member's motion under consideration, and bring back a decision later.

T. Perry: I seek leave of the House to make an introduction.

Leave granted.

T. Perry: I'd like to welcome to the east gallery students from Maimonides School in my riding -- the only Jewish secondary school west of Winnipeg -- and their teacher Dr. Court. Would members please join me in making them welcome -- but not for too long with the applause, because I hope to meet them in a minute or so.

[2:30]

J. Dalton: I ask leave to table a document on the Pacific Salmon Treaty.

Leave granted.

[ Page 10426 ]

Hon. G. Clark: I ask leave of the House for the Select Standing Committee on Forests, Energy, Mines and Petroleum Resources, the Select Standing Committee on Environment and Tourism, the Select Standing Committee on Transportation, Municipal Affairs and Housing, and the Select Standing Committee on Aboriginal Affairs to meet tomorrow during sitting periods.

Leave granted.

Orders of the Day

Hon. G. Clark: I call Committee of Supply A, the Ministry of Aboriginal Affairs; and in the main House, I would first of all like to call third reading of Bill 11.

CEMETERY AND FUNERAL SERVICES AMENDMENT ACT, 1994

Bill 11, Cemetery and Funeral Services Amendment Act, 1994, read a third time and passed.

Hon. G. Clark: Hon. Speaker, I call second reading of Bill 15.

CORPORATION CAPITAL TAX AMENDMENT ACT, 1994

Hon. E. Cull: This bill increases the exemption threshold for the corporation capital tax to $1.5 million of paid-up capital from the current $1.25 million. It also increases the threshold at which financial institutions are required to pay the 3 percent tax from $500 million, where it currently is, to $750 million of paid-up capital. The bill also exempts cooperatives and incorporated family farms from the corporation capital tax. Finally, it makes a number of technical and administrative changes that will clarify the application of the tax.

With respect to increasing the threshold, this increase in the exemption level will make about 1,000 additional small businesses totally exempt from the capital tax, and the tax will now be phased in between $1.5 million and $1.75 million of paid-up capital. Previously the tax was phased in for taxpayers whose capital was between $1.25 million and $1.5 million. As a result of this increase in the threshold, a further 1,000 firms will pay less capital tax. All in all, over 2,000 small businesses in British Columbia will benefit from the changes made under this act.

The threshold for financial institutions has also been changed. The threshold will be increased now so that the 3 percent rate does not come in until $750 million of paid-up capital is involved. This has been done to ensure that the tax does not discourage the growth of locally based financial institutions.

Incorporated farms are being exempted from the tax in order to remove an inequity within the farm sector and also to provide assistance to B.C.'s agricultural sector. The exemption for cooperatives is designed to foster the growth of the cooperative movement within the province. As a result of these changes, about 500 family farm corporations and cooperatives will now be exempt from the tax. The technical changes to the capital tax are designed to clarify the application of the tax. They confirm existing policy and administrative practice.

In

summary, this bill increases the fairness of the corporation capital tax and makes it less complex. On that basis, I move second reading.

F. Gingell: I was fascinated by the minister's final words in dealing with second reading of Bill 15. The minister said that these amendments increase fairness. I'd like the minister to understand that when something is unfair and you just change it a little bit, it doesn't increase fairness; it perhaps just reduces the number of businesses that are being treated in an unfair manner.

"Unfair" is exactly the right description to use about the corporate capital tax. It is a tax that is unfair, it's a tax that is unjustified, and it is a tax that, unfortunately, is one of the factors causing businesses to decide to invest in other provinces and in other countries. Certainly I know it's a factor that's taken into account when new businesses are looking at where they shall establish themselves to take advantage of the opportunities we all see from the growing trade and economic activity in the Pacific Rim.

[J. Beattie in the chair.]

It simply goes without saying that it is an important matter -- a critically important matter -- for the provincial government to repeal this act in its entirety. It was brought in in 1992; certain changes were made in 1993; we now have more changes in 1994. I can assure the minister that all British Columbians -- particularly those who are unemployed, particularly those who are looking for the new job opportunities this government speaks about so blithely -- are hoping against hope that this government will repeal the corporation capital tax. Then we will be able to encourage business to locate here, and we will be able to encourage investment to be made here.

British Columbia, as we all know, has tremendous advantages. We have the advantage of our environment, we have safer streets, we have a medical health system -- all of which are looked upon with envy by our friends south of the border and in countries around the Pacific Rim. Let's try to take advantage of these things; let's stop doing things that cause people to make decisions to go into other jurisdictions.

We of course will support these amendments -- they make a bad piece of legislation somewhat better -- but the bill that we intend to support with all enthusiasm in the future is when this government has the courage to recognize what it must do, and that is to bring forward a bill that repeals the corporation capital tax.

J. Tyabji: I have some brief comments with regard to Bill 15. First of all, I'm obviously in favour of the amendments to the corporate capital tax. But the position of the Alliance is that the corporate capital tax should be abolished without any amendments. In lieu of it being repealed completely, I have to give credit where it's due, and I'm very happy to see the amendments with regard to agriculture. I'm sure the minister recognizes the serious constraints on the agriculture industry right now, and this is one small measure that should alleviate some of the problems. I would hope that if cabinet recognizes the serious problems that exist in the agriculture industry in B.C. today, the one

section of Bill 15 dealing with the corporate capital tax not applying to agriculture will be expanded to include recognition of some of the very serious financial hardships occurring with the repeal of the Farm Income Insurance Act and with federal resistance to import restrictions. So although I am in favour of the amendments, I wish the government would reconsider the corporate capital tax in its entirety. The mining industry is still very hard-hit by the corporate capital tax, as are other resource industries -- but most particularly mining because of the high capital that would appear on the books before

[ Page 10427 ]

any revenue is generated from it. So I'm in favour of the amendments but against the act in its principle. I hope the government will take further measures on agriculture.

R. Neufeld: I have a few brief points on Bill 15. It's not that often in the House that one can stand up in favour of legislation presented by the government, and I certainly support the changes forthcoming in the amendments. I believe this is the second amendment to the corporate capital tax since it was introduced in the first year of this government's administration. It was introduced by the now-Minister of Employment and Investment and was introduced in a way that made British Columbians feel they hadn't been paying their fair share of taxes -- especially corporations.

The minister of the day talked incessantly about how fair this tax was going to be, and I think all the opposition parties at the time spoke against it. Specifically, I recall speaking against it in relation to the tax on corporate farms, because of the difficulty that the agricultural industry was going through at that particular time, especially in my constituency. So I am happy that we have removed it from corporate and family farms. It's a move in the right direction.

Of course, just like the two speakers before me, I feel that the removal of the corporation capital tax altogether would also be a move in the right direction. I think we would find an awful lot more investment in British Columbia. If there is one thing investors talk about incessantly when you hear them or read them in the newspapers, it's how regressive the corporation capital tax is and how it affects investment in British Columbia. So I would hope that if this government is still here next year at this time, they will come forward with a third amendment, and that will be the removal of the corporation capital tax in its entirety.

With that, hon. Speaker, I take my place, and I will be voting in favour of Bill 15.

G. Farrell-Collins: Just a few comments with regard to this bill. As we know, it is an amendment to the existing corporation capital tax, and there are some changes in this amendment that I think many members of the opposition will be pleased to see. But we are still looking for, number one, a complete removal of the corporation capital tax, since it is seen by international and domestic investors as the single largest deterrent to investment in this province. I think the government should always be mindful of that.

In an effort to create jobs and to create an economic future for the people of this province, young and old alike, it's incumbent upon the government not just to spend the taxpayers' money, which they have gone out and borrowed, but also to make B.C. a welcome place for investors to bring their funds and to encourage small and medium-sized businesses to start up here. Indeed, if we can get some large businesses, it would be even better.

We know that when this tax came in, there was rather loud comment from those investors in Asia who have tended to bring substantial amounts of money into British Columbia over the last ten years or so. That was because the Premier had just recently visited them to tell them that there would be no new taxes in British Columbia, and he subsequently turned around and taxed the capital they had just invested. So I know they weren't very pleased either by the apparent lack of communication between the then-Finance minister and the Premier or, I would say, by the Premier's perhaps slightly less than forthright comments dealing with tax increases in the province.

[2:45]

The question of valuations is another that needs to be addressed, and I imagine the opposition Finance critic will be putting amendments in committee stage. Many people may not be aware of the valuation problems with the corporation capital tax -- except for those who are getting hit with it. It's a case where one person may for some time have held a piece of equipment or piece of property that is valued at something below the threshold rate for the corporation capital tax, and therefore tax isn't being paid on that asset,

whereas somebody who purchased it recently or a new competitor who is expanding -- perhaps located right across the street, with a similar piece of land or equipment -- ends up paying corporation capital tax on it. So I think there is an inherent problem with the tax, as far as the valuation of assets goes. I hope that the Minister of Finance, if she's not willing to get rid of the tax altogether this session, would be willing to look at some of those valuation problems and see if we can't correct them, so that all corporations, all small and large businesses in this province, are competing on an equal footing.

D. Mitchell: I only wish that I could be rising to address a bill by a different title. I only wish Bill 15 could have had the title

An Act to Repeal the Corporation Capital Tax.

This bill, which is perhaps the most inequitable piece of legislation brought in by the NDP government since its election two and a half years ago, really has been duplicitous, and it has not done what the government said it was going to do when it was first introduced. That's borne out by the Minister of Finance's estimates, which she tabled in this House this year with her budget, in which she shows that last year, although they estimated that the corporation capital tax was going to bring in $288 million for the government, it actually brought in $335 million. That's almost $50 million more than they themselves estimated.

When the government brings in an inequitable tax -- which is a tax on assets, which includes debt as well -- for many businesses, including small and medium-sized businesses, and it raises more money than even it, in its most optimistic forecast, could have projected, one has to wonder where these tax revenues are going. After the government brought in this tax, it indicated that the revenues from the corporation capital tax would go toward reducing the debt of this province. Yet the budget that the Minister of Finance brought in doesn't even begin to address the accumulated debt of the province of British Columbia.

There is a good argument that because they raised another $50 million with the corporation capital tax in the last fiscal year, perhaps that should be rebated to the businesses that the tax was levied on in the first place. We hear nothing from the Minister of Finance about a possible rebate of the extra revenues being generated by this inequitable tax, to people who are paying this tax but can ill afford to. We have to support this bill, of course, because it makes a very terrible piece of legislation somewhat less terrible. But it's still unacceptable to the majority of British Columbians.

The Minister of Finance received a lot of representation during the budgetary process, and she received briefs from a number of organizations. It's not a surprise to me that she ignored the recommendation of the Business Council of B.C., which made a submission to her in February of this year. It says:

"The government should move to reduce existing business taxes and fees that are unrelated to companies' profitability. A top priority is to eliminate the corporation capital tax because of its damaging impact on the attractiveness of British Columbia as an investment location."

Under the

section of their brief entitled "Tax Policy," they went on to say:

[ Page 10428 ]

"The single most important step the provincial government could take to improve the investment climate in B.C. would be to eliminate the corporation capital tax -- a tax on assets, not profits, and one which does not exist in most of the jurisdictions with which B.C. industry competes."

I'm not surprised that the government doesn't take all the advice that's proffered them, but they would have done well to accept the recommendation of the Business Council of B.C. to repeal the tax -- not to amend it or make it somewhat less terrible than it is, but to repeal it completely. At the very least, the minister should explain why the tax has raised almost $50 million more than the government forecast a year ago, and she should tell us whether or not she will consider a rebate to companies and businesses that have been forced to pay this inequitable tax in the first place.

H. De Jong: First of all, I'd like to state a few positive things about the bill. It has eliminated a totally unfair tax against certain groups of farming enterprises, and that is good. We on this side of the House have fought hard for that. I congratulate the minister for finally admitting that it was a mistake to put that tax on in the first place.

Going back to when this bill was introduced for the first time.... It almost seems that the government recognizes that it was a total mistake to put that tax on. The only point is that they are repenting their mistake little by little. As other speakers have said, it's unfortunate that the total corporate tax against the business community is not being taken away.

What seems more strange in this bill is that the minister has said that cooperative sales outlets and plants that process agricultural products are now being exempted from the tax. We all know that within this province we have cooperatives and independents who try to be of service to the farming community. Why not those independents that are particularly processing farm products? Why make a distinction between cooperatives and non-cooperatives -- or independents, as they're usually called?

I think it's absolutely ridiculous and unfair, and it certainly will do no good in terms of trading beyond this province -- not only within Canada but also in international trade. I think that perhaps it excludes a portion of those independents, and they can no longer compete with those in a cooperative setting.

It would appear that this bill was intended to be a money grab at first. The government has recognized it was a mistake and repented little by little. It would now seem that it is used as a bag of goodies, which I cannot accept. I think the government should come clean and say, "Let's abolish this whole corporate tax," because that's what it's all about.

W. Hurd: I'm pleased to rise in my seat today and speak to Bill 15, Corporation Capital Tax Amendment Act, 1994. This is the second amendment the government has made to this act. Both involved small incremental increases to the amount of the exemption, and now the total exemption of the family farm, which is certainly a supportable venture but one which really reveals, I think, the government's lack of understanding about the farming community in British Columbia.

When I was at a Federation of Agriculture meeting last year, I had occasion to talk to a number of farmers who, five to ten years ago, had been encouraged to incorporate in British Columbia because of the advantages it offered a sector of our economy -- a sector which, as the hon. Speaker well knows, is a variable occupation that can see fluctuations from year to year. They were snared in this tax completely unfairly, I would say.

I can recall the accountant delivering the dissertation on the corporation capital tax at the Federation of Agriculture meeting and pointing out how difficult it was to even define the term "paid-up capital" when it comes to assessing the value of the family farm. Clearly, the fact that two years after the introduction of this bill we are now finally dealing with the exemption for the family farm re-emphasizes, I think, the notion that the government really didn't understand the difficulty this tax would pose to those in the farming community, even though it has been there for the last two years.

The exemption allowance increase of $250,000, while it may seem a great deal to a layman, is really minuscule compared to most corporations in the province. It's interesting to note that the fundamental philosophy of the corporation capital tax remains unchanged. That philosophy is that if you go to the bank or other financial institution in this province to borrow money for expenditures on plants and equipment, to hire people or to perhaps improve the quality of employment and life in your community, you will pay a tax on that capital. That is the principle and philosophy of this act, which remains unchanged, despite the amendments we're dealing with today.

It speaks volumes for the differences between that side of the House and this. There has to be a recognition that when capital is borrowed for purposes of expansion and employment creation, benefits flow to government from that activity, which really speaks to the need to avoid tax on that initial investment or initial borrowing from the bank. Unfortunately, the philosophy of the capital tax remains unchanged in this province.

The fact is that those small corporations that do go to the bank to borrow the capital they need for expansion take a risk -- and it is a considerable risk with the business climate the way it is now. They are going to see their net share capital increase and their paid-up capital increase, and they are going to pay a tax on that type of risk-taking venture.

It never ceases to amaze me that we sit in this assembly and deal with small incremental changes to this act. It's almost as though the fingernails of the government are sliding down the blackboard on this issue. What is needed, and has been needed for some time, is the recognition by government that this tax is punitive and unfair, and that it acts to discourage risk-taking and investment in the province. Before the term of this government is up, I hope that we will be debating a bill which would completely eliminate the corporation capital tax in British Columbia.

Hon. E. Cull: I find it very curious to listen to the opposition speak about this bill. On the one hand, I am pleased to hear credit being given to the changes that we're making; but it seems to me that they want to have it all ways when they go on and say that not only do they want what we're doing but they want the corporation capital tax repealed immediately. They stand here in this House and tell us that they want the tax cut, and they also want the deficit cut. But when we talk about their particular ridings, they want schools, hospitals, education funding and more money for tourism marketing.

They want all kinds of things that are good investments to have in their communities, but you can't have it all ways. Somebody has to pay for all the things these members ask for when they stand in this House representing their own constituents and their own ridings.

When they called for the elimination of the corporation capital tax, not one of them said where they expect that $330 million that was raised last year to come from. Do they want it to come in cuts to services? Maybe they could tell us where they'd like it cut: out of the Education budget or the Health budget? Do they want us to build fewer schools or to make

[ Page 10429 ]

fewer renovations to hospitals? There are all kinds of things that we could do, but we are striving for a balance. There has to be a way of paying for the very necessary investments made by the public in this province, because it's not only the private sector that's making investments.

[3:00]

The critics also suggested that investment is being hampered by the bill. Clearly, people who are making investments in the province don't like this tax; they don't like any taxes. If you ask anyone if they would like to eliminate a tax or if they like paying taxes, being human, they are all going to say: "No, we don't want taxes. Let's get rid of them." But people and businesses have to pay their fair share. With this capital tax, capital spending in British Columbia in 1993 increased 8 percent. That's compared to a drop of almost 1 percent in the rest of Canada.

The opposition is suggesting that somehow this tax is driving investors away from the province, when the evidence is entirely contrary to that. An 8 percent increase in capital spending exceeds the stated indications. When StatsCan does its survey and asks: "How much do you think you're going to be investing this year?" -- it exceeded that by 2 percent.

To the member for West Vancouver-Garibaldi -- if I've got that right -- who asked why our estimate was exceeded, our estimate was exceeded because investment in this province is stronger than even we expected. And that's what's happening here. People are continuing to invest in British Columbia because they know that we have the second-lowest taxes overall -- and the lowest debt burden in relation to our economy in Canada, and that we're one of the best places in this country to invest. And I think the evidence is shown by the decisions that have been made by business over the last year.

Now let's get down to the nub of the problem here. The corporation capital tax was brought in in 1992 to break the back of the deficit. The mess that we inherited in terms of the finances of this province had to be turned around if we weren't going to see a ballooning deficit. We brought in the corporation capital tax so businesses could pay their fair share in eliminating the deficit. And it has been effective. The deficit has been reduced from the $2.4 billion we inherited in 1992 to under $900 million this year.

It is part of our overall debt management plan. Taxes have been frozen overall in the province for three years. As I've said a number of times to the business community in the last number of months, when the deficit is gone -- as it will be in 1996 -- we will be able to consider the corporation capital tax, and we will reconsider it at that point.

With that, hon. Speaker, I now move second reading of Bill 15.

Motion approved.

Bill 15, Corporation Capital Tax Amendment Act, 1994, 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. E. Cull: Hon. Speaker, I call second reading of Bill 19.

TAXATION STATUTES AMENDMENT ACT, 1994

Hon. E. Cull: I am pleased to rise to speak on the Taxation Statutes Amendment Act. This is

an act that includes a number of amendments to different taxation statues that will provide tax relief to both individuals and businesses by focusing on tax fairness, on the reduction of red tape and on support for economic development. The bill actually contains amendments to seven provincial statutes to effect changes which British Columbians told me they supported very strongly during my prebudget consultation, when I went around the province and talked to business, labour and community people throughout British Columbia.

The first amendment in the bill is to the Home Owner Grant Act, and it increases the home value threshold to $450,000 from $400,000, for reducing the homeowner grant. The increased threshold reflects the higher assessed values, and it ensures that the intent of the act remains unchanged: that 95 percent of British Columbia homeowners receive the full homeowner grant.

There are also amendments to the Income Tax Act, and they form part of a tax relief package for the mining industry in recognition of its role as a major exporter and important regional employer. The assistance is designed to revitalize a key sector of the province's economy at a time when it faces low commodity prices and increasing competition from low-cost producers in other countries. The income tax amendments will allow mining companies to deduct mineral taxes in calculating provincial corporate income tax.

Another amendment in the act concerns our support for strong ties between the province and the Pacific Rim. To help the province take advantage of the expected growth in the Asia-Pacific area, the Motor Fuel Tax Act has been amended to provide for a fuel tax reduction of 1 cent per litre on international flights. This measure will allow the Vancouver International Airport to enhance its role as the North American gateway to the Pacific Rim.

Another change to the Motor Fuel Tax Act deals with people who are able to receive the fuel tax rebate if they have disabilities. We are now increasing the annual limit from $300 to $400, which will be a considerable benefit to people who are able to take advantage of that rebate.

There are also a number of changes to the Social Service Tax Act. The two most significant are the restoration of the trade-in allowance on the purchase of passenger vehicles and the increase in the luxury tax threshold to $32,000 from the previous $30,000. The balance of the amendments are intended to improve fairness and enforcement and to clarify various provisions of the act.

In keeping with our commitment to review the taxation of automobiles, the Premier and I met with industry representatives over the last number of months. Indeed, the consultation began with the former Minister of Finance, who struck an industry task force to look at the impact of last year's tax changes. What was really interesting -- and I know that industry representatives will say this as well -- was that in working together over the last 12 months, we discovered that information that government had and that industry had was not entirely correct. By working cooperatively, we were able to come up with a common understanding of what was happening in the industry and then recommend changes.

As a result of the work that was done, we decided to restore the trade-in allowance on the purchase of passenger vehicles but also to raise the threshold for the luxury tax from $30,000 to $32,000. The government believes that British Columbians who can afford to purchase more expensive vehicles can afford to contribute more to the cost of providing essential government services. But the increase has been put in place to recognize that prices have increased as well, and that some higher-priced vehicles are required in

[ Page 10430 ]

order to live and work in many northern and rural parts of the province.

The balance of the amendments to the Social Service Tax Act in Bill 19 are intended to improve fairness and enforcement and to clarify some provisions in the act. Let me summarize those changes very briefly.

First of all, there's a refund provision that has been replaced with a point-of-sale exemption for bona fide aquaculturalists on the purchase of boats, motors and related parts. This change will reduce compliance costs for business and administrative costs for government, so it's a win-win.

A refund is also provided for the tax paid on materials used to construct portable buildings for export, so we can ensure that British Columbia manufacturers are not placed at a competitive disadvantage in competing for contracts in the export market.

An exemption is provided for the purchase of liquor and certain other supplies by commercial airlines for use in serving their passengers on international or interprovincial flights, to ensure that B.C. suppliers are able to compete effectively to supply these products.

The act is also amended to require people who regularly sell motor vehicles to be registered as dealers under the Motor Dealer Act prior to being registered under the Social Service Tax Act. This amendment will prevent unlicensed individuals from purchasing vehicles for resale that are exempt from the provincial tax.

The act is also amended to clarify that businesses operating both inside and outside B.C. are eligible for a refund of the tax paid on goods purchased and stored in the province but not otherwise used in the province. And then there are some definitional changes.

Bill 19 also provides for two changes to all of the province's consumption tax acts, including the Social Service Tax Act. The first change ensures that businesses selling tobacco, fuel, hotel-like accommodations and other consumer products and services are eligible for a proportional refund of tax remitted on bad-debt accounts. The second extends the appeal period to 90 days from 60 days for appeals received by the province on or after March 23 of this year.

To summarize, we're pleased to introduce the measures in this bill to reduce the tax burden on individuals and businesses and to improve the fairness of the tax system. I now move second reading of Bill 19.

F. Gingell: Again, as with the last bill, we will not be opposing these amendments. We are pleased that the amount of the exemption on assessed residential property for the homeowner grant has been increased. But like the corporate capital tax, the homeowner grant and the provisions that claw it back in no way deal with the issue of ability to pay. As we all know, many of Vancouver's early families have lived in family homes in Vancouver, sometimes at great cost and sacrifice to themselves. They have no intention of selling, wish the home to remain in their family and are being unfairly treated because of reductions in the homeowner grant that are based purely and simply on assessed values.

I was also interested when the minister spoke about a task force that was struck by the previous minister to deal with the issues that became apparent on the disallowance of sales tax credit on car trade-ins. I think that the minister, by using the word "struck," described only part of it. The truth of the matter is that the previous Minister of Finance struck out -- and struck out badly. Here was a minister who brought in a property supertax which had to be cancelled.

He brought in the cancellation of trade-in allowances on new automobile purchases, and one year later that was recognized to be the disaster it was, and that was repealed. The minister got moved from his responsibilities. I think the sad thing is that the Premier didn't realize that this minister can do as much damage in his new portfolio as he did to this government in his last.

An Hon. Member: That's terrible.

F. Gingell: True.

This government has to recognize that that taxation must seem to be fair. Again, the particular matters that have been dealt with here are only making minor changes to those items that are not considered fair.

I am pleased that the Minister of Finance obviously has read through last year's Hansard, has taken the advice of the official opposition that came up during the exchanges on the social services tax and has finally stopped requiring businesses to pay taxes that they do not collect from their customers. I'm really pleased to see that the adjustments for bad debts are finally going through; that's long overdue. I'm really pleased that this Minister of Finance is recognizing many of the problems that have become inherent in our tax system and is taking steps to change and improve them.

I hope that this isn't the end of the minister taking these actions and that next year there will be further amendments to try to correct some of these inequities, if this minister is still in her current post.

[3:15]

We will be voting with the government on this bill. I look forward to dealing with these various items in committee stage, which is perhaps a more appropriate forum for discussion.

L. Fox: I'm pleased to stand, take my place and speak on Bill 19, the Taxation Statutes Amendment Act, 1994. I think it's only appropriate that it should be recognized that most of the amendments contained in this bill are, in fact, amendments to statutes brought forward by this government over the course of the last two years.

Specifically, I very clearly recall the debates in this House on the jet fuel tax and the loss of the trade-in credit in the automotive

section of this bill. It's a shame that over the course of the last year the people who purchased an automobile had to pay 7 percent more out of their pockets because of an action of this government and the arrogant then-Finance minister. He failed to respect the opinions brought to him both by the Motor Dealers' Association of British Columbia and by opposition members, when that minister was told very clearly by all people opposing the legislation then that it would result in less taxes being collected by this government.

It's really unfortunate that that minister failed to heed the arguments of the day and that subsequently many British Columbians had to pay 7 percent extra for their purchases of automobiles over the course of the last year. That is merely an indication of the tax-and-spend attitude of this government, whereby they pay little heed to the concerns of taxpayers and pay heed only to the concerns of those who are very close to them and advise them on a day-to-day basis, but who really haven't got the pulse of the common concerns of British Columbians.

I would be pleased to support this bill. But I find it extremely ironic that it took a change in the Finance minister portfolio, in terms of the individual representing that government, before we saw the courage to correct a very dramatic mistake made by this government over the last two and a half years. Had this government had the courage and

[ Page 10431 ]

wisdom to listen to British Columbians, we'd have seen a lot less taxation and spending, and we'd have seen some of those very crucial areas of the province's economy affected by less spending, not more taxation.

I find it rather ironic. A few months ago when the Premier announced no new taxes, it had a very hollow ring. Ever since that time we've seen increases in virtually every fee being collected around the province, including a substantial new tax on the forest sector. This bill only reminds us that even with this government it is possible, occasionally, to admit error. Unfortunately, it's usually too late and at the expense of the economy. It's unfortunate that we have Bill 19 before us, because this bill could have been prevented had the government listened a year ago when we were discussing those taxation issues.

However, I will be supporting this bill. It is a very minor move towards righting wrongs, but I think British Columbians will understand that the government really doesn't know what it's doing. It doesn't do research before it brings legislation forward, and it passes legislation and then looks at the impacts. It's really unfortunate in today's world that we have a government that operates in such a manner.

J. Tyabji: You can almost look on this bill as the cumulative mistakes from last year's amendment act. It covers quite an area, and some questions arise. On the one hand, it's very easy to be encouraged by the government's recognition that people with disabilities need a larger refund under the Motor Fuel Tax Act, and the increase in appeal time under a number of acts in this bill, from 60 to 90 days, is very encouraging. Having had some experience with what happens once an appeal is launched, I hope something can be done on the government side to reduce the amount of time that it takes to hear an appeal and come to a decision.

With regard to the change in taxation on cars, I find it interesting that the act referred to car leases in addition to car sales, and that those provisions will be removed. The question that arises for committee stage is whether that is in effect for people who incurred leases last year, how much money was raised by the government last year with the car tax, and whether or not the....

Interjection.

J. Tyabji: The previous Minister of Finance says $30 million. Why isn't this retroactive? Why isn't there some recognition of the people who contributed to the $30 million? That will come up in committee stage, obviously.

We know that last year's budget was particularly difficult for the airlines. Although Canadian Airlines will experience some capital infusion with the recent purchase of shares by American Airlines, I hope the government will recognize that steps like these allow Vancouver Airport and B.C. to be a more competitive environment for businesses to operate in.

I hope we will see more recognition of the need of people with disabilities to have allowances of the kind made with regard to their motor fuel tax rebate increase from $300 to $400.

Committee stage is where we have to ask some questions about why this government made these decisions last year, what decisions were taken to bring these amendments up at this stage, and how the people who paid these taxes in the intervening year can have some redress. That is what is really regrettable. We can all support the amendments, but we have to recognize that millions of dollars were generated from taxes that were seen to be so unfair that the government brought in

an act to repeal them. If the government is going to recognize that these taxes were unfair enough that they need to be repealed, then the government should recognize that the people who paid them deserve some redress for the amount of money they are out of pocket.

I'd like to conclude by saying that the Alliance is in favour of this bill but in opposition to some of the taxes that remain as amended by this bill.

R. Neufeld: I would like to speak briefly to Bill 19. I can tell you from the outset that I will vote in favour of Bill 19, because it is a move in the right direction to reduce punitive taxes that this government has introduced over the last two years. One should not forget that what we've been dealing with here all afternoon are reductions or changes in regressive taxation measures introduced by the NDP government over the last two years.

This government talked very much, and still talks very much, about consultation with the public -- with those affected -- before they bring forward any legislation, so we wonder why they would now be bringing forward this legislation to change back a little what the opposition talked about a year or two ago as being regressive.

I recall the homeowner grant. Of course, it does not affect my constituency at all -- $400,000 and $450,000 homes -- but it certainly has an effect on a number of people in Vancouver and in the lower mainland in general. That was one that I think all opposition parties talked about at quite some length. This government was not willing -- or, I should say, the minister of the day was not willing -- to listen to recommendations that were forthcoming on that.

I'm glad to see that there is change for the mining industry. Maybe this government is finally learning that the mining industry is leaving British Columbia. Even though the Minister of Finance says that everything is rosy in British Columbia, I'm sure she will agree that the mining industry is not so rosy and hasn't been for a number of years -- not just since this government took office but before that. But the regressive taxation on the mining industry that this government brought forward through a corporate capital tax and through electricity increases -- you name it; there's just about nothing they missed -- has certainly had an effect on that industry.

The 1 cent reduction in motor fuel taxes. I think the minister who introduced that bill a year ago is in the House now and will certainly admit it was a terrible mistake. It shouldn't have been put there to start with. We have an industry that was asking for a guarantee from government so they could keep operating, and government taxed them more.

The social services tax on luxury vehicles. I recall saying during the debate that people and businesses in the north purchase vehicles that cost in excess of $30,000 for business purposes or even for private purposes, such as four-wheel drives if they live on ranches or in places out of the community. Again, no one listened. But now, all of a sudden, those people who purchased vehicles over the year are stuck with having paid that extra tax.

[D. Lovick in the chair.]

The one that really is the worst one and that this government should be chastised for dramatically is the removal of the tax on trade-in allowances on vehicles. That was the most ridiculous move I've ever seen in my life. We made presentation after presentation to the government on the effect this would have on that part of the industry in British Columbia. The minister admits that the government

[ Page 10432 ]

had the wrong information and that the industry had some wrong information. They finally got together -- but that's this year. It took them a whole year to get together. This is a government that talked about consulting with everybody. In fact, the minister that introduced this bill is in the House at the present time, and I remember him saying many times: "Yes, we've talked to that industry. Yes, we have, and it's not going to affect them." He was happy to introduce it. One year later -- bang! -- what have we got? We're changing it totally because we had the wrong information and because we didn't consult.

Now you tell me what's fair. What happens to all those taxpayers who purchased new vehicles or who traded in vehicles and didn't get the tax allowance? This year, all of a sudden, the government admits that it made a stupid error in introducing the legislation in the first place. They penalized people who bought vehicles over the last year. That's what's so unfair about this.

If they didn't want to listen, I can understand that, because they don't listen very well; they never have listened very well. They don't consult the public, and they don't consult the industry. But I don't know what this minister is going to do now to compensate those people for last year. Are we going to do anything? Are we going to look back at it and say: "Yes, this was a really bad mistake, and I'm sorry"? Or are we just going to write it off to experience?

[3:30]

It's no wonder that taxpayers in British Columbia are so disillusioned with the tax system and with the government we have today. One year they introduce a tax that they say is really fair; the next year they take it out. What's going to happen next year? Heaven only knows. Are we going to introduce some more, or are we going to take some more of this regressive taxation out? Are we going to bring forward more taxation statutes amendment acts? I assume we are, because we're going into the fourth year of an administration. It's called election fever. It's called spending money.

One of the NDP members from Prince George was catcalling here awhile ago, when one of the opposition members was talking about a bill, saying: "You shouldn't say anything, because you're not going to get any B.C. 21 money spent in your constituency." That's as ridiculous a statement as I've ever heard.

L. Fox: It's pretty factual, though.

R. Neufeld: But I guess it's pretty factual. Is that what happens with this government? This government doesn't know that once it's elected, it's supposed to represent all of the people in British Columbia, not just the favoured few, not just a few buddies, friends and labour unions. It should represent all British Columbians -- every one of them. And to every one of them who bought a car or a pickup or a vehicle of any kind last year, this government should be writing a letter explaining the stupid move they made, saying: "Yes, we are sorry, and we're going to look at it."

If you go to the estimates, you'll see that they raised more money than they expected for social services. I don't know which

part it came out of, but maybe....

F. Gingell: Taxpayers' pockets.

R. Neufeld: Exactly. Someone said the taxpayers' pockets. There's only one taxpayer, and that's where it came from. People who bought last year and who contributed fairly, as the minister says, to all of the programs that we need in this province -- education and social programs.... They contributed totally unfairly for one full year. That's not fair, and something should be done about that.

It's unfortunate that the ministers changed. Now we have a new Minister of Finance in place who is trying to clean up the bloody mess left by the last minister. I feel sorry for her some days. Other days I don't, because she is part of the government that agreed to do that in the first place.

The minister also talked about a reduction in social services taxes on liquor served on aircraft in order to make the B.C. liquor industry more competitive. I don't have any problem with that; I think that's another good move. I live in Fort St. John, which is close to the border; we're not very far from Alberta. What we need is a government that will bring us more in line with what Alberta taxpayers and businesses pay in taxes. We have all kinds of companies that headquarter in Fort St. John -- and some that don't anymore. They headquarter in Grande Prairie because it's cheaper, and they operate in Fort St. John.

This is a government that talked about not wanting Alberta people working in the province, especially on the Island Highway. This government is concerned about Victoria and any place on the Island -- and Vancouver, I suppose. Is that where all the concerns are? Obviously it is. Why aren't they concerned about those industries and companies that work out of Fort St. John and Dawson Creek? A multitude of communities right on the border have all kinds of difficulties competing with Alberta companies. Alberta companies are free to come into British Columbia, do their work and then go back again.

L. Fox: Except for on the Island Highway.

R. Neufeld: Except for on the Island Highway.

Part of that bill last year was a 7 percent tax on labour. That was another stupid move. It raised a bunch of money, but it was a stupid move by this government, because it drove all kinds of business out of the north. In my area specifically, the business that works on drilling equipment and those types of things left Fort St. John and Dawson Creek. It went to Edmonton and Grande Prairie -- all because of some regressive moves by a government that just wanted to gobble up more money and bring in a bigger amount.

They certainly have. In three years, they have brought in $4 billion more through increased taxation and fees from people in British Columbia. In her wrap-up of the last bill, the minister talked about a terrible mess left by the last government. I'm not going to dispute any part of that, but the fact is that it wasn't as bad as what she talks about, and that was proven. It showed up in the Peat Marwick reports time and time again.

When this minister talks about cleaning up the mess and reducing the deficit from $2.4 billion to $900 million, what she's failing to say is that most of that debt is transferred into Crown corporations or some other place. It's called creative bookkeeping, and the average British Columbian knows about it and is darned tired of it.

It's time that this government started to be a little more fair, not just to corporations but to the average taxpayer in British Columbia -- that average taxpayer who bought a car for $30,000 and traded in a vehicle for $20,000 and was missing that $1,400. That's what they should be concerned about, but they're not. They're not concerned about the corporations, and they're not concerned about the working person. It's obvious from legislation such as this, which was brought forward and is now amended one year later.

It's time that they amended a lot of legislation that this government has brought forward. This is just the tip of the

[ Page 10433 ]

iceberg. I will be very happy to see a lot more of it amended, but in a greater amount.

Hon. E. Cull: Hon. Speaker, in listening to the last member speak about wanting to come down to the playing field of Alberta and how taxes should be the same as they are across the border up there in Peace River country, I guess he's also calling for the same kind of cuts that they've made in spending. They made a 20 percent cut to education funding.

Interjection.

Hon. E. Cull: I hear somebody over there talking about scare tactics. I guess they're suggesting that the Alberta government isn't really serious. If the Alberta government is serious with their spending plans, then there are going to be very serious cuts made to social services, education and health care spending in that province. The member has got to take the good with the bad.

The other thing, though, that I find peculiar about his remarks is that I understand he was on a platform with the Minister of Municipal Affairs just last week, calling not for tax cuts to business but for a greater share of taxes to be paid by business towards local municipalities to support services up there. Again, the inconsistency of the opposition.... The opposition manages to argue it all ways -- totally inconsistent. It's about time they showed some responsibility to a consistent argument, so that their constituents know exactly what they're going to get with what these people are promoting.

To conclude, I know the opposition critic would like to believe that I spent many hours poring over last year's Hansard, but I have to tell him, and you, hon. Speaker, that the changes brought about in this legislation are a result of my staff and I making over 50 presentations to community, business, labour and other groups around the province. You yourself were involved in some of those presentations. These are the good ideas that have come forward to the government from the people of British Columbia. Within the constraints of the fiscal situation that we're in, I am happy to accommodate as many of them as possible, and we will continue to do so. With that, I move second reading.

Motion approved.

Bill 19, Taxation Statutes Amendment Act, 1994, 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. G. Clark: I call second reading of Bill 18.

MEDICAL AND HEALTH CARE SERVICES SPECIAL ACCOUNT ACT

Hon. E. Cull: This is a very short and straightforward bill that creates the medical and health care services special account within the consolidated revenue fund. It also allows that a subaccount can be established within the special account to reduce fluctuations over two or more fiscal years in demand for payment from appropriations under the Medical and Health Care Services Act.

Essentially, the bill allows the implementation of an important provision in the agreement that was negotiated last year between the government and the B.C. Medical Association. Part of that agreement set out a number of actions that the government and the doctors of the province would do to try to contain the costs of medical services in the province, particularly to reduce utilization.

There was recognition that if that was to be successful in years of underutilization, some provision should be made that would allow for the carrying forward of underexpenditures into the next year to allow for some flexibility in years when the utilization might go up. This is recognizing that medicine, as much as we like to think of it as a science, is somewhat unpredictable in terms of demands on services. It will allow for greater and more cooperative management of medical services than has been done in the past in the province. On that basis, I now move second reading of Bill 18.

F. Gingell: I would have been pleased if this had been a genuine move to multi-year budgeting. I really do believe that it must be difficult for government to try to deal with one year at a time and at the same time try to find a cure for the terrible disease of March madness that all governments seem to have. I'm not completely convinced that this bill is going to accomplish what the minister intends it to, and I look forward to discussion during committee stage.

Every time I get involved in these rather complex and difficult accounting procedures through these special accounts -- which everybody seems to be confused by -- it seems to me that we should try to understand that an expenditure out of a special account will still require a particular vote in a subsequent year. The funds cannot be expended without the amounts being included in the estimates and in the vote process.

I presume that the intention here, or what will in fact happen, is that this will only be a notational account that will indicate from year to year whether specific subgroups of expenditures made under the Medical and Health Care Services Act have been underexpended. I look forward to debate during committee stage, in which I hope that I and other members of this House will get a better understanding of the intricacies of the accounting proposed here.

[3:45]

Deputy Speaker: Seeing no other speakers, the minister closes debate.

Hon. E. Cull: This is the kind of bill that will probably be more thoroughly discussed in committee stage. As I said, it is an important step in implementing our agreement with the B.C. Medical Association. I now move second reading of the bill.

Motion approved.

Bill 18, Medical and Health Care Services Special Account Act, 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. G. Clark: I move that the House recess for ten minutes.

Motion approved.

The House recessed at 3:46 p.m.

The House resumed at 3:56 p.m.

Hon. G. Clark: I call second reading of Bill 16.

[ Page 10434 ]

MINERAL TAX AMENDMENT ACT, 1994

Hon. G. Clark: Bill 16 contains some significant tax concessions for the mining industry. The Minister of Energy will, of course, wish to carry this bill in committee stage debate, and may wish -- I just advise members of the House, with their indulgence -- to make some broader comments in the first stage of studying the bill.

With that notification, I simply say that this is good news. We've been listening to and working with the mining industry for some time, particularly the coal industry -- and other mineral activities -- and we have been endeavouring, within our fiscal ability, to make some concessions to them in order to encourage exploration. After all, the coal and mineral sectors are major contributors to the B.C. economy. Historically, the mining industry has been a real driving force behind the economy of British Columbia -- and continues to be.

We believe that the mining industry has a strong outlook in British Columbia. We believe there are already some new mines ready to go into production this year. We're interested, of course, in encouraging that stable base and that economic development. However, we do know that the coal industry, in particular, has had tough times with international competition and the international recession, which has led to a decline in steel production. We've made significant moves here to try to give some tax relief to the industry in British Columbia.

We're confident that by working cooperatively with the industry through bills such as this, we can accelerate some of the projects that we know are economically attractive and will take place over the coming years.

So I'm delighted to commend second reading of this bill to the House. I want to acknowledge to the members of the House that the Minister of Energy intended to be here. She will be participating in carrying this bill in committee stage. I know the members will give her an opportunity to make some general comments at that stage, as we, of course, always afford members of the opposition. So with those few remarks, hon. Speaker, I move second reading.

D. Jarvis: This is a bill that we will have to support -- not that we don't like supporting government bills. When the Premier says there will be no new taxes, and this tax amendment in actual fact does not increase taxes, it's an improvement on the tax situation for the coal industry. As the member over there said earlier, at a time of world oversupply, when the pressure is on the coalmines in British Columbia, every bit of help this government can give the industry is appreciated.

I imagine that we could have had some more significant changes. Although she's not here now, the minister has said that she's always concerned about the mining industry. Similarly, the Minister of Employment and Investment just said that he's always interested in mining development in this province. However, it's a sad state of affairs when we see that revenues from mining dropped considerably over the years of the previous regime. This present regime has done nothing to encourage the development of mining, although they do say there are a few mines coming on.

Five or six of those mines have been approved, but they're a little reticent about coming on. Due to the environment in British Columbia, it seems that they do not wish to put their capital into it.

[4:00]

One of the good things about this bill is that it is of benefit to the coal industry, in that it levels off its taxation to equal that in other mines. There are problems coming for the coal industry in the future. In the next four years contracts are looming with purchasers throughout the world who are all trying to batter us down further and further. So we will need help in the coal industry. I suggest to the minister that she should also change taxation as a provincial barrier, such as with fuel taxes and the corporation tax. This government also raising the price of electricity to the mining industry has caused untold problems for them.

I'd like to close by saying that a few minutes ago, when talking about the corporation capital tax, the minister said she was amazed that opposition members were criticizing the fact that we should have less taxation and all the rest of it. She said that you can't have it both ways. I would just like to say that the Finance minister should bear in mind that you can have it both ways: if you don't help out your revenue sources, you can't have taxes coming into this province. It's obvious that they haven't done too much on this end of it, because the revenue from our resources has been continually going down.

On that point, I will sit down, thank you and say that I will be supporting this bill.

D. Mitchell: I'm pleased to rise to speak to Bill 16, the Mineral Tax Amendment Act, 1994. I'm somewhat surprised by the way the bill has been brought to the House. The bill stands in the name of the Minister of Finance, the Minister of Employment and Investment has made some very brief and very modest remarks about this important piece of legislation, yet the minister indicates that the Minister of Energy, Mines and Petroleum Resources will actually take the bill through committee stage. I'm kind of confused about the government's legislative program.

Bill 16 is a positive piece of legislation. Hallelujah! The government has finally discovered, after two and a half years in office, that there is an important industry in British Columbia called the mining industry, and that, yes, it needs some help to sustain well-paying jobs in British Columbia, instead of chasing them out to South America and the rest of the world, as they have been doing for their first two and a half years in office.

Bill 16 actually is a very significant piece of legislation. I'm not sure why the government is so modest about it and isn't defending it more seriously. It reduces the tax rates for coalmines in this province, one of the most important sectors of the mining industry. It provides more flexibility in deducting exploration costs for mine operators; that's very significant and, hopefully, will prevent more mines from leaving the province or closing down. It provides an additional capital cost allowance for mines to encourage new mine development in the province. I think all of that is extremely positive.

I'm not sure why the government isn't more enthusiastic about this piece of legislation. It's been a long time coming; it's much needed. The government seems to want to pretend that the mining industry continues to be the province's best-kept secret. The bill doesn't do everything. It is significant. It provides a package of assistance to the industry that runs into the millions of dollars, and I think that's much needed.

As the official opposition critic indicated, over the last period of time, this government has done far too little to assist the mining industry in the province. We hope this isn't too little too late, because the mining industry has pointed out that more serious issues face British Columbians when it comes to preserving such a well-paying industry as mining -- issues such as land access, security of mineral tenure and the regulatory and permitting changes that are required to attract mining investment as a safe, environmentally sound industry.

[ Page 10435 ]

The realities that the industry faces in our province are quite grim. Employment levels are at a low that we haven't seen over the last decade, dropping by over 2,000 workers between 1991 and 1992. During the first year of this administration, we lost more than 16 percent of the employment in the mining industry in British Columbia. Exploration and development are at an all-time low in the province; $29 million was invested in the mining industry last year, compared to $213 million if we look back just a few years to 1988 -- an all-time low in exploration and development spending in our province by the industry.

Total mining expenditures declined almost 50 percent in 1992, the second year of this administration. The industry lost over $1.6 billion in the last three years in British Columbia.

We've had a number of mine closures in B.C. I won't list them right now, but there has been depressing news over the last few years since this administration came to office.

When the mining industry suffers, so do government revenues and so does employment. Tax revenues to government are down, dropping from $401 million in 1991 to $351 million in 1992. How can we support this government's misguided policies when they have led to a steep decline in revenues to the Crown?

Our mining industry isn't being given a full opportunity to live up to its potential. Bill 16 is a good start in the right direction. It's a very belated attempt by this government to recognize that we do have a mining industry in B.C., and it should be supported. Once it was the number two industry in the province, standing behind only forestry. We should be restoring it to its rightful place. We should be encouraging exploration and development. We should be doing more.

Bill 16 deserves to be supported by members of this assembly. But we should also recognize that this government should hang its head in shame for almost killing what was once a vital industry in only two and a half years in office. We can only hope that this is a small step in the right direction and that the government is going to recognize the mistakes it made in the first half of its term of office. Bill 16 is a start in the direction of believing that mining really does have a future in British Columbia.

R. Neufeld: I want to briefly go over a bit of Bill 16, the Mineral Tax Amendment Act. As the Minister of Employment and Investment said, this is a good-news bill for the mining industry.

I'm pleased that the government is starting to see the error of its ways. They're starting to catch on. After two and a half years, we have an overtaxed industry. They've increased hydro rates by -- what? -- 6 or 8 percent or higher, and they are going to increase them every year from now on. They've introduced a corporate capital tax on industry, and they wonder why industry is moving out of British Columbia. They wonder why we've lost 2,000 jobs in the last couple of years. Investment in the mining industry is 10 percent of what it was a mere five or six years ago.

The corporation tax was increased by this government. All these taxes have come into place since this government was elected in 1991 and brought in their first budget in 1992 -- just a little while ago. Now they're trying to bring industry back. I'm glad they're finally starting to see the error of their ways, but I think it's a little late for some of them.

We've seen fees of every kind being increased in the last two or three years. The fuel tax was increased. In fact, that's a big issue with the mining industry that this government doesn't want to deal with. There are WCB increases. We see ICBC increases. We see sales tax increases to the mining industry. We saw a 7 percent tax on labour brought in by this government. Now they're finally coming forward with the Mineral Tax Amendment Act in order to give the industry a break. After we've choked them this hard for this long, it's about time we released the hand a bit so that this industry can again start generating for the province what it did a few short years ago.

It's interesting to note that we will be debating six bills in the House today, and five of those six bills are amendments to legislation that was brought in by this government in the last three years. Most of it deals with reducing the taxation that this government put on the people and the industry of British Columbia. They're finally seeing the error of their ways.

The mining industry is very important to British Columbia. In fact, this year I believe it will contribute about $50 million -- not including taxes -- in fees and royalties to the province of British Columbia. That is way down from what it used to be. Hopefully, with the tax breaks they're finally going to give the industry, after choking it half to death over the last two or three years, it may come back, but I'm not sure. We don't know what's going to happen with the corporate capital tax next year. We see how they change it every year. This year they changed it for farmers.

Maybe next year they will say that they need a bit more. The mining industry may pick up a little, and they will take a bit more money from them. Or maybe they're going to increase the corporate tax. Who knows?

When you see what this government has introduced in the last three years, and the amendments, it's no wonder that we have a nervous investor out there. Who would invest in this climate? One year you're paying 7 percent tax on something, and the next year you're not. Way to go -- that's a good way to make investors in British Columbia feel secure. At the present time they're certainly not feeling secure. Because of that, along with a massive increase in this province's debt and the amount that's going to be gobbled up in order to service the interest on the debt, the mining industry in British Columbia is nervous.

We have also seen it in forestry, where another example comes to mind. The government talked about a forest renewal plan that was going to cost the industry something like $600 million. About $400 million would go back into the renewal plan. Then all of a sudden there was a big surprise: "I'm sorry I didn't tell you this, but you're going to have to pay another $100 million in royalties." It was another little slide-it-under-the-blanket surprise, another little under-the-rug trick, which this government is great for. It's no wonder we have an industry that's nervous about investing in British Columbia. It's because of this government's actions.

Earlier the Minister of Finance chastised me because I went to Fort St. John and stood on a podium with the Minister of Municipal Affairs and talked about taxation fairness for industry. I make no apology for that. I have supported that move for a long time. In fact, we want the same as what the southern communities on Vancouver Island and in the lower mainland enjoy. This government is very attuned to them; they know all about them. The taxation that we are trying to get for the people in the north -- it's not for anyone other than the taxpayers in the north -- is no different than what is enjoyed in the south.

So I can't for the life of me understand why the minister would chastise me for doing that. It's obvious that this government doesn't care about industry or about the people in British Columbia.

[4:15]

Not too long before that, the Minister of Energy, Mines and Petroleum Resources went to Fort St. John and announced that they were going to give a tax break of $600,000 a year to the largest oil company in the world,

[ Page 10436 ]

Imperial Oil, which doesn't even have an office in Fort St. John. They moved their office to Grande Prairie because it was a little more competitive there, and the climate was a little better for business. That tells you how much in tune this government is with what's going on in the province. What did this government do? They chastised me for wanting to give the people in industry in Fort St.

John a few dollars so they could enjoy some of the same things that people in the southern part of the province enjoy, and then they turned around and gave the largest company in the world a $600,000-a-year break on royalties that isn't going to help one person in British Columbia -- not one person. That's how backward this government is. It's no wonder they bring in bills and then have to bring in amendments.

But this is one amendment that I can vote in favour of. I hope that it's just a start. I'm sure it will be, because as I say, we're in the third year of this administration. This is just a start to amendments to regressive legislation that this government has brought forward in the last two and a half to three years.

G. Wilson: It's a pleasure to rise on second reading of Bill 16, intituled Mineral Tax Amendment Act, 1994 -- otherwise known as the sugar that coats the pill.

Interjection.

G. Wilson: I see the member from the Cariboo is laughing. He might well laugh. The mining operations in this province have indeed suffered at the hands of this government. I don't think there has been a more articulate spokesperson than the official opposition critic, the member for North Vancouver-Seymour, who for two years has effectively taken up the cause of the mining companies in this province.

An Hon. Member: Did you say articulate?

G. Wilson: I did, hon. member. The member should listen up, because there has been a consistent voice with respect to mining operations in this province, and I think that it's....

Interjections.

G. Wilson: Hon. Speaker, I hear the members saying "mining in every park," and so on and so forth. Clearly, the mining companies in this province have not received anything except bad news from this government, until this particular bill. It's therefore nice to be able to stand up and congratulate a government when it finally does something good, even if it is just to sugarcoat the pill it has been feeding the miners for the last two years.

Quite clearly, this Mineral Tax Amendment Act, 1994, is something that all of us should support and use as a yardstick to measure the direction this government is attempting to take with respect to correcting some of the mistakes that it made in the past. We hope that the government has indeed learned from some of the past legislation to recognize exactly how much of a hardship that legislation has put on the mining industry.

I come from a riding which, as most people may perhaps not be aware, has a large number of mines and whose economy is dependent on mining, albeit not the coalmining that is a principal part of this bill. I can tell you that people....

Interjection.

G. Wilson: As the member says, Texada Island -- yes, and the communities on Texada.

Interjection.

G. Wilson: As the member from the Cariboo says, it's nice fishing there. It's a wonderful place to live, and it would be a better place to live if this government would stop providing disincentives to the mining industry and allow people opportunities to expand those operations.

I think that we all have to support Bill 16, and certainly we do. The consequential amendments that are attached to it are significant for many mining operations in this province. While it is indeed good news, as I suggested, it's good news only because it is a sugarcoating of what has been draconian legislation against mining in this province. Mining should be, and always has been, a very sound and solid part of the overall economy.

I would hope that we're seeing a trend from this government, and that we're actually going to have adequate legislation coming forward to protect the interests of those people who invest in our extractive sector and recognition that mining is indeed a fundamental part of our economy. It is an important part of our regional economy and supports many local communities.

I am proud to say that the Alliance party supports Bill 16. We are prepared to move forward and assist any who are prepared to work on trying to expand the mining communities in this province. We see it as a vital part of our economy, and we would hope that this government would see the same.

F. Gingell: We recognize that Bill 16 is only just a starting point that deals primarily, from a financial point of view, with the reduction of royalties on coal minerals to the level of those on base metals. Since 1989, provincial revenues in the form of mineral royalties have dropped from $75 million to only $31 million. That is all that this government expects to mine from the mining industry....

Interjections.

F. Gingell: Open your ears -- '89.

Recognizing that the mining industry has exports of $2.5 billion a year, which is probably a good measure of its economic activity, that represents something in excess of 3.5 percent of gross provincial product. They also constitute 15 percent of British Columbia's total exports. One appreciates that this is a critically important industry.

The majority of funds that accrue to both the federal and provincial governments from the mining industry come from income taxes paid by employees, from various forms of sales and other consumer taxes paid by mining companies, and include all the other forms of fees and user fees, such as hydro rates, that mining companies pay. It's important to recognize the very small portion of total revenues received by government that comes from mineral royalties.

In order to create economic growth and more employment, and to allow this government to get out of its present deficit position and to start working on the reduction and repayment of our provincial debt, this province needs to create the right economic atmosphere for mining in British Columbia. The issue of the difference between the royalty rates paid by coalmines compared to base metal mines has been one of the thorns in the flesh of mining companies, and I join with all other members of this House in supporting Bill 16 to see that particular thorn being pulled from the flesh.

[ Page 10437 ]

If we are going to have a vibrant mining industry in British Columbia, the first thing the mining companies need is certainty of tenure. As we all know, mining companies start with exploration, and they have to have the certainty and knowledge that the values they find through their exploration efforts will be allowed to develop into mines. This is a start, but this government would be spending their time in a very useful, worthwhile and profitable way if they were to think about all of the things that can be done to encourage and assist the development of our mining industry in a manner that is environmentally acceptable to all British Columbia's citizens.

As my friend for North Vancouver-Seymour said, we will be supporting this bill. We look forward to further discussion in committee stage, but we do suggest that this is just one small step. When provincial government revenues have come down from $75 million in 1989 to only $31 million in 1994, it's clearly time for the government to think about the actions they are taking that have caused this dramatic reduction.

Deputy Speaker: I recognize now the Minister of Finance to close debate.

Hon. E. Cull: My thanks to the Minister of Employment and Investment, who introduced second reading for me in my absence.

I have listened carefully to the debate the last few minutes, and I want to assure the Finance critic for the opposition that this bill is indeed the result of the very process he is encouraging. The Premier has established a forum with the mining industry on the future of mining in this province. Our government takes the future of mining very seriously. We have moved to assist mining in the province not only through tax measures but through some of the expenditure measures which I know will be discussed in greater detail during estimates of the Ministry of Energy, Mines and Petroleum Resources.

This process doesn't end with this legislation; in fact, it continues. The Premier will be continuing to meet with the ministers responsible and meeting with the mining industry to see what we can do to improve the competitiveness of mining in the very difficult world economic situation right now. This particular bill will go a long way to putting us on a good footing from the taxation point of view.

With that, I move second reading of the bill.

Motion approved.

Bill 16, Mineral Tax Amendment Act, 1994, 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. E. Cull: I will just take this opportunity to present the report of guarantees and indemnities for the fiscal year ended March 31, 1993, in accordance with

section 56 of the Financial Administration Act.

Hon. G. Clark: I call second reading of Bill 7.

FINANCIAL ADMINISTRATION AMENDMENT ACT, 1994

Hon. E. Cull: Bill 7 amends the Financial Administration Act to clarify the responsibilities and duties of the comptroller general and strengthen the reporting requirements for write-offs, extinguishment of debt and remissions. It removes the reporting requirements for refunds, clarifies the references to cash payments when they contradict accrual accounting policy, and allows for electronic signatures in addition to written ones for the authorization of payments.

Dealing first with the duties of the comptroller general, existing legislation doesn't accurately reflect the responsibilities and duties of the comptroller general, which have evolved over time. This amendment places more emphasis on the comptroller general's role in implementing a financial framework for financial management and control.

With respect to the provisions for reporting requirements for write-offs, extinguishment of debts and remissions, the bill acts on one of the recommendations of the Public Accounts Committee, which was that previous provisions were insufficient. These provisions did not require the reporting of write-offs, extinguishment of debt and remissions if they were authorized by any act except for the Financial Administration Act. With this amendment, all of these situations, from all authorities, will require disclosure in the public accounts.

On the other hand, the requirement that refunds be reported has been removed. No public interest is served by reporting the refunds, because they are simply disbursements of funds which were received in error and do not conform to the Financial Administration Act description of public money.

There are further amendments to sections 20, 23 and 32, to correct references to cash payments where there is a contradiction with the government's stated accrual accounting policies. Accrual accounting -- which is based on revenue earned and expenditure incurred instead of on the receipt and payment of cash -- was adopted by the government in 1981; however, certain sections of the act are still using the cash accounting language. This amendment will clarify the language so that those sections which are confusing or contradictory will now be brought into compliance.

[4:30]

With respect to the authorization of payments, expanding the definition of "signature" to include electronic authorization will allow for new technologies to be introduced within the next few years.

The auditor general has reviewed this act with my staff and has expressed some concerns, so I will be tabling an amendment during committee stage to deal with one of the auditor general's concerns.

I move that the bill now be read a second time.

F. Gingell: Far be it from me to stand up and in any way criticize a bill where the government finally takes recommendations from the Public Accounts Committee. I'm sure the government will always find that recommendations from the Public Accounts Committee are worthwhile and should be listened to and followed through on. If only the government would let the Public Accounts Committee sit at sensible times and under sensible arrangements, perhaps even more good things could flow from that.

I also wish to touch very briefly on a subject. A great deal of change is taking place in the way governments are recording their financial transactions and reporting to the public their financial position and the results of their financial operations. Over the last two centuries it has become established that in the normal course of events, financial statements should be prepared and reported in a manner that complies with clearly established standards. Professional bodies -- in Canada, normally the chartered accountants, but they work with the certified management

[ Page 10438 ]

accountants and the certified general accountants -- produce standards and rules by which companies must live when reporting financial results. We can all appreciate that the most important thing in looking at financial statements is to ensure that they have been prepared in a fair manner, that they truly do disclose the results of the operations and the financial position of the organization being reported on and, most important, that they are reported in a consistent manner so proper comparisons can be made from period to period.

[The Speaker in the chair.]

In Canada, an organization called the Public Sector Accounting and Auditing Board deals with the issue of the way governments should report their financial results. We will look to that body to set standards and deal with the issues that we're dealing with at the moment as standards are being changed and practices are being improved. Bill 7, as has been done in the past, leaves the decision on financial statement presentation in the hands of Treasury Board. That means Treasury Board determines the accounting policies that are going to be used and the ground rules for the public accounts.

I guess I don't really have any argument with that, except that I would have been more comfortable if this bill required Treasury Board to consider and report on all of the recommendations of this Public Sector Accounting and Auditing Board.

Fortunately, in British Columbia, both with the previous administration and with this one, we have been on the leading edge of improved financial reporting by governments. British Columbia has indeed been recognized as a pace-setter. I really do want to encourage this government and this minister to ensure that British Columbia stays on the leading edge. I will take the opportunity, if I may, during committee

section of this debate to deal with some of these matters in a more detailed fashion, particularly with ensuring that we all clearly understand the difference in the roles and responsibilities of Treasury Board, of the comptroller general and of the auditor general.

With that, I would like to draw my remarks to a close, except to say that in principle we support this bill. This bill is clearly a move to improve accounting practices, and we encourage the minister in this regard.

G. Wilson: It is a pleasure to speak to Bill 7. As the opposition Finance critic just commented, I think that the Public Accounts Committee is one of the better committees of this Legislative Assembly to be a member of. It gives you perhaps the best understanding of the workings and financing of government, and therefore is really important. I would also acknowledge, for those who might not be aware, that it is chaired by the opposition Finance critic. I think he does an excellent job.

The opportunity for us to review and improve the manner in which government reports on expenditures and accounts may seem to be really only in the interests of political junkies, but I think it really is critically important to the public, because it is one of the few ways that the public can actually understand how government operates and how their tax dollars are being applied.

Therefore I think it is important for us to look at these accounting practices and not only be in sync with the amendments being made across the country, but also be able to provide an opportunity for people to have an understandable set of accounts so that they can see how this accrual accounting process actually works and what the procedures are.

In principle, we in the Alliance support this bill. We have a couple of questions we would like to raise in committee stage with respect to two of the sections of the bill. If I had a general comment to direct to the minister by way of Bill 7, it would be that there must be an easier way to present the documentation without having to repeat the existing legislation to the extent that it is. For example, on page 2 of Bill 7, basically one word is changed in the entire page, and one has to look to find exactly what that word is.

Similarly, on page 3 the word "spent" is the only word on the entire page that is changed. For lay people not familiar with accounting practices, sometimes wading through these bills becomes a little bit difficult; and of course, the suspicious-minded in the opposition might think something is being hidden in some of this legislation.

Interjection.

G. Wilson: As the member for Delta South, the official opposition Finance critic, says: "And we're usually right." Therefore there are a couple of matters with respect to accounting procedures that we would like to address when we get to committee stage. Beyond that, it's nice to see the government is listening to those that would try to have an improved accounting system.

R. Chisholm: I ask leave to make an introduction.

Leave granted.

R. Chisholm: Mr. Lemna, a teacher, and 110 students from Chilliwack Secondary school are in the precinct today to see how democracy works. I would like the House to make them most welcome.

The Speaker: The minister closes debate.

Hon. E. Cull: I am pleased to hear recognition for the positive steps taken by this piece of legislation, and I move second reading of the bill.

Motion approved.

Bill 7, Financial Administration Amendment Act, 1994, 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. G. Clark: Hon. Speaker, I call second reading of Bill 17.

PROPERTY TRANSFER TAX AMENDMENT ACT, 1994

Hon. E. Cull: The Property Transfer Tax Amendment Act, 1994, introduces an exemption from the tax for eligible first-time homebuyers as a replacement for the high-ratio-financing tax relief program. The bill also closes a loophole which has been used to avoid the tax on long-term leases.

Housing prices in British Columbia are among the highest in Canada, and they pose a major barrier to many young families struggling to purchase a first home. The exemption for eligible first-time buyers fulfils a commitment made during the last election campaign and will go a long way towards helping young families achieve their dream of home-ownership. In light of the government's limited resources and the need to spend taxpayers' money

[ Page 10439 ]

responsibly, the program has been designed to target the exemption to those who require assistance to purchase a reasonably priced first home.

To qualify for the exemption, the following conditions must be met: the value of the property purchased must not exceed $250,000 in the lower mainland and Capital Regional District or $200,000 in all other parts of the province; applicants must not have previously owned a home or an interest in a home; applicants must have resided in B.C. for at least one year prior to registering the property in the land title system; applicants must be Canadian citizens or lawfully admitted to Canada for permanent residence; applicants must have registered financing for an amount equal to 70 percent or more of the fair market value of the property and must not reduce financing by more than a specified amount during the first year; and finally, they must reside in and use the property as their principal residence for at least one year following the application for exemption.

Partial exemptions are provided for properties that qualify under the fair market value thresholds but are larger than half a hectare in area. Under certain conditions an exemption will also be available for first-time buyers who purchase bare land on which to build their first home. To ensure that applicants meet all of the requirements of the program, a lien equal to the tax will be registered against the property until all eligibility requirements have been met.

As I said a minute ago, the first-time homebuyer's exemption does replace the existing high-ratio-financing tax relief program. But this program will remain in effect until June 30, 1994, to allow purchasers who were in the process of buying a home and were therefore expecting to take advantage of this program to, in fact, do so.

The first-time homebuyer's exemption actually improves on the existing program in three ways: it will benefit more first-time buyers, since more people will benefit under the program I'm introducing today than benefit under the existing one; it will provide a complete rather than a partial exemption; and the maximum house prices have been increased to better reflect current prices.

[4:45]

Bill 17 also closes a loophole that has been used to avoid tax on long-term leases. As announced earlier this year, Bill 17 introduces amendments, retroactive to January 31, 1994, to prevent tax avoidance through the inappropriate use of leases for 30 years and less, which is where a number of leases are stacked up on one another to try to avoid the tax. This amendment will aggregate all of the leases against a property within a six-month period for the purposes of calculating the property transfer tax payable.

I might also note that there is an amendment. I'm not sure whether it's on the order paper yet or is to be introduced. There will be an amendment dealing with the time period during which a purchaser has to occupy a house as his or her principal residence to deal with requirements under the Residential Tenancy Act.

I think the bill clearly demonstrates our commitment to help young families get into a home in a very expensive market.

I now move that the bill be read a second time.

F. Gingell: It's with a little less pleasure than earlier this afternoon that I rise to speak to Bill 17. Hidden away in

section 4 of this bill, the amendment to 3.27, is an issue that deals with a false declaration. It's known in the trade as double jeopardy. If you report something wrongly and claim an exemption that is not appropriate -- if you haven't told the truth -- you'll not only pay the tax but you will suffer a penalty of an equivalent amount.

I rise today recognizing double jeopardy and recognizing that in the future this government will throw across the floor to us that we did not support the exemption for first-time homebuyers, which is absolutely wrong. We strongly support the exemption for first-time homebuyers. It is something that we called for time after time. But we did not call for the elimination of the exemption under high-ratio financing. We think this is a retrogressive step. It deals with people who are acquiring a home in the market and who are obviously at the low end of the wealth scale. It gives an exemption to people who are subject to the need for major financing.

During the minister's opening statement on this bill, she stated that getting rid of the high-ratio-financing exemption and bringing in an exemption for first-time buyers would help more people. That has me completely bewildered. Yes, I understand -- and I'm sure the minister wasn't suggesting -- that there will be more people helped because they have raised the threshold level from $200,000 to $250,000 within the Greater Vancouver Regional District and from $150,000 to $200,000 outside it. I'm sure that that's not the reason.

So the minister must be suggesting that there are some individuals who would not have qualified previously but who will now. On the face of it, I fail to understand that, because there still is a requirement for high-ratio financing to qualify for exemption as a first-time buyer.

We should realize the kind of money that has been involved in high-ratio-financing relief in past years; the amounts have been reasonably substantial. In the year 1991-92, the cost to the government treasury was $14 million, and it benefited 17,500 people. In 1992-93, the number of people who benefited went up to 22,300, and the total costs were just under $16 million. In 1993-94, as property values began to rise, one can appreciate that fewer transactions qualified, and the numbers came down to 17,000 people. Clearly, it was very appropriate for the government to increase those threshold levels to ensure that people struggling to acquire their first home would not be hurt.

But they have done it, Mr. Speaker. I'm absolutely convinced that when we get the statistics for the year 1994-95, the amount of tax relief afforded through this new program will be down substantially from previous years. If the minister is certain of her numbers, I'd be happy to have a small wager with her as to what the results will be.

I personally believe that the elimination of high-ratio financing is going to have a very negative effect. We think the repeal of those sections is of such importance that we are not going to support this bill. That's where the double jeopardy lies. We were really pleased that the minister announced the exemption for first-time homebuyers in the budget speech. We believe that the majority of those who will be exempt now would have been exempt under the previous regulations. It is the fact of the repeal of those regulations that will cause us to vote against this bill in second reading. We hope that we can convince the minister to change her ways during committee debate.

M. de Jong: The best way to understand the impact this legislation is going to have, Mr. Speaker, is to take a typical family and understand what's going to happen to them as a result of the shell game that the government is playing on this matter. Yes, the introduction of a full exemption for first-time homebuyers is a positive thing; but when you weigh it against what is going to happen to a typical family with the elimination of the high-ratio-financing tax relief aspect of the property purchase tax legislation, it becomes

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apparent that it's the typical family in British Columbia that is the net loser.

Let's take the Smith family. It is a typical situation. This is under the former legislative framework. They come in and buy a townhouse. They are a young couple, just married. They buy that townhouse for $100,000. Ordinarily, they would be required to pay $1,000 in property purchase tax, but because it's high-ratio financing, as most first-time purchases are, they pay $250 property purchase tax. Three years later they've got two kids and are looking for a couple of bedrooms, because the little loft-unit townhouse isn't big enough. They go out and buy another place.

Now they're into a single-family detached dwelling, and they're paying $192,000. Once again, it's high-ratio financing. They don't have that much more money. They need a house with a couple of bedrooms to raise their children in, so they're looking at a higher cost. It's high-ratio financing; that's the only way they can move up to the larger home. They make the purchase....

I'm referring to a document -- it's a transaction that I was involved with in my office. People made the purchase. This is their story. They got out of the townhouse that they'd owned for two or three years and bought the place for $192,500. They should have paid $1,925 worth of property purchase tax but didn't because of the high-ratio exemption. In fact, they only paid $596 for the property purchase tax. Over the course of three years and with those two transactions, they paid a total of $846 in property purchase tax. It's very simple: $250 on the first and close to $600 on the second.

What's going to happen to that family now as a result of this legislation? Same scenario: family buys the first townhouse for $100,000. The minister is right. They don't pay any property purchase tax; they get the exemption. Except two or three years later, they've got two kids and are looking for another house. They're going to move up; they want a back yard, a place for the family to grow. They buy that home for $192,000. How much property purchase tax are they paying? It will be $1,925.

When you compare the two situations, the family that paid $846 property purchase tax over the span of three years under the former framework will pay more than double that, $1,925, as a result of this legislation. It just doesn't make sense. The very people the minister says she's trying to help are being hurt. Quite frankly, there are only two ways to look at it: either it's a classic shell-game tax grab by the government, or the minister doesn't even understand the implications of her legislative framework. I certainly have my suspicions, and they're borne out by what my colleague says: that it's a tax grab by the minister, and she doesn't want to admit it.

The figures will bear out that the exemption which has been created will affect very few people. It has to be pointed out, as well, that it's going to affect those people who paid the least amount of property purchase tax in the first place. First-time homebuyers were traditionally making high-ratio-finance, CMHC purchases. They were paying minimal amounts of property purchase tax on their first purchases: $250, $300 or $400. In exchange for introducing that exemption, the minister is grabbing vast sums of money from every other purchaser in the province.

The people she says she wants to protect with this legislation are going to be hurt time and time again, because as their families grow and they try to move up in the world and find housing that will accommodate their families, this minister is going to have her hands in their pockets to the tune of a full 1 percent and 2 percent over the threshold. There are no exemptions and no relief, and it's going to affect the people she says she's trying to help. I don't think she's trying to help them; I think it's a deliberate tax grab on the part of the minister, and she just doesn't have the courage to say as much.

[5:00]

Having said that, the minister correctly points out that the legislation closes a loophole dealing with the lease side of things. She has correctly identified that, and I'm pleased to see that she has taken action to remove the ambiguity that surrounded long-term leases insofar as the application of the property purchase tax was concerned. But make no mistake about it: this is not a good-news situation for young families or hard-working British Columbians; this is a tax grab by this government, and to call it anything else is simply misleading people.

The numbers speak for themselves. My colleague is correct when he says that at the end of the year we're going to look at the numbers and see