2000 Legislative Session: 4th Session, 36th Parliament

HANSARD

The following electronic version is for informational purposes only.

The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

MONDAY, MAY 1, 2000

Afternoon Sitting

Volume 19, Number 4

[ Page 15157 ]

The House met at 2:08 p.m.

Prayers.

The Speaker: The member for Cariboo North.

D. Zirnhelt: Cariboo South, Mr. Speaker.

The Speaker: I'm sorry. My apologies, member. It's Cariboo South.

D. Zirnhelt: That's fine. I'm pleased to represent both ridings. The member isn't here, and on his behalf I'm making some common introductions, hon. Speaker.

[1410]

I'd like to introduce to the House some very aggressive, dedicated and concerned parents, from school district 27, who are here to meet with Ministry of Education officials about concerns they have about school closures proposed by the school district. They are Robin Rusau and Brian Rusau from 70 Mile Elementary School, Caren Folster and Zena Thorsteinson from Buffalo Creek Elementary School, Vicki Elzinga and Isabelle Dodd from Riske Creek Elementary School and the Toosey band. Representing Crescent Heights Elementary School, although she's from Mcleese Lake, is Heather Robertson.

And representing McLeese Lake Elementary School, which is in Cariboo North, are Barb Scharf, Kim Atchison and Marie Beck. Accompanying them is Terry Tate from the IWA local in the Williams Lake area. Please make them welcome.

Hon. U. Dosanjh: Hon. Speaker, I want to welcome back a very important member of the press gallery. BCTV cameraperson, or cameraman . . . . I'm told he's old-fashioned, is he not? I don't know; somebody will kill me for being politically incorrect. But I want to welcome Ron Thompson. He's been a veteran cameraman in the gallery here. He's back in good health and good spirits. I would like the House to please make him feel welcome once again.

G. Farrell-Collins: For our side of the House, we'd like to welcome Ron back as well. I just advise everybody to stay out of his way and you'll do just fine in the corridors.

Hon. M. Farnworth: In the gallery today we have a special guest, Shirley Douglas, the daughter of the late Tommy Douglas, one of the founding members of the CCF-NDP and the Premier that brought medicare into Canada. Shirley is here to meet with community groups and myself later this afternoon to discuss the future of medicare in British Columbia and Canada. Would the House please make Shirley welcome.

Hon. D. Miller: In the gallery today are two members of the team of the northern development commissioner. Cheryl Soucie is the executive administrative assistant for the commissioner and Ron Burleson is the senior coordinator for the Northern Development Commission. I'd ask the House to make both of them very welcome.

M. de Jong: I'm thrilled that my sister Pat is in the gallery, and with her today is a friend from Saskatoon, Saskatchewan -- Cass. I hope the House will make both of them welcome.

G. Hogg: In the gallery today are 20 grade 11 students from the independent Southridge School, along with their teacher Mr. Julian. Would the House please make them welcome.

E. Walsh: I'm pleased to introduce someone to the House today who works very hard for all residents of my Kootenay riding. I would ask the House to welcome my CA, Laura Kirkhope, to the Parliament Buildings.

G. Abbott: In the gallery today is my constituency assistant, June Wayslow, and I'd ask the House to make her welcome.

Oral Questions

RESERVATION SYSTEM FOR B.C. FERRIES

G. Plant: B.C. Ferries, the B.C. Ferry Corporation, is looking at imposing a mandatory reservation system, despite the fact that the idea of mandatory reservations has been condemned by everybody from the B.C. Automobile Association to the gang at the other end of the hall known as backbencher NDP MLAs. Well, thanks to the FOI Act, Mr. Speaker, we have a B.C. Ferries memorandum from April of 1999 on the subject of reservations and recommendations, and here's what it says: "Mandatory reservations are not an option." Will the minister responsible for B.C. Ferries please tell us why she and her Crown corporation continue to push a scheme that it knew a year ago was an unpopular non-starter?

Hon. J. MacPhail: There have been ongoing consultations throughout the late fall -- and will continue throughout this spring -- about ways to improve B.C. Ferries services. I know that not only my colleagues on this side but the colleagues on the other side will agree that there should be an improvement in service. I wholeheartedly support the corporation figuring out any way that will improve service. All of the improvements will have to be based on wide-ranging public consultation; that's what's occurring now, as we speak. It's good to get the feedback.

[1415]

The Speaker: The member for Richmond-Steveston with a supplemental question.

G. Plant: Well, Mr. Speaker, the minister can talk about customer improvements, but the very memo that expresses opposition and recognizes the bad public policy idea known as mandatory reservations also explains its primary purpose. This is what that memo says: the primary purpose of reservations programs is "to increase net revenue." Surprise, surprise -- government talks about one thing, but in fact we find another cash grab. Will the minister agree that when everyone who takes a ferry has to pay a mandatory reservation fee, what she's really talking about is a fare increase?

Hon. J. MacPhail: Sorry, hon. member; that's not what this is about at all. In fact, the Ferry Corporation was recently put on sound financial footing by the first government ever to actually give them a dedicated stream of revenue for the very first time -- a dedicated fuel tax. The debt of the Ferry

[ Page 15158 ]

Corporation, the past debt of the ships being built, is going to be accommodated by the central government. The Ferry Corporation is now solvent.

What the Ferry Corporation now must concentrate on is improving service to the customers. I hope that the members opposite will agree with that goal. I hope that the members opposite, rather than just responding to the media, will actually engage in the public consultation around ways to improve service. I hope the members opposite will fully understand that any change in the fares, whether they be changed up or down, will be open to wide public consultation.

FAST FERRY PROJECT INFORMATION

C. Clark: You know, the fast ferries have certainly suffered their fair share of bad luck these days. The Premier, on the fast ferry file, insists that we know everything there is to know, that it's all open -- case closed. It's time to move on ahead as his party sails off into the sunset. Well, we have also put in another FOI request. We asked for all the information -- all the correspondence that had been generated -- on fast ferries out of the Crown corporations secretariat. You know, I should have looked in my crystal ball, because instead of getting the information . . . .

What I got was 186 pages, 126 of which were so heavily severed that they didn't even exist anymore. So can the Premier tell us what has happened to his promise of being open and accountable, when indeed they're still hiding and withholding information from the public?

Hon. J. MacPhail: Hon. Speaker, there have been several reports that give all of the details on the fast ferry project -- people who were to be held accountable, all of the details of what went on during that time. The auditor general's report, the Hugh Gordon report, the JJMA report, a technical report -- all of that information has been in the public domain for over a year.

The Speaker: The member for Port Moody-Burnaby Mountain with a supplemental question.

C. Clark: Hon. Speaker, if all the information is in the public domain, then why don't they hand it over when we ask for it under the Freedom of Information Act? We ask for the information, and we get a document that is so heavily severed that most of it isn't even there anymore. If this government is so committed to being honest with the public, then tell us what they've got to hide.

And if this minister will not tell us what is in this document -- if she will not table the rest of this document that she's withheld from the public -- will she at least stand up today and tell us that she is going to have the chairman and the CEO of B.C. Ferries and the head of the Crown corporations secretariat sit in this House during estimates and answer the questions so that they can fill in the blanks?

Hon. J. MacPhail: The member opposite knows full well the rules of the Freedom of Information and Protection of Privacy Act. Our act is complied with always, and there are avenues of appeal if that's not the case.

Hon. Speaker, if somehow the opposition is suggesting that all of the information concerning the project of the Pacificats is not in the public domain, then they're not doing their homework. It is unbelievable that on May 1, 2000, the Liberal opposition is still searching for answers that we get on this side. We've got the answers, we know who's to be held accountable, we know what mistakes are made, we know how to fix those mistakes . . .

[1420]

Interjections.

The Speaker: Order, members.

Hon. J. MacPhail: . . . and, hon. Speaker, we are fixing those mistakes. We're moving on, actually, to improve ferry service. But at the first opportunity there is to discuss with the public about improving ferry service, the Liberal opposition goes crazy with the fact that we're actually having a public discussion on improving ferry service. That's what we're moving to. We've corrected the mistakes of the fast ferry project. We've admitted to the wrong. We know how to fix the mistakes. We're moving on with improving the service for ferry passengers.

LAUNCH OF THIRD FAST FERRY

M. de Jong: It's an interesting response from the minister. Curiously, at no point did she mention the launch of the third fast ferry that took place last week. How odd. Remember, Mr. Speaker, the old days -- the first launching of the ferry? The NDP Premier amid flowing champagne proclaimed: "They said we couldn't do it." And then, when they launched the second ferry, the NDP battle cry was: "I wish we hadn't done it." Now, last week, with the third launching, I guess the NDP battle cry is: "I didn't do it."

Can the Premier or the minister explain what pressing government business kept them from attending the launching of this multimillion-dollar NDP-sponsored white elephant?

Hon. J. MacPhail: It is marine tradition to launch a vessel. It's the time when you get to honour the workers involved with building the vessel as well. I do note that at the first two launches, unfortunately neither of whicn I could attend . . . . I do remember that there were lots of Liberal MLAs at those first two launches as well, of course, because they represent the workers who live in the ridings where the good work on the vessel was done.

Hon. Speaker, this vessel, while according to marine tradition was launched and named, will not be put in service and will be offered for sale as a new vessel.

The Speaker: The member for Matsqui with a supplemental question.

M. de Jong: It's a curious non-answer. We did adjourn for the week so that the Premier and the minister could be in attendance. Why doesn't the minister just take this opportunity to be honest with British Columbians and tell them the truth and say: "We were too embarrassed, having wasted almost half a billion tax dollars -- hard-earned tax dollars -- from British Columbians?" They were too embarrassed to attend.

This is my question to either the minister or the Premier: why don't they stand up today and apologize to all those British Columbians who waited in a lineup last long weekend

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while this floating white elephant sat idle in the ocean -- a testament to this government's mismanagement and ineptitude?

Hon. J. MacPhail: They do . . . . Well, actually, they don't cease to amaze me -- the Liberal opposition. The hon. member across hesitated for a moment, because he may have said that there might be something wrong with the long lineups. Yet they have spent their entire time criticizing a Ferry Corporation which understands that customer service needs to be addressed when people have to wait in lineups for ferries. That is exactly the kind of question that the Ferry Corporation, under the direction of the government, which wants to improve ferry service . . . .

A government that recognizes that the ferry system is part of our provincial transportation system -- a government that understands that we, for the first time, have put the Ferry Corporation in a solvent position -- understands fully the value of ferry service to people . . . .

We have admitted to mistakes in the past. We are fixing the problem of the fast ferries, and we will continue to move forward on placing a high value on the ferry service on which communities rely.

[1425]

MENTAL HEALTH PLAN IMPLEMENTATION

C. Hansen: My question is also to the Deputy Premier, but on a very different subject. It was more than two years ago that she announced a $125 million program for mental health to be implemented over seven years. Earlier this year the now Minister of Education, her colleague, said that not only has the program not been implemented but that funding for that mental health plan had not even been included in the budget.

My question is to the Deputy Premier, because as Minister of Health she announced a program that had no budget, and as a Minister of Finance she failed to follow through and provide that budget. Will the Deputy Premier, on behalf of the government, apologize for deliberately misleading B.C. families in announcing a plan that was nothing but a sham?

Interjections.

The Speaker: Order, members. The Minister of Health.

Hon. M. Farnworth: Thank you . . . .

Interjections.

Hon. M. Farnworth: Are we ready?

Hon. Speaker, I would like to inform the opposition that in fact the mental health plan is being implemented. What's taken place is a number of steps which are critical to the successful implementation of the plan. First and foremost were legislative changes, which this House debated and which came about as a part of a consultative process which saw that mental health community groups and advocates from right across the province had input into the legislation and the changes.

That legislation was adopted and debated in this House and was supported by all sides of this House, and that was the cornerstone of the mental health plan. That was put in place in November. That is critical if you want to fund the plan further, hon. member.

Second, hon. Speaker, what was taking place was the development of best practices so that we can implement the rest of the mental health plan -- best practices which have now been compiled and which are available so that different regions of the province can see what's happening in terms of the implementation and best practices for providing mental health services in British Columbia. In fact, it is so comprehensive that at a recent mental health conference in terms of best practices in this country where we were anticipating 250 attendees, we had over 500 people, because British Columbia is leading the way.

The Speaker: Member for Vancouver-Quilchena for a supplemental.

C. Hansen: What British Columbia is leading the way in, in mental health, is false hopes, announcements with no substance, and process after process and no community support.

Hon. Speaker, last Saturday marked the second anniversary of the very tragic suicide of Shawn Arsenault, who was a young Victoria man with schizophrenia. The coroner's report that came out on Shawn's death said that he was unable to access the mental health services that he needed -- the very kind of services that are set out in the mental health plan. Will the Minister of Health -- since the Deputy Premier would not do it -- admit that his government has acted cruelly towards the families who are suffering with mental health problems and has given false hope by not providing the mental health services that were promised over two years ago?

The Speaker: Noting that the red light has gone on, I'll ask the minister to be brief in his answer.

Hon. M. Farnworth: Hon. Speaker, I have said publicly and will state here in this House that we will be implementing -- and are implementing -- the mental health plan. It is to be funded over five to seven years. In fact, there are projects being funded that will deal with the services that the people of this province require in places like Prince George and Nanaimo and Kamloops, which are seeing services relocated out of the lower mainland and regionalized into different parts of the province.

The plan is being implemented. The money is in place to put those services into the region. That's what's happening, hon. Speaker, and it will continue to happen.

The Speaker: The bell ends question period.

Point of Order

Hon. D. Lovick: Mr. Speaker, I'm rising on a point of order. The absolute, quintessential rule for question period in this chamber is that all questions must be directed to ministers concerning matters that fall directly within the area of ministerial responsibility. If there's one thing that's a constant throughout the entire parliamentary system throughout the entire Commonwealth, that's it. That's the quintessential rule, Mr. Speaker.

The question that was posed a few minutes ago . . . .

[1430]

Interjections.

The Speaker: Order, members.

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Hon. D. Lovick: The question that was asked to the Deputy Premier a few moments ago had nothing whatsoever to do with the Deputy Premier's responsibility. It also accused the Deputy Premier of misleading the House. It as well, Mr. Speaker . . . .

Interjections.

Hon. D. Lovick: It as well, I think, if we look closely . . . .

Interjections.

The Speaker: Members.

Hon. D. Lovick: If we were to look closely . . . . I'm building the case for a point of order, in case the member can't follow the difficulty of the argument. Mr. Speaker, the point I am making is that the question that we saw a moment ago was absolutely out of order. It was in fact a mask, a means of a personal attack on a member of this House. And moreover, Mr. Speaker, this is a pattern that has been carried out by the opposition for some months now.

It's a deliberate, flagrant abuse of the rules of this House, Mr. Speaker. I am rising now simply to ask the Speaker to please take under advisement the matter I have merely alluded to here and to investigate and review the issue. It seems to me we are in danger of destroying any decorum or due procedure and process in this chamber.

The Speaker: The Opposition House Leader on the point of order.

G. Farrell-Collins: Mr. Speaker, I think what we're . . . . The person who's in grave risk of, I think, upsetting the decorum of the House is the member who just spoke, with the comments he made off the record earlier in question period today -- some of which he's known for in the past.

Mr. Speaker, the member from the opposition benches posed the question on mental health to the government. It is impossible to get straight answers out of this government. Ministries change. I don't know how many Ministers of Health we've had in the last couple of years. I don't know how many Ministers of Finance we've had in the last couple of years. If the Deputy Premier is uncomfortable answering for her record, then I'm sure the janitor is glad to get up and answer the question for her, as he's done repeatedly. So, Mr. Speaker, members are able to ask those questions. If the government doesn't like the questions, that's unfortunate.

On the second matter, Mr. Speaker, I think that if the Government House Leader reviews the record, he'll note that the member for Vancouver-Quilchena did not accuse the Deputy Premier of deliberately misleading the House. He accused the minister of deliberately misleading the people of British Columbia, and that is true.

Interjections.

The Speaker: Order, members. I want to thank both the hon. members for their presentations on the point of order. The Chair is of the view that the question to the Deputy Premier would have been out of order had the Minister of Health not decided to answer the question.

As to the rest of the matter of the point of order, I'll review the Hansard and if necessary come back to the House. I think that ends the matter for now.

Orders of the Day

Hon. D. Lovick: I call Committees of Supply. In Committee A, we will be debating the estimates of the Ministry of Transportation and Highways. In Committee B, we will continue the debate on the estimates of the Ministry of Forests.

The House in Committee of Supply B; T. Stevenson in the chair.

[1435]

ESTIMATES: MINISTRY OF FORESTS

(continued)

On vote 34: ministry operations, $297,814,000 (continued).

Hon. J. Doyle: Before I continue, hon. Speaker, I'd like to refer back to the last time we were sitting in this House, the week of April 17, before we took the one week off. The opposition spent several hours reviewing details of the forest worker transition program, administered by Forest Renewal British Columbia since 1996. No doubt the member for Shuswap intends to continue with some questions on this matter. Before I turn the floor over to my hon. colleague, I would like to take a few moments to review the facts before us.

I trust the opposition has gained an appreciation for the complexity of the issues surrounding the decision of the Canada Customs and Revenue Agency to assess taxes against clients involved in this valuable program. Unfortunately, one of the most revealing comments made when the House last sat was by the member for Shuswap. It was that members opposite weren't interested in whether the program was successful or not -- couldn't care less. I apologize to the hon. member now, because I am going to talk about the facts of the matter, including the success of this program.

Forest Renewal B.C. has assisted over 8,000 displaced forest workers through this program with up to $27,000 in income support for training allowance -- a very generous program. It's one of the most generous in the country, I think -- up to $27,000. Some people got $5,000, but you could go up to $27,000. A hundred million dollars was provided to clients over the last four years in this program, and 80 percent of the people that took the program -- unqualified -- are now working because of this program. If the opposition had its way, there would have been no program, no help provided -- nothing.

For the record, Forest Renewal received opinions from recognized tax accountants and tax lawyers. Forest Renewal sought confirmation of those opinions from the federal tax department. Forest Renewal B.C. attempted to do two things: (1) get a definite ruling from Revenue Canada; (2) in the meantime, make sure that clients received the most benefit for the program dollars that they received. Forest Renewal kept clients informed of its actions. Some clients heard the warnings and took action; some did not.

[1440]

For instance, all clients that were registered in the 1997 program received notice before the time to file their taxes in 1998. They all received letters from FRBC telling them, before they had to sign their 1997 taxes, that there was still some concern ongoing as to the federal government's stand on the

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tax issue. Having lost the fight with Revenue Canada, a portion of those program dollars must now be returned to the federal government in tax. We think it is wrong, but it is the law.

What have we done? What has the government done and what has FRBC done to help the clients? It's true that some clients face hardship as a result of Revenue Canada's decision to impose taxes. But the taxes they face today are no more than the taxes they would have faced then. In fact, as a result of the agreement that our officials have reached with Ottawa, the taxes they face are a good deal lower. So I'm pleased as the minister to have worked out, in the first month, the agreement-in-principle which assisted those workers.

In the agreement that we worked out, clients receive a two-year tax deferment on the federal taxes. One-third of taxes owing -- that being the provincial portion -- was forgiven by the province. Clients have been offered an amount equivalent to two years' interest on the balance of federal taxes owing.

Just for the interest, since the last time we were in this House a week or ten days ago, FRBC has had over 300 calls from clients who have been through this program asking about the agreement-in-principle. When the agreement-in-principle is explained to those clients, actually 96 percent -- that's up from 95 percent -- of clients who have been contacted and used the FRBC line . . . . Once it's explained to them on the phone -- the agreement-in-principle and the ramifications -- they are pleased with the agreement-in-principle that's been worked out.

The best thing to help a client pay their taxes -- 80 percent of the graduates of this program -- is the fact that 80 percent of the graduates of this program are working today.

What I can not say, which has been some of the problem the last time we were discussing this item in the House . . . . This matter is indeed before the courts. I have here a writ of summons filed in the Vancouver office of the Supreme Court of B.C. on January 27, 2000. As a result of this, I am obviously constrained in what I can discuss. While I am prepared to answer questions of fact, I will of course not respond to questions based on speculation or hearsay.

On the last day we were in the House, the hon. member for Shuswap, the critic for Forests, admitted that -- shortly after the House started sitting, after the lunch break -- when he said that legal action had been commenced and that it was clear to him now what the implications of this action were.

G. Abbott: I want to make a few comments here off the top too, in response to what the minister has had to say. First of all, hon. Chair, I would like you to take particular note of what the minister has said today. It seems to me that what the minister is attempting to do here is to have his cake and eat it too. He wants to be able to get up, give the government spin on this most unfortunate situation but then not defend it. I take exception to that.

I think you should make note of this, hon. Chair -- that if he wants to get up, if he wants to maintain a particular spin about how this has occurred, then he should get up and defend it as well. I take exception to the minister getting up and telling me that it's this way and then not defending it. We have an important public policy issue here. I want to see the . . . . If the minister's going to get up and say, "Oh, we're right; we were right.

This is the way it is" -- if he's going to do that -- then he can get up and answer the questions too, and not go back to the legal shield that he has held up throughout these debates in order to do that. That's the first point, hon. Chair, and I want you to take note of that. The minister has launched into this by saying: "We were right; the opposition's wrong."

Yet he is going to use that shield of the legal defence, I'm sure, just as soon as we get on to it. I want you to make a note of that, hon. Chair, because I think it's going to have a bearing on the way that we should respond to these questions.

[1445]

Second point: we did spend several hours in here -- no question -- on the previous Thursday talking about this. The several hours were largely comprised of me asking very brief questions followed by very long pauses, followed frequently by the minister getting up and saying: "Well, I can't answer that." That was how we spent several hours in here. We haven't begun. We have not yet addressed some of the critical questions around this. The minister shouldn't think this is going away.

I'm not going to sit here in this House and have the minister tell me, "Well, it's this way," and then not defend himself in terms of what the government's response to those questions is. So I want the minister to appreciate that. I'm not going to sit back and be a part of this attempt to rewrite history.

The point here is very clear. The minister wanted to talk about the principle of the thing. He said that the taxes would have been no more today than they would have been had they paid them back in '96, '97 and '98. Well, the fact of the matter is that any responsible government and any responsible government agency are going to want to apprise their clients about what their real, actual tax situation is. If people know that, then they can make provision to pay those taxes. Surely, after all the debate we have had here, that should be clear.

People don't want to be surprised in December of 1999 that they owe back taxes for two or three years or whatever period of time they happen to have been in the program; they don't want to suddenly be confronted by that. They want to be told up front what their real, actual tax position is. Then they can govern themselves accordingly.

Our debate has been around that point of whether the response from Forest Renewal B.C., the response from the government, was appropriate. I think that we have, to this point, presented a good deal of evidence to suggest the contrary, most of which the minister has responded to by saying: "I'm not going to respond to that, because it would prejudice our legal position."

As I understand it -- I'm not a lawyer, and I'm very grateful for that -- a writ of summons has been issued, but there is certainly not any case active. There is no case active, and the minister knows that. So we can continue on. Hopefully, some of the questions that went unresolved last day can perhaps be resolved today. I don't know. I'll be surprised if they can be.

But I think there's an important public policy issue at play here. I think there are important lessons that the government should have learned from all this. Obviously they're not acknowledging that there has been a failure here; they're not acknowledging that things could have been done better. I'm yet to be convinced that the government has learned its lesson and that they have adjusted their practices in keeping with that.

Where we were last day is that we talked at some length about the development of this program, the initial debate

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around whether those benefits would be taxable. We talked about the engagement of Doane Raymond, their initial opinion and their letter subsequently to Revenue Canada about whether those benefits would be taxable.

One of the questions that was unresolved . . . . Given that we have legal counsel here today with the minister, perhaps he can fill us in now. In September '97, Revenue Canada advises FRBC that those benefits definitely are taxable. We still don't have an explanation of the gap between October '96, when Doane Raymond writes, and September '97, when Revenue Canada responds. Can the minister tell us today, based on the full advice that he has presumably had over the last couple of weeks, why there was almost a year lapse, between October '96 and September '97, in the clarification of the issue of whether those benefits would be taxable?

[1450]

Hon. J. Doyle: Actually, the reason we didn't get back to the clients for up to a year is because it took Ottawa approximately a year to get back to us.

I'd just like to say . . . . The hon. member across the floor mentioned that we got final word from Ottawa in November '99, I think it was, that this program would be taxable. Is the opposition saying that they wouldn't have started this program in 1996, 1997, 1998 or 1999? We wouldn't have had a program, because they would have wanted to wait until they got definite word from Ottawa. I'm pleased that we started the program.

It took a long time to get final word out of Ottawa as to the tax status of this program. It took almost a year to hear back from Ottawa, hon. member -- on your question.

G. Abbott: Can the minister advise what steps Doane Raymond took between the time they issued their letter, in October 1996, and September 1997, when we got the formal response from Revenue Canada? On what occasions did FRBC contact Doane Raymond with respect to whether an explanation had been forthcoming from Revenue Canada? And did Doane Raymond in turn follow up and attempt to secure the status of that particular issue?

Hon. J. Doyle: It is the belief of the government that Doane Raymond was in contact during that year, during that time, with Revenue Canada to try to get a definite answer from them.

G. Abbott: On what basis is that belief held?

Hon. J. Doyle: It's based on the fact that there was communication between FRBC and Revenue Canada staff.

G. Abbott: So the minister is saying that between October '96 and September '97, there were direct interventions by FRBC to Revenue Canada surrounding the issue of the taxability of benefits. Can the minister advise: on how many occasions did FRBC officials contact Revenue Canada with respect to that issue?

Hon. J. Doyle: We don't have a definite number as to how many times there was communication back and forth.

G. Abbott: So what is the belief that, in fact, follow-up occurred based on? Is there no evidence of e-mails or records of telephone calls -- or written correspondence, for that matter? Is there none of that to support the suggestion or belief?

Hon. J. Doyle: There are no written records of the communication, but there was communication.

G. Abbott: So there's no written record; there was no e-mail; there was no conventional mail. Are we to understand, then, that there was some contact made by telephone?

[1455]

Hon. J. Doyle: While there is no written record, I will assure you that FRBC was very concerned during the year that we were speaking about a minute ago and are still speaking about -- when there was this concern about taxation between Ottawa and the clients out there. There was communication between FRBC and Revenue Canada.

G. Abbott: We've heard from the minister now on a couple of occasions on how carefully they have monitored calls incoming from former clients of the forest worker transition program to Forest Renewal B.C. In fact, we have a documented number of calls. We know the precise nature of those calls -- whether they were supportive of the agreement-in-principle and so on. Yet when it comes to the issue of what happened between October 1996 and September 1997, there doesn't seem to have been a whole lot of tracking with respect to when the calls occurred or what the response of Revenue Canada was.

Is there any indication of what the response of Revenue Canada was to the indefinite number of contacts from FRBC?

Hon. J. Doyle: I have said to the hon. member across the floor that there is no written record of the communication that there was between FRBC and Revenue Canada. You make reference to the calls that FRBC received in the last month or two. I will let you know that before the agreement-in-principle was worked out at the end of March, there were many, many calls to FRBC from clients, mostly of a negative nature. But since the agreement-in-principle was worked out, as I mentioned earlier, 96 percent of people that called, when the AIP is explained to them, are satisfied with what we have done to try to put this issue to bed.

G. Abbott: I thank the minister for again reinforcing the point I'm attempting to make, and that is: now that the agreement-in-principle is in place, theoretically, and FRBC is getting some calls, and we know that FRBC had calls before the agreement-in-principle, and that all seems to be very well documented, do we not have any documentation of any sort around this very critical period between October 1996 and September 1997?

I want to know whether Doane Raymond was doing their due diligence as your accountants to secure a decision from Revenue Canada, and I further want some evidence that Forest Renewal B.C. was doing due diligence either through Doane Raymond or directly with Revenue Canada. Is there nothing to substantiate that suggestion?

Hon. J. Doyle: I think that you, the hon. member across the floor, know that FRBC was very concerned to try to get this issue dealt with. That, hopefully, explains to you and other people who are in this House that FRBC did work to the best of their ability to try to get an answer back from Revenue Canada.

[ Page 15163 ]

G. Abbott: In fact, I don't know that at all. It's been one of the things that has puzzled me from the first time that I looked through this file. There is a very long gap between October '96 and September '97, where it appears that the issue was thrown into some kind of void -- a kind of black hole -- where there was no discussion, no follow-up and no explanation. Frankly, I am not reassured by the minister's comments to date that in fact there was that follow-up to this very important issue. I'm still not hearing it.

The fact that FRBC apparently was concerned enough to ask Doane Raymond to write a letter and get a conclusion to the issue is not sufficient. I want to know whether there was follow-up from October '96 when Doane Raymond wrote their letter to Revenue Canada. Who followed up? Who was pursuing the file on a daily, weekly or monthly basis?

[1500]

Hon. J. Doyle: I feel that I've tried to answer the question. FRBC had made communication with Ottawa on the work on this file. I don't have anything written; I don't have any information other than what I'm giving you today, hon. member. But FRBC is telling me that this file was worked on with Revenue Canada to the best of FRBC's ability.

G. Abbott: Can the minister advise who in the Forest Renewal organization and who in Doane Raymond were responsible for pursuing the tax issue with Revenue Canada during that period, October '96 to September '97?

Hon. J. Doyle: The individuals in Forest Renewal that worked on this on our behalf were Judy Pryce and Jacqui James, who were employees at that time.

G. Abbott: Can the minister advise who in Doane Raymond was responsible for the file after October '96?

Hon. J. Doyle: The individuals in Doane Raymond that worked on this were Andy Little and Susan Mehinagic, tax partners in that firm.

G. Abbott: If there had been written communication between either Judy Pryce or Jacqui James of FRBC and Revenue Canada, would it have appeared in the package of documentation which was provided to us through the Freedom of Information Act?

Hon. J. Doyle: Yes.

G. Abbott: I am presuming, therefore, that there was no written communication between Judy Pryce, Jacqui James and Revenue Canada or Doane Raymond through that period. Certainly there's none evident to me, and I think the minister has already acknowledged that there is none evident to him. Would it be the practice of Forest Renewal B.C. to make a notation whenever a verbal communication was made between themselves and Revenue Canada over an issue as important as taxability of benefits?

Hon. J. Doyle: Not necessarily.

G. Abbott: Not necessarily. Could we assume, then, from that response that there may or may not have been a record made of calls of that sort and that therefore either there were no calls made or there were calls made but they were unrecorded? Is that a fair

summary?

[1505]

Hon. J. Doyle: We can assume there was no record of the calls.

G. Abbott: In

summary, then -- and I don't propose to spend the rest of the day on this -- we have no evidence of written communication, nor do we have evidence of verbal or oral communication with the federal government. But we do have a belief that the appropriate officials followed up at indeterminate dates with Revenue Canada on this. Again, is this a fair

summary?

Hon. J. Doyle: Yes. It's on the record that FRBC staff were concerned about this issue.

G. Abbott: Again, there would be no point in disputing that FRBC was concerned about the issue. Presumably they were concerned enough at least to engage Doane Raymond to attempt to secure an answer.

I would think the organization would have been concerned a month, two months, three months, six months after that there had been no explanation. I remain puzzled, subject to a better explanation from the minister, as to what evidence there is that this concern on the part of Forest Renewal B.C. manifested itself as an intervention with either Revenue Canada or Doane Raymond to ascertain, in reasonable order, that there had been no conclusion reached with respect to the Doane Raymond letter to Revenue Canada. Again, the issue is not around whether they were concerned.

Obviously we'll never prove one way or another whether they were concerned or not. We could easily offer up the explanation that of course they were concerned; they engaged Doane Raymond. The issue is: was due diligence followed in terms of securing from Revenue Canada that definitive decision around the taxability of benefits? Again, I don't want to spend all day on this. Does the minister acknowledge that there's no evidence to suggest that that occurred?

Hon. J. Doyle: I feel that I've given the hon. member across the floor all the information that I can on this issue as far as communication between FRBC, Doane Raymond and/or Ottawa.

G. Abbott: I'm not going to beat my head on this particular wall any longer.

Near the conclusion of our last day of debate around this, we did talk about the advice from Revenue Canada in September of '97 -- the advice that in fact those benefits were taxable. I think there was an acknowledgment from Doane Raymond at that point in time that, yes, they were taxable. The minister suggested, in response to a question from me, that when FRBC secured the decision of Revenue Canada around taxability, they immediately -- or at least in the next pay period -- sent out an advisory to their clients with respect to the taxability issue, and that is a document which I did not have in my possession at that time.

I still have not been able to secure that document. The minister promised me that he would provide me with a copy

[ Page 15164 ]

of it. Can the minister advise me of where that document is, which was promised? Can he send it across to me now? Does he have any other documents to table?

[1510]

Hon. J. Doyle: Hon. Chair, I must admit to the member opposite that I did not realize that you cannot table documents in committee -- I was made aware of that after we went into committee this afternoon -- or I would have tabled them earlier. So that was an honest mistake. But I will send across the floor the copies of the information that FRBC did send to clients.

G. Abbott: I won't hold up proceedings here to look at the documents now, but I will try to review them as the day goes on. If there are questions that arise as a result of that document, I'll ask them then rather than hold up proceedings here.

One of the issues that was critical in our last discussion, which I think still remains a very critical issue here, is how effectively the taxability question was communicated by contractors or other delivery agents to clients of the program. My hon. friend the member for Fort Langley-Aldergrove had a number of questions around that last day. It seems to me that it is one of the important issues that remains outstanding here.

I want to read into the record a communication around this particular point and then invite the minister's comments, because I think it goes to the heart of whether delivery agents and contractors were properly carrying the message with respect to taxability -- if indeed there is a way of describing proper in this particular context. The communication is from the CEO of FRBC, Roger Stanyer, Friday, on February 20, 1998, to Kelly Nontell, who's an FRBC official, with respect to this:

"I am quite concerned that we are going to get into a disagreement with the lower mainland offices over the appropriate remedy, based on what the clients were or were not told and what communication had taken place between the executive director's office and the lower mainland offices.

"Therefore we should attempt to acquire copies of any written communication between the Island office and clients as well as any written communication between the Island office and the lower mainland offices or copies of any minutes of meetings where the issue was discussed between the offices.

"The reason for concern comes from conversations between the minister's office and one of the lower mainland offices. The people in Van" -- which I'm presuming is short for Vancouver -- "deny any knowledge that these moneys might be taxable. I don't want to stir anything suspicious at this point, but we need to prepare for the argument."

To that Kelly Nontell responds later in the day: "I'm asking Brian, Christine, Jim and Katherine, who all became involved in the [forest worker transition program] at different times, if they have any information in writing -- meeting minutes, e-mails, etc. -- that indicate what and when advice regarding the tax issue was provided by Victoria to our delivery agents." This was February 20, 1998, 3:44 p.m.

I'll be interested to hear what the minister's reading of this is. But my reading of this is that there was a good deal of concern at the highest levels in Forest Renewal B.C. -- at least on February 20, 1998 -- about how effectively contractors and other delivery agents were carrying the message with respect to taxability. Is that a view that the minister shares?

Hon. J. Doyle: I think that the letter in question from FRBC CEO Stanyer shows that the CEO of FRBC was concerned in case there was any misunderstanding between FRBC through the contractors to the clients. So what FRBC did before one would normally file their taxes is send letters to all the clients, copies of which I gave you a little while ago in the House.

[1515]

G. Abbott: The issue here, though, is whether the direction of head office in Victoria was being reflected in the direction, the advice, that was being rendered in the Vancouver office and presumably elsewhere. Is the minister aware that there were discrepancies up to and including February 20, 1998, between the kind of advice that was being delivered in different parts of the province?

Hon. J. Doyle: I can't speculate about what was spoken individually from a client to a contractor. But to ensure that there was no doubt as to the tax status of these moneys between FRBC and Ottawa, letters were sent out to FRBC that made sure that all clients got the same information.

G. Abbott: Certainly letters went out. Certainly at different stages we see the issue becoming a little bit more definite. But it seems to me -- and I don't have the letter in front of me . . . . As late as November '99, clients were still being advised to show tuition as a bursary or as social assistance. It seems to me that if we got clear direction in September of 1997 from Revenue Canada saying that this is taxable . . . . Why don't we just bluntly say: "This is taxable. It is going to be subject to tax. You are going to pay tax on it"? Why do we continue perpetuating the possibility that clients can somehow escape this?

Hon. J. Doyle: The opinion that FRBC got from Revenue Canada in September 1997, as you can see by the letter that FRBC sent out to clients in February 1998, was in no way a clear opinion. It was very hard to read between the lines as to just what they were saying. That is why that fairly lengthy document went to clients in February of 1998. Also, it was not a binding opinion from Revenue Canada at that time.

G. Abbott: I'm fascinated by the reference to a binding opinion. What is a non-binding opinion from Revenue Canada? Why would one think that?

Hon. J. Doyle: The opinion in September 1997 was from staff, but it was not bound in law. It was from staff; it was not a definite reading of the law as far as Ottawa's or Canada's decision on this issue.

G. Abbott: How did FRBC reckon that that binding resolution would be found?

[1520]

Hon. J. Doyle: Because of the uncertainty of the letter we got back from Revenue Canada in September 1997 . . . . I'm just quoting from part of the letter that Doane Raymond got back from Revenue Canada: "Since the tax treatment of the assistance depends, in part, on the purpose of the payment as outlined in the participant's job plan, the taxation of any assistance provided to a particular participant must be determined on a case-by-case basis."

Because of the kind of decision we got back from Ottawa . . . . That's when we hired the tax lawyers to continue

[ Page 15165 ]

to get a possible clear answer from Ottawa -- hopefully the one we wanted, being that this wasn't taxable. But we continue to fight it on behalf of the client base in the province.

G. Abbott: I think we'll get into that point later on. Again, just to summarize, FRBC receives the decision of Revenue Canada in September '97. They say to themselves: "Well, we have to look at this on a case-by-case basis, and perhaps we can still challenge it legally." Presumably the thought is that at some point, the tax lawyers can be engaged on this file and that perhaps we can overturn the decision. Is that a fair

summary of what the objectives of FRBC and perhaps the ministry were at that point?

Hon. J. Doyle: Remember that our clients were receiving a maximum of $400 per week to support themselves and their families while in training. Because of the tremendous impact of this opinion on those clients, in February 1998 Forest Renewal referred this technical non-binding opinion from Revenue Canada to tax experts employed by Lawson Lundell Lawson and McIntosh.

G. Abbott: Let's pursue that point for a bit. The minister said that people are making $400 a week. That's true. Obviously people don't want to lose a cent off their cheque if they don't have to. Again, the fact of the matter is . . . . I'm sure that if you asked any of them whether they'd like to know what the reality is with respect to whether they're going to have to pay a big bill down the line, they're probably going to say: "I'd rather know what the reality is, rather than having to pay a big bill down the line. I may not be in any better position then to pay it off than I am to see deductions made along the way."

I think that's the important point here. When we don't give people what should be the clearest of advice, then people will not be able to make decisions on the soundest basis. Again, in February '98 -- this document that was just provided to us -- the clients are being told to claim the money as social assistance. So it seems to me that we are still not being up front with the clients in not communicating to them what the implications of the Revenue Canada decision are. I think there is real avoidance here of coming to grips with reality.

To go on, the issue is referred to Lawson Lundell, the tax lawyers in question. I'm assuming that Lawson Lundell took some actions in terms of developing a strategy around challenging the Revenue Canada ruling. Can the minister advise what steps were taken subsequent to that point? What has been done?

[1525]

Hon. J. Doyle: I'd first like to clarify that every client was advised by February 28, 1998 . . . . To quote from the Revenue Canada letter: "Revenue Canada recently told us that, in their opinion, both the training support and income support you received under the forest worker transition program are taxable." It is also a fact that since May 1998, Forest Renewal British Columbia has advised all new clients in writing of Revenue Canada's determination.

G. Abbott: Why didn't the letter stop there? Why go on and say: "We think we should attempt to get it done as social assistance or as a bursary or whatever"? Why didn't you just communicate that brief thought: "Revenue Canada is telling us that, in their opinion, both the training support and the income support you've received under the forest worker transition program are taxable"?

What you do in this letter of February 28 is go on and say: "I am writing to inform you that Forest Renewal B.C. is disputing that decision. FRBC has obtained legal advice that agrees with Revenue Canada's position with respect to the training support. However, legal advice is that the income support is equivalent to social assistance, which is not taxable" -- and on and on.

I think, again, that if people are going to make the best decisions . . . . Again, we had a long discussion about this on Thursday previous. When clients are involved in a program -- when they are employed or are participating in a program that's funded, organized and conducted by a large government agency -- they tend to believe what that agency tells them. Why did we go on? Why didn't you just keep it simple and say, "Look, here's what Revenue Canada's saying," full stop, and let people make their decision?

Hon. J. Doyle: The letter from Revenue Canada in September 1997 . . . . As you can see on the response that we gave to clients in February 1998, the letter from Revenue Canada wasn't clear. It was the opinion of FRBC, which it stated in the letter sent to the clients . . . . The gist of the letter from Revenue Canada that we got was to ultimately leave it up to the clients. Also, FRBC wasn't in the business of giving tax advice. It was ultimately up to those clients to, hopefully, get tax advice if they felt a need to.

G. Abbott: That seems to me precisely what you do in the letter of February 28, 1998. You say, through the vice-president of communities and workforce: " . . . we recommend that you report the training support amount shown on the T4A slip as a 'bursary' on line 130 on your tax return. You should report the income support amount shown on the T5007 slip as social assistance on line 145 and deduct it on line 250. You may also be able to claim a tax credit for tuition and education amounts on line 323." If that's not tax advice, what would the minister describe it as?

[1530]

Hon. J. Doyle: FRBC chose to provide information that presented both sides. Revenue Canada's reply to us wasn't clear in any way. Clients could make up their minds as to the benefits and also have the right of appeal that they would have individually.

G. Abbott: I just don't see how one could possibly read that into the letter. There's a very clear recommendation from Christine Lattey, the vice-president, around how to manage this tax situation. There's a very clear recommendation about how to do it. I don't see how it can be construed as saying: "You may do this or you may do that." It says: "We recommend . . . . "

I don't know how you can escape that. No amount of words saying, "Well, we didn't give tax advice" or "We didn't do this" or "We didn't do that" or "We warned people . . . . " It just doesn't cut it. People look to their employers for the best of advice with respect to how to manage their tax situation, and they clearly weren't getting it here.

I guess we can go on all day about that, with nebulous answers and perhaps well-defined questions that the minister

[ Page 15166 ]

really doesn't want to answer. Whether the Deputy Premier's enjoying it or not, we're going to continue on.

The issue of what the legal counsel for FRBC did after September of '97 . . . . I posed the question, but I didn't get a response to that. Did legal counsel attempt, as quickly as possible, to get some clarification or resolution to the issue of the taxability of benefits?

Hon. J. Doyle: Yes.

G. Abbott: I'm sorry, hon. Chair; I missed the answer. Could the minister repeat it?

Hon. J. Doyle: The answer to your question is yes.

G. Abbott: So the legal counsel for FRBC attempted to get a prompt determination on that. When was that obtained?

Hon. J. Doyle: Verbally we received word on February 25 and in writing on February 26.

G. Abbott: Of what year?

Hon. J. Doyle: Of 1998.

G. Abbott: So in September '97 we have the non-binding decision -- or what the minister has termed "non-binding decision" -- of Revenue Canada. On February 26, '98, the issue from the perspective of FRBC and the government, is resolved. Lawson Lundell have pursued the matter and apparently have arrived at a conclusion about whether or not the Revenue Canada decision is right. What was that?

[1535]

Hon. J. Doyle: The letter that we received on February 26, 1998, from Lawson Lundell . . . . In a part of that letter, the short answer is: "In our view, strong arguments do exist to support Forest Renewal B.C. taking a position contrary to that set forth in Revenue Canada's technical

interpretation letter."

G. Abbott: So strong arguments exist. Does that mean that the issue's resolved in FRBC's favour?

Hon. J. Doyle: No, but it did show us that there was significant doubt as to whether we should or shouldn't cave in to Revenue Canada.

If I could, hon. member, I'd like to quote further from the letter that was sent out by FRBC on February 28, 1998, to all clients registered in this program. The first paragraph hasn't yet been read out by anyone in this House. The first paragraph of that letter reads:

"Re: Client support payments under the forest worker transition program

"Revenue Canada recently told us that, in their opinion, both the training support and income support you received under the forest worker transition program are taxable. This includes money you have received directly and any money paid to a training institution for your tuition, books or other training-related costs."

I just want to put the first paragraph of that letter on the record.

G. Abbott: I think that's actually the third time that part of the letter's been put on the record. Again -- I mean, I just asked this question ten minutes ago -- why didn't you stop there? We've had an explanation around that. Again, it's clearly on the record.

Going back to the legal advice, we have the lawyers saying in late February '98 that there is significant doubt about the Revenue Canada decision. So what? What do you do then?

[1540]

Hon. J. Doyle: Staff advised Revenue Canada that it would issue a T5007. Revenue Canada never responded to the inquiry in an official way until July 1999.

[J. Cashore in the chair.]

G. Abbott: That doesn't address the question that I raised, which is: what did FRBC and/or Lawson Lundell do in the wake of their expression that there was significant doubt about the issue? Is the suggestion being made by the minister here that the response to that, on behalf of the clients of the forest worker transition program, was to write to Revenue Canada and say: "We think there is significant doubt." Is that it? Is that what the public policy from that point on was based around?

Hon. J. Doyle: Based on the legal advice that FRBC received, we issued T5007s. We advised Revenue Canada of this and awaited their response.

G. Abbott: Apparently Lawson Lundell at least didn't just sit and wait for a response to Revenue Canada. In a letter of July 28, 1998, they write to Forest Renewal B.C., attention, Kelly Nontell, with respect to the forest worker transition program income tax status of payment. This is a long letter, several pages long, and contains a great deal of detail. But I think there are portions of the letter where we really come to the heart of the issue from their perspective. I will ask the minister to address point 5, particularly as set out on page 2 of the letter. Point 5 reads in part:

"We confirm that, in subsequent discussions with Kelly Nontell of your office, we advised you as follows: (

a) Revenue Canada's position, as reflected in the technical

interpretation sent to Doane Raymond, is consistent with Revenue Canada's stated administrative position in earlier technical

interpretation of which we are aware. (

b) Given Revenue Canada's stated administrative position, it is unlikely, in our view, that Revenue Canada would alter its position unless forced to do so as a result of a court decision. As such, it is our view that FRBC would not be successful in challenging assessments against program participants at the appeals division level. Rather, it is our view that a court challenge would ultimately be required."

And then it goes on to talk about the costs and so on. But I won't go into that.

The last point with respect to that -- and I think it's a follow-up from point 5 in part, as well as paragraph 6 . . . . Under the analysis and discussion

section of this letter, I'll quote: "We confirm that relying on the facts described in paragraph 6 above, the likelihood of FRBC succeeding in a court challenge of Revenue Canada's administrative position with respect to the income support payments is small."

Then they go on to further discussion around that. It appears that at least at the level of discussion between Forest Renewal B.C. and Lawson Lundell, there is still discussion ongoing. It would appear -- and again I'll characterize it, and

[ Page 15167 ]

the minister can tell me if he takes exception to it -- that the guts of the Lawson Lundell letter of July 28, '98, is that if we go to court, we're going to lose. Is that a fair assessment?

[1545]

Hon. J. Doyle: The letter that you quoted from, hon. member, was based on five clients that had been reassessed by FRBC -- five clients only.

G. Abbott: Is the minister telling me that in the discussion and analysis of this situation as contained in the letter of July 28, '98, the belief of FRBC and of the ministry was that in fact they were still going to succeed should there be a court challenge?

Hon. J. Doyle: Hon. member, it was not FRBC's decision to dismiss a court challenge. We also continue to review other options.

G. Abbott: So it's the position of Forest Renewal B.C. and a position of the Ministry of Forests, from your perspective or their perspective, that the issue of Revenue Canada's position around the taxability of income support payments is still not resolved. Am I understanding you correctly?

[1550]

Hon. J. Doyle: Yes.

G. Abbott: Why then the agreement-in-principle? Why have we again let what appears to be a very important legal issue go unresolved for a very extensive period of time? In fact, we have negotiated this very one-sided agreement with Revenue Canada or what purports to be a negotiated agreement with Revenue Canada. Why do we not have a resolution of this issue? Surely that's possible.

Hon. J. Doyle: On November 4, 1999, Revenue Canada closed the door on further administration discussions on this issue. I decided when I became minister, and within one month of that, we worked out the AIP with the federal government. You know the results of that -- that we would pay the provincial tax and pay the interest for two years on the federal tax to bring some peace to those families that were concerned about this, these clients.

G. Abbott: The minister says that on November 9, '99, Revenue Canada closed the door with respect to administrative issues around that taxation question. I don't understand why, notwithstanding the letter of July 28, '98, where Lawson Lundell says, "If you go to court, you're going to lose," and the minister says: "Well, that's only with respect to five of the clients . . . . " If there remains significant doubt in the mind of the government with respect to the taxability of those benefits, why hasn't Revenue Canada been challenged? Why haven't we taken them on? Why haven't we used the most advantageous test case and tried to take it on?

Hon. J. Doyle: The agreement-in-principle that was announced on March 29 does not in any way restrict any client's right out there to fight this case with Revenue Canada.

G. Abbott: But what the agreement-in-principle does -- and we discussed that at the start of these estimates -- is commit B.C. to paying the provincial share of the income taxes owing on the income support received by the program clients. It commits the province of British Columbia to pay the federal government an amount equivalent to the interest charged by the Canada Customs and Revenue Agency on the balance of the tax debt for 24 months. That's what the agreement-in-principle does. It binds the federal government to absolutely nothing except, presumably, to receiving all that money.

Again, if there is significant doubt in the minds of the minister and of Forest Renewal B.C. about whether in fact the non-binding decision of September '97 was wrong, why didn't we test it legally?

[1555]

Hon. J. Doyle: It's the opinion of FRBC, and . . . . Our prime concern was resolving this issue in a manner which allowed clients to make full use of program funds. Through paying the provincial share, we did this at least with the funds that were within our jurisdiction as provincial government. We did spend quite some time working with the federal government -- Ministry of Finance officials -- and we worked with Revenue Canada for some time. It was important to bring some resolution to this, in my opinion as Minister of Forests. I think that's what we did our best to do when they announced the AIP on March 29.

G. Abbott: I think the critical point is that in a long period of time from October of '96 through, effectively, January -- or today -- of 2000, clients have been led to believe that there was significant doubt about the decision that had been put forward by Revenue Canada. If that's the case, if there was and if there is a sincere belief that significant doubt exists around the validity, the legality, of Revenue Canada's non-binding decision of September '97, why is it not pursued? Why, after all this time . . . ?

Why go on for four years -- or going on four years; three and a half years -- saying: "Well, the accountants are saying this, and the lawyers are saying this"? Why go on that far and then run the white flag up and say: "You know, we still don't believe it, but we're giving in"? Why does that happen?

[T. Stevenson in the chair.]

Hon. J. Doyle: FRBC continued to explore that option as well as others which would help clients retain maximum benefit of the program funds. At the end of the day we judged that the agreement-in-principle was the way to go to bring some certainty to their lives. We could have waited from '96, '97, '98 or '99 through to the year 2000, almost, to get a final clarification from Ottawa. Hopefully the member is not suggesting we wouldn't have put the program in place until then, held it back and not have had this program in place for the 8,000 people that registered until we got a final decision from Ottawa.

I think we did our best. At the end of the day we did the agreement-in-principle to bring some resolve to this long-term matter.

G. Abbott: I don't recall anyone at any point suggesting that the program shouldn't proceed. The issue is: what's the advice that you give to clients about the taxability of their benefits? Given that it's going on four years, and the fact that it was an issue in October '96 and continues on and on

[ Page 15168 ]

through to the present, seems to me to underline the point that if there are serious questions in the minds of Forest Renewal B.C. about the legality of the Revenue Canada decision, you've got to test it at some point. Yet that doesn't seem to have been done.

[1600]

Now, the minister says: "We decided that it was better to pursue an agreement-in-principle rather than to test what we believed to be the significant doubt around the taxability issue." It seems to me, in fact, that what has happened is that the government didn't believe they'd win. Therefore they decided that it would be better to deal with this by pursuing an agreement-in-principle. Perhaps the minister would like to comment on that; perhaps not.

I will also, while I have the chair, ask this question: when did the minister reach the conclusion that the direction to go was an agreement-in-principle rather than further testing of the legality of the Revenue Canada decision?

Hon. J. Doyle: The decision by FRBC and the minister to go ahead with the AIP was made in mid-February 2000.

G. Abbott: So mid-February 2000 is when the minister and FRBC say to themselves: "We have decided that rather than testing the significant doubt around the legal issues, rather than testing that, we are going to pursue an agreement." That's mid-February of 2000. Is that correct?

Hon. J. Doyle: That is correct, yes.

G. Abbott: Is it fair to say that the commencement date, in terms of whatever negotiation has gone on between Revenue Canada and FRBC and/or the Ministry of Forests . . . ? Is that the effective starting date?

Hon. J. Doyle: January 10, 2000, is when communication was made with Ottawa on this issue.

G. Abbott: So, in fact, the decision not to pursue any further legal action on the taxability issue but rather to commence a negotiation with Revenue Canada was made on or around January 10, 2000.

Hon. J. Doyle: January 10 was when the minister started the discussions. It led Ottawa to think that we should get into some discussion to resolve this issue. Mid-February is when we started negotiations, and as you know, the agreement-in-principle was worked out on March 29.

[1605]

G. Abbott: Up until early January, Forest Renewal B.C. and the Ministry of Forests were still actively pursuing the possibility of undertaking a legal challenge against Revenue Canada's decision -- correct?

E. Gillespie: I ask leave to make an introduction.

Leave granted.

E. Gillespie: I'm very pleased to introduce to the House today 50 students from Highland Secondary School in Comox, along with their teachers, Ms. Van Dinter and Madame Provencher. There are a number of parents who are accompanying these students as well. I ask all my colleagues to please make them welcome.

Hon. J. Doyle: We always kept that option open. We also looked at ways of helping clients in their own appeals.

G. Abbott: I guess the issue of whether that option was being kept open is reinforced by the letter of December 24, 1999, from Lawson Lundell to Katherine Rowe, which states in part: "As requested, I am enclosing a

summary of arguments that may be used to counter Revenue Canada's position that the income support payments are taxable." It goes on to say: "If you have any questions concerning these arguments, please telephone me."

Would it be fair to assume, given that a

summary of arguments was requested at some point prior to December 24, 1999, that FRBC or the Minister of Forests continued to mull over the possibility of a challenge, but for some reason chose at some point on or prior to January 10 not to pursue it? What was it about the character of those arguments, or the character of the case that could have been mounted against Revenue Canada, that caused the minister to pull back and say: "Whoa, we're going to try to negotiate our way out of this"?

Hon. J. Doyle: The letter that the hon. member is reading from was advice to clients, not to FRBC. FRBC decided not to continue fighting this, because there was concern that it could go on for many years. And it was not just the tax bill that they might owe Ottawa and/or Victoria, in those days but that the interest on it could get to be very, very high. So that's where FRBC, or government, decided to look at the agreement-in-principle which you worked out and which we've talked about over the last 20 minutes.

G. Abbott: That's very nice, but let's cut to the chase here. Frankly, your decision must have been based on some kind of appraisal of the strength of the legal arguments you could bring to bear in a court of law with respect to the decision of Revenue Canada. Surely there was some consideration or analysis around that point in making the decision to go down a path of negotiation as opposed to a path of legal challenge. Surely that must be the case, is it not?

[1610]

Hon. J. Doyle: The reason that government decided to go the AIP was because we were concerned about the delays and the cost to clients as this thing went on from year to year. That's why we decided to go for the agreement-in-principle.

G. Abbott: So the minister thought that they could win. Is that right? You just didn't want to put people through the delay and the pain of delay? But surely, if we are talking of people who have unexpectedly received tax bills of several hundred to several thousand dollars -- they're all blown away by it -- and if we've got a good case, why the heck aren't we pursuing it? I don't think that we want to insult the intelligence of the people of British Columbia and say: "We think we had a great case, but we're not going to pursue it, because we think negotiation's better, because then we can do something quickly." Surely, if we've got a case, we want to pursue it, do we not?

Hon. J. Doyle: Government, or FRBC, considered many options. At the end of the day we decided that the AIP was

[ Page 15169 ]

the way to go. I'd like to say that based on what I've mentioned earlier, based on the AIP that is in place . . . . When people call our office -- and 300 people, as I've said earlier, have called . . . . Once the AIP is explained to them, 96 percent of clients that call our office are pleased with the AIP that's been worked out. Many options were looked at. At the end of the day a decision was made to go with the agreement-in-principle.

G. Abbott: So the minister is telling me that in their learned consideration, they still have a heck of a case there; it just hasn't been pursued. Is that right?

Hon. J. Doyle: We are saying that the strength of the case was one of many options or many factors that were looked at. At the end of the day the agreement-in-principle was the best policy decision. As I mentioned earlier, 96 percent of clients who call the FRBC office are saying it was the right thing to do. They are glad to get on with their lives.

[1615]

G. Abbott: Could the minister remind me . . . ? I think he cited this figure early on in our debate around this point. The agreement-in-principle is going to cost the provincial treasury, as I recall, somewhere around $10 million, excluding the millions that the displaced forest workers will be remitting to the federal government. I think the province's responsibility through the AIP amounts to somewhere around $10 million. Is that correct?

[B. Goodacre in the chair.]

Hon. J. Doyle: The best estimate we have today is $10 million. It might fluctuate up to $12 million -- the cost of the agreement-in-principle.

G. Abbott: So the AIP, as it is currently structured . . . . It is estimated it will cost the provincial treasury $10 to $12 million. Is there some upset or threshold figure at which the province would see it as worthwhile to test what is apparently a strong set of legal arguments against the Revenue Canada decision?

Hon. J. Doyle: No.

G. Abbott: So the decision was not based around it costing $10 million or $12 million or $50 million or $100 million. The decision was to pursue a negotiated course rather than challenging legally -- with apparently some purportedly good arguments -- the Revenue Canada decision. Is that a fair assessment? The decision was made to go down the negotiating road, and it really didn't matter what the amounts were.

Hon. J. Doyle: I remind the opposition that when this item broke last year, the opposition said to us as government: "Why didn't you go to Ottawa and try to work out the best agreement possible?" I feel we have done that on behalf of the workers.

Also, the member makes reference to dollars. I would remind him that we invested $100 million in 8,000 workers, and 80 percent of the people that graduated from FRBC, from the courses they took, are now working because of this program. It's been a very, very good program.

G. Abbott: That's very nice, but I'd like the minister to answer my previous question.

[1620]

Hon. J. Doyle: Could the member repeat the question please?

G. Abbott: The question was around whether . . . . If the program cost $10 million, $50 million, $100 million, that didn't matter. The government had made an assessment of its legal position, it had made an assessment of its negotiating position, and it had resolved irrevocably to pursue the negotiated position. Is that correct?

Hon. J. Doyle: Government decided to pursue the negotiation process.

G. Abbott: The next question I have in my mind, then, given that we have negotiated an agreement-in-principle which accounts for the provincial share of the income taxes owing and accounts for the amount of the interest charged by CCRA on the debt for 24 months . . . . Why, given the government's position there, was there a rejection of the offer from Revenue Canada on August 23, 1999, to settle this issue? Again, for the benefit of those who might not be familiar with this particular document, I'll read it for you:

"Dear Sirs:

"The employees of Forest Renewal B.C. have received incorrect information slips for the 1996, 1997 and 1998 taxation years. The information slips issued were T5007s, when in fact correctly should have been T4As.

"It is the department's understanding that Forest Renewal B.C. is considering paying the income taxes owing by the employees as a result of the incorrect information slips being issued. The department would only accept this alternative with the understanding the amount is not recoverable from the employees and Forest Renewal B.C. will undertake to issue proper information slips in the future."

The letter then goes on to talk about the payroll information up to and, presumably, including 1998. It talks about what the amounts owing on the above would be, and it goes through the amounts. I'll get the minister to do the math on the letter of August 23, 1999. But it appears to me that what Revenue Canada is offering to do on August 23, 1999, is settle this matter with the province. Indeed, that's exactly what the opposition have been talking about with respect to the resolution of this. Is that a correct reading of this letter?

Hon. J. Doyle: Much has been made by the opposition and certain critics regarding the so-called deal proposed by Revenue Canada to resolve this issue during this period. I would ask everyone to consider the following. First, the federal government offer, at that time, was only for the 1997-1998 tax years, or some 6,300 clients enrolled at that point. Even then, their offer was approximately $2 million higher than their own estimation of the taxes owing. Add to this the 1999 enrolments and those who would not graduate until the spring of this year, 2000, and the total number of clients is pushed to 8,618. The cost of the so-called deal, in Ottawa's terms, rises as high as $20 million.

[1625]

With those terms, Forest Renewal B.C. decided it could not justify settling with the 1997-1998 clients only, when the

[ Page 15170 ]

1999-2000 clients had been given substantially the same information. More importantly, given all the efforts made to communicate the facts to the clients as mentioned, there was no reason then -- just as there isn't now -- why Forest Renewal should be responsible for the taxes that individuals face.

G. Abbott: Again, it seems to me precisely the case that the government is trying to argue two things here: that they were doing it right and that Revenue Canada was wrong, that even though they claimed to be giving, over time, better and better advice around whether the benefits were taxable, somehow the '99 people should receive the same treatment as the '96, '97 and '98 people -- even though, by the minister's own claims, they were giving more substantial and clearer advice to the clients at that point.

So it seems to me that the government is arguing in three different directions here: they did the right thing; Revenue Canada is doing the wrong; we gave people good advice; we didn't give them good advice; they should benefit; they shouldn't benefit.

It seems to me that you can't dismiss this proposal from Revenue Canada that easily. They're saying: "The department would only accept this alternative with the understanding the amount is not recoverable from the employees and" -- here's the kicker -- "Forest Renewal B.C. will undertake to issue proper information slips in the future." FRBC never did that, did they?

Hon. J. Doyle: Yes, FRBC did do that.

G. Abbott: Then why do we have the problem?

Hon. J. Doyle: Revenue Canada's advice came in hindsight; that was after the fact. Our concern was not to jeopardize the client's right to full use of the moneys that had been forwarded to them.

G. Abbott: I am completely puzzled by that response. Revenue Canada's advice came in hindsight? Surely the minister will acknowledge, after our many hours of debate here, that Revenue Canada has been saying the same darned thing from day one. From October of 1996 they've been saying the same thing over and over and over again: "The benefits are taxable; the benefits are taxable; the benefits are taxable." How can the minister possibly stand in this House and tell me and tell the people of British Columbia that Revenue Canada's advice came in hindsight? I am utterly, utterly baffled by that response.

[1630]

Hon. J. Doyle: Revenue Canada said nothing until September 1997. I think they made reference to it in 1996, just to clear the record, and then their advice was unclear. To help clients to have full access to the program dollars when they needed it, based on legal advice, we took the position we did in 1998.

G. Abbott: In fact, clearly Revenue Canada is saying in '96 that it's taxable. I don't know why else you would assume . . . . Why else would Doane Raymond be engaged to help you determine a question? I presume that you didn't manufacture the possibility that Revenue Canada might treat this as taxable when you believed that they would not. Doesn't that stretch the bounds of credibility somewhat here? I just find that utterly bizarre.

Again, the issue of August 23, 1999 . . . . Now, I presume that there was some consideration and discussion that went into sorting out whether that was a deal that FRBC and the government should take or not take. When Revenue Canada says to FRBC that they'll only accept the deal if Forest Renewal B.C. will undertake to issue proper information slips in the future, is the government saying that Revenue Canada was wrong and that the proper information slips were being provided?

[1635]

Hon. J. Doyle: Yes, based on the fact that there was legal disagreement on advice given to the clients.

G. Abbott: The position of the government is that as of August 23, 1999, FRBC was issuing proper information slips. The minister has said yes -- that as of that date, they believe they are still doing it right. In fact, at that point in time, we know that they also have legal advice that they have a strong argument to make against Revenue Canada's position. FRBC thinks they're right; the government thinks they're right. They have legal advice that they're right.

Why don't you take the government on? Why don't you take Revenue Canada on at that point? Why maintain a fiction? Why not grab the bull by the horns and resolve it at this point in time? I mean, clearly everybody thinks they're right here. They think they've got a strong case. You know, if we're going to say no to the proposal that's put forward by Revenue Canada at this point, why aren't we taking them on?

Hon. J. Doyle: Back to the questions that you asked. Fact 1: Forest Renewal B.C. cannot take Revenue Canada to court on its own. Legally the only ones that can do this are individual clients. Fact 2: until clients had been reassessed, there was nothing to challenge. Reassessment did not happen until December 1999.

[1640]

G. Abbott: Again, we know that as of July 28, Lawson Lundell has been engaged to look at that issue for precisely five clients. The upshot of the letter of July 28, as we discussed, is that if we go to court, we lose. Is that not correct?

Hon. J. Doyle: The opinion that you're reading was based on the chances of five clients only, not on anything wider than that.

G. Abbott: Well, exactly. The minister has just told me that the client would have to take on Revenue Canada, and here we have five of those clients. I presume that's all that had been identified at that point. Or was there a whole other bag of clients who got a different opinion from Lawson Lundell? I don't think so. I think you had five, and you had an opportunity to take them on. You looked at your legal situation and said: "No, we're not doing it." Is that not correct?

[1645]

Hon. J. Doyle: The five cases you mention were not our best cases. We knew there were stronger cases out there. We wanted to go with our best cases, and we did not have our best cases until after everyone was reassessed in December 1999.

[ Page 15171 ]

G. Abbott: Then I'm a little puzzled by this. This is a memorandum from Kelly Nontell dated February 20, 1998. Under a heading entitled "Current Position" she says: "Subject to the advice of legal counsel, Forest Renewal will challenge Revenue Canada taxation's technical

interpretation No. 963865 with the objective of eliminating any tax on the training support and income support provided to clients. This will take time."

It appears to me that as of February 20, 1998, what we have been talking about has in fact been extensively discussed, and it appears that we're ready to go. What happens?

Hon. J. Doyle: I'd like to remind the member opposite that the goal was to come up with a solution that helped clients to make the best use of the program dollars they got back and to get back to work. The legal opinion you're referring to now was one of several opinions that we looked at, at that time.

G. Abbott: So the government and/or Forest Renewal B.C. are looking at a legal opinion back on February 20. They're actually considering a legal challenge on February 20, and they say: "Subject to legal advice." The minister also made reference to clients with a better case or the best case or whatever, in answer to an earlier question. Am I to understand, then, that there is a different legal opinion floating out there with respect to clients who, in the opinion of Forest Renewal B.C., are in a better position to challenge? Is that correct?

Hon. J. Doyle: No, there are no other legal opinions. Actually, in the last question I made a mistake when I said "opinions." I meant to say "options." So I guess that's where we got off track in this discussion.

[1650]

G. Abbott: Thank you for that clarification.

So the notion that we had clients of the program who would be in a better position to challenge Revenue Canada on the issue of the taxability of the benefits is a notion that is internally generated, as opposed to something about which the agency received legal advice. That view or that notion was internally generated, as opposed to generated by legal advice. Is that correct?

Hon. J. Doyle: It was jointly arrived at between staff and legal advisers that there were other better cases out there than the one that we referred to earlier -- the five people in that opinion that we talked about.

G. Abbott: Why wouldn't the identity of those better clients be just as clear in February 1998 as it would be in February 1999?

Hon. J. Doyle: At that time there were no reassessment notices on which to build a case.

G. Abbott: But surely you don't need reassessment notices to appreciate the position people are in. Obviously that is already the subject of a lot of discussion around Forest Renewal B.C. and within government as well. Surely there would be an opportunity to clarify this point with Revenue Canada in February 1998 -- would there not?

Hon. J. Doyle: To launch a court action, you need a decision to challenge. Revenue Canada did not make a decision until December 1999.

G. Abbott: Again, that goes back to the issue of why the offer from Revenue Canada on August 23, 1999, was rejected. If Revenue Canada hadn't given any final reinterpretation or reassessment notices until that point in time, what are we doing talking about a settlement agreement back in August '99? Is there not a sense in the government and in the corporation that there's a problem? Is the fact that we are now dealing with the issue -- and dealing with it in much bigger numbers -- not testimony to the fact that they simply let a bad situation go on for another year?

Hon. J. Doyle: The hon. member is entitled to draw any conclusions he likes. We've been forthright in the facts on why Forest Renewal did not accept this deal offered by Revenue Canada. I feel that we've tried our best to answer questions that have been raised on this issue. It's my feeling that some of the questions we're getting now are repetitious, and we have answered, or tried, to the best of our ability. Sometimes there are legal concerns in the way of an answer. On some of the questions that are being asked now, I feel like we've been there before; an answer has been given to the best of our ability.

G. Abbott: The latter part of the statement perhaps is true: to the best of your ability. That may well be the case.

There's another portion of the memorandum from Kelly Nontell of February 20 that I want to ask the minister about. "Consideration is being given to providing additional funding to clients to help offset the tax liability generated by client support payments received under the [forest worker transition program]." What was the outcome of that consideration that was given to providing additional funding?

[1655]

Hon. J. Doyle: We decided not to.

G. Abbott: Why was it even being considered?

Hon. J. Doyle: It was one of the many decisions we were considering at that time.

G. Abbott: I'm going to try to be my usual helpful self here and suggest why it was being considered. I think the answer -- at least one of the potential answers -- to the question is found in an e-mail of February 4, 1998, from Kelly Nontell to Jim Cameron. It says -- and I think this should be noted and emphasized: "It's pretty clear that there has been considerable inconsistency about information related to applicants and clients, and selective hearing and

interpretation and implementation of 'directions' from the program management on the part of the program delivery managers." That would seem to me to be pretty much at the heart of the reason why FRBC, at that point, was considering providing additional funding to clients to help offset the tax liability. Does the minister agree?

[1700]

Hon. J. Doyle: The member opposite noted the date of the e-mail as February 24, 1998. The correspondence was

[ Page 15172 ]

passed over to the member some time ago that on February 28, 1998, FRBC sent letters to all clients providing them with consistent information on the issue.

G. Abbott: If that's the position of government -- that as of that date in early 1998, consistent information was being provided to clients -- why not then take the deal that was tendered on August 23, 1999, that goes up to and includes '98? The minister was telling me that it didn't include '99; therefore, it couldn't be accepted. It seems to me there's an inconsistency in what's being said here.

Hon. J. Doyle: I mentioned this earlier. With the terms offered by Revenue Canada, Forest Renewal British Columbia decided it could not justify settling with the 1997 and 1998 clients only, when the 1999 and 2000 clients had been given substantially the same information.

[1705]

G. Abbott: But the minister just told me that as of February '98, they were providing clear and consistent information to the clients. Did he not?

[T. Stevenson in the chair.]

Hon. J. Doyle: The same information letter that you have -- which I sent over some time ago, hon. member -- went out on February 20, 1998. Similar letters or the same letters went out to clients in 1997, 1998 and 1999. So why would we take a deal that only dealt with 1997 and 1998 clients?

G. Abbott: So the minister is saying that qualitatively, there is no difference between the advice provided to program clients in '97, '98 or '99 -- or perhaps 2000, for that matter.

Hon. J. Doyle: As of February 1998 we ensured that the advice was consistent. By providing a letter to all clients, we continued to provide this advice until November 4, 1999, when Revenue Canada closed the door on an administrative solution.

G. Abbott: So the position of the government is that effectively the same information was delivered over time to the clients, but that there may have been regional variation with respect to that prior to February '98. Is that the government's position?

[1710]

The Chair: I'm pleased to advise the House that in the precinct today are 28 grade 8 visitors and five adults from St. Matthew's School in Seattle, Washington. Would the House make these young people welcome.

Hon. J. Doyle: As you can see from the record, there were some variations in the early information. However, in February 1998, FRBC took steps to ensure that all clients were on a level playing field as far as information was concerned.

G. Abbott: Again, if that's the position of government -- that there is a difference between '96 clients, '97 clients and perhaps '98 clients in comparison with those subsequently, who the provincial government argues were given clear and consistent advice -- why does the Revenue Canada proposition not make sense?

[1715]

Hon. J. Doyle: As of August 1999, the position of Forest Renewal B.C. was that all clients had been provided with consistent information. That was one reason why the deal was rejected.

Let me remind the hon. member of the other reasons. First, the federal offer at that time was only for the 1997-98 tax year or some 6,300 clients enrolled at that point. Even then, the offer was approximately $2 million higher than their own estimation of the taxes owed. Add to this the 1999 enrolments and those who would not graduate until the spring of this year, and the total number of clients pushes to 8,618. And the cost of the so-called deal on Ottawa's terms rises as high as $20 million.

More importantly, given all the efforts made to communicate the facts to the clients, as mentioned, there was no reason then -- just as there is no reason now -- why Forest Renewal B.C. should be responsible for the taxes that individuals face. I know I've read that out before, but I just want to emphasize my statement initially and back it up with the information I just read.

G. Abbott: Then I guess we've come full circle. If that's the position of government, why are they negotiating an agreement-in-principle around it? Because they're compassionate? Is that the sum of it -- they're compassionate? I see nodding over there -- that this is all based on compassion, not any legal liability. That's an interesting point. I'll ask the minister if that's correct.

Hon. J. Doyle: The agreement-in-principle was not to compensate clients; it was to address the financial hardships created by CCRA's decisions.

G. Abbott: So, not to put too fine a point on it, this all the fault of Revenue Canada, and the government of B.C. is just generously stepping up to the plate to help out those folks who've been victimized by Revenue Canada. That's the

interpretation of the minister here -- that there's no responsibility, despite the raft of documents we've talked about, about the inconsistency in which this is delivered. It's the position of the government that it's merely the NDP government being generous to a group who've been victimized by Revenue Canada. Is that correct?

[1720]

Hon. J. Doyle: The answer is no. A legitimate dispute over the tax status existed. At the end of the day, Revenue Canada made a decision, as it is entitled to do. We examined a number of options to help clients deal with the consequences of this decision. The agreement-in-principle was the best policy decision or best option in our opinion, and we made that decision to go with the agreement-in-principle to address this issue.

G. Abbott: We may come back to that proposition at some point later here.

I want to talk about how, administratively, this issue of taxability was managed. Earlier on in our debates on this particular issue, I made reference to an e-mail of October 29, 1997, from Katherine Rowe to Jacqui James. It stated:

[ Page 15173 ]

"About six to eight months ago we requested a ruling from Revenue Canada on whether or not the income support we pay to clients on the [forest worker transition program] is taxable income. I was told that you were coordinating this.

"Have we heard anything back? It is getting fairly urgent -- if they do say income support is taxable, we will have to implement a system to process about 3,000 T4As quick like a bunny in order to have them ready in January."

The response to that from Jacqui James to Katherine Rowe reads, in part:

"I recently contacted the CA firm who was dealing with Revenue Canada and I have been informed that the tax partner I was dealing with has retired and the new one starts in a few weeks. However, they have received an answer from Revenue Canada very recently, and it doesn't look like we can avoid issuing the T4As. However, I should be getting the official wording soon and will update further."

And then, again, later that day a response from Katherine Rowe to Jacqui James:

"Thanks, Jacqui, this has a huge significance for the program, so as soon as you hear for sure, please let us know. Is there any way we can follow-up with Revenue Canada directly? Katherine."

So that's the discussion around whether T4As would be used. My recollection from our previous debate -- if indeed the minister responded to this one -- was that a decision was made to go with the T5007s as well as the T4As.

Anyway, this issue continues, and it continues clearly on February 24, 1998, when there is an e-mail again from Christine Lattey to Jacqui James. It says -- and this is around the issue of T4As:

"We will know tomorrow early afternoon what we are going to do. It will be either:

(1) Proceed with issuing the T4As, but revise the letter to be sent with them.

(2) Prepare new forms, one for tuition and one for income support. The latter would be a social assistance form. New letter to be written."

On February 25, the following day, Kelly Nontell wrote to Jacqui James:

"The decision has been made to go with a new strategy regarding the tax forms for the [forest worker transition program]. This means Barb Pley will be producing new T4As for the training support only and T5007s for the income support -- as 'social assistance' payments -- and linking these up with new covering letters. Therefore, the copies of the existing T4As and the master list that Barb has prepared for Revenue Canada must be 'dumped.' "

[1725]

My reading of that exchange is that administratively, Forest Renewal B.C. had reached the conclusion that they should go with T4As, in line with the advice they had received from Revenue Canada. However at some point -- and it would appear to be around February 25 -- there is a change of direction, and in fact they've decided to attempt to maintain the previous position of the corporation and go with the T5007s. Is that a fair assessment of the situation -- that the corporation was contemplating doing T4As as per the advice of Revenue Canada but changed its strategy and went with the previous strategy?

[1730]

Hon. J. Doyle: We received Revenue Canada's advice in January 1998. As we had to meet the standard February 28 deadline for issuance of tax slips, we put steps in place to do this while at the same time seeking legal advice. We received that advice on February 25, and it said that we should issue T5007s to preserve appeal rights of clients. So on February 28, we issued the T5007s.

G. Abbott: The prospect of changing the treatment, which again I understand to be based on legal advice -- and we may have to pursue that point a little more; we talked about it earlier . . . . The consequence of that was some angst on the part of some FRBC personnel. This -- it's not clear who this is from; it's largely whited out -- is a description from this document of something called "Operation Overload -- from the perspective of the finance department, regional office." It says -- this is the portion that's not whited out:

"Income Tax -- Do I need to say anything? We have bent over backwards to prepare the T4As within the deadline imposed by Revenue Canada. The envelopes were stuffed and ready to be mailed. Then Victoria changed the letter and promised to send the new version as soon as possible. We unstuffed the letters. Then they decided they would take a different approach with Revenue Canada and send out T4As and T5007s, depending on who received what type of income. And new letters too. We are still waiting for a directive on that. This means yet more work for all staff. I'm not sure we can make the deadline, but we'll do our damnedest to try."

I hope the Chair forgives the "damnedest" reference, but perhaps it's appropriate in this case.

Now, who is developing this direction? Are we to understand that the corporation as a whole was moving in a particular direction around accepting Revenue Canada's advice, going with T4As? And then in February we get legal advice that says: "No, don't go there." Is that right?

Hon. J. Doyle: That is correct -- yes.

G. Abbott: I don't have that document in front of me. The only Lawson Lundell correspondence that I have . . . . I presume the legal advice came from Lawson Lundell, but I don't know that. Who provided the legal advice that the government should continue along the path? Presumably, if the practices of the government are corrected in the winter of 1997-98 -- because this document's dated February 25, 1998 . . . . If it's corrected then, presumably the problem goes away. From Revenue Canada's perspective, their decision would be in place. Who gives the legal advice, and what's it based on?

[1735]

Hon. J. Doyle: The decision was based on information provided by Lawson Lundell. It was based on their read of the Income Tax Act.

G. Abbott: Could the minister advise of the date of the correspondence providing that advice and what specifically the advice was based on? I mean, their reading of the Income Tax Act might be a broad explanation of that, but I am looking for a rather more specific explanation of why, at that point, the FRBC's legal advisers would be saying that we should go in that direction.

Hon. J. Doyle: As mentioned previously to the hon. member, we received verbal advice on February 25, 1998, and written advice on February 26, 1998. The hon. member has the opinion in front of him. I think he's been reading from the opinion, so he has the opinion on the letter of February 26 from Lawson Lundell in front of him. If he wants to read more or wants to ask more questions, of course that's his right.

[ Page 15174 ]

G. Abbott: I don't know what the minister's referring to when he talks about Lawson Lundell's letter; I don't have that here. I have a letter of July 28, 1998, from Lawson Lundell, but I don't have a legal opinion of February 26 from them. So I'm not sure what the minister's talking about when he says that I'm quoting from it.

Hon. J. Doyle: The information or the letter I'm referring to was in the FOI package. But if you don't have one handy, I'd be happy to send you another one.

The Chair: Through the Chair, minister.

Member continues.

G. Abbott: I'll attempt to secure a copy of that letter as well. But can the minister address the latter part of my previous question, which was: what are the specific reasons why Lawson Lundell recommended that we move from the approach that had been apparently accepted -- which is T4As, the accepted approach from Revenue Canada's perspective? Why the move to T5007s? That seems to me to be the crux of the question. What is in the Income Tax Act that Lawson Lundell saw, which said: "Do it this way"?

[1740]

It would seem to me that -- and again, let's just cut to the chase a little bit here -- the prudent, safe way to proceed here, rather than to continue on with the possible consequences of this for another year, would have been to do what had been initially anticipated, which was to go the T4A route.

Hon. J. Doyle: I could read the letter of February 26, 1998, but it's eight pages long and self-explanatory. I suggest that we provide another copy of the letter to the hon. member, and he can revisit his questions after he has a chance to familiarize himself with the document. Did you find a copy, hon. member?

G. Abbott: I'll take the minister's advice and review the letter and perhaps revisit this legal advice issue. In fact, certainly we will.

Will the minister agree, though, that prior to the receipt of that legal advice, the administrative direction of Forest Renewal B.C. was to incorporate the advice of Revenue Canada and to issue T4As as per the direction of Revenue Canada?

[1745]

Hon. J. Doyle: We could have taken Revenue Canada's advice, but it was unclear. We wanted further legal clarification, knowing of the impacts that the Revenue Canada decision could have on our clients. Overall, we wanted to ensure that our clients could access the funding they needed to help them become re-employed.

G. Abbott: The question I asked, actually, was whether the administrative direction of Forest Renewal B.C. prior to the receipt of the legal advice contained in the letter of February 26, 1998, and delivered orally on February 25, 1998 . . . . Prior to that, the administrative direction of Forest Renewal B.C. had been to prepare T4As in line with the advice of Revenue Canada. I didn't ask anything about whether it was correct or incorrect, good advice or bad advice. I am asking you a strictly factual question about whether that was the administrative direction of Forest Renewal B.C., because I understand that to be the case.

Hon. J. Doyle: Yes, that was the opinion, pending legal advice.

G. Abbott: The question, then, is why, prior to the legal advice, did FRBC administratively take that position?

Hon. J. Doyle: We have already mentioned that we had to take this advice, because the tax deadline was February 28 to get information to clients.

[1750]

G. Abbott: I just want to refer now to the letter of February 26, 1998. The minister had mentioned an eight-page letter. The one I have -- maybe it's the Coles Notes version . . . . I have a letter of February 26 that's two pages long. Again, while I haven't had an opportunity to consider all the contents of it, I do want to move to the final or penultimate paragraph with respect to what advice is contained in the letter. I'll quote from it:

"Given the arguments set forth above, and the complete lack of judicial guidance in relation to paragraph 56.1(

a) of the act" -- possibly 51(

u) of the act -- "it is our view that should Forest Renewal B.C. decide to take the position that income support payments made under the program constitute 'social assistance' payments for the purposes of the act, Forest Renewal B.C. would not be acting unreasonable in doing so. Accordingly, it is our view that Forest Renewal B.C. would not be acting unreasonable in issuing T5007 slips to the recipients of such payments."

I guess my question to you is: is there another letter that contains rather more compelling advice than what I'm reading here? Actually, no -- pardon me. That is page 8 of the document. I just don't have the full document; I just have pages 1 and 8. That explains that. So clearly this is the advice coming from Lawson Lundell that FRBC would not be acting, I would use the term, unreasonably in issuing T5007 slips.

Well, it seems to me that there's a big difference between saying to go out there and issue T5007 slips because it's the right thing to do . . . . It is the right and appropriate thing to do under the act, and we believe we're in a strong legal position in doing so. What this says is that Forest Renewal B.C. would not be acting unreasonably in issuing T5007 slips. It seems to me that in fact this is close to being ambivalent in its character. Would the minister agree?

Hon. J. Doyle: Respectfully, to the hon. member across the floor, he only has two pages of the document; so it is incomplete. He needs to read the middle six pages before reaching his conclusions, and . . . .

The Chair: Through the Chair, minister, please.

Hon. J. Doyle: The hon. member needs to read the middle six pages before he can reach a decision. And if he can't find the other six pages, we'd be happy, as I said earlier, to pass them on to him.

G. Abbott: I can't imagine anything I'd rather do more this evening than read the middle six pages of the legal opinion. Therefore I would like to move that the committee rise, report progress and ask leave to sit again.

[ Page 15175 ]

Motion approved.

The House resumed; the Speaker in the chair.

Committee of Supply B, having reported progress, was granted leave to sit again.

Committee of Supply A, having reported resolution, was granted leave to sit again.

The Speaker: I understand the Lieutenant-Governor is in the precincts, so we'll wait for his arrival.

[1755]

His Honour the Lieutenant-Governor entered the chamber and took his place in the chair.

Law Clerk:

Holocaust Memorial Day Act

Tuition Fee Freeze Act

In her Majesty's name, His Honour the Lieutenant-Governor doth assent to these acts.

[1800]

His Honour the Lieutenant-Governor retired from the chamber.

[The Speaker in the chair.]

Hon. D. Lovick: I move that the House do now adjourn.

Motion approved.

The House adjourned at 6:01 p.m.

PROCEEDINGS IN THE DOUGLAS FIR ROOM

The House in Committee of Supply A; D. Streifel in the chair.

The committee met at 2:47 p.m.

ESTIMATES: MINISTRY OF TRANSPORTATION AND HIGHWAYS

(continued)

On vote 46: ministry operations, $464,471,000 (continued).

D. Symons: Just continuing on with the questions toward the end of our last session, there were some questions dealing with the Okanagan bridge. I think one thing that wasn't asked at that time . . . . You now have funding for the design work on that going on currently, I believe. I do remember that back in 1995, early '96, there was also some funding put in for design work to put the fourth lane on that crossing. I'm wondering, then, at what time you will be able to guarantee that there will be funding for this project, so we don't just do a design as we go into the next election, but rather the project will carry forward with the new Okanagan Lake Bridge.

Hon. H. Lali: We have not resolved the funding arrangements with local government. Work is still underway, and we need to see what happens with that.

R. Neufeld: I'll maybe touch on some things that have to do with Highways today, so we'll go to Fort Nelson first and the Sierra-Desan road. Maybe I could get a brief update on the Sierra-Desan road, on how that contract's going. It was signed, I believe, at the end of 1998. There are some specific amounts in the contract that deal with road structure, drainage, roadside and bridge structure upgrades, and some maintenance services. I'll go through them one by one, and maybe the minister could tell me how much is expended on each one of those contracts.

It's a five-year contract that this money will be expended on -- a total of $11 million, including almost a million dollars in financing and bonding costs. But the road structure upgrade is the first one, and the price for that -- and I'll round the numbers off -- was $5.7 million. If the minister could tell me how much of that has been expended on the Sierra-Desan road, that would be great.

Hon. H. Lali: The contract is on budget and on schedule. As far as the costs that the hon. member is asking for, we'll have to supply those figures to the hon. member, because we don't have them with us here right now.

[1450]

R. Neufeld: Okay, I appreciate that. I'll put it in the record, so you'll be able to go back to the record. I expect you'll be able to draw those numbers out fairly quickly, as one is one fiscal year past and we're in the next fiscal year. But the first one was a road structure upgrade. Actually, maybe it would be easier if I gave the minister . . . . It's

schedule 65 in the contract. Would that be sufficient for ministry staff to get that information? It's the road structure upgrade, the drainage upgrade, the roadside upgrade, the bridge structure upgrade and the road and bridge maintenance services. As I understand it, the Ministry of Energy and Mines was to expend a certain amount of money that would be matched by the contractor. Has that in fact taken place in 1998-99?

Hon. H. Lali: We'll get back to the hon. member on all of those issues that he has just outlined.

R. Neufeld: Could the minister tell me how soon I could have that information, so I can ask some questions yet, before his estimates are over? If I can get that information fairly quickly . . . . Or is this something that's going to take awhile?

Hon. H. Lali: We can get that information to the hon. member within a day.

R. Neufeld: That's great. I appreciate getting it in a day. I'm actually quite surprised that we don't have that information a little bit sooner than a day. I know it's maybe convenient for the ministry not to have to answer questions around those numbers, but these are fairly straightforward. They are in the ministry's own documents, their own contract, and I would assume that we have staff on hand that are monitoring that

[ Page 15176 ]

contract. I would hope that someone is monitoring -- and monitoring the cost -- to make sure that that money is expended.

If you don't have the numbers for those first few things, can you tell me whether Energy and Mines has expended its share of money on maintenance for the Sierra-Desan road that it promised to do to date? There's a matching amount that the contractor will put in, and there's a matching amount that Energy and Mines will put in. Will the minister tell me where, within the estimates, I can find how that money is allocated, or where . . . ? I can't find anywhere where there's been an amount of money put out for the maintenance on the Sierra-Desan road.

Hon. H. Lali: Energy and Mines has an annual contribution of $300,000, which they did last year and will do this year. As far as some of the other information the hon. member is asking for, we have about 500 projects in any given year that are carried forward throughout the province. Obviously the member has been asking questions that are related to cash flow on each of these contracts. Obviously that information that he's asking for is not here with us, but we'll get it over to him. It's not any attempt to try to not answer any questions or that somebody has deliberately left any information out.

It's just that it would be too onerous to try to carry information on the cash flow on every single project that the ministry and the TFA carry forward every year.

[1455]

R. Neufeld: I appreciate that. This is a project that's being financed by industry, and BCTFA is actually just the agent for administering it. Industry is actually paying the total costs of this upgrade on this highway. The reason I thought I might be able to get some of those answers is because every time I pick up a press release that relates to northern roads, there happens to be a mention about the Sierra-Desan road as though it is something to do with the ministry.

In fact, we'll go to the last press release where I read it. That's just April 26, 2000, where the North Peace highways improvements have been announced. There are 15 items that are announced. One of them happens to be the Sierra-Yoyo-Desan road. I thought that I would be able to secure that information, because it seems to be a favoured one for press releases. Obviously I'll have to wait a day, and I wait in anticipation of receiving that information.

I'll go to the press release of April 26, and I understand it's about North Peace. The minister can correct me if I'm wrong. I'm actually going by the newspaper, so one can sometimes get the wrong number. It states that $6.1 million is going to be expended on the constituency of North Peace roads. In the press release there are a number of items that I recognize -- again, like I said, the Sierra-Desan road. I want to find out whether that's included in the $6.1 million, because that is industry-funded. Let's make sure it's not in the $6.1 million.

There are three other ones that are talked about, which are the Alaska Highway and Fort St. John modified traffic islands, construction of north- and southbound deceleration lanes and the Alaska Highway at 108th Street, Fort St. John. The amount of money that's included in the $6.1 million that the ministry announced -- is that the total cost for those three items or the ministry's share only? Also on the Sierra-Desan road, I want to ask if that was just put in there as an add-on. Or is some money allocated from the Sierra-Desan road in the $6.1 million? Are we actually going to get $6.1 million on our roads?

Hon. H. Lali: The $6.1 million does not include the Sierra-Yoyo-Desan road, and it also does not include the oil and gas initiative 2. I think the hon. member wanted to know what the items were under the $6.1 million. I understand that he has a copy of the ministry and TFA projects for the Peace River North electoral district. If he wants, I could read some of this into the record. But the $6.1 million does not include the Sierra-Yoyo-Desan road.

R. Neufeld: Through the Chair to the minister, thank you for that answer. The other three items on that press release were: Alaska Highway at 100th Street -- if you've got a copy of the press release -- Alaska Highway at 96A Street, and Alaska Highway at 108th Street, all going through Fort St. John, which will be jointly funded with Fort St. John. What I'm asking is: is it the total amount of dollars that you have put into the $6.1 million or just the ministry's share?

Hon. H. Lali: It's just the TFA share.

R. Neufeld: In 1998, Peace River North enjoyed $11 million in reconstruction; in 1999, $6.5 million; and this year $6.1 million. I do notice that Peace River South this year will receive $9.3 million and in fact last year got a lot more than Peace River North too. I am not saying that Peace River South doesn't require some funding for roads, but the rural road task force identified the roads in the North and South Peace that needed reconstructing, and it seems to me that the major use for oil and gas roads is in the North Peace. I am wondering how we managed to only allocate $6.1 million to the North Peace and $9.3 million to the South Peace.

[1500]

Hon. H. Lali: I don't have the information on one part of the hon. member's question with me, but I'm going from memory. When I first became minister two and a quarter years ago . . . .

Interjection.

Hon. H. Lali: The hon. member can make jokes all she wants, but as I recall, she didn't do a heck of a lot in terms of the sawmill that went down in Lumby when that came up. I think she may want to recall that.

Anyway, the first part of the hon. member's question . . . . Over two years ago when I first became minister . . . . At that time it was the North Peace that had the larger investment, as opposed to the South Peace, and last year the numbers were almost reversed. This year, obviously, $6.1 million is in the north, and I think a greater chunk under the TFA is actually in the south. But the oil and gas 2 is for five years. It's roughly $20 million a year. And although the program has not bee