Volume 4 PROVINCE OF NEWFOUNDLAND THIRTY-SIXTH GENERAL ASSEMBLY OF NEWFOUNDLAND 4th. Session VERBATIM REPORT THURSDAY, JUNE 19, 1975 SPEAKER: THE HONOURABLE M. JAMES RUSSELL Number 54

June 19, 1975 Tape 2444 (Morning) PK - 1 The House met at 11:00 A.M. Mr. Speaker in the Chair. HR. SPEAKER: Order, please! ORAL QUESTIONS : MR. SPEAKER: The Hon. Leader of the Opposition. HON. E. M. ROBERTS (LEADER OF THE OPPOSITION): Mr. Speaker, in the absence of the Premier perhaps the Minister of Justice could answ-er a question. I would like to know the situation with respect to C"oose Bay. There seems to be a great amount of controversy. Statements which the Premier has made have been contradicted by the Prime Minister, I am told,or by officials at Ottawa. But what is the Aituation at Goose Bay?

There has been ample warniqg given in the House by the Member from Labrador North of the fact that, you know, we are heading for difficulties,if in fact - MR. SPEAKER: Order 1 please! The Hon. Leader of the Opposition is now proceeding to make a speech. HR. ROBERTS: No, Sir, I am not. lam asking a question. What I am saying is what is the situation? The Premier has made some statements which have been contradicted 1 I am told~by the Prime Minister. But could the Minister of Justice tells us where the government stands? OhiWe have got a new Minister of Justice. HR. SPEAKER: The Hon. Minister of Fisheries. HON.

J.C. CROSBIE (MINISTER OF FISHERIES): Hr. Speaker, as the members of the House know who were here yesterday,or who listened to the media, I was directed by the Premier to communicate with Mr. MacEachern on this situation,which I have done. Now yesterday the Premier spoke to the Prime Minister~yesterday morning, who knew nothing about this alleged new situation in the Goose Bay area, and he said he would check and have Mr. HacEachern communicate ~ith me. So last night I spoke with Hr. MacEachern and the situation is.as I am told by Mr.

MacEachern.the Secretary of State for External Affairs that he has no new information on the U.S.A.F''s posftion at Goose Bay and the air base at Goose Bay. 7165

June 19, 1975 Tape 2444 (Morning) •~2 Several years ago.as all members of the House knOW',the U.S.A,F. reduced their operations nt Goose Bay or they gave up their rights, whatever they were,to the airport site, and since that time they have continued to have B-'reduced operation there, and as tenants of the Department of Transport of Canada ~ho have taken over the air base 7166

June 19 • 1975 Tape 2445 (Morning) PK - 1 and the facilities there. That lease expires on June 30, 1976. Hr. MacEachern says that he has heard nothing in recent weeks, days or months to indicate whether the Americans have decided.or reconfirmed~! suppose,that they are going to leave on June 30, 1976 when a lease expires,or whether they wish to renew the lease for some longer period. He has not had any indication from them. He therefore proceeds on the nss::m?timt until he hears from the United States of America that on June 30, 1976 they are going to leave since that is the t:tme the lease expires.

But there has been no recent communication to him or to his department.or to him anyway,as far as he knows,that the United States has made the decision either to stay on longer or to reconfirm that they are leaving on June 30, 1976. So therefore the recent news report does not appear to be a report. about something new having happened.or some new development that we have not been informed about, but rather it is just somebody in External Affairs verifying that on June 30, 1976 the lease entered into by the U.S.A.F. or the Department of Transport expires.

Wel1 1 that has been known, of course, since the lease has been entered into, about two years ago or whatever date it was entered into. The American officials here in Newfoundland when questioned on the matter say that their instructions are any statements in this subject have to come from the Department of External Affairs at Ottawa. We have checked with the Minister of External Affairs, the Secretary of State for External Affairs,who says there is nothing new in this situation that has come to his attention, If there is he will certainly let us know as soon as they have any new :tnformation on that.

In the meantime there is a Goose Bay Task Force that was set up several years agojchaired by a federal official in the Department of Regional and Economic Expansion, and their worY continues. But 1 believe that the - although thiH has to be clwcked ~ but 1 belivt> that there has to he at least a year';, notice rdven the 11.S. if they want to renew that lease. So presumahlv th:rt.: is golnt>: to be some 7167

June 19, 1975 Tape 2445 (Morning) PK - 2 definite indication from them shortly as to 1,1hat they plan to do. Rut once we know definitely what they plan to do then the Goose Bay Task Force or whatever other agency or work is required 1 ot task force.whatever input is necessary to ennure a smooth transition And to see that the people affected get new employment or are transferred to other employment those steps will be put into an urgent status and there· will be a year to do all that is possible to see that the people involved get employment and that the transition is as Btllooth as riossible.

So I can only tell the House what l have been told by the Secretary of State for External Affairs, and what I was also told by '1r. Jamieson vho I talked with this morning.that as far as either of these gentlemen know there is absolut1Uy nothing nev that has been communicated to the Government of Canada in the last days or weeks, and the situation is as I have said it, as they have reported to me. In the meantime they,are going to investigate this in more detail or attempt to ascertain exactly what the intentions of the U.S.A.F. are which they vill let us know about as soon as they know them.

So in other words the situation is no different today than it was forty-eight hours ago or two weeks ago or two months ago.

And that is really all we can report to the House on it, except that the federal people are looking into the whole situation thoroughly and if there is anything to report they will inform the Newfoundland Government, and both governments will proceed:,in that event,to see that everything possible is done at Goose Bay as has been done in ~ther areas to see that the employment of these people, that they get alternate employment, and that the Goose Bay area continues to develop in any way possible. So that is really all I can say an it at this time, Mr. Speaker.

That is the result of my conversations with the Secretary of State and Mr. Jamieson. HR. "S.P}~AKER_:, . MR. ROBERTS: The Hon, Leader of the Opposition. I thank the minister for a very full and complete answer • It seem~ to let it rest. Are veto assume essencially that the press 7168

June 19, 1975 Tape 2445 (Horning) Pl< - 3 reports are just ill-founded,or speculation to begin with, and are ill-founded speculation. There, has been, you know, an immense amount of heat generated, but apparently rcmarkedly litt.le light. You know am I safe in~or are the people - Hold on now\!t is hard to ask a question when the minister is not able to listen because somebody else is speaking to him. Are ut• c.orT0ct if we 7169

June 19, 1975. Tape 2446 RH - l a.ssume that, as r said, the reports in the press-you know, today's Dailv Ne'WB features it all over pa~e one;and yesterday's Telegram and yesterday's News had it"and the enc and the private stations hnve tk1d it- are speculation and in the event, ill-founded speculation. '·ffi. SPF'.AKER: The honourable Minister of Fisheries. HOU. J. CROSBIE: I believe what it is~ it is a bit of a puzzle, t-l_r. Sneaker -hut I helieve what it is is that somebody call External Affairs and ask them or their press officer, you know, is the U.S.A.F. leaving Goose Bay June 30, 1976.

This is my supposition now as to what happenediand that he said, oh, yes, their lease expires June 30, 1976. So 1 think that is hO'J this all originated l\nd it is quite true that their lease expires June 30, 1976. Therefore from that you can assume that they are going to leave then unless they indicate some other intention. But that is not the same as -you know, the U.S. ~till ha~ to let the Government of Canada and us know whether they are i:;oing to leave on that date or whether they want it extended. This they have not yet done.

They either have to confirm,yes, we are going at that date.or if they want to stay on longer,and this has not heen done yet. But l think myself that is how, you know I mean,I do not think it is just made up by the press. I think that is how the story got started. ~rP_._ :':I'~~: '.'R_:_,R j)B ERTS: The honourable Leader of the Opposition. Hr. Speaker. n further supplementary, Could the minister indicate to the House what is the notice period under the lease? I do not think the lease document has ever been made public. If so, it has not been tabled in this House.

It is a federal agreement, I assume, between the Government of Canada and the Government of the United States. It mav even be classified under some sort of security reasons he.cause it nffects defence establishments. But could either the ttinister of Fisheries or the ttfnister of Industrial Development.,who I think has a p,reat deal to do with this in that capacity, indicate at ,;1hat point the Americans as tenants are required to let us know, to 7170

June 19, 1975. Tape '14M1 RH - let the Government of Canada know and thus to let the people of New­ foundland and particularly the people of the Goose Bay-Happy Valley area know,whether they intend to renew their lease when it expires twelve months from now or not. T think pnrt of the speculation, the question that has been asked is that I he-lteve people are under the impression, Mr.

Speal,er. that there is a twelve month notice, you know, that on the thirtieth of June, 1975 the Govern~ ment of the United States has got to notify the Government of Canada whether they intend to renew their lease when it expires twelve months hence or not. 1 think that is probably the reason the matter has arisen now. If the ministry are not aware of the answer~and they may not be, would they undertake please to find out and let the House know preferably today or tomorro"W, if at all possible. A phone call to Ottawa should give the information. HR. CROSBIE, We do not kno'W the answer. Mr.

Speaker, the position is that we do not have the lease in our hands. This is a matter between the U.S.A,F. and thf' Dep..irtr.:ent of l:Xternnl Affairs. which department closely guards the rir,hts that it is to represent Canada externally in foreign affairs. We do not have a copy of the lease. I asked Hr. Jameison this morning that very question, you know, do they have to give a year's notice or do they have to indicate before the final year if they want to renew it or i1hat the date is?

He thinks or he thought it was twelve, you know, a year, it was something to do with a year there and he is going to check on the matter. But I mean we will have to check with the federal authorities and I have already asked them to let us knov exactly what that situation is. When we get the information we can g.1ve it to the House. MR. SPEAKER: The honourable l""e1r:her for Bonavista North. MR. P. TllOHS: Mr. Speaker, I would like to direct a Question to the Hinister of Forestry and Agricu1 tun.>. Could the minister i.nform this House if the previous ratc-s that w,:r~: app1 it•d to the pastures 71 71

June l'l, 1975. Tape 2446 RH - 3 throughout the Province, the rates last year, would they apply also this year or is there an increase in the rates? MR. SPF.Ah'ER: The honourahle ?-4'inister of Forestry and Agriculture. HON. H. COLLINS: Mr. Speaker, there has been no increase in the pasture rates, !-fR. SPEAKER: The honourable Hember for Bonavista North. MR. THOMS: !-Ir. Speaker, I would like to direct a question to the Minister of Health. Could the Minister of Health inform this honourable House if he or his department is taking any action as to the possihility of legalizing denturists in this Province? MR.

SPEAKER: The honourable Minister of Health. HON. R. WELLS: Mr. Speaker, after the report of the Select Committee this matter ~ent under review 7172

June 19, 1975 Tnpe 21147 (morning) TP-1 and study in the. Department of Health, Tt has not heen forgotten, and as I say the department and officials in the department are workinr; on it, There is nothing obviously to come hefore or has come before the legislature this session. But. T should imugine b.v the next session of the legislature we will be ln a pnsi tion to report to the legislature and before that,of course, to f'0vernrr.ent as to what is proposed. }fP .• SPEAKER: The honourable !-femher for Bonavista North. MR. THOMS: Mr. Speaker, I would like to direct a ouestion to the Minister of Provincial Affairs.

T presume this is - I am not sure if this is directe<l properly or not. Could the minister inform this honourable House as to what date the ombudsman will open his office and where will his office be? lsfP-. ROWE: That goes to Justice. MR. THOMS: Well, could I direct the question to the Minister of Justice? HR, SPEAKER: The honourable Minister of Justice, HON. T,A, HICKMAN (MINISTER OF JUSTICE): '-Ir, Speaker, J suspect that that question should he more properly directed to Your Honour seeing that the ombudsman is a service of the House and not of the government. HR. F. ROWE: _MR.

HICKMAN': You cannot ask a ciuestion of the Speaker. This morning when I was driving I heard the ombudsman on an open line programme and he was asked that question. lle said that - I distinctly heard him say that he was aiminr, to open an office on July 1 but he is still in the process of finding an office accommodation. HON. J. ROUSSEAU: (MINISTER OF TRA."·rnPORTATIOr): May I start - MR. SPEAKER: The honourable Minister of Transportation and Comm.uni cations. _MR.

ROUSSEAU: l have received flS 11cting 4fofster of Public Works and Services, an official reouest from the nrr.hu<lsmrm for the Department of Puhlic i-!orks to procure space for them anJ officials will be contacting him. We are in the process, T pr0s11t:1:. I had the call 71 7 .3

June 1.9, Jq75 Tape 244 7 vestcrdav. So, I pr-P~ume that the officials of the Department of Public Works will ht> nn"-1 nttemptfnr, to find a place for the omhudsman and his offjce. MR. THOMS: Mr, Speaker. could the Minister of Justice inform this hnnourahle House approximately what number of staff the ombudsman w-ill hiwe? MR. HICKMAN: Thnt would be an impossil->le question to answer. rn-2 It is a speculative question. I have not the fo~giest idea. The act provides that the ombudsman has the right to hire adeQuate staff.

I am sure that he 1 heing a very comp.ttent antl prudent man;will not rush in and hire any more than are required, But the nu!t'her-I have no idea. 1 wnuld imagine a lot will depend, that the staff ~ill grow as the enquiries grow. HR. SPEAKEP: The hnnourahle Member for St. Barbe North. t-m. F. ROWE: Hr. Sneaker, if I could get the attention of the f-.1inister of "1:ines and Enerr,yf Privately yesterday I brought to his attention the fnct thnt there was a fire at the shed at the Daniels !!arbour mine sf te and he snifl he would check it out.

I was wondering i. f the minister could give a brief and concise report - MP. SP.fl.{f)NS: No way! MR. f', ROWE: - on how this fire would affect - MR. SIMMONS: No way! '-m. f'. ROWE: - thP st,,rt up date of the zinc mines - ,.,rn. SPEAKER: Orde>r, pleflSt"! _\t!'._:. F. ROWE: - nf the zinc mine at Daniels Harbour and how it would affect, if at all, the employment in that particular area at the present time? \.fR, ~PFAKER: The honourable !--finister of Hines and Energy. HON. L. HARRY ("HNISTF:R OF MINES AND ENERGY): Mr.

Speaker, by cofn~inence Thad an appointment arranged with an official of, one of th£' vtce presidents of the Teck Corporation for yesterday aftprnnon on another matter,nnd the honourahle member raised that point 11f th mP ,1.nd T raised it t,,,ith the official who himself had only ju.,;t n short t:ir'C' before !Parne.d of the fire. As I understand it 7174

June 19, 1975 Tape 2447 IB-3 there was a garnge burned and there were certn1.n air compressors, two air compressors destroyed. HR, DOODY: The asbestos plant hurner'! down, HR, BARRY: The official was not quite sure just what the extent of the damage was. I am not sure if the mi n:f ster has heard th 1.s morning. MR. DOODY: known today. MR, BARRY: MR. DOODY: MR. BAFRY: He was in touch w:i th Vancouver and it will be The damage, the amount, the cost. No, I do not know. One of the sub-contractors was on the job last night. The figures that I heard range from ~25o,nnn to ~750,00.

So, I am not clear just vhat the extent of the damage was. Yesterday afternoon the vice president thour;ht th,1t it could result in some unfortunate delay in commencfng the project, but I understand this morning the MinistE"r of Industrial f\eveloprnent has been speakinp; with the same gentleman who has since been in touch with the head office of the company and it looks as if there need not be any rlelay in commencing the operations,which is fortunate ff that fs the case. It would be too bad if this operation,which has proceeded very well so far, it would be too bad if it was delayed by whot presumably was

an act of God. Hut, it looks at the present t:frne as if there should not be any delay in the commencing mining operation. \.fR. SPEAKER: The honourable ~femher for St. Barbe Nnrth. 7175

June 19, 1975 Tape No. 2448 NH - l MR, ROWE: I have a questfon for the Minister of Health, Sir. Jn vieW" of the correspondence that I had vith the former Minister of Health with respect to a medical clinic to serve the St. Barbe North area.and this is pending the success of a medical clinic in the St. Barbe South area, the one in Port Saunders - if the medical clinic in Port Saunders turns out to be a successful experiment, I have been promised that there would be a medical clinic established in St.

Barbe North - I wonder if the minister could indicate to the honourable House, Sir, 'Whether or not a medical clinic is planned for the St. Barbe North area 1 in the area of Flowers Cove,and I think thfs will take the nature of the renovation of the existing nursing station in Flo\lers Cove at the present time, could the minister bring us up to date on that please. or undertake to get the information? MR.SPEAKER: The honourable Minister of Health. HON. R. WELLS 1 MINISTER OF HEALTH: Mr.

Speakerf a decision has not been made yet on the matter which the member raises but I would be glad to receive any representations from him and depending on the outcome, you know.the success of the other nursing station, it will be taken a very close look at and any representations would be gladly received. MR. SPEAKER: The honourable Member for Bonavista North. MR. THOMS: Mr. Speaker, 1 \lOuld like to direct a question to the Minister of Municipal Affairs.

Could the minister inform this honourable House if he has made any announcements as to water and se'Wer projects throughout this Province,and if not does he plan on making any announcements in the near future. MR.SPEAKER: The honourable Minister of Hunicipal Affairs and Housing. HON, A. B. PECKFORD, MINISTER OF MUNICIPAL AFFAIRS AND HOUSING: Mr. Speaker, yesterday morning, starting nine o'clock yesterday morning telegrams were sent to all the municipalities in the Province from which we received requests, if their requests were successful for such assistance for water and sewer.

So as of today, now I would say by five o'clock this afternoon,every municipality that has approval to proceed with funds for 7176

June 19, 197 5 Tape No. 2448 NM - 2 water and sewer systems, improven~nts to systems and this kind of thing will be informed by five o'clock this afternoon. MR. THOMS: Supplementary, Mr. Speaker, I wonder could the minister inform this honourable House exactly what projects were approved7 MR. SPEAKER: Order, please! That answer would take a considerable length of time if the honourable member is thinking not only of his own district but province-wide and the Chair has no intention of letting the honourable minister go down through a whole list of projects for a provincial viewpoint. MR. THOMS: Hr.

Speaker, could the minister then inform this honourable House how many projects were approv~d. SOME HON, MEMBERS: Hundreds and hundereds. MR, PECKFORD: Mr. Speaker, I do not know exactly. I have not counted them but I can say~ and I am pleased to say, that upwards to $20 million worth of projects have been approved which in my opinion is a significant number of dollars and will mean a significant dent in the need for water and sewer facilities throughout the province. MR. THOMS: I must say it is certainly better than 1973 when we only had three projects approved. Mr.

Speaker, I wonder could the honourable minister - MR. MURPHY: St. John 1 s Centre has neither one. MR. THOMS: - attempt to table the information in the House as to which - MR. SPEAKER: Order, please! HR. ROWE: You could not get a sewerage system big enough for the minister! MR. SPEAKER: The honourable Member for Twillingate. MR. GILLETT; I have a question for the Minister of Transportation, Mr. Speaker. I wonder if the minister woulri be kind enough to cell me at least in the Tuillingate district whether or not he has made plans to increase the amount of equipment to do the job in the Twillingate district.

There is a very serious shortage of equipment and I understand the trucks have been in Grand Falls, lying there for 7177

June 19, 1975 Tape No. 2448 NM - 3 months unrepaired, MR. SPEAKER: The honourable Minister of Transportation and CommWlications, HON. J. ROUSSEAU, MINISTER OF TRANSPORTATION AND COMMUNICATIONS: Is the honourable member talking about the summer maintenance programme? MR. GILLETT: Yea. MR. ROUSSEAU: The immediate one7 I do not have the answer, I will undertake to get it for the honourable member and give it to him privately if he wants to or publicly in the House if he wants it, But I will check sometime during the day on the status of the equipment in Tvillingate. MR. GILLETT: A great shortage. MR.

SPEAKER: The honourable Member for Hermitage. MR. SIM!-B)NS: A question for the Acting Minister of Public Works; I wonder would he indicate to the House whether any decision has been made with respect to the rental of office space for government purposes. MR. SPEAKER: The honourable Minister of Public Works and Services (Acting). MR. ROUSSEAU: Mr, Speaker, as we suggested we had six proposals which we made a statement on at that time, These were analyzed by the officials of the Department of Public Works. As the honourable member knows and the House knows,of course,we had a public opening.

The analysis took some time, 7178

June 19, 1975 Tape 2449 (Horning) PK - 1 At the same time,and coincidental with this,we also suggested that we were updating the figures in respect to our own building, and we had to go to Ottawa to the Bureau of Management Consulting which had donf' a previous study on this, and this was received during the past week or so. The proposals now.or the analysis of the proposals plus the cost figures for our own building are now before cabinet.

And I would anticipate.as I have said\an answer within two weeks, It may be less or so, but cabinet is presently considering it and within two weeks, maybe three weeks we should have an answer. MR. SIMMONS: A supplementary. Do I assume from what the minister has said that a possibility of extending the present building or putting an additional building in the immediate vicinity is still being looked into seriously? MR. ROUSSEAU: Yes. MR. SIMMONS: That is one of the options that the minister is still considering or cabinet will consider.is that correct? MR. ROUSSEAY: MR. SIMMONS, MR. ROUSSEAU, Yes.

You mean for ourselves or - Yes. Oh no, It would be in government's view highly desirable to have the building on the Confederation Complex. There are certain factors, traffic flow and so on that we would have to consider,but certainly it is highly desirable. So we are looking at all of the options~ all of the proposals. They have been analyzed and government will make a decision imminently, within the next two weeks.give or take a few days, I would hope. MR. SIMMONS: A supplementary to the minister.

In the event that option is selected, the option of providing space in the immediate vicinity either as part of this building or a separate building, would one of the four companies which submitted the proposals be the only companies considered for provision of space in that way or would a new tender be called to provide such space? MR. ROUSSEAU: Beyond what I said now I cannot give any details until it is discussed by cabinet. You know, when government makes a 7179

lune 1q, 1975 Tape 2449 (Morning) PK - 2 decision the honourable member will be the first to know. Some of the companies that did make presentations on the building here in the area as well as with their other proposals. MR, SPEAKER: "!R. SIMMON_§_: The Hon. Member for Hermitage. I wonder if the Minister of Mines and Energy has been able to get the information he undertook to find yesterday in connection with the possible layoffs in the Newfoundland Hydro because of the central billing? HON. ME!<BERS: }!Jl. BARRY: HR. SPEAKER: HR. F. ROWE: Oh• oh! No,as a matter of fact. The Hon. Member for St. Barbe North. Mr.

Speaker, I would like to follow up on the questions asked by my colleague from Bonavista North to the Minister of Municipal Affairs and Housing. Rae the minister's department sent out to these councils telegrams whose applications were rejected and giving them the reason for the rejection of their applications? HR. SPEAKER: The Hon. Minister of Municipal Affairs and Housing. HON. A. B, PECKFORD (MINISTER OF MUNICIPAL AFFAIRS AND HOUSING): No, }-fr. Speaker I we have not done that yet because we have been so busy trving to get the telegrams out to the councils that have had their requests approved.

But ve will be in touch with the other councils because t.ie have a full list of all the requests. So we vill be able to get in touch with the other councils as well. !fR. F, ROWE: Will the minister, Sir, indicate whether, number one, the list so far is a final list, and undertake, and promise the House of Assembly that he vill be sending telegrams off to the councils who have been rejected or refused for some reason or other. Will they get these telegrams? And is the list at the present time final and complete, and will he table that list? MR. PECICFORD: Mr.

Speaker, I think those questions could be relegated to the Order Paper. HR. F. ROWE: !'fR. SPEAKJJ>_:_ "'IR. F. ROWF_: 7180 You <lid have the guts to send out •••• Order, please! .•• that is wong.

June 19, 1975 Tape 2449 (Morning) PK - 3 MR. PECKFORD: Grow up boy! MR. SPEAKER: The Hon. Member for Bonavista North. MR. F. ROWE: Politics in the extreme. MR. P. S, THOMS: Mr. Speaker, the Minister of Mines and Energy has departed so I will keep my question until he comes back. MR. SPEAKER: The Hon. Member for Fogo. CAPT. E. WINSOR: Mr. Speaker, I was going to direct a question to the Hon. Minister of Transportation but he is taking a quick puff there so I will just wait until - do not rush.

Could the Minister of Transportation inform the House if the contract for the Gander Bay Loop Road, that is from Gander Bay tcmard Carmanville, has been let, if so, who are the contractors? MR. SPEAKER: MR. ROUSSEAU: The Hon. Minister of Transportation and Communications. You know, I do not have detail. I can get it for the honourable member. But I can assure the honourable member that whichever tender was the low tender will be the company who gets it. The actual name of the cotnpany.I can again inform him,! will check.

I know,~e called for four different contracts, two five mile units on each side of that in the total contract. So there may be as many as four companies involved in that area. I knou there were some tenders opened yesterday morning, and I think some of them might have been the one on the area that the honourable member mentioned. But I will check today and give it to him privately as to each of the four. MR. SPEAKER: The Hon. Member for St. Barbe North. MR. F.

ROWE: Sir, I wish to give notice that I was not satisfied with the minister's answer and I wish to debate it during the late show this afternoon, please, and I will submit it in writing. 7181

June lfJ, 1075 Tape 2450 (morni.ng) JB-1 '.Hl!JF'.RS OF THE flAY: On motion thnt thf' 11ouse resolve itself into n Committee nf thf' Whole on the sairl hills. t-ir. Speaker left the Chair. A hill. "/In Act To tunend The Regulation Of Mines Act." (No. 66) On motion r'.lAuse (1) through (3) carried. ~ntion, that the Committee report having passed the bill without amendment, carried.

A hill, nAn Act To Limit The Ffoancial Responsibility Which " 1;iy Be Incurred By The Province In Respect Of Newfoundland and Labrador 'Hydro Without Further Reference To The Legislature." On motion Clau9e (1) through (4) carried. ~otion. that the Comm:.! ttee report havin~ passed the bill without amenrlment, carried. A bill, "An Act To Ratify, Confirm And Adopt A Guarantee Agree­ ment µ~de nerween ?oyvarfne Leasing Limited And The Government And Fishery Products Limited." On motion rlause (1) and Clause (2) cnrried. MR. CPOS!HE:: comma 1975. 1974 should be 1975.

Clause (1) there should be On motion rlause (1) as amended carried. On motion Clause (3) and Clause (4) carried. _!'TT'. CHAIRMAN: Shall the

schedule carry? J-IP. r,nosnIE: There is one correction on the schedule. on page 12 of the sC'1edule. In the top line the word 'the' should go in before the worrl rnrtiling. So it would be following the mailing thereof, Okay. Jlnve VfHI ROt that1 ~: ... !:}.it l PM/\N: •tn CP()SB1E: Shall the

schedule as amended carry? No. Wait now. Page 13,

schedule A, fifth or opposite the foHrth period there should be 1011.6933 instead of 0933. '{R. rli,\ JRMAN: Shall sche,rlule A as amended carry? , 1n. crnc:,TnE: Then down four lines opposite eight where it says 01.~763 it should be 93.5753. On motion,

schedule nnd

schedule A as amended carried. Mntion, that the Committee report having passed the bill with ,,,~rr.p a.rnendment,cnrried. On motion thnt the C:ri:r,mittee rise, report progress nnd 7182

June 19, 1975. Tape 2451 RH - l ask leave to sit again. Mr. Speaker returned to the Chair. MR. CHAIRMAN: Mr. Speaker, the Committee of the Whole have considered the matters to them r~ferred and have directed me to report having passed bills number nfi and 71 without amendment and having passed hill number 67 with some amendments and asl: leave to sit again. On motion report received and adopted, bills ordered read a third time presently by leave. On motion that following bills be read a third time, ordered passed and title be as on the Order Paper. A bill, 11

An Act To Amend The Regulation Of Mines Act. tt A bill. "An Act To Limit The Financial Responsibility Which May Be Incurred By The Province In Respect Of Newfoundland And Labrador Hydro Without Further Reference To The Legislature." On motion amendments to Bill 67 read a first and second time. tills ordered read a third time presently by leave. A bill, 11

An Act To Ratify, Confirm And Adopt A Guarantee Agreement Made Between RoyMarine Leasing Limited And The Government And Fishery Products Limited." On motion second reading of a bill, "An Act To Impose Taxes On Income From Mining Operations Within The Province And On Income Obtained Or Derived From Persons Holding Rights To Hine," (Bill Nn. (,3) MR. SPEAKER: The honourable Minister of Mines and Energy. MR. BARRY: Mr. Speaker, this is a significant piece of legislation in that it is the first significant change in the mining tax regulations in this Province in many years.

One of the first steps that this administration took when it came into office was to look at the situation with respect to the revenue derived from the resources of this Province including the mineral resources but also forestry, agriculture, fishing, a general survey of all our resource based industries, to determine whether there t.1as adequate direct revenue coming to government, adequate benefits to the people of the Province whether directly or indirectly. In discussinp, this piece of legislation 7183

June 19, 1975. Tape 2451 RH - 2 we have to keep in mind that the mining tax is not the only benefit that a Province receives from a mining operation. We have to remember that the employment that is derived from mining operations, the sales tax, the corporate income tax and the personal income tax paid by employees, all of these have to be kept in mind and the mining tax has to be looked at in this context. Now, we find a situation that has existed in Newfoundland -where the mining tax has not been adequate. Not only has government come to this conclusion, not only did the task force of officials that we initially set up to look at it come to the same 7184

June 19, 1975 Tape No, 2452 NM - l MR. BARRY: conclusion, not only did the consultants that were then set up to zero in specifically on the things that should be done with respect to mining tax, not only did they also come to the same conclusion, we also had the Royal Commission on Mineral Revenue which then took off from where the consultatnts stopped, provided the opportunity for people throughout the Province~for companies and all interested parties to make representation, not only did they come to the same conclusion that there was not an adequate mining tax system in this Province but I submit, Mr.

Speaker, that this has been the concensus with respect to the ordinary Newfound Lw-, ·.-, for many years, that the Province is not obtaining enough in the way of direct revenue from the mining operations of this Province. So we decided that this should be changed and we set out to change it. And I would submit, Mr. Speaker, that in this legislation, when you consider the fact that the Royal Commission was not set up tmtil last Spring, that they brought in their report ... one of the fastest reports of any royal commission late last Fall, that the report was only released back this January- w11cre are we now?

February, Harch, April, May, June, approximately five months ago-and that we are now proceeding with legislation, Mr. Speaker, directed towards the subject matter of this Royal Commission,.

I think it indicates thnt we hnve r,iven this matter some priority and that we have taken fo.st, dlrcct action in this very important area, And I have to say here that w-.:, would not have hPen nhle to cct this legislation before the House had it not been for an awful lot of hard work put in by officials of both the Department of Mines and Energy, the Department of Finance, and the Department of Justice, specifically the Deputy Minister of Hines and Energy, the Assistant Deputy Minister for Mine:n,Mr. John McKillip and Mr. Fred Lukins.and Mr.

Lawrence Spracklin, an economist with t.he department, all put in many hours under a lot of pressure to get this legislation ready :rnd t1r. flmn!"d Hillier of the Department of Finance 7 the mining tax assessor, and Hr. George Macaulay, from the Department of Justice, the draftsman, all of these gentlemen worked under very trying circumstances under a lot of pressure, under a very 7185

June 19, 1975 Tape No. 2452 NM - 2 tight

schedule to get this legislation prepared so that it could be presented before this House in this session. Now, Mr, Speaker, 1 would like to point out that we are not putting this bill forward as a model act, as the ideal in mining tax law. This is not a perfect act. It is far from perfect. There are areas that we have to do further work on, specifically I would refer to the provisions of the legislation dealing with the deduction of expenditures on exploration, the sections of the act dealing with processing allowances, the

section of the act dealing Yi.th depreciation allowances. These and other technical areas are so complex, there are so many ramifications both for existing mining operations and for future operations that we concluded it would be impossible to have legislation that directed itself to changes in these areas ready for the House at this particular time in this session. So we had to make a decision~ Would we postpone the legislation?

Or would we bring in legislation that,as I aay is not perfect, is not ideal, but goes a long way towards setting up the level of mining tax that ehould be appropriate in the Province, aete the broad guidelines, the general guidelines, removes a lot of uncertainty that was being felt in the mining industry,because ever since really the Royal Commission was appointed the mining industry has been wondering what is going to happen and uncertainty can lead to a falling off in investment in the mining industry. We did not want to see this so we decided that the best policy would be to bring forth this 7186

June lQ, 1975 Tape 2451 (morning) IB-1 legislation which, as I say, does not complete the work, does not complete the task.but goes a lcng way in that direction, And w-e will continue over the next several months or a year, however long it takes, to add the refinements, the suhtleties, the nuances that may he necessary to make this legislation ns good as any found anywhere in Canada. The other noint, of course, is that if we ha<l put off this legislation there \.muld he sinnific:mt revenue loss to the Province in this current yenr.

It is tHlr he1 ief that too much revenue has been lost over the past years to permit any further losses and that it was necessar:1 for us to take immedjate action as quicklv as possible. So, that is why,rrn 1 say,thcre are areas here where we are not saying the act is perfect, hut p;enerally it goes a long way towards settlng out proper guidelines for the operation of mining companies in the Province~and in our opinion i.t is legislation that is long overdue.

The main benefj ts of the act as submitted to the House are, first, that we will remove the situation we have had in Newfoundland where we have had an unrealistic mining tax: rate, a mining tax rate that is outdated, that is muc:h helm.1 that of any other province. The current rate as you know as set out in the ~ining Tax Act is five per cent. That rate is the. louest in Canrtda. The mininp: companies, most of the mining companies that made representation to us agreed that that was a ridiculous rate nnd it was much ton lm.1 ann that 1 there should be some renlistic, re,.1.sonahle increase.

This a.ct thnt is now before the House would increase the mining tax from the current five per cent to an effective rate of sixteen per cent for most operators. No'-', I say for moBt operators• ond I say sixteen per cent even though you will not see sixteen per cent referred to in the legislation because you have to look at Gin different sections of the act, Mr. Speaker, in order to get the total tax on operators because it is hroke.n clown into two parts. It is a tax, a t11ining tax on operators nnd we alro hnvc a mineral rights t:n:.

Part two imposes a mining tax of fifteen per cent on certain income nnd part three imposes a further tax of twenty per cent on other 7187

June 14, 1071 T~pe 2453 (morning) Hl-2 i.ncome :md this Part thrne.where,rn the first

part imposes a mininr, tnx, the- second

part imposes what we would call a mineral rights tax. This is done, }fr. Speaker, in recognition of the fact as set out by the Royal Commission on Mineral Fevenue that there was significant revenue being derived by certain companies who had originally held mining rights and who had transferred these to other companies, signlficant revenue being received by such companies that WAS not subject to the mining tax and where a government was not receiving a share of such revenue.

So, we have put forth, incorporated the princfple in this bill that in addition to the normal mining tax that hoth operators,and we Yill call them landlords, both operators ,1.nd people who receive rentals, royalties and 11.ke payment from operatinv companies~ that both of these typea of companies or individuals should pay a mineral rights tax, a tax on revenue that they derived from the right to mine, the right to mine that they have nbtained froTI" the people of this Province.

W~en you look ~t the combined effect of the fifteen per cent of mining tax and the twenty per cent of mineral rights tax on the respective portions of income, you have an effective rate of tax on 7188

June 19, 1975 Tape 2454 (Horning) PK - 1 operators of sixteen per cent - sixteen per cent as opposed to the current five per cent. And the tax on reve_nue received by landlords, or by the recipients of rentals, royalties, or other payments for mining operations,that rate of tax is at the rate of twenty per cent,

whereas at the present time there is no tax on such revenue. We have to, Mr. Speaker, when we are talking about the mining tax or the mineral rights tax~we have to look at the total tax burden that will be incurred by companies in this Province. We have to look at the mining rights tax and mineral tax in the light of the existing corporate tax,both federal and provincial. And as you know, Mr. Speaker, the current federal corporation tax rate is twenty­ five per cent reducing to twenty-one per cent over the next three or four years. The current provincial corporate tax on mining companies is thirteen per cent.

So you have your existing corporation tax of twenty-five per cent and thirteen per cent, or thirty-eight per cent on profits. And, Mr. Speaker, there is some merit in the argument that if we had a more effective or a more adequate corporation tax system~ there is some argument, Mr.

Speaker, that you may not have any need for a mining tax at all, Because if you accept the further principle that is set out in this act, and which differs from one of the recommendations of the Royal Commission, the principle that your tax should be a percentage of profits rather than so much per ton or so much, a certain percentage of the value of production, if you accept that the principle.as we submit it should be, that you tax profits, that is the best way of government obtaining direct revenue, then what does it matter if you take it all in one form through a corporation tax or if you take it from both a corporation tax and a mining tax?

Well the reason it matters at the present time in Newfoundland is because - this is one of the most shocking things that came out of the Royal Commission Report in our further investigation - is that the existing method of imposition of corp0ration tax,and the existing 7189

June 19, 19i5 Tape 2454 (Morning) PK - 2 rules -with respect to the allocation of corporation tax between provinces.results in a significant loss of revenue to this Province, to other provinces. Now granted we would say we will get it back by way of equalization or - HR!.. ROBERTS: How does that happen? MR. BARRY: Pardon? MR. ROBERTS: How does that happen? MR. B,!t-RRY: Well it is a very complicated set of regulations. but I will - if I can just - and I have them here, and twill not go into too much detail on it. But - MR. ROBERTS: It is a sweeping generalization, and what is the RUTH'IOtt for it? '!R.

BARRY: I intend to if the honourable member would permit me. We have a situation where there is a set of regulations that provides for the allocation of corporation tax between provinces where you have a company operating in more than one. province. MR. ROBERTS: These are federal regulations. MR.-~ These are federal regulations, but if a province permits the federal government to collect a corporation tax then we go along with these regulations, If we do not, of course, we take over the collection of our own corporation tax. And I might say, Hr.

Speaker, that this is an area that is being examined as to whether there is anv advantage of our government getting involved in the collection of it~ own.either corporation tax for mining companies alone or corporation tax generally. We have requested the Department of Finance to look into this. 7190

June 19, 1975. Tape 2455 RB - l At first glance the problems, of course, are the fact that you then have to gear up large staff, technical staff to get involved in the actual mechanism for collection and so on which is n0la1 being paid for by the Federal Government. We would have to determine whether the potential benefits outYeigh the additional cost. But I will just give you an example of an area.

Well, first of all, the allocation of corporate tax between Provinces is based on a set of federal regulations that takes note of the, Yell.first of all obviously the income that is earned in each Province, but also where the head office or the actual working offices of the cor­ poration are,where most of the employees of a corporation are employed, where contracts are made and so on.

If I could 1ust have a moment here I will just give you an example. '1 General rules: where in a taxation year a corporation had a permanent establishment in a particular Province and had no permanent establishment outside that Province, the whole of its taxable income for the year shall be deemed to have been earned therein." That is the case where you just have a so-called permanent establishment in one Province. ' 1 Where in a taxation year, a corporation had a permanent establishment in a particular Province and a permanent establishment outside that Province, the amount of the taxable income that shall he deemed to have been earned in the year in the Province is one-half the " aggregate - now this is an example of the complexity of this area - "one-half of the aggregate of that portion of its taxable income for the year that the gross revenue for the year reasonably attributable to the perm.anent establishment in the Province is of its gross revenue for the year." So, you have to try and attribute revenue.

MR. ROBERTS: It is clear, b it not? ~·'P. BAR'RY: Tt may be clear in r-he s.1yirr;, cle11r in drdnp is smrethinp, else. 7191

Pl' - 2 1 n:z~·--~Rn:,:,: Next, ''that nortlnn of its tn.xable income for tlw vear t:hnt the nggrer,ate of thC' snladC's and wages paid in the year by the corporation to cmplovees of the permanent establishment in the PrClvince is of the> nggregnte of al 1 salaries and wages paid in the year by the crrporation." Then you get into, "for the purpose of determining the gross revenue for the year reasonably attributable ,, to a permanent estahtislttnent, you get into, "the follm-rin1?- rules shall apply: '"Where the destination of a shipment of merchandise to n customer to whom the merchandise is sold is in the particular Province or country the gross revenue derived therefrom shall be attributable to the permanent establishment of the Province or country.'' You get into this question of ·where shipments are designed, are destined for. !JR.

ROBERTS: If F..atons sell a pair of mitts, a pair of cuffs here in ~ewfoundlnnd, the tax comes to Newfoundlanrl. That is the gist of it. Okny, okay.

"Except, as provided in paragraph (c), where the destination of a shipment of merchandise to a customer to whom t:ic merchnnrlise i!': sold is in the Province or a country oth!'.r thnn Canada, etc., in which the taxpayer has no permanent residence, if the person negotiatin~ the sale may reasonably be reRarded as Peing attached to the permanent establishment in a particular Province or country the gro.<Js revenue derived therefrom shall he attributable to thnt permane.nt establishment." We get into the question of who is nttttched to what establishment. 1 do not want to go into all of these, Pr. Speaker.

I woulrl like to ~ct another one. For example, ''where gross revenue is derived from services rendered in the particular Province or country, the ~ross revenue shall be attributable to the permanent ei;tablishment in the Province or country.,. Where are services rendered?

Another c>x:1mple, "where a customer to whom merchandise is sold instructs that ~hi.pment to be made to some other person and the customer's office vith vhich the sale was negotiated i!'; loc:1ted in a country other than Cnnadn in "1hic11 the taxpayer has no permanent establishment" you get n nu~her of different rules, If the merchandise is produced 7192

June ]{), 1Q75 Tnpe 2li')fi (rnorn:lnr,) or manufnct11red or prod11ced and manufactun,i! ('nti rely in a r:nrticular province the ?,rnss revenue sh11ll he attrilrntn.hlc ta that province. If the fT',erch1mrlise was prorluced or rr.anufacturf'd partly in one province and partly :in another, the gross revenue :Is proportioned and shall he the proportion that the salaries ancl wa13es pair! in the year to employees in various provjnces is of the IF-1 total salaries and vages paid to all employees, to summarize the section.

There are many other rules here, 1'1r, Speaker, that are detailed and specific but they hoi 1 down to the fact that ue have- a problem - HR, CFOSBIE: Will you yiel<l when you have nn opportunity. 1 have a ministerial statement. tl'P. HARQY: Yes, if T c.0ul{l _iost finish this sentence that T nm hnlf- v:ny throur;h. It bo1 ls rlovn to that - ~R. TTOTIETITS: Ts there an Pnd to it? ~. RAP.PY: Hr. n1efonhal,er up there, nppnrl'ntly llansarrl cnn nrvc>r ffod thf> heginning or the end of n sentence, :in Hansard. "fP.

POBfRT~: He came up with one of the prr>nt quotes of nll time, "It's a long road that has no ashcans." HR, HARPY: Well, ""r. Speaker, we have a prohlem vhich I ¥-•ill r,o into a bit more after the honourable minister makf's his st,1tement. We have a problem arising from the fact that ve. have companies that obtained almost nll of their revenue fror,i mininp, operations within this Province and yet have almost all, in some cases all of their employees located in another province who ,1re making their contracts in other provinces wht:>re shiprr:Pnts are d0stinetl to, other provinces. ~fP.

POHET>TS: The law requires thi:>m to hnve offices here. He could do that. _}•fR. BARPY: I will ar1dress myself to that :!n a mDl'lent. PP. SPEAKER: The honournhle '-'inister of Fisheries. 'fP.. cnmmtE: ur. Sneaker, v.:lth the pc.ndssion of the House T want to make another statement which tte might cnll an atltienrlum to the one T rna<le a half hour apo. ~- 'QOHf!<'TS: 1"r. Sp~aker, t.'I" nll g:ive consent but T nnrlerstnnrl it is a rtinisrerial statement and ,1 nornm.l rip.ht cf c.ommr-nr wiuld arnI•1. Ts thnt the correct 11nrlr>rstan11inr? 7193

.Ttme 19. 1975 Tape 2456 (morning) rn-2 l.ffi. SPEAKER (STAGG): Yes. ~lR. CROSBIE: Hr. Speaker, this is in connection with the Happy Valley-Goose Bay area. N0v1, I have just had a call from the Director of Defense Relations in the Department of External Affairs who informs me that the American authorities several weeks ago formally confirmed to the Department of External Affairs their decision to not to renew, or not to stay in the Goose Bay area when the present lease expires on June 30, 1976. A statement is being made nol-1 or will shortly be made, the statement iR to be made at twelve noon.

I am not sure whether it is our ti.me or the Mainland time.

A joint statement by the tJ!;Af and the Department of External Affairs to this effect, that they have given formal notice, that they will be leaving on ,June 30, tq76, that this is part of 11 larger programme by the t!SAF nf consolidating facilities and streamlining facilities and so on in various areas of the world 1and that the decision will affect some 600 American personnel and 200 Canadian personnel who worked with the USAF, The gentleman in question says that the Government of Newfoundland have not been notified prjor to this because they were nttempting to get more details from the USAF vith respect to - 1-m..

ROBERTS: What kind of details could you get? HR. CROSBIE: This was a formal notice~.hut they were attempting to P.et more details from the USAF on the implications of this formal notice. It also appears that the USAF may want to retain a small­ I do not know if it would be force there.that there might - on a cnretnker basis. There may be some small number employed on a caretaker basis in case they want to go hack if an emergency nrises nr whatever. They were wanting to get nll the implications and details hefore notifying the Government of Newfoundland and making any public statement on the matter. Now, Mr.

Speaker, all one can say is that you kno~ this is a fantnstic piece of buref!ucractic bungling,to put the best face on it. I acce.pt the fact certainly that Mr. HacEachen and Mr. Jamieson1 vhom T q1t1ke to last night and 7194

June 19, 1975 Tape No. 2457 NM - l this morning,are both honourable men and of course if they had this information I am sure they would have given it to me. And, you know,I mean it is a most unusual situation, So the fact remains that formal notice has been given by the American authorities.

The Secretary of State of External Affairs has not yet communicated to the Province, communicated to the Province about ten minutes ago, fifteen minutes ago that they are not going to renew the lease after June 30th., 1976 and the number affected 1 of course,may be more than I have mentioned but their statement says 600 American, that is American personnel,and 200 Canadians who work with them directly.

There may be some small presence there after that date, That has to be worked on, In the meantime there will- of course,the Goose Bay Task Force is in place and this government will be communicating with the Government of Canada and the local authorities up there so that an intensive programme can be developed to see that all of these people are given, get alternate employment and that everything is done to see that this phase-out goes smoothly and with as little grief to people in the community as possible. So that is the situation.

The situation is exactly contrary to what I said a half hour ago, which was based on information I was given last night and this morning. But anyway we now have the true picture. The Government of Newfoundland - speaking on behalf of the Government I can only say that we are extremely aggrieved that the information has come in this manner and has come out this way.

It is hardly excuseable, but anyway this is the way it has happened and of course we will do our part and I am sure the Government of Canada will to see that the whole thing goes as painlessly as possible and we have got a year~of course,to get ready for this notice which will become effective June 30, 1976. That is all I can really say at the moment, Mr. Speaker. MR, SPEAKER: The honourable Leader of the Opposition. MR. ROBER.TS: Mr. Speaker, I think all of us in the House are in the same state of catatonic shock as a result of the announcement which the 7195

June 19, 1975 Tape No. 2457 NM - 2 ministPr made and the shock is all the greater because an hour ago the minister, relyinr; on the information given to him, had, ,1s he im>t said, told us the direct opposite. There arc two points to be made, Sir, and there is nothing at all to be said really about the first one, except to note that there is nothing to be gained for Newfoundland by saying exactly what any of us thinks of the conduct of the Government of Canada in it. I could use some very strong words, but let me say it is inexcusable and intolerable.

This ridiculous excuse that somehow they were r,athering further details, I do not see how there could be any details. I mean, a death sentence is a death sentence and you do not need to know anything further. I mean, what can be more further than a death sentence. And let it not be misunderstood what this announcement is. It is, with one stroke of the pen, the entire community of Happy Valley - Goose Bay has had its raison d'etre, its entire renson for existence, threatened nnd possibly removed.

I was speaking earlier this r.iorning with the gentleman from Labrador '.forth who is in Goose Bay, in the area, and there arc approximately ] ,'V)O job:. directly involved in this. TI1ere au the 200 to which the minister referred, people who are employed by the USAF directly, but in addition there are about 800 civilians employed by the Hinistry of Transport at Goose Bay, Sir, nnd almost all of them are employed in connection with the operations generated by the Americans and with USAF r,one there will be a need for very few people.

All one will need is the normal staff that would operate an airporat at whatever level the Goose Eay Airport would operate at, and that is not a very large level, I fear, you know, not a large level of employment, so about 1,000 jobs will disappear in the next twelve months. the matter is even more serious than that. Now, Sir, I do not know if \JC are being: attacked, Mr. Speaker, or if windows arc> hcinr, blotm shut, or if it is the door on the other side, but the Minister of Hines und Energy was being distracted frorr time to time by doors slamming nnd it is really mont upsettinr,.

Haybe the pages or something could do something or the Clerk could stand between the window and the ledge 7196

June 19. 1975 Tape No. 2457 NM - 3 in case it falls. He could catch it or something. Mr. Speaker, the entirer you know these 1,000 jobs are just about every basic productive job in Goose Bay - Happy Valley 7197

June 19, 1975 Tape 2458 (Morning) PK - 1 with the exception of the jobs that are provided by the Linerboard operation, and they are not that numerous- and we all know the problems that that operation is having. This House and the government now have a terrific challenge placed before them. It is not the place for a debate. Sir, I am only allowed to make a few comments, but let me say that I think the Government of Newfoundland and Labrador must make it an absolute priority to respond to this problem. The Goose Bay Task Force has been at work for a couple of years.

I am told it has made progress, but I have not seen very much of that progress I must say. Now is the time for it to appear. And I think the Government of Canada have a very great responsibility as well. These are federal employees, federal governmeftt employees, and it is not just enough to say that they will be looked at elsewhere or anywhere else. If there is going to be a Goose Bay-Happy Valley there vill have to be some form of work provided for the people there nov. if not the entire community as we know it vill disappear, We will be faced with another Bell Island. I wish we could debate it, Mr. Speaker.

Perhaps the House Leader would allov a debate either later this day or tomorrow on a motion to adjourn. I think it would be appropriate. We had one on the Placentia Base he will recall,two or three years past, and I think it was useful. We had a similar one on Bell Island. Rut let me just say that with one stroke of the pen now a thousand jobs have been wiped out. It is almost enough to make a man weep, because a thousand jobs in Newfoundland, Mr.

Speaker, you know, govermnents~period~in terms of office have not succeeded in creating a thousand jobs and - here we are 1with one stroke of a pen a thousand jobs are gone. It is not a matter for blame now, the time for blame is either past or yet to come. But it is a time for positive action by this government and above all by the government at Ottawa. That their conduct - I do not speak of the Minister, Mr. MacEachen or the Prime Minister.I 7198

June 19, 1975 Tape 2458 (Morning) PK - 2 have no doubt they were passing on the information they had. But there should be some rear ends booted in the Department of External Affairs and in the other appropriate departments. The conduct of bureaucracy has been absolutely inexcusable that we should hear about this in this way, and only.,in effect,after the minister~speaking in this House,had been, you know, forced to make statements vhich turned out to be incorrect, statements which he made bel~ing to be full and complete.

It is not often the honourable gentleman and I, Sir, agree on public affairs in this Province. But I think we can agree on this one, and, you know, there is no point kicking Ottawa but it should be noted they have really treated the people of this Province, and the people of Goose Bay-Happy Valley very badly indeed. It is a sad day for the Province, Sir, A thousand jobs, you know, is a staggeringly great number in any part, but a staggeringly great number even more so in the Goose Bay-Happy Valley area. MR. A. EVANS: Mr.

Speaker. would the Minister of Fisheries perm.it a question on that statement? be leaving with the Yanks? Did Trudeau indicate that he would MR. SPEAKER: The Hon. Minister of Fisheries. MR, CROSBIE: The only thing that the Leader of the Opposition said that I queried·,that will have to be checked out,is the thousand jobs. I mean that sounds like a lot more than we think is the case, you know, MR. ROBERTS: I do not have all of the information before me, but I am told it is about a thousand.

The 200 directly~and of the 800 employed at M.O.T. now, less than 100.I am told~will be retained if the airport were to be operated as a normal civil airport and not as a, you know, not ae a facility for the use of USAF. But it should be checked. But the figure,! think~comes from my conversations with the gentleman from Labrador North, you know, who is not only aware, but ~ery much involved in the economic life of the area, MR. CROSBIE: We will check it out any,.,ay. Thank you, Mr. Speaker. MR. SPEAKER: The Hon. Minister of Mines and Energy. I \.tas not in the 7199

June 19, 1975 Tape 2458 (Morning) PK - 3 Chair at the time. I understand he has not finished the second readin~ of this bill, and he may continue. MR. BARRY: Yes, Mr. Speaker. Well it is sort of depressing, Hr. Speaker, to carry on after that statement, but I guess it is just an indication of the ever greater seriousness of getting our O'WYI house in order with reFpect to the resource-based activities that we have in the Province to make sure that we squeeze out every possible benefit for the people of the Province that we can from the development of our resources.

And this is one of the things that we are trying to do with this dramatic and radical change in our mining tax legislation. And I might add, Mr. Speaker, that this is something that was not done without a lot of thought been given to the effects that it could have both on existing operations and on future operations in the Province.., the effect it 7200

June 19, 1975. Tape 2459 U-1 could have with respect to the amount being spent on exploration in the Province which I will refer to in a moment. Mr.

Speaker, I was also referring before the minister made his statement to the problem that we have ~here companies are making revenue in the Province,and this revenue, the taxation of this revenue is being shared with other Provinces because of these companies locating most of their personnel in other Provinces or because of other actions, other modes of carrying on business that under the existing regulations with respect to the allocation of corporate tax results in considerable revenue being lost to the Province, Now, Mr. Speaker, I am not trying to say that this Province should have a free ride.

I am not saying that we should ignore the fact that we are part of Canada, that we obtain benefits from other Provinces as well, that you have got to have, you have got to encourage free trade and free flow of investment and so on across provincial boundaries. But ~hat I am saying is that this is an area where we have to take a very serious look at the impact that the existing tax regulations, allocating tax between Provinces is having on the amount of tax that we get from our mining operations.

As I said, we have asked the Provincial Department of Finance to direct their attention to this matter and this is now being done. It is for this reason, Mr. Speaker, that we are not able to proceed by way of the corporation tax on mining companies to obtain improvements in the direct revenue received by our Province because there are, in our opinion, inadequacies and problems there that we still do not knw the full significance of. I am referring here to the corporation tax regulations. So, we cannot rely on that alone, even though in principle. Hr.

Speaker, if you had your ideal corporation tax then you question whether there was any need for a mining tsx at all. There is some good argument along the line that if you had a proper corporation tax on profits, why do you need a mining tax at all. Well, as l explained, we do not have an ideal situation with respect to corporation tax. Therefore we have concluded that we must, 7201

Tape 2459 i[ we are going to improve the situation, do it by changes in our mining tax legislation. We have, for example, Mr. Speaker, vith PJ! - 2 respect to one company discovered that although we will say close to 100 per cent of the revenue is beini earned in Newfoundland we have the Province being entitled to only fifty-two per cent of the corporate tax of that company. So you have al.JDost half the potential tax being lost because of where the company is set up, its permanent establimnent, where most of its employees are located and so on.

Now, the honourable Leader of the Opposition says, well why do you not just pass laws requiring companies to set up their offices and have all their employees in the Province. Mr. Speaker, that is a route that is being looked at. That is an area that is being looked at. It was mentioned in the Royal Commission Report and we have not rejected that as a possible method of approach. But we are not in a position at this time, ~r. Speaker, to bring in legislation to this effect because we have not had an opportunity to adequately assess the ramifications.

For example, we are greatly dependent upon national companies and,in some cases, international companies to spend money on exploration in this Province, to spend money on developing new mining opportunities. 7202

June 19, 1975 Tape 2460 (morning) rn-1 Now, if we impose restrictiom; on these companies of certain types, there is a good possibility that we will not see these companies being prepared to operate within the Province. So, we have to go very carefully in this area. He do not want to lose the momentum that we have built up over the last two years where we have seen a dramatic, n great increase in the amount of money being spent on exploration for minerals :In our Province.

We do not want to lose the course that has been developing w1'ere we h;ive many new companies, both national and internationa1 1 coming to Newfoundland nnd beinp, prepared to spend considerable amounts of money in our Province, The last two years figures. we understand, wUl continue this year judging by the expenditures to dnte and the number of clairr.s staked and so on to date th1 s year. The momentum :Is good with respect to money being spent on exploration and we do not want to create dis:i.ncentives that wHl cut off this flood of investment capital into our Province.

That would be merely cutting off our nose to spite our face. So, we have to go very slowly here. But I can say. I can confirm that we are looking at the possibility of hav:Jng certain regulations with respect to the presence of permanent establishments by corporations who are carrying out mining operations in the Province or who are receiving revenue by way of royalties and so on. This will be looked at very carefully over the next several months. But for now, Hr.

Speaker, we have to move with the amendments to the mining legislation,as I say,not that all the answers are in this legislation but because there Yill be significant immediate benefits to the Province by going ahead with this act. The first benefit, the main benefit I mentioned was, of course, the setting out of a new realistic tax rate. We are setting the rules of the p:nme clearly for companies to see. not just as far as existing operators are concerned. some existing operators,and I will mention riualific.1tion here in a morr.ent, but nlso with respect to what companies will he able to expect in the future.

When they col!1e in today and they look at the potential of Newfoundland, they want 7203

June 19, 1975 T!'pe 2460 (morning) IB-2 to know what the rates of taxation are going to be in the event that they make n minernl discovery. They want to know what the rules of the ~ame are going to be. We hnve to remove the uncertainty that nm., exists because of this review of the mining tax legislation that we have done. We knew the uncertainty 1,1ould be created. That was a necessary evil hut our alternative was to do nothing. That would be unacceptable. So we decided we would risk the uncertainty. We would bring about changes in the mining tax but we would do it as quickly as possible, Nr.

Speaker, so that any uncertainty would be removed quickly and the momentum thnt has been built up by the expenditures for exploration in the Province would continue. Now, another main benefit from this mining tax in addition to setting the general level of tax is that of course we will nO'W' he taxing this revenue that was being received by landlords that previ.ousl.y vent untaxed. That will mean a significant amount of revenue for the Province comrnencing this year.

The act, as I have said, continues the principle of taxing profits rather than going to R, what they call, an ad valorem tax on the value of production. The reason we have gone for a tax on profits is because the investigation that we have done indicates that if you tax the value of production there is the encouragement of what they call high gra~ing, Hr. Speaker, that the tax on profits is the best way of ensuri.ng that every last pound of ore is recovered. 7204

June 19, 1975. Tape 2461 RH - 1 If you have a fixed cost based on the value of production that vill encourage high grading companies taking out the ore that will produce the greatest percentage of proflt initially 1 and it will result in their leaving in the ground the lower grade ore. We do not want to see this in the Province because we believe that the provincinl demand, the nation demand, the international demand for mineral corr.modities require that we not he wasteful, that we, where possible, recover every last possible pound of ore.

So this is the reason we have gone for the tax on profits as opposed to an ad valorem royalty. This tax on profits is one that is generally accepted throughout the industry. I am not saying that we accept everything that the mining industry suggests we should do in the way of mining tax. We have not. We will not. But we listen and when they give useful su~gestions, useful arguments as to why a particular course of action will lead to problems for the Province then we are prepared to consider this. In this area we have concluded that the tax on profits is the best way of proceeding. Mr.

Speaker, if I, without going into too much detail, if I could just say that we should not have the mistaken impression that this act will immediately apply to all operators in the Province. This is not the case. You have the situation, the unfortunate situation in some ways in the Province of having a patchwork quilt of regulations. Almost every mining operation has a special agreement, a special act, special rules applying with respect to mining tax and so on. At the present time there are only three companies operating in the Province under the provisions of the general Mining Tax Act.

They are the Rambler operation, Advocate Mines operation and the Alcan operation and the new zinc mine at Daniel's Harbour, of course, Newfoundland Zinc will also operate under the Mining Tax Act, so that the amendments to the Mining Tax Act will automaticnlly apply to these operators, to these four operations. Hr. Speaker, it will also applv to future operations in the Province. 7205

Tape 2461 PJt - 2 What ue nre dotnr, ii:; c.ctti.ng

an act of J?ener.11 apolicntion, ., ret1l_i)';ti.c net. We are setting: th~ rule<J: of the gan.e to the rlcv£>1op­ nr,nt of future mining operations. He have examined the rates of tmt in other Provinces. He have concluded ;1nd companies have con­ firncc\ that this is the case, that we are competitive With other Provinces, that our rate is reasonable when contrasted with most other Provinces, Some Provinces have ~one to much higher rate!'l. I should not say some. One in particular, British Columbia, hns gone to higher rates, to different methods of tnx.

There are, I think it is p;enernllv - I am not saying this to be critical of a neighbouring Province or a neip;hbouring provincial government, hut there has heen considerable criticism of the Bdtii,;h Columbia type regulation. It is suggested that there has been some falling off in mineral exploration and development in the Province. I cnnnot confirm that. But basically what I nm i:;ayinr,: is that we have taken a reasonable approach, a moderate approach here hut one that is a dramatic improvement and a radical change from the previous situation 7206

June 19, 1975 Tape No. 2462 NM· l that we had in our province. With respect to the existing operators, Mr. Speaker, it is our intention with respect to the operators that are now operating under special agreements, there is a clause here that says that this act will not apply to those operators. But it is our intention, Mr.

Speaker, to commence discussions with each of the companies operating under special agreements with a view to determining first of all whether the rates paid under their existing agreements are leas than the rates that they would pay by this act of general application and where, if and where we discover that the rates paid are less than this ratP. of general application we will be requesting companies to consider renegotiation or increasing of their rates so that they will be in line with what we are setting out as the reasonable rate of taxation. Now what I am saying, Mr.

Speaker~ is 1 first of ~11,we have very. very complex special agreements in some cases. I will give you examples. Say the iron ore mining operations~ We have two completely different types of agreements. Wabush Minea,for example is a partnership, a joint venture between various companies and they have a very different method of paying tax than does the Iron Ore Company.

The Iron Ore Company of Canada has a rate of tax that is baaed to a certain extent upon the international price of iron ore, In determining whether it would be of advantage to the province to have the type of regulations that are set out in this bill apply~for example,to the Iron Ore Corporation, we would have to make certain estimates as to what the, or certain projections as to what the international price for iron ore is likely to be and so on. In other words it is not automatically obvious that the province would benefit by having this act of general application apply to all operators throughout the province.

This is an area where much more investigation has to be done. We no~ are gettin~ to the stage where, and this hnn taken an unbelievably long time just to get the hard data to work with, the information to work with, but we are now getting to the stage where we have,we think,most of the information we need to analyze these companies that are operating under special agreements and we will be looking at what the rate of tax is that is payable under these special 7207

June 10, 1975 Tape No. 2462 NM - 2 agreemcntR, what the effective rate is as compared to this new act:and where existing operations are paying less than the rate set out in L½is act then we will be requesting that the rate be brought up to the level as set out i.'1 the act. Now this is not an insigliificant step for this government to take, Mr. Speaker. It is not one that we throw out without careful consideration or thought.

We have to recognize that when a government enters into an arrangement or an agreement with companies, mining companies or any other company, that it is not a light undertaking to change the rules of the game in midstream, But we believe, Mr.

Speaker, that most companies are reasonable, most comapnies understand that conditions change, most companies realize that if there is an insignificant amount of direct revenue going to the government of a province where they are operating that this is not a healthy situation, and I think most companies would be prepared to take a look at what would be a reasonable rate of tax in areas where they are not now paying such a reasonable rate. So, Mr. Speaker, that is all I want to say on that topic, but I wanted to stress that the act does not automatically apply 7208

June 19, 1975 Tape 2463 (morning) IB-1 to all operators but that we intend to use this as a basis for discussions -with the companies operating under special agreements to -work our improvements in the tax situation in those cases where we find that the taxes now paid do not reasonably relate to the levels as set out in the new Mining Tax Act. Mr. Speaker, there are I think some - was it Mark Twain who said, "There: are lies, dnmn lies And st;:itistics, 11 ?Well 1 one of the biggest proble~~ that you have - AN HONOURABLE MEMBER: Bismarck. MR. BARRY: Is it Bismarck? MR. DOODY: Samuel Clemens. MR.

BARRY: Samuel Clemens also known as Mark Twain. In any event, Hr. Speaker, the lies, damn lies and statistics in this area are very difficult to analyze. In the Royal Commission Report itself,for example,there is a chart that purports tc set out the corporation tax paid hy mining companies in the Province. And you look at that chart and you almost end up in shock when you see that they set out that the corporate tax for all mining companies paid in the Province has in some years fallen as low as $36,000, a ridiculous, ridiculous amount. But, unfortunately, Mr.

Speaker, that particular chart is somewhat eisleading in that this only includes the corporate tax for companies that are defined as mining companies and apparently what we have discovered in further investigation is that there are companies that we would consider mining companies that are not classed as mining companies under the federal corporation tax definition of the term mining company. They are classed as a processing company or some other type of company and therefore their revenue would not be included in that chart set out by the Royal Commission.

So, we have had difficulty in getting the proper statistics, the proper data to work with because a decision, Mr. Speaker, that you make is only as good as the information you have available to you in making it, But we have now reached the stage where "1e 7209

June 19, 197S Tape 2Mi3 (morning) rn-2 believe with a reaBonahle degree of certainty that we can move towards improving the tnx rate in the Province, that this will lead to an increased revenue for government but that it will also permit sufficient incentive for companies to continue operating in this Province and sufficient incentive for companies to be attracted to the Prnv1nce, new companies to invest money in exploration and in the development of mining projects. If I could just set out for you what we see, Mr. Rpenker, as the combined rate, rhe effective tax burden on companies when you consider - SOME HON.

MEMBERS: Pear! Penr! }m. BARRY: today. I nm really having some dramatic affect around here 'iR. DOODY: You got a big impact. HP., ROREPTS: You nearly brought the House down. lv!T'. BARRY: When you look at the effect, the total tax burden paid by corporations, corporation tax, federal and provincial and mining tax, we have to look at what is the total tax burden, -what percentage of their revenue do they end up paying. Now, }fr, Speaker, we hnve, 1lone certain calculAtions here. The area that we l-'ere aiming for was in the area of fifty per cent.

We believe that that is a rensonahle tax burden for companies to operate under. If I can just hrtvf> a moment here to dig out my statistics, Mr. Speaker. I have got it misplaced here somewhere. Sorry, I am just trying to finr! the complete table. 7210

June 19, 1975 !ffi. BARRY: Tape 2464 (Morning) Mr. Speaker, the combined rate of the provincial mining tax as set out in this proposed legislation, and the federal PK - 1 corporation tax, and provincial corporation tax I have lost my table here uhere I had all of this set out - is a little over fifty per cent. It will be a hit more for the landlords, the corporations that will be taxed at the rate of twenty per cent on the revenue that they receive from mining operations. But the operators will be taxed at the rate of sixteen per cent.

Now you cannot just add to­ gether the thirty-eight per cent corporation tax that presently applies, and the sixteen per cent - well you can. That would give you fifty-four per cent - but the actual percentage paid by companies will be reduced because of certain deductions that they are permitted with respect to the way the taxable inc0tt1e is computed.

And from the work that we have done it is unlikely that any operator will pay fifty per cent of their income in combined taxes, because of the fact that most of these companies will continue to have deductions for money spent on exploration, for money spent in pre-development expenses, processing allowances that they are permitted and so on.

So we have worked out the combined tax burden on companies, and we have concluded that the rate as set out in this Mining Tax Act when combined with the federal corporation tax and provincial corporation tax will result in a reasonable tax burden on the companies that we hope to have involved in the Province. Anyhow, Mr. Speaker. I can terminate this for now. I will answer any questions that honourable members might raise at the end of the debate.

I would mention briefly that there are other recommendations of the Royal Commission on Mineral Revenue that we have not rejected, we have not reached final decisions on. One of those, for example, is the one I referred to earlier about imposing certain requirements with respect to where companies have permanent establishments. There is one recotmnendation there, for example, that all companies acquiring mining leases be incorporated within the Province, Just as an example of the types of ramifications that decision alone would have, you have to consider again, Mr.

Speaker, that right now we are benefiting, this 7211

June 19, 1975 Tape 2464 (Morning) PK - 2 Province is benefiting from the fact that companies. national companies operating here are able to deduct from their income tax paid in other provinces, their mining tax)corporate tax, in smae cases money spent on exploration in Newfoundland. So we have to keep in mind, you know. that we cannot just operate in a vacuum here. We cannot be totally isolationist~ We have to recognize that we obtain benefits by being part of the country, Canada.

And ve have to work out what is a reasonable arrangement, a reasonable reciprocity with respect to companies that operate in other provinces. But there are recommendations in the Royal Commission that have not yet been dealt with, that are still being looked at. But the signifiance of this proposed legislation indicates, Mr. Speaker, that with respect to the two recommendations that received the most criticism of the Royal Commission, we have not accepted those recommendations, namely, the recommendation that we not tax profits hut we tax ad valorem or on the value of production.

And secondly, that we not issue mining leases but that we negotiate the terms of mining leases after discoveries have been made. Both of those ve have not accepted. We have not considered that they would he reasonable in that they would, in our opinion. lead 7212

June 19, 1975. Tape 2465 RH - I to the falling off of money spent on exploration in this Province and it is not likely that we would keep up the rate of exploration that we now have. The amount of revenue that will be gained by the Province in this year depends upon, Mr. Speaker, to a certain extent the rate of productioa in various mining operations. Of course, that can be affected by strikes such as, for example, the well, there is a Wabush strike in operation now and that would affect the - MR. ROBERTS: St. Lawrence. MR. BARRY: Pardon? MR. ROBERTS: There is the lockout at St. Lawrence. MR.

BARRY: The lockout at St. Lawrence, So that if the value of production goes dovn and the profits of the companies ~o down the mining tax will go down as well. But assuming a reasonably normal year, we have estimated that additional revenue of between $4 million and $5 million to the Province for this year will result from this act. A significant portion of that will come from the new tax that is being imposed on landlords. I have to say that we have received some fairly heavy opposition to this tax.

Companies that are affected are Labrador Mining and Exploration Company, the Price Company in their agreement with ASARCO. MR. ROBERTS: Royalty tax. MR. BARRY: That is right, a cax on royalty payments which is, as I mentioned earlier, an acceptance of the recommendations set out by the Royal Commission that we. tax these payments. The third - what is the third one? - oh, yes, the NALCO - Canadian Javelin payments from Wabush Mines. So, we have received objections from, naturally enough, from these companies.

We have pointed out however that there has been a rebate of federal corporate tax of fifteen per cent. the most recent one. Actually, there has been twenty-five per cent over the last five or six years, hut the last rebate of 7213

June 19, 1975. Tape 2465 PJl - 2 fifteen per cent is there. What we are imposing is a tax of twenty per cent. So it is not exactly ruinous if you consider their position today as opposed to where they were prior to that federal corporate tax rebate. So we think that this is a reasonable rate of tax to impose on these companies for their royalty payments.

It is not an easy step to take, ,ut basically we have to decide whether we attempt to make any improvements in the existing situation or whether we not. lf we decide that we had to~as we did, that we had to affect improvements then that meant withstanding some criticism from companies who would say that we are changing the rules of the game as far as they are concerned. The only other alternative, Mr. Speaker, would have been for us to accept the intolerable situation that we found~and that has existed for some time and we are not prepared to do that. So we think that this legislation is forvard looking.

It is long overdue. I would ask the support of all members of the Rouse and I move that it be given second reading. MR. SPEAKER : The honourable Leader of the Opposition. MR. ROBERTS: Mr. Speaker, it is with interest that I note the Minister of Industrial Development told the Minister of Mines and Energy that he, the Minister of Industrial Development, intended to support the bill. I think that is reassuring and adds another chnpter to the glorious history of Cabinet responsibility and the doctrine of collected responsibility for legislation. Mr.

Speaker, the minister gave a somewhat lengthy explanation of the bill. }~. BRE'IT: To say the least. MR. ROBERTS: - Sorry? The gentleman from Trinity North says to say the least. I am glad to share the view of the gentleman frotn Trinity North or to hnve him share mine. I think the minister's explanation was lengthy. But it ~as 7214

June 19, 1975 Tape No. 2466 HM - l a good one. I did not get to hear nll of it in the House, but in between the windows falling and doors shutting and announcements of Goose Bay and glass shattering and what have you, I think I followed it and I think,and here the gentleman from Trinity North and I may not be on the same wave-length~ I think that the minister 1 s explanation was a very good one. Unfortunately,though,he did not touch on a number of the points which I had hoped he would touch upon. I am particularly interested to know what effect if any this will have on equalization. The Royal Commission has a

section on equalization and I just read it again- it is an appendix to the report~and I will be charitable and say that whoever wrote the

section I do not think understood the equalization principle as it has developed in federal-provincial relations. But as I understand it, and perhaps I do not, so the minister I know would be only too happy to correct me, what equalization says in effect is that the Government of Canada will guarantee that (

a) the government of a province receive in respect of any of a given number of tax fields.and it must be about twenty-five or twenty-six separate tax fields by now,will receive an aoount of money on a per capita basis equivalent to that which they would have received if they had been equilized up to the national averages, provided that they charge taxes at at least the national rate. Now that is, like most of these fiscal policy things. it is extremely complicated. It is basically straightforward.

If we have a seven per cent tax in Newfoundland and if the national average sales tax is., say, seven per cent and our seven per cent tax only produces $20 per capita over a year and the national average yield of all the ten provinces at that seven per cent rate is $30 a year, we are given a payment on equalization of $10 per person. 55,000 people we are given $5.5 million to equaliz2 it up, And of course mining income has been brought within the equalization thing. It was done back in about 1963. I remember watching Mr, Manning who was then the Premier of 7215

June 19, 1975 Tape No. 2466 NM - 2 Alberta, the honourable Ernest Manning, he is now a Senator, agreeing quite readily at a conference in the Railway Committee Room in Ottawa, and I think most of the ministers here have probably been in the Railway Committee Room in the House of Commons, which is where the federal­ provincial conferences were formerly held,and it was

an act of statesmanship on the part of Mr. Manning, made a little easier by virtue of the fact that Alberta even then was a wealthy province compared to the rest of Canada, particularly with reference to Newfoundland and the Atlantic area, but by including the revenues from oil and minerals in the equalization formula,as was done at that time, it cost Alberta $40 million or $50 million a year. Alberta had been receiving equalization payments even though by most measures it was a fairly prosperous province.

But in those days the only taxes that were equalized were the corporate and the personal income taxes and Alberta on that basis actually got equalization payments up until about 1963 or 1964 when the act was changed. But I wonder if the minister could tell us what effect this will have. I do not have all the information here. I suppose the Canadian Tax Foundation, I could dig it out from their publications.

But basically.where do our tax rates now stand with respect to the national tax yields as deemed, And the gentleman from Green Bay, the Minister of Municipal Affairs is following it closely and I know he follows the concept and understands it at least as well as I do, that Ottawa deems that tax rates are set, You cannot get equalization,to use my sales tax example, by not having any sales tax. You are deemed to have yielded a certain amount. It is a very complicated formula. Ottawa has been notoriously inaccurate. In any given year they may be $10 million or $20 million one way or the other.

You do not mind when they are $10 million or $20 million under at the start of a fiscal year and halfway through the year the Finan~e Department is able to send the glad news to Cabinet that)gentlemen you can carry on with your spending spree because the people in Ottawa have told us we aremder on tax equalization, it is going up. But l would warn the honourable gentlemen opposite that that 7216

June 19, 1975 Tape No. 2466 NM - 3 is a two-edged sword. Every now and then Ottawa does come through and say,we overestimated, we overpaid you and there will be something a little less in your next pay cheque and that something n little leas is we are going to take it back. But in any event I do not know what effect these taxes will have on the equalization, if any, but the minister perhaps when he speaks to close the debate could touch upon that point~ Unless he wants to say anything now. But I have no particular comments on it except to say that I would like to know what it is. As 1 say, 7217

June 19, 1°75 Tape 2467 (morning) IR-I the RnyAl Commfssir,n on enunlizntion was renlly very weak. do not think they understood the concPpt.

They made the relevant point that equalization of mineral and resource royalties is changing very rapidly and particularly with respect to the oil royalties where Ottawa have said they will not equalize up to the national average on oil royaltif's be.cause the incredible amounts of money that Alberta in particular has heen getting~and Saskatchewan to a much lesser extent, have had the effect of raising the national averar:e. on oil and mineral and resource royalties to astronomical heights, We could levy exactly the same tax on oil as Alberta did.

Not producing any oil nt present we would get no dollars from it but the equalization - I forge the figure. What was it? $3 billion or $4 billion John Turner was quoting if the oil revenues had been fully equalized? Some astonishing figure. It would have heen a bonnnzn for the Government of Newfoundland and the Government of Nova Scotia and a number of the other so called have-not provinces. It would have been a disaster for the treasury of the Government of Canada, But, in any event, you knrn.,, if the minister would tell us a word or two about the effect on equalization?

Now, Sir, it is nearly one o'clock and I would like to if it is in order, could we call it one o'clock hecause otherwise 1 will have to speak for two or three minutes and then 1you know ,carry on. Let me call it one o'clock and then we will come back at three and I will say what I have to say on the bill, MR. SPEAKER: It now being one of the clock, I do now leave the Chair until three o'clock this afternoon. 7218

June 19, 1975 Tape 2468 (Afternoon) PK - 1 The House resumed at 3:00 P.M. Mr. Speaker in the Chair. MR. SPEAKER: Order, please: Before we commence there was one question only that has been given to me for the so-called Late Show today, It is the question asked by the,Hon. Member for St. Barbe North on behalf of the Hon. Minister of Municipal Affairs and Housing and that will be at 5:30 this afternoon. I think the Hon. Leader of the Opposition closed the debate at lunCh hour, and I recognize the Hon. Leader of the Opposition. MR. E. M. ROBERTS: I do not know if closing the debate is the right vay to put it, Mr.

Speaker. I had only begun the debate. But I did want to say a few words with respect to the Mineral, just the

short title, The Mining and tlineral Rights Tax Act. The-minister introduced the bill for second reading, and I think I made one preliminary point before we called it one o'clock. Mr. Speaker, the minister gave a fairly extensive explanation of the bill, and in his own vay,I thin~ 1 he touched upon most of the points which needed to be touched upon. The bill itself for all of the falderal and all of the great names and noises is essentially a fairly simple bill. It provides for some taxes on mineral productions,or on the proceeds~! should say,of mineral production in the Province.

It provides basically for t'W'o types of taxes. The names in the bill are"mining tax" and "mineral rights taxt' The mining tax essentially is a tax on profits, and the minerals rights tax is a tax on profits, but also a tax related to the amount of the mineral rights pa)tl'Dent. The mineral rights tax might be likened in a very real sense to a royalty tax.

Now, Sir - oh the other preliminary point I would make is whiJe the bill provides for these two taxes on all the mineral production in the Province, as the minister himself pointed out the effect of Section (8) of the bill is to provide that these new tax levels, these new taxes in one case, and the nev tax level in another case,apply only to four present operations, I think as I recall them they ~ere 7219

June 19, 1975 Tape 2468 (Afternoon) Alcan, the Johns-Manville operation, the Advocate Mine at Baie Verte, the new mine at Daniels Harbour, and the fourth vas - MR. BARRY: The Rambler Mine. PK - 2 MR. ROBERTS: Oh the Rambler Mine. I thank the minister. These were the four operations. And, of course, any nev ones that come in the new act will apply to them unless, of course, they are exempted. And we have no way to knov, And indeed there can be no way to knov whether or not nev mines will be exempted. I believe it to be the ministry's policy, and if so I support this policy,that they should not be exempted.

But, you know, it is a brave man, Hr. Speaker, who forecastfl the future. The minister can say and he can,in fact,believe, and I am quite willing to assume that he does believe,that the policy of the administration is now and ever shall be that a new mine wishing to come into production will pay these taxes or no others. event. You knov, we will have to await the In any event at present it only applies to four operations, the four which I have named with the help of the minister- the Rambler, the Advocate, the Alcan and the zinc, the Daniels Harbour Hine.

Now, Sir, - or let me add to close off that point - that I think the ministry have really done the only thing they could by bringing in Section (8). We have the legislative power, the legal power to vary the agreements that have been made. All of these agreements under which the various mines are paying different rates of royalties and different rates of tax, all of these have been approved hy Statute in the House. We have pas•ed several through within the last two or three years, and a number over the years since Confederation, and some of them are pre-Confederation.

I think the Labrador Mining and Exploration one, if I am not mistaken, was about 1937, the legislation under which they got their rights and under which they exercised their rights, the legislation which requires them to pay certain royalties to the Province. So they have been in effect, they are laY, they are binding 1there are agreements between the government on one hand and a corporation or corporations on 7220

June 19, 1975 Tape 2469 (aft£>rnoon) the other hand. And while we hnve the legal power to ch:=mp,P ther,, I think it would be very wrong t0 chanp,e then un:I laterally ,md 1 nm very glad that the government hnve chosen not to do so. Now, Sir, the two taxes t-1hich will he levied under the provisions of this bill are two very diffr,rcnt nncs :md, T snhr:ilt, should be approached differently. Let me deal first with the m:lnfop tax which is the tax that sets forth in sectirns ('j), (A), ;mri (7), part two of the h:111 before the House.

This tax has heen in effect, as I unrierstand it, for mnnv yen rs in Newfoundland. Tt has hPen in effect at a rate of five per cent per n:nnum on the tnxah le incorre or as <lcfine-n. I do not have the act in front of me, and I nm not spcakfog in an nccnuntinr, sense, but, there hns been n tax in effect but :It has been p;:dd only 1iy threr operations, the rl1ree that the minister !ms named or the four less the zi.nc r:1ine which is not yet fo production.

The three are, of course, ngain the Alcan and the Pambler and the Advocate. ,'Ill othPr mineral operations in '.~ewfounrUand have negotiated specinl nrrnnr;err.ents with the government and these ;;pecial arrangements wer0 embodied first of nll in nn agreement between the nnrties and then subsequently werr raHfied by legislation, both from the. pnlicy point of viev: a wisr., move, but also because of the legal and constitutional requirement in thi.s Province, that no agrC'erncnt of r:1ori, than a year can he entPred into, ;,1ith binding effect by the government unless it has hoen npprovcd hy the legislature.

The government of this Province undC'r the cons ti tut ton of this Province, the pre-f'ommission constitution which is still in effect hns no power to conmit the people of this Province, as I under­ stand it, to any aereement of more than twelve r.onths i.ri duration unless thnt agreement has received either sanction in itself hy the legislature or unless the f:overnor in Council is nctinG under authority of some act of the legislature. The nin:Lster is looking 0ufazicnl. Is he rofn)', to drnlleni:e that? •.1n.

HARPY: Th0re was n recent crt'cif' tli:1r car.,f' Lefort- r],;, <;unr0rrr Court of r:,mnda that: is somewhat contrary to, ac:tut1l1y tn :1 c:,c-;p nf .. r. Jnsti re 7221

lune 111,]975 Mifflin on the> J think it was the Javelin case~ ~ 1-'TI. FORFRTS: Well. I cf'rtn:lnly have not read all the recent ca;:;c~ of the - MP, RARPY: - as to the ostensihle authority of a minister in makinp; n commitment. !'-m.

ROBERTS: Well, I was not even speaking of the ostensible authority of the minister. t-.'hat 1 am really saying is that as a minister✓ as 11 menher of the rnhinet I saw an infinite numher of opinions from the la"7 officers of the Crowr, who consistently and constantly and I believe correctly advised the government that, ynu know, an agreement to he binding if it is to be a period of more than twelve months must he entered into either under some lep,islativ~ authorization or must be ratif:!ed by legislation.

That :f.s why we have any number of nets in the statutes of this Province, you know, "An Act To Ratify, Confirm, And Adopt An Agreement Between; and that, Her Majesty In right Of Newfoundland and Some Mining Conmany." Be that as it may. As far as I know the old mining true has been paid only hy these three operations. The other operations are paying different rates of tAX. All the government are doing here is changing the rate of tax. They are not making it apply to all the old operations. T do not criticize that. I said that I think that is the right: thjnr, to do.

But, I want to be sure that the nenple of Newfoundland realize exactly what this bill is all about, thnt in that sense it is not a great step forward. A five per cent rate becomes a fifteen per cent rate. That i,; an increase of A factor of three, Significant hut not riuite so significant, Slr, when one realizes that the Government of ranada have abated the tAxation on mineral companies. The minister told us this morning that they have abated It within the past tvn or three years,either have or are about to. Tt is ph:wed in ovc:r a period of t\,tr, or three years by a sum of cventy-five per cent.

The tax rate - T made a little note - the tax rate when he spoke.nnd he could correct me,please,if I mfsriunte him, was that the tax rate now on mineral corporations is twenty-five 7222

June 19, 1975 Tape 2469 (afternoon) IB-3 per cent of their taxable income. Is that - I am taking the federal corporation tax. That is correct? It formally was higher. It has been rebated. I had not realized it was - HR. BARRY: Remember they do not perrni.t the deduction of royalties. MR. ROBERTS: Oh, yes. !-ffi.. BARRY: That was the umle-rtnkinr, - MR. ROBERTS: I will come to that, I mean the change in the method of computing them.

Let us deal wi.th that now then since the minister has brought it up, Formally the Government of Canada allowed to be deducted from a company I s income in computing taxable income for the purposes of corporation tax, they allowed as a deduction the royalty paid to the Province 1or for that matter the royalty paid to anybody else! but let us talk about the royalty paid to the Province. Then after Hr. Lougheed in Alberta and Hr.

Blakney in Saskatchewan started deciding they were going to get a great deal more from the resource developments - I do not ~uarrel with it 1but I am just relating stated facts - the royalties were raised substantially and the Government of Canada,rightly or wrongly,hut again I am relatini the facts and not assessing their merits, said we are no longer going to allow the deduction of royalties, 7223

June 19, 1975. Tape 2470 D-1 because that would have been a way for the government of the Province effectively to take almost all of the income from a project. And the Government of Canada - again, I am not taking a position at this point on the rights or wrongs of their moves - the Government of Canada said that "WOuld negate the federal power to tax and the federal desire to tax and therefore ve shall change the rules. We will not allow royalties to be deducted and then subsequently they rebated, they changed the rules. Then, Mr.

Speaker, they went ahead and changed the tax rate hecause, of courset in this country we do not as yet pay all of our taxable income as defined in taxes. we pay a percentage of it.

Whereas the rate formerly was of the order of forty per cent,to which was added the provincial tax~which in this case is thirteen per cent in Newfoundland, the rate is now to be twenty-five per cent, to which again must be added the provincial tax. Am I correct? I did not think I had forgotten it. It has been a year or two since I had occasion to look it up. So, we have the situation now, Sir, where in respect of federal tax a company, a mining company doing business in Newfoundland will compute its taxable income~including therein royalties,whereas formerly they were taken out.

Its taxable inc0111e will include such amounts as it may have paid in royalties~and it will then take twenty-five per cent of that sum and will send it off to Ottawa to satisfy the obligations to pay c•rporation tax. They will additionally send thirteen per cent off to Ottawa who are acting as collecting agents for us, the r.overnment of Newfoundland and Labrador in this sense. Our taxes are collected by the same rules as theirs.

Now, Sir, for a company operating in Alberta, an oil company or a company operating in Saskatchewan.or a company operating in British Columbia}where I believe the royalty payments have been 7224

June 19, 1975. Tape 2470 RH - 2 raised substantially as have the tax rates, the net effect of it all - well. you could an argument - but the net effect of it all is that about the same porportion of their total income goes to taxes as hitherto.

Fow, if the House wants and if it is in order ve could get into a detailed discussion, Obviously the effect in each case will depend upon the facts in each case,but I think it is a safe generalization to make that the net effect of what has been done, the present situation,is to leave the companies operating in those Provinces ~hich have substantially increased their royalties in roughly the same position. Well, the minister shakes his head. When he speaks, perhaps he wuld vant to touch upon this.

But in any event I was going to go on and point out that all that is irrelevant to Newfoundland because we have not changed our royalty rates in Newfoundland. We have not changed our royalty rates in Newfoundland, We are increasing the mining tax but we have not changed the royalty rates. MR. BARRY: The mining tax is not deductible either. MR. ROBERTS: No, I - otherwise, if the mining tax were deductible then the Province would charge a royalty and call it a mining tax - and a rose by any other name. But, Sir, we are increasing the mining tax by ten per cent, ten points.

We are not talking per cent of income, We are talking points of corporate tax. And instead of - no, I am wrong, I am wrong, I am sorry, Sir - instead of taking five per cent of the net income, of the taxable income derived by the operator we are going to be taking fifteen per cent. We are taking an additional ten per cent of the taxable income.

The point I mn making is that as I understand it - now-, the minister did not give us figures and I do not think dealt with this at any length in his argument, in his presentation of the bill and perhaps he will when he comes to close it- but the total net take from the mining companies in business in Newfoundland will not be significantly greater. They uill be paying less to Ottm:a. They will be paying more to Newfoundland. 722':i

.June 19. 1975. Tape 2470 RH - 3 l welcome that. O~viously that is a good thing. What money we get we cnn spend. What monev tlttawn r,ets~Ottava spends. If they choose to give it to us well and good. But if they choose not to there is remarkably little that we can do about it. So, this hill in itself is not going to make the mining companies pay any greater proportion of their'taxable income to the coffers of the Treasury, federal and provincial together.

It should be noted that Ottawa's decision to vithdraw from the tax field, fifteen points, fifteen per cent 'With an increase as a positive thing, then that would benefit n company. Then as against that saying you can no longer deduct taxes paid to the government of a Province, be they called royalties or be they called taxes, that left us, I believe, more room than we are occupying now. Perhaps 7226

June 19 t 1975 Tape 2471 (Afternoon) PK - l the minister could address himself to that. Let us take examplea. Let us suppose a company made $100,000 hitherto in taxable income in Newfoundland. If they paid a federal corporation tax, Your Honour, of forty per cent of that, now that $100,000, Sir, under the old system would have allowed a deduction of monies paid to the Province for royalties, five per cent. So let us say they made $100,000, and they paid $5,000 to the Province under the five per cent tax - am I right so far? - it left them $95,000 in taxable income.

We have already taken care of their wages and everything. The $100,000 figure is after that. They would have paid forty per cent of that to Ottawa, and that would have given us $38,000 in payments to Ottawa. And then they would have paid another thirteen per cent of the ninety-five per cent to us, and thirteen per cent of ninety­ five per cent is $9,500, and another $2,850, and that is $12.350. I could be wrong on the arithmetic but I think it is close enough. So then out of their $100,000, Mr.

Speaker, the company would have paid the Government of Newfoundland $17,350, and that is $5,000 in royalties or in mining tax.,call it, and $12,350 in corporation. And they would have paid the Government of Canada $38,000 in tax, in corporation tax. Now that was the old system, Sir. Let us now look at our same company with the present system. The company after they paid their uagea and paid their men and paid their gasoline and all of that makes $100,000, They have to pay us $15,000. Okay, that is $15,000 for Newfoundland.

But they are not allowed to take that off the Ottawa - the figure from which Ottawa taxes or the base on which Ottawa taxes, so Ottawa is going to take twenty-five per cent of $100,000, so that is $25,000 that goes to Ottawa. And in addition we get our thirteen per cent on the corporate tax and we are playing it the same way that Ottawa is playing it, the same rules that Ottawa is following because that ii:; the condition under which they collect, If it was not for that they 7227

June 19, 1975 Tape 2471 (Afternoon) would not collect. So we get thirteen per cent of $100,000, $13,000. PK - 2 Our total take, Mr. Speaker, now is $15,000 and $13,000 for a total of $28,000, And they pay Ottawa $25,000. And the total is $53.000, almost exactly the same as they were paying under the old system which was $50, 3 - well it was $55,000 to both governments under the old system. The Newfoundland take has gone up. It has gone up from $17,000 to $28,000. So we are ahead by $11,000 on my examples. N<N I am not going to stand by those figures, Mr. Speaker, until the world ends, butt think they are correct.

I think the example as vorked out is a correct one. So let it be realized that the total tax burden on the mining companies, as I understand it, does not seem to have increased very greatly. The total amount of money accruing to Newfoundland will have increased but not dramatically, not by three times. In my example here, will have increased from $17,500, in round figures, to $28,000, and that is $11.000 on $17,000 - HR. BARRY: The amount we are receiving from mining tax will have increased three times. MR. ROBERTS: Yes. But not the amount received by Newfoundland. The minister said, Hr.

Speaker, that the amount received by mining tax would have increased three times. That is quite right,

Whereas formerly it was $5,000, it will now be $15,000, and that is three times. What concerns me, as one concerned with the public finance of the Province, is not how much we pay on any given heading, or however much we get on any given heading from a company, but what the total take to the Treasury is. Because if we are doing a benefit cost analysis of any sort obviously what counts is everything we get. Nov the other tax rates have not changed, the S,S.A. and the gasoline tax still apply as they would have before. There has been no change in that. But surely what counts, Mr.

Speaker, is the total amount of money which the Minister of Finance receives in a year in respect of the operations of a company, and in this case a mining company. So the effect of the Ottawa abatement 7228

June 19, 1975 Tape 2472 (afternoon) 1!1-1 and the effect of the change in deductibility of mineral taxes and royalties has been to leave the rax burden of the companies substantially unchanged. I think my figures would he eounl h- tnJP with any level of taxable income. I do not know what vnuld hanrwn if the royalties have increased dramatically from say, $5,000 to $60,000. Hut that is not our case here. We are talking of fivP per cent to fifteen per cent or $5,nno to SlS,nno in our example.

So, I think that is a point worth making, We are not overtaxing the mining companies, I nm not suggesting we should,but let it be known that as I understand it, people I have discusserl this with, they are not ~oing to be paying a great deal more of their total income over to government~ federal and government provincial taken together.

The fact that we are able to increase our taxes here is largely because of the fact that Ottawa 1 for reasons nothing to do with Newfoundland but because of the situation in Alberta and :fn Saskatchewan and Rritish Colurrbia 1 Ottawa has agreed to rebate a large part of its tax revenu.s. Now, Sir, it should be noted that in each case we are talking only about taxable income, the company's income after deducting there­ from the amounts that the Gov~mment of Canada will recognize as being legitimate expenses, expenses incurred in the process of earning the income.

Now, that is one of the taxes levied by this act, Sir. It is an increase from five per cent to fifteen per cent. That is well and good but it does not Bpply to any of the existing operations. It is not going to give us a nickle more from any of the arrangements that are there. I do nnt see how it could. 1 do not think in policy it should. But the fact remains it will not. Then in addition to that it will not significnntly increase the total tax burden of the companies concerned althnu.1•h it will increase the amounts which .,ie recdve directly in our trC'nsury. ,mrl that 1s very mue:h to the gno<l.

That 1,-J,>S vii; I raised the eqmllization point hecnuse I w;,nt rn know just t.'hat ,1ffcct th:!s will have on equalization. 7229

June lQ, 1975 Tape 2472 (afternoon) rn-2 You know,equalization is a strange thing, Mr. Speaker, a very stranr,e thinr,. Tt is almost a ~uaranteed annual income. If we were talking spcfal \.."elfare policy equalization is a guaranteed annual income. The Government of Canada is saying you will get a certain amount. Nmt, it is different from stabili%ation which is another formula that Ottawa used in their dealings with provinces. nut equalization sort of says, we will guarantee that if you work so many hours you will earn so many dollars an hour. That is not a had analogy at all.

It is like a minimum wage and a guaranteed annual inco~.e. If we make the money on our own then Ottawa does not pay it up. When the Minister of Social Services comes to look at guaranteed annual incomes, I am sure one of the hig policy problems is the problem of incentives. You knou, he is nodding his head in agreement and I think he and T are on all fours at this one. You knm,,r, I do not - this is not the place to debate it and I am not sure that any perfect solution has been found but it is the problem.

If a man is receivinr, sod.al assistance, Yhat incentive 1s there for hin to ?-Pt out nnc1 work nnd earn some money and get nff social assistance. t once discovered the quite startling fact that people on social assistance in Newfoundland were paying 100 per cent income t;lx. In fact they are nnd were because if they earned a dollar under c~rtain conditions a dollar came off their socinl assistance check and that is 100 per cent income tax. story altogether. But that is another So, so much for the mininp, tax part of this bill, Mr, Speaker.

The Raval Commisslcm recomr:iendati.on was not accepted by the government. That is renlly neither here nor there. I mean, the government are not bound to accept any Royal Commission reports unless they want to. The commission which I think did a splendid job hy the wny_and I think the citl?.ens nf Newfoundland 01,,e a debt to nr. Goundrey and Mr. Noonan, not Mr. Noonam, Mr. Maher, Mary Noonan 's father,and Mr. !-fart in. the three commissioners. They wt>:re Rood choices and discharged their commission with promptitude 7230

June 19, 1975 Tape 2472 (afternoon) and with dispatch and I think a very excellent report resulted. The cotmnission recommended, I think it Yas a seven per cent tax on income as opposed to a fifteen per cent tax. I am looking through the recommendations but I do not see the level here. I think it was seven per cent. MR, BARRY: But you have to tie that in with the other th1rty per cent as well. TB-3 MR. ROBERTS: Right, Right. Well, I will come back to that. I suspect a total tax burden on a company under the bill is not significantly different than that what would have obtained - MR.

BARRY: 11.6% as recommended• MR. ROBERTS: So in any event the commission recommended a seven per cent income tax and we are now looking at a fifteen per cent tncome tax. Of course that is in add:ftion to the normal corporation tax which in the case of Newfoundland is thirteen points. So, what we will have now is that a company making money in the mineral business in Newfoundland will 723.l

June 19, 1975 Tape No. 2473 NM - 1 pay twenty-eight per cent of that money to the Government of Newfoundland, fifteen per cent as a mining tax, thirteen per cent as an income tax and will then pay twenty-five per cent to the Government of Canada as an income tax and so the total tax burden is fifty-three per cent, not significantly different than it was before all the folderol started, the only change in it is that we are getting more as the Government of Newfoundland. Well and good. Now, Sir, the other tax in the bill is the Mineral Rights Tax and it is a very great number of words.

Your Honour will find it in part three of sections nine and ten of the bill and there are two separate taxes because there are two separate situations to be taxed. There is the one where an owner has said to somebody, well come in and mine on my land, I hold or I own the mineral rights and I have - you come in and you in effect carry out the mining operations and we will make some arrangement back and forth.and these people now have to pay a tax which is set forth in

section nine. And there are a lot of words there, Mr. Speaker, and the mre I read the uords and the more lawyers I talk to the less the words seem to mean. The