Legislative Assembly of Ontario

The House resumed at 8 p.m.

CORPORATIONS TAX AMENDMENT ACT (CONCLUDED)

Resumption of the debate on the motion for second reading of Bill 88, An Act to amend the Corporations Tax Act.

Mr. Speaker: When we rose at 6 o’clock, the hon. member for Beaches-Woodbine was about to hold the floor.

Ms. Bryden: I would like to thank the Liberal critic for yielding his position to let me speak following the minister, since I have a rather important engagement tonight connected with my environmental critic responsibilities. I will carry on; the Liberal critic will follow. I’d like to thank him and his colleagues for the courtesy.

This amendment to the Corporations Tax is a rather important bill, because it introduces a new principle, the principle of automatically opting in to federal tax changes in the corporate tax field.

In the past, Ontario has opted in only by bringing in its own legislation, varying the federal tax in such legislation to the extent it desires. But now we will be automatically opted into any federal tax changes unless we introduce specific legislation to vary that federal legislation. So, it is a sort of lock-step principle we are adopting on federal corporate taxation.

I find it a bit surprising to see such unanimity of policy between the Liberals at Ottawa and the Conservatives at Queen’s Park. But perhaps it’s not surprising when we consider the field we are talking about is the treatment of corporations. They both appear to have, basically, the same philosophy with regard to the taxation of corporations. That is to design a tax system which favours the corporations and puts more and more of the burden on the average individual taxpayer and on regressive taxes such as user charges, property taxes, even motor vehicle licence fees which in the next two months are going up sharply in southern Ontario.

Mr. Haggerty: In southern Ontario?

Ms. Bryden: A great many people in southern Ontario who will be noticing that.

Both the Ottawa government and the Queen’s Park government have been taking a smaller and smaller percentage of their revenues from the corporations in the past decade. In Ontario, the figure has dropped from 17.5 per cent of total revenues in 1965-66 to about 10.4 per cent now.

This adoption of the lock-step legislation also indicates the acceptance by both governments of the current thrust of federal tax legislation, which follows the outdated and discredited philosophy that the way to stimulate the economy is to give large tax concessions to the corporations. Fast write-offs, concessions to resource industries and inventory allowances have not stimulated the economy. They have simply stimulated corporation profits.

A recent survey by the Canadian Dow Jones showed that corporation profits for 128 companies surveyed went up by 17 per cent in the third quarter of 1977 compared to a year ago. That’s a lot higher rate of increase than the six per cent that’s being allowed to wage earners in this year.

This represents the sixth quarterly gain in corporate profits. At the same time we have faced the highest unemployment rate in history, and shocking deficits at both levels. These governments should be looking for tax revenue where the money is, and using that money for direct job creation to prime the pump by tax reductions for the low and middle income groups.

I have pointed out before in this House that Ontario’s corporation tax rate hasn’t been increased since 1967, over 10 years. We are below four other provinces in the rate of tax at 12 per cent. In fact, only Prince Edward Island and Alberta are below us, and we know that Alberta collects large amounts of revenue from oil and gas licences and royalties.

There are some questions I would like to ask as to the effects of this lock-step stance which the bill effects. The first question is whether we need a separate corporation tax administration, if we are going to be in such close conformity to the federal Act. What is the present cost of our corporations tax administration, since in the estimates it is lumped in with several other tax collection operations? I would like to ask the minister, will there be any savings from this simplification of the Corporations Tax Act and of the forms that have to be filled out?

We might say that the cost of operating our own corporations tax administration is justified if we are going to make use of the opportunity to vary our tax from the federal tax on matters of significant principle, but at the moment I don’t see much desire on the part of this government to do so. However, perhaps it’s wise to keep that option open so as to keep the administration in place for the time when the NDP takes over.

In the meantime this hill is certainly welcome in that it simplifies the operation of the tax. Everybody likes a reduction in form filling. It also saves the time of the Legislature, since we would not have to put through numerous amendments to the Act every year to conform to the federal Act. But, of course, it makes it more difficult for this Legislature to monitor our tax system and to vary it. In fact, it may be there will be a feeling with this sort of joint corporations tax that one should not tinker with it; except on matters of very great importance, if we are unhappy with certain clauses we will hesitate to ask the federal government to change them.

It may also reduce our bargaining powers with the federal government if they know that anything they enact we will automatically enact, unless we are willing to introduce a special bill to set that aside. On the other hand, it might increase our bargaining power in that the federal government will be more hesitant to make changes when it knows that every change it makes is automatically enacted in Ontario by virtue of this bill.

It may mean less consultation with us before tax changes. In the past, federal-provincial conferences have usually gone over proposed tax changes if they are of significance, within the limits of cabinet secrecy. Whether there will be as much consultation under this automatic opting in, I am not sure.

The minister in her opening remarks on the bill mentioned the taxation advisory committee, which had given her considerable assistance in the drafting of this bill. It is a good idea to consult outside people, but I wonder whether it should be just people who are connected mainly with the business world, or who work with business corporations. She mentions the Canadian Bar Association, the Institute of Chartered Accountants, the Tax Executives Institute, and I think there was one other group.

Hon. Mrs. Scrivener: The Canadian Federation of Independent Business.

Ms. Bryden: Oh yes, thank you, Madam Minister. The Canadian Federation of Independent Business. It seems to me corporation tax is not just for the corporation; it’s for the raising of revenue in this province. If you are going to consult people outside, you should also consult the Consumers’ Association of Canada. You might also consult a distinguished economist such as Gordon Milling, who is head of the research department of the United Steelworkers, or John Eleen, the Ontario Federation of Labour’s economist.

I wanted to ask the minister whether this bill brings into effect the three per cent inventory valuation adjustment which the provincial Treasurer announced in his 1977 budget. This was supposed to compensate, to some extent, for the effects of inflation on inventories. There is a lot of controversy about inflation accounting. I understand this particular change in the budget was not brought in last July when the other tax changes were being brought in because Ontario had a committee investigating the whole question of inflation accounting. Now that committee has reported, I am not sure whether this bill has brought in that part of the Treasurer’s proposals in the budget.

The report of the committee on inflation accounting concluded that adoption of a comprehensive method of inflation accounting or current value accounting is not appropriate at this time. However, as an interim measure, it did suggest corporations might, as a supplement to their annual reports, disclose what they considered their accounts expressed on an inflation basis. This was to be as a supplement to their conventional financial statement to enable people to look at both figures as an aid in decision-making and policy development.

It is rather notable that the committee did not suggest the adjusted results should be reflected in a revised treatment of business income for tax purposes. For that reason, I am curious to know if the government has moved any further in that field.

In a minority report to the report of the committee on inflation accounting, Gordon Milling, the Steelworkers’ economist, raised serious questions about inflation accounting as favouring the corporate sector with a special degree of inflation compensation not enjoyed by the average taxpayer or wage earner. 1 would hope we are not moving ahead with that inventory valuation adjustment.

My colleagues are going to deal with some of the other aspects of this bill, such as the introduction of the allowance for venture investment corporations and some of the other details, so I think those are the main remarks I wanted to make.

[8:15]

Mr. Haggerty: I want to touch upon certain areas of An Act to amend the Corporations Tax Act, 1972. Any form of income tax, whether it be corporations tax or personal income tax, has always provided a difficult area for many individuals or even experts to understand fully.

The purpose of this hill and its 28 amendments is to bring forward provincial tax laws to parallel the federal tax changes, and any amendments that may be forthcoming in the tax changes. It is to dovetail provincial legislation with federal laws. If there is a disagreement from the Ministry of Revenue, changes will then be made separately, otherwise the bill will automatically apply to any federal legislation, as I understand the Act.

It is a streamlining process making legislation easier for the public to understand. There are certain areas in which the bill doesn’t coincide or parallel the federal legislation. One is the management fee, I guess it is; election contributions; and the deduction for advertising on foreign communications media, such as television and radio.

There is another area I want to deal with in more detail. It relates to the area of VIC. This particular area is an area I’m not quite sold on. I don’t think we know enough about or understand this particular section of the bill. It’s the section that includes the venture investment corporations.

At this stage the ministry is asking the Legislature to give final approval to its proposal introduced in the last provincial budget. The legislation to permit the incorporation of a venture investment corporation was going to be passed into law this year, in 1977, to be proclaimed on January 1, 1978. It’s almost like rubber-stamping legislation that’s already been passed.

The intent of this particular section of the bill is to put new life into, and to assist, small business corporations. It relates to risks taken and certain tax breaks that follow. Looking at it in more detail, I find all the bill relates to me is it’s a tax deferment for the larger corporations.

As I said before, I’m not solely convinced this is going to give new life to our economy. We do need employment and job creation.

During her estimates the minister was asked a question concerning this particular section of the bill. One of her staff indicated the purpose of the bill was, in short, that any corporation investing in a venture investment corporation will be able to deduct an amount which is equal to 250 per cent of its investment in a VIC at 12 per cent, which is the corporate income tax rate, in computing its income tax. That particular deduction is worth 30 per cent in terms of tax rate to the corporation. Instead of getting 12 per cent, which is the normal corporate rate of any kind of deduction in computing income, they can actually claim a 30 per cent tax rate for their investment in a VIC. As you can see, it could be a substantial tax deferment program for large corporations. Quoting from page six of the submission to the Royal Commission on Corporation Concentration by the Association of Canadian Venture Capital Companies -- apparently they have done some study in this area:

“The Canadian venture capital industry seems to be moving away from financing new products and technologies. Most venture capitalists currently have a diminishing interest in start-ups. A survey of the members of our association indicates that newly started companies represent only 11 per cent of the total venture capital invested in 1974…”

I believe 1974 was when the Treasurer (Mr. McKeough) had the brainwave to introduce this particular piece of legislation. For some unknown reason it was tabled or not brought forward.

The report goes on to say: “...invested in 1974 and 18 per cent 1975. Sixty per cent of the funds invested by our industry in 1974 and 70 per cent in 1975 went into the development and expansion of already existing corporations, with almost 50 per cent of such companies so funded already having received funds from the venture capitalist … in other words, a significant percentage of the Canadian venture capital industry’s activities is currently being devoted to keeping going those companies representing the venture capitalists’ better investment.” There is also evidence “...that weak investments are being abandoned more quickly by Canadian venture capitalists.

“Problems currently facing the Canadian venture capital industry: Venture capitalists are probably involved in the riskiest and most difficult segment of the investment world. They have traditionally been willing to take risks on all kinds of unknowns -- new concepts, technology, and often unproven management.

“Yet, as indicated in the previous section, there is a distinct trend away from the higher-risk end of the venture capital spectrum towards more conservative second, third and fourth round financing in more established, sometimes even public, companies.

“Of further concern is the erosion of the Canadian venture capital industry itself. In the past five years, there have been more withdrawals than new entrants of pools of venture capital in Canada. Some of the more significant and, in certain instances, more successful venture capital companies that had operated in Canada have or are in the process of withdrawing: Charterhouse Canada Limited (backed by an English merchant bank); Guardian Venture Limited…” There’s a list of them, about seven or eight -- “International Capital Corporation (Royal Bank of Canada; IAC; United Corporation); a division of MacMillan Bloedel Limited.”

He goes on to say: “The flow of funds to small business has also been acutely curtailed because the individual investor, as well as the larger family pools of capital, have virtually abandoned the equity markets. Not only are such investors almost totally absent from the purchase of common stock of public companies but also from any equity-related financing of private Canadian business entities. The following statistics reinforce the collapse of the new issue market for growth companies...”

And the list goes from 1968 -- the number of issues in the United States were 358; in Canada it was 54. The boom year was 1969; apparently a number of them entered into agreement: there were 698 issues in the United States and 150 in Canada. But by 1975 it had gradually dropped; in the United States there were four issues; in Canada, two.

It goes on to say: “This reduction of risk and expansion capital directed to start-up or junior growth companies has become an acute problem and threatens to have a serious adverse impact on the future economy of our nation. It is not so much that the capital isn’t available, but rather that the risk of such investings have increased immeasurably without a concomitant augmentation of the rewards.

“The major reasons for this are:

“1. Many investors in private and public small and medium-sized companies in the 1960s undertook such activity with little sophistication. Improper in-depth research of the quality of investment and subsequent inability to monitor such investments led to many investors being badly burnt. This was not confined solely to Canadian investors.

“2. The implementation of capital gains tax in Canada, effective January 1, 1972, lowered significantly the potential net after tax returns on risk investment.”

I’m sure the minister has that particular section in the bill, where the persons investing in a VIC over a period of five to seven years perhaps -- that’s the length of the investment, the experts tell me -- if there’s any profit to be made, it can be related to capital gains tax.

Then in the report by the Ministry of State for Science and Technology, entitled, “The Availability of Risk Capital for Technological Innovation and Invention in Canada,” on page 47, on the venture capital industry it states: “Of 79 firms surveyed, 77 of which were contacted, all of whom either are or were active in making venture capital investments over the past three years, only 46 were found to be ‘active’ or ‘semi-active’ in the field in Canada today. This includes several recently founded companies.

“The venture capital industry in Canada is far more conservative than generally thought by those outside the financial community, allocating some 95 per cent of its funds and effort to developing existing business rather than funding start-ups. It is estimated that 33 (77 per cent) of the 46 firms reporting fail into the ‘conservative or very conservative’ category, with 72 per cent of the reported funds available for investment in their hands. Of the balance, only some two per cent of the total available funds reported is handled in the three firms (six per cent) classified as ‘aggressive.’

“The majority of existing venture capital firms are operating with a small current capital availability. Of the 46 firms deemed active in the field, 30 (65.2 per cent) report $1 million or less currently available for investment.

“Venture capital firms appear to have a life cycle, probably from five to seven years, unless heavily funded initially, or are in receipt of a regular injection of new capital. Therefore, it is essential to encourage the formation of new venture capital companies or cause funds to be injected into existing venture companies, if the industry is to remain an important supplier of high risk capital. (Fifty-nine per cent of the firms surveyed in a 1971 study are now inactive in the venture capital field.)”

After reading those two reports I wonder why the minister is bringing forth this particular bill, or why even the Treasurer is introducing the VIC program in Ontario. It’s not going to produce a job creation program. It’s not going to produce an upswing in the economy in Ontario. So one would have to question the reason for bringing forth such legislation. It may improve some areas of the economy, but I don’t think it’s going to do the job the people of Ontario are looking forward to.

We’ve seen where we’ve allowed industry certain tax concessions. We see it in the resource allowance. We see it in the depletion allowance sector. We see it in the capital cost allowance. We primed the private sector but for some unknown reason the economy isn’t moving upward.

We’ve seen the Treasurer bring in tax credits for production machinery in the province of Ontario. We haven’t seen any jobs that were supposed to be created by this particular program. There’s been no proper monitoring of such a program as it relates to job opportunities. We know that it’s going to cost the Treasurer some $160 million in lost revenue. I don’t know what this particular section of the bill will cost in the loss of revenue to the province of Ontario. There’s been no indication what revenue is expected by this deferment of taxes through such a program.

I hope the minister is right that it is going to bring forward an upswing in the economy, that new businesses will be started. But based upon the two articles I road to the minister, it doesn’t look hopeful we’re going to be moving in that direction.

[8:30]

I think the minister’s going to have to look to other options to stimulate the Ontario economy. There are other areas to which the minister can give certain tax concessions. One would give power to the consumer to go out and purchase new goods, and that is a cut in the personal income tax. Some would argue it may add to inflation again. I don’t think the cut would be so great it would cause that much alarm that we’re going to have high inflationary cost again.

We can have a reduction in the retail sales tax. That would put some life into the economy. This was proven in the year 1975 when it was applied to the automobile industry. There was a certain loss to the Minister of Revenue but I think in the long run it kept the economy going. It kept job opportunities available for persons in the province of Ontario. I think the main concern today is about jobs. What about the unemployment situation here? What can we do to create employment in the province of Ontario?

If I’m not mistaken, I think the Treasurer suggested there would be certain tax cuts and he would cut the personal income tax providing it was subsidized by the federal government. That responsibility lies with the Treasurer and with this minister.

I think there are other areas to which the government should be looking. I’m sure there are funds available through the province of Ontario.

The particular article I was looking for suggested the government provide measures for the small business sector of our economy. I’m talking about the working people of the province of Ontario. They should have some opportunity to invest some of their earnings in a business venture in the province of Ontario. The area I’m suggesting has proven successful in the United States. No doubt it could be successful here. This is again from a submission to the Royal Commission on Corporate Concentration.

The Association of Canadian Venture Capital Companies presented this brief on June 6, 1976. It said they should be encouraging a greater flow of capital to small and medium-sized businesses which require changes in the present income tax structure. “Corporations should be permitted to deduct from taxable income a certain percentage of their annual gross payroll -- it is suggested between 10 to 15 per cent -- if such funds are given to an employees stock ownership trust, used for the purchase of that corporation’s common stock. This would improve the liquidity in private company share transactions. An alternative way out for investments in small companies would enhance investment in such companies and the opportunity for entrepreneurs and key management to realize on their ownership interest.”

I think they’re suggesting through this particular comment there is an area in the province of Ontario which should be tapped.

I recall the discussions we had when I was a member of the select committee dealing with Ontario Hydro and its proposed rates in 1976, about the province, or the government, or Ontario Hydro going to the foreign market, into the United States, to borrow money. If you go to the United States and borrow a huge sum such as $500 million or $350 million as Ontario Hydro has done it costs Ontario taxpayers about 18 to 20 per cent interest on that borrowed money. That is money leaving this country. The interest is going over there and it’s a healthy interest. I suppose that’s what you can call class triple-A, isn’t it? That’s right. That’s why we get such a good rating over there, because we’re paying 18 per cent on our money. Of course, one of the reasons we’re paying that is the devaluation of the Canadian dollar and the exchange in the American money.

But if you go back to the last war, millions of dollars were raised through Canada bonds and the purchase of War Savings Certificates. You could buy them at $5, $10, $50 or whatever off your payroll. A huge amount of money was raised at that time; it was simple to get money this way. In fact, in the last government bond issue some $2.4 million was raised and it was raised at $100 or $50, in that area.

There is no reason why the government can’t tap the private sector. I’m talking about the labour sector, the employees in industry. We know by looking at the statements of banks, trust companies and credit unions there is a wealth of money there.

By coincidence in Canada we perhaps pay more in taxes than any other country in the world. In the United States they’re not taxed as heavily as we are here. Perhaps that’s one of the reasons why the business sector can go out and move more openly, creating more productivity and more employment. In the States, you can purchase municipal bonds, utility bonds and there is a good break given to the average person who wants to invest in corporation bonds, the blue chip market. I’m speaking in particular of government bonds -- you purchase these bonds and you’re given tax-free interest.

I suggest to the government, this is the market into which we should be moving. Giving somebody tax-free interest on $100 is not going to break this government considering what we’re paying in the foreign market. That’s what is hurting us more here than anything. It adds to the cost of inflation.

I suggest this is one way the government could raise money without it costing us too much. It also gives a break to the average employee in industry today, enabling him to say “I am a shareholder in the government in a sense; I am getting a break.”

I can tell the minister this much: without that employee coming into the picture, this province is pretty near broke. It’s almost bankrupt. It’s bankrupt when it has to pay interest rates at that high a rate.

I’m not going to oppose the bill. I don’t think our party is going to oppose the bill. But I don’t think it goes far enough to create jobs. This is what is hurting our economy. The Premier (Mr. Davis) said that to the Prime Minister of Canada the other day on the question of unity. The matter is to get the economy rolling again. I’d have to agree with the Premier on that particular statement and this is the direction in which we should be moving, not giving these little piecemeal handouts to the large corporations which have not proven they are creating jobs according to the purpose of the legislation -- any of the legislation. There is no proper monitoring done by the government.

I notice this particular bill says it will be done jointly with the Minister of Consumer and Commercial Relations. Again, the minister may run into difficulty there if the government doesn’t have the proper monitoring system.

I suggest to the minister this bill doesn’t go far enough. It doesn’t provide the goal of creating jobs and I suggest to the minister it’s time she went back to the drawing board and brought something in here to provide that employment opportunity for Ontario citizens.

There are some particular areas I want to get into in detail in third reading, relating to the matter of exploration of gas and oil in Ontario. There’s an area on which I want to question in some detail during third reading.

I see nothing wrong with the present bill as it relates to the matter of paralleling provincial legislation with the federal legislation, but again I would have to question the minister. I raised the matter during the minister’s estimates that we have one collection agency for personal income tax purposes, with the federal government collecting it for the province of Ontario. If we are that close in paralleling corporation tax with the federal government and their tax schemes, then why not have one tax collector to do both jobs? I am sure we could have a saving here in manpower, in that we wouldn’t have to have parties going through two different government agencies in connection with their corporation taxes.

There is another good point I like about the section that relates to the tax field, and that is if there is some dispute on assessment for corporation taxes, at least the door’s open that the minister may make that correction at that level without going to the higher courts. Based on that, I will support the bill and our party will support the bill, but we say it doesn’t go quite far enough.

Mr. Acting Speaker: The member for Brantford.

Mr. Makarchuk: This bill is another good example of social justice. It’s social justice for the corporations, which is typical of the Tory philosophy or the intent of the whole Tory management of the province.

The big problems with all of the tax legislation that we get from this government is the fact that you still do not work to try and provide an equitable tax system for the people of this province. The net result of that is evident when you look at the distribution of income in our society. Once again you find out that the 20 per cent of the people at the bottom, who used to get about four per cent of the national pie, are now getting slightly less; and the 20 per cent at the top, who used to get about 43 to 44 per cent, are getting a slight percentage point more. If you have a tax system in this province that was a fair tax system, that provided the regulations and legislation that would ensure that all people pay their fair share of taxation, then you wouldn’t have the kind of discrepancy and maldistribution of income you do have in society right now.

This bill has some commendable features in terms of eliminating a lot of paper work, making life easier for the accountants. Perhaps they will be able to devote more time into figuring out new ways of evading the payment of taxes; and it certainly will do that. But it really still doesn’t plug the loopholes; and you still can take a trip to Hawaii on the taxpayers or charge it to your business; you can still have cars. All sorts of things, under the existing tax system, are available to people within the corporate sector which are not available to other people in the world. If you look at the people who perhaps sit in the galleries, they have to pay taxes. What we are saying is that the other people who are getting away with it should also be paying taxes. We are not saying they should be paying more, but we think they should be carrying their load.

In Canada there used to be a time, under federal legislation and provincial legislation, where people with incomes of over $1 million were not paying one cent in income tax. Since the federal government has brought about some changes in the Act and tried to plug some of the loopholes, I think the figure now is $600,000. There are people in this country who have incomes of that size and still get away without having to pay a cent of income tax. This bill does not try to remove those kind of unfair relationships that exist in our society.

There is a great deal of concern on the part of our party and ourselves about repatriating our economy, about having some control about what happens in our economy, and that’s very important. You will find that just about any responsible group in Canada, the Economic Council of Canada, the Science Council, and everybody, will tell you that one of the reasons we can’t manage this economy is because we don’t control it, that all the decisions are made somewhere else. Proper tax legislation slowly but surely can move in the direction of ensuring that Canadians acquire control of their economy; that we have a say in what happens in our economy. There are other methods; but by using tax legislation you could bring about that kind of a change. Again you do absolutely nothing on this; you allow the condition to persist. You allow the amount of foreign control of our economy to increase; you sit back and encourage it; you seem to think that this is the answer. You send your people to Hong Kong; you send them to Japan; next thing you know you will probably be sending Claude Bennett to Albania to try to get some support.

[8:45]

Mr. Foulds: Not a bad place to send Claude, as a matter of fact.

Mr. Roy: As long as he promises to stay.

Mr. Makarchuk: But instead of trying to arrange your economy through the use of tax legislation to ensure that we have control of it, you use the opposite method and you continue to try to get somebody in. They don’t come into this country because they feel generous towards us or because they are feeling charitable towards this country; they come here because they know they can make a buck. They recognize the representatives who are sent out -- as I said before, they can tell a mark from a distance. They know there is a province up for plunder in this country, and that is exactly what you are doing.

In the discussion of the revenue estimates with the minister, there was a great deal of argument between ourselves regarding the matter of leakage: whether the Ontario tax department adequately collected the tax that should have been payable to the people of Ontario; whether foreign or multi-national corporations were evading taxation by various means. The minister and her officials -- who are sitting under the galleries over there -- incidentally were really quite adamant and said, “Yes, we are collecting. We are certainly getting the money that is due the province,” and so on.

I am sure the minister must have read the article in the Globe and Mail, which appeared about a week ago -- and this was after the estimates, I may add. What is happening is that the Canadian and the United States tax authorities are starting to audit these firms. The reason they are doing that, if I may quote from this, is the fact that they feel they are getting away without having to pay taxes.

I’ll quote some of the pertinent paragraphs from this article. It is a report by Mr. James Gourlay, who is the Director General of Revenue Canada tax audit division. The writer said, “Mr. Gourlay said both countries are concerned about the tendency by multinational companies to siphon off profits from North Americans to subsidiaries in countries where there is little or no corporate income tax, such as the Bahamas, New Hebrides, Liechtenstein, Panama and Hong Kong. He said that he has no estimate of how much income tax is lost to the Canadian government as a result of profits being funnelled to tax havens. The total loss for all individuals and corporations, not just resulting from tax haven use but from all types of tax evasion, is estimated at about six per cent of the total tax collected each year. This would amount to $1.7 billion more tax being collected in Canada each year if there was no evasion.”

I may interject here that if Ontario, in a rough sense, collected one third of the tax in Canada, that would mean a fairly sizable sum of money if they didn’t permit this evasion to continue.

I’ll continue reading from the article: “But Mr. Gourlay said that with his 25 years of experience in tax administration, my gut feeling is that it is higher than six per cent.”

Another paragraph from the same article says: “Some use of tax havens by multinational companies is legitimate under Canadian and US law. For instance, if a North American company importing a product from Asia has its stock in Hour Kong for repackaging, the profits from this can legitimately stay in the tax haven and not be taxed in Canada or the United States.”

Your legislation has absolutely nothing in it to try to prevent those kinds of distortions in the tax system.

Continuing from the article: “A secondary thrust is to show that the transfer prices on purchases and sales between the multi-national affiliates and the tax haven subsidiaries are out of line with arm’s-length market price, and therefore are contributing to the funnelling of profits to tax havens.

“Companies also use other techniques to divert profits to tax haven subsidiaries, such as payment to them of unwarranted management, advertising, or insurance fees.”

This again was brought out in the discussions we had on the minister’s estimates. The minister finally agreed that yes, we did sue some people; yes, we did collect some money. But the minister refuses to acknowledge that there is leakage from our tax system, that we are not collecting the legitimate tax that belongs to the people of Ontario, and that she is not doing anything about it.

I’d like here to touch briefly on the depletion allowances mentioned in the bill. It makes one wonder, being aware of what is going on in multi-national corporations and how they operate, whether your department really knows, when you grant allowances to Imperial Oil or any of the oil companies -- and I presume you do that and it’s in your legislation -- whether you know what their expenses are in Saudi Arabia or some other foreign country.

I’m sure that somewhere along the line book expenses can be doctored. You have absolutely no way of really checking them to find out whether they’re legitimate or not, but I’m sure they’re used by the local auditors. You get the audited statement from the economy, and you accept it as gospel truth. I’d like to see you sometime move in on these oil companies and find out just exactly how they apportion the profits and expenses, who pays what and how much, and whether they’re legitimate or not. Because they certainly make profits here, and if they make profits in Ontario, they should be taxed on the basis of what they make in Ontario.

The idea of the venture investment corporation is another of those difficult Tory policies that is -- well, sort of more for the greedy. When you give someone a 250 per cent tax exemption, again the people all over Ontario would be happy to get that kind of tax exemption or tax break. As was pointed out earlier, there is absolutely no indication that this is going to do anything for jobs in Ontario, that this is going to create new investment, that this is going to start new businesses or anything of that nature.

Basically, the businessman today, if he has something good, if he feels he can make a profit, will go ahead and do it. He’s not going to wait because he’s going to get a fantastic tax write-off. The assumption is that I’m going to take a bigger risk because I will be able to get a bigger tax break. I don’t think there’s a businessman in Ontario prepared to take any kind of risk -- no matter what the tax breaks are -- if he has not got assurance he’s going to either get his money back or make a profit.

All you’re doing here is giving to our corporate elite. They call them the paper-pushers, the paper-hangers, the people who move cheques around and nothing else. They don’t start industry; they don’t create jobs; they’re involved in various take-overs. All you’re doing is giving them some extra tax breaks, so they’ll have more money to salt away and can push more papers.

If your government was serious about creating jobs, I suggest you give John Rhodes another $20 million or $30 million for the home repair program. As well as taking care of a lot of decrepit housing, that will do a lot more for creating jobs in Ontario than any of your venture capital nonsense.

Build housing at cost, ensure that land for housing goes out at cost, service land, cut out the speculative nonsense and you’ll do a lot more for jobs in this province than you would anywhere else. You don’t have to sit back and wait for someone to go out and look for new resources or prospect in Ontario. If you feel that they’re not doing it because of certain tax restrictions -- which do not exist in Ontario, incidentally -- if they argue that way, perhaps you should start looking at joint venture projects in prospecting, in industry, in refineries, in smelting. We could start getting those secondary jobs in the fabricating plants, start getting those secondary jobs in Canada, in Ontario, instead of shipping them out as we are doing right now.

Again, your legislation does absolutely nothing for this. There were 1,000 people in front of this building at noon today. They had a very clear message for this government: we want jobs. We need jobs in this province, so we have to do things to create the jobs in this province.

It’s not something in the hands of the gods or something supernatural. The problem, the economy, is in the hands of the people of the province, the governments of this province and this country. Both of them are giving us the same rhetoric, the same nonsense we heard in the thirties. Instead of dealing with them, they look for scapegoats.

Mr. Swart: But you can’t interfere with the corporate sector.

Mr. Makarchuk: And the favourite scapegoats right now are the people in government. Of course, if we get rid of the people who depend on the Children’s Aid Societies, get rid of the people in the hospitals, get rid of the people in the nursing homes and get rid of some of the people in all those other institutions, everything would be fine. Earlier it was the trade unions; they were the favourite scapegoats. Then you put in the nurses because they went on strike. Then you put in the teachers because they went on strike. Now you’ve got the public servants in there. That is the way you run your damn economy. You go around looking for scapegoats instead of dealing with the problems that affect our economy, that affect our jobs on a sustained and concerted basis, so you know what you are doing and where you are going, and how to try and get there.

You are not doing any of that. Your legislation here is an example of a lack of direction in terms of ensuring your economy operates in a way that provides jobs. The one item with which we are going to deal -- and the minister can explain why there has been a departure from the federal legislation -- is section 7, dealing with the fact Ontario allows the spending of money on television, advertising, et cetera, at the border points as an expense, whereas the federal government does not. I want to tell the minister right now, unless she has a very good reason, we will be moving an amendment to eliminate section 7 so the same rules that apply to the federal corporation tax will also be applied in Ontario and firms will no longer he able to use the money spent for advertising on American TV as a legitimate expense in figuring out their corporation tax.

As my colleague has said, we will reluctantly support this bill. We see it as an improvement, as was mentioned earlier, in that it helps to clear up some of the paper work, perhaps making things a little more readable and understandable to the people of this country and of this province. But in terms of the general thrust of the whole corporate structure, the way you mange the economy, it’s a very poor piece of legislation; it is typically Tory.

Mr. Roy: Mr. Speaker, I wasn’t going to speak on this bill, but in listening to the comments of my colleague from Brantford to my left here, I feel when I hear some of those comments about what his solution is to the problem of unemployment, the problem of taxation, the problem of the corporation, it’s not quite that simple. It seems certain things have to be said so it is quite clear where different parties stand in relation to certain legislation.

I must admit I was somewhat surprised, after listening to his comments, that he ended it all by saying he was going to vote in favour of the bill.

Mr. Foulds: He persuaded you to vote against it, did he?

Mr. Roy: He didn’t persuade me to vote against it, but he has persuaded me, when I hear the type of rhetoric and philosophy espoused by the people on my left about this type of legislation, there is some sort of an onus on us to take an opposite position. I think it follows, in fact, naturally.

I say, Mr. Speaker, without any hesitation or apology whatsoever, that I think a lot of what has been said here about the question of taxation, profits, corporations and jobs is basically hog-wash; and it is. One of the things my friend is talking about is the question of taxes, profits and corporations. One of the problems is, jobs aren’t created out of thin air. We, as a party, would like to go on record as saying the role of government is not to create jobs. It is the role of private enterprise to create jobs and we are not afraid to say that.

Mr. Makarchuk: What if they have a conflict of interest?

Interjections.

Mr. Roy: You see, Mr. Speaker, the interesting part is we let them speak and don’t interrupt; we listen to their hog-wash, which is basically what it is, espousing their philosophy -- which may sell well to an NDP convention but the people on the street who know better know it for what it is. But the minute we get up and make certain comments in opposition to this, or espouse a different type of philosophy, then they get all excited.

Mr. Samis: Tories will do that to you as well.

Mr. Swart: Your position is similar to that of the Tories.

Mr. Lupusella: But free enterprise is obsolete; now what are you going to do?

Mr. Roy: Then they start interrupting. I don’t mind that; it makes the debate more enjoyable. If nothing else, it keeps certain people around here awake.

[9:00]

Mr. Foulds: It is the only thing that gives substance to your contribution sometimes.

Mr. Swart: Why don’t you get off the floor?

Mr. Roy: I say again, without any apology, the role of government is not to create jobs; this is the role of private enterprise, whether it’s corporations or people. Again, we in this party don’t see anything insidious about the fact that there are corporations. We don’t see anything insidious about people making certain profits in this province. We’re not particularly concerned about that; that’s what this economy is about; that’s how this country was made what it is.

Mr. Foulds: Yes, and what a mess it’s in.

Mr. Roy: We say that it’s important that we in this province create an atmosphere where corporations can function, that we establish a tax system that is not so negative that we drive corporations out; the minute that we start doing that is when we start losing jobs. We like to create an atmosphere on the part of government which creates a competitive atmosphere so that corporations stay here and create jobs. The approach taken by the members to our left is simply this: First of all, the basis of taxes --

Mr. Foulds: Why don’t you give us your position; we’ll enunciate ours.

Mr. Roy: See how they get excited.

Mr. Acting Speaker: May I ask the member for Port Arthur to wait his turn and then he will have a chance to speak, if he wishes.

Mr. Roy: Mr. Speaker, it’s interesting, and I appreciate your intervention, but it’s so interesting when I look at my colleagues to my left, whom I’ve listened to very patiently, they get all excited at the truth.

Mr. Foulds: That’s because you spend three hours a week in the Legislature.

Mr. Roy: It’s basic economics. The point is simply that they start saying: “Oh, corporations again.” I think they are back in 1972 and with David Lewis, when he was talking about corporate bums and all of that. I thought they had got over that. The member for Ottawa Centre (Mr. Cassidy) who talks about the economy, would, I think, frown on listening to some of the comments that we’ve heard here this evening about NDP philosophy. Basically what they talk about is that the corporations again are ripping off the economy on the question of taxes. That is not the case. In fact we’re losing corporations because the tax atmosphere in this country and in this province is such that they’re better off operating some place else. This is why we have corporations going some place else; and when that happens we lose jobs.

Mr. Lupusella: Take Inco.

Mr. Foulds: No, Inco’s been overtaxed.

Mr. Roy: There’s nothing insidious. They talk about Inco, and I would have thought again they would have learned something about Inco; learned that this province and this country do not operate in a vacuum. We are in a competitive position with other countries.

Mr. Makarchuk: It’s just the Liberal Party that operates in a vacuum.

Mr. Roy: We’re in a competitive position with other countries, with the whole world; yet they don’t seem to understand that. If we lose our competitive position, be it by way of taxation, be it by way of wages, be it by some other way --

Mr. Makarchuk: That’s right; they are going to take the nickel on their backs and walk out of the province.

Mr. Roy: -- in fact we lose more jobs. They don’t seem to understand that. They fail to see that if we can’t sell a product, if corporations are not competitive here, then we will lose jobs --

Mr. Lupusella: Give us a bit of justification.

Mr. Roy: -- and the government will lose revenue. You see it’s a self-destructive argument that they are talking.

Mr. Bolan: It’s a self-destructive party.

Mr. Roy: It is that; and they are the self- destructive part.

Mr. Bolan: And they are trying to con the unions.

Mr. Roy: How are they all going to solve it? What should the government be doing, according to them? It seems that every time we get a revenue bill we keep hearing this philosophy. I feel compelled to stand up and again espouse why that type of philosophy is really a fairy-tale. It sells well, but I’ll tell you it’s selling less well in the NDP conventions, because the NDP leadership candidates aren’t even talking that way any more. They are talking about a more creative climate; they are talking about restricting government spending; and this is something new.

But we do want to put on the record, Mr. Speaker, that we as a party feel it is important, be it corporations or individuals, that we foster an environment and an atmosphere where they can stay competitive with other corporations, be they in other provinces or in other parts of the world. When we can do that, then we keep jobs. When we can sell our products, that’s when we create jobs. It’s not the way they’re talking about it; they’ve sort of got it ass-backwards, saying that government has all the answers. That might sound unparliamentary, but that’s exactly how their philosophy sounds.

I say again that it is not the role of government to create jobs; its role is to create the proper atmosphere so that private enterprise can in fact create jobs. That, at least, is the philosophy of this party over here.

I want to say something to the minister about this legislation. I want to be critical in the sense that I feel that the people who will and can take advantage of this type of legislation, unfortunately, are not going to be your small businessmen. I think this is still far too complex. Whether it’s a federal law or this law, your small investor, your small businessman, who wants to be playing around with $2,000, $3,000, $5,000, which is exceedingly important to him, will not be able to take advantage of this because it’s still too complex; to take advantage of it he needs the type of advice and the type of expertise which he cannot afford.

I say to the minister that it’s not altogether within her realm; she’s trying to sort of dovetail her legislation with the federal legislation, which in my opinion is still far too complex.

Mr. Foulds: Now we get the reason for his position.

Mr. Roy: It’s unfortunate, and I’d like to put that on the record, that the federal government and the province --

Mr. Foulds: The member for Ottawa East lies supine before the federal Liberals.

Mr. Roy: -- have not seen fit, over these years, to try to simplify the tax process. Really, the only people who can afford to take advantage of all the schemes in this type of legislation or the federal Act --

Mr. Makarchuk: “Schemes” is a good word.

Mr. Roy: Well, “scheme” is not an improper word; it’s a definition under the Income Tax Act; there’s nothing wrong with that.

Mr. Samis: It certainly has a connotation to it, doesn’t it?

Mr. Roy: I see nothing insidious about that word.

Mr. Makarchuk: Scheming how to avoid paying taxes.

Mr. Foulds: It’s a Liberal word.

Mr. Roy: What I’m saying to the minister is that the system has become so complex that the only people who can take full advantage of it are those corporations that are large enough to be able to have a whole staff, to be able to pay accounting firms and that sort of thing. That’s unfortunate, because some of the aspects and some of the advantages very often offered could be taken up by small corporations, but they cannot because they cannot afford the expertise and are not even aware of it.

I don’t mind telling you, and I don’t mind admitting, that most people don’t understand this; in fact very few of us, if it wasn’t for the philosophy that we’re discussing, that the NDP raised earlier and that I’m talking about now, frankly when it comes to the technicalities of this type of legislation there are very few people here who have sufficient expertise. In fact I suspect, working with accountants on and off who are working on books, I get the feeling that sometimes they don’t understand as well as they should the mixture of the Income Tax Act and the mixture of this type of legislation.

I appreciate that it’s difficult -- and I can recall, Mr. Speaker, some time ago -- who was it who looked at the income tax and talked about a buck is a buck, I don’t recall who --

Mr. Handleman: Carter.

Mr. Samis: The Carter commission.

Mr. Roy: Yes, the Carter commission --

Mr. Samis: A great commission of the Liberal government too.

Mr. Roy: -- which suggested a simpler way of looking at the question of taxation of profits --

Mr. Samis: That’s right, which opposed them.

Mr. Roy: -- and some of the advantages and disadvantages under the Income Tax Act. I thought it exceedingly unfortunate that the federal government, which attempted just three, four or five years ago to make some changes to the Income Tax Act --

Mr. Samis: Edgar Benson was minister.

Mr. Roy: -- in fact seemed to have brought in something that was far more complex than we had to start with.

When I look at that Income Tax Act, and I see section 21, subsection 6(a)(i), subsection 3(i) -- you have to be a mathematician just to follow that you’re in the same section, never mind understanding what they’re trying to say.

Mr. G. Taylor: It’s rough if you’re a lawyer.

Mr. Roy: I appreciate this is beyond the minister’s control, but the fact is there has to be an effort on the part of government, if it wants to give advantages to all citizens or to all corporations, as we’re trying to do under this legislation, that it make this information available and produce it in such a fashion that it’s accessible to everyone. I’m convinced that most of the small businesses in this province, which comprise, after all, a major part of what keeps the economy of this province going, will not be able to take advantage of this type of legislation; and that I find sad.

I wouldn’t even have to limit it to this legislation. The way we’re cranking out legislation in the House, they’re not aware of most of it. But surely when it gets to the question of taxation, we should give the same advantages, or we should at least take steps to have legislation brought forward that is easily accessible and understandable and not only to the advantage of the large corporations.

Again, I don’t see anything insidious about large corporations that are creating jobs, paying taxes and that sort of thing, but the fact is they’re given a break because they can afford to have all the experts and the small corporations can’t.

It reminds me of business corporations in the development field. Only the large ones now can afford to stay in that business because of all the red tape they have to go through; they have to get all the proper experts to get through the proper channels. No small corporation can afford that kind of help or has staying power to take advantage of what the system offers them.

I think we should look at something like this. I appreciate it’s not easy, especially in a federal system when you must have provincial legislation which dovetails with and conforms to the major federal statute. But it certainly wouldn’t hurt my feelings if the minister were to convey to the federal minister the feeling of certain members in this House that the federal statute is still far too complex. I’m convinced that, somewhere along the line, some government or individual is going to grasp that Income Tax Act and try to reduce it in such a form that even people as limited in intelligence as I am will understand it. Thank you, Mr. Speaker.

Mr. Foulds: Mr. Speaker, I’ve been stimulated to enter this debate because I believe that taxation can be used as a tool for two basic purposes. It seems to me that whether it’s income tax or corporation tax, which is what we’re dealing with here, the primary function of the tax should be to gain revenue for the state -- the province, in this case -- to administer necessary and useful social programs or, if you like, hardware programs such as the building of highways and other kinds of services that the citizens of the province need, whether they are individual citizens or corporate citizens. I think that the member for Ottawa East missed a very important point in the argument put forward by my colleagues previously in this debate.

Mr. Lupusella: All the points; not just one.

Mr. Foulds: The second useful function of tax is that, by its modification, it can be used to stimulate or slow down the economy, depending on what one wishes to do with it at this cycle in our current state.

Mr. Roy: That’s where you’re wrong. That’s the old system. It doesn’t work any more. The socialist government in Britain said it doesn’t work.

Mr. Foulds: By the way, Mr. Speaker, I do hope that you’ll allow the member for Ottawa to interject as frequently as he sees fit. Obviously his original presentation was lacking in substance and did not suffice --

Mr. Roy: It certainly got you stimulated.

Mr. Foulds: He obviously feels it’s necessary to put a number of footnotes on the record as I proceed, so please allow him to do so.

Mr. Boy: It stimulated the member enough to get him off his rear and on his feet.

Mr. Foulds: He reminds me a bit of the character in Hamlet known as Osric. Being knowledgeable in these things, Mr. Speaker, you will recognize what a shallow fop Osric was and how he was sent packing by many people in that play.

I would like to point out, in terms of the principle of taxation, the number of tax concessions that have been made to the corporate sector in our history. In a philosophical vein, I’d like to point out and try to correct some of the errors of history that the previous speaker tried to put into the record of his Legislature. It was not private enterprise on its own hook that built this country.

Mr. Bradley: Don’t you like private enterprise?

Mr. Foulds: It was not private enterprise on its own hook that built the railway system across this country; there was a good deal of government involvement.

Mr. Swart: The government bailed them out when they went broke.

Mr. Foulds: It was not private enterprise that built the airline system in this country.

Mr. Roy: We should have had it, though.

[9:15]

Mr. Foulds: For 30 years, that was a state-owned operation because it was unprofitable. Private enterprise wouldn’t invest in it but once it became a profitable operation, the weak-kneed Liberal government at the federal level turned it over to the private sector. It gutted the --

Mr. Roy: Here we go.

Mr. Foulds: -- system that had been established, so that the profitable runs were given to the private sector. But the private sector --

Mr. Swart: Like the Gray Coach.

Mr. Foulds: -- did not have the guts to take the chance in developing an airline system across this country. Today, in the northern part of this province, the private sector does not have the guts, the initiative or the capital to invest in a provincial air system to service the needs of the people of the north. It is the state, the province, that must intervene through norOntair to provide that service. Hopefully it’s safe, but in view of the revelations of the last few days I am not sure of that.

It is not private enterprise which built the highway and road systems of this province. It is not private enterprise then, as the member for Ottawa East says, which has singlehandedly built this country.

Mr. Roy: I never said single-handedly.

Mr. Foulds: In fact, it is the history of this country and the history of this province that it has been the state, the government, that had to do a number of these functions. For that reason, we in this party say unashamedly --

Mr. Bradley: Nationalize.

Mr. Foulds: -- that because a number of those things have had to be done by the state and the corporations have benefited from that action, then they should be made to pay their fair share, that’s all.

Mr. Makarchuk: Let the record show that the member for Ottawa East does not know his history.

Mr. Foulds: I would suggest, for example, that in one area the Conservative government of this province has demonstrated its lack of faith in the private enterprise system and that it has been supported by the Liberal Party of Ontario when it briefly formed a government. That is that the Ontario Conservative government nationalized the private power companies of this province to form Ontario Hydro.

Mr. Roy: He is out of order.

Mr. Foulds: The Liberal government did not reprivatize that in the brief period that they were in power. So there is a good and honourable history of the public sector providing and creating jobs. I would simply like to point out that --

Mr. Conway: That is selective history. I hope you don’t teach that in Port Arthur.

Mr. Foulds: -- in the western European countries that today are experiencing the lowest --

An hon. member: You had better learn about it.

Mr. Conway: Public sector dictators.

Mr. Foulds: Is this your maiden speech?

Mr. Roy: He is talking about the public sector and private enterprise. It is taxation we are talking about.

Mr. Deputy Speaker: Order. The member for Port Arthur has the floor.

Mr. Foulds: I would like to point out that in those western European countries that are experiencing the lowest rates of unemployment, if our major concern -- and the major concern of a number of speakers this evening has been the creation of jobs through a balance in the taxation formula as expressed in this bill --

Mr. Roy: No unemployment in China, no problem.

Mr. Foulds: Those western European countries that have the lowest ratio of unemployment have admittedly mixed economies where private and public enterprise often work together.

Mr. Roy: We are not against that.

Mr. Foulds: West Germany is a good example. Norway, Sweden, Austria are other examples.

Mr. Roy: We are not against that.

Mr. Makarchuk: You are changing your tune.

Mr. Roy: No, no. No wonder you will never form the government. You are so narrow minded.

Mr. Foulds: I would like to point out that none of those governments wait for private enterprise, as the member for Ottawa East would like to do, wait for the private sector to create jobs. That is all we in this party are saying at this stage with relation to the principle of this bill.

Mr. Roy: We are saying there is too much government.

Interjections.

Mr. Deputy Speaker: Order, order.

Mr. Foulds: So I would like to support the taxation principles expressed by my colleagues in the New Democratic Party previously on this bill; the shallow, inaccurate, unresearched, irrational statements of the member for Ottawa East should not go unchallenged.

Mr. Conway: I thought the Laxer wafflers were dead!

Mr. Makarchuk: They are all in the Tory party.

Mr. Deputy Speaker: Is there any other member who wishes to participate in this debate? If not, the hon. minister.

Hon. Mrs. Scrivener: I must express my gratitude to those members who did actually discuss the principle of the bill, which deals with simplification and administrative change, and points out policy differences between the government of Ontario and the government of Canada. I think the member for Beaches-Woodbine (Ms. Bryden) did this quite admirably. She caught it up very quickly and in her first two paragraphs highlighted those principles immediately.

She talked about the design of tax systems that favour corporations. She referred to fast write-offs, concessions to the resource industries, et cetera, which have not helped the economy. Similarly, her colleague the member for Brantford had some harsh words to say, to wit: “Corporations should be carrying their fair share of the load.”

Mr. Foulds: That is not a harsh statement.

Hon. Mrs. Scrivener: He expressed concern about the repatriation of the economy. He said people came to Canada “to make a buck.”

On the other hand, the member for Ottawa East was then stimulated to get up and score some of the remarks made about the bill in terms of its ability or nonability to create jobs, to engage in taxation, and the whole matter of profits in corporations. He said, “We are losing corporations because of the tax atmosphere.” Right on.

Mr. Roy: See that?

Mr. Foulds: Name one; give us an example.

Hon. Mrs. Scrivener: “If we lose companies,” he said, “we lose revenue and we lose jobs.” Mr. Speaker, I have to say I too would like to comment on this particular aspect of the debate this evening, because I think perhaps we have to face some harsh truths. Some members in the opposition benches don’t seem to be able to face up to those realities.

Mr. Bradley: Which ones?

Hon. Mrs. Scrivener: First and foremost, the whole question of multi-nationals was laid on the line. The taxation of multi-national corporations in Canada is one of the toughest in the world, with only France enforcing a system which would be described as more severe.

Mr. Samis: Says who?

Mr. Foulds: Would you like to support that or would you like to duck that?

Hon. Mrs. Scrivener: I would point out that taxes in the United States -- this is a comparison -- take a smaller share of the gross national product than in Canada; 28 per cent as compared to 37 per cent in Canada.

Mr. Samis: What kind of taxes?

Hon. Mrs. Scrivener: The total tax impact is greater in Ontario than in the United States when considering all levels of taxation.

Although the United States has a higher rate of federal income tax, 48 per cent compared to Canada’s 36 per cent, its narrower taxable income base effectively reduces its federal income tax to a level approximately the same as Canada’s. However, the greater impact of other taxes on the Canadian taxpayer, nine per cent of the gross national product, is substantial.

Mr. Foulds: What are you reading from?

Hon. Mrs. Scrivener: For example, 33 per cent of Canada’s tax revenue is derived from sales tax, whereas the comparable figure in the United States is only 19 per cent. This is due in the main to the heavy burden of federal sales tax.

Mr. Conway: Give the socialists hell.

Hon. Mrs. Scrivener: At the federal level, great care is taken to see that such devices as inter-company pricing, royalties, management fees and so forth, dividend stripping, are thoroughly controlled. In addition, payments made off-shore have a withholding tax of 25 per cent imposed upon them in jurisdictions with whom no tax treaty exists.

The Ontario government follows exactly the same policy. Because of constitutional limitations we do not always follow the same procedures, but the result is the same. Our rules concerning inter-company pricing and dividend stripping are the same as those of the federal government. In addition, royalties, management fees and other like payments are effectively disallowed as deductions, to the same extent and effect as the federal withholding tax.

The general position in Canada --

Mr. Samis: Who wrote that?

Hon. Mrs. Scrivener: -- is so severe that in international business circles, Canada -- and of course that includes Ontario -- is regarded as a hostile tax environment.

Mr. Foulds: By whom? In comparison with whom?

Hon. Mrs. Scrivener: Competition from states bordering Ontario has reached serious proportions.

Mr. Samis: Read Darcy’s speeches.

Hon. Mrs. Scrivener: Corporation taxes are pretty much the same in all cases, but for all other taxes a company is generally better off in the jurisdictions to the south of us than they are here. Mr. Speaker, I think this is a most regrettable state of affairs. Given the need for jobs, I believe the entire area of taxation as it relates to corporations should be re-examined with a view to restoring our competitive position.

Mr. Foulds: Why didn’t the minister do that with the bill? By the way, I like the spontaneous nature of the typing.

Hon. Mrs. Scrivener: The question the member has just raised is, why didn’t we do that in this bill. It just indicates, Mr. Speaker, how grossly he misunderstands the bill.

Mr. Foulds: That’s what we are challenging, the shortness and narrowness of the minister’s vision.

Hon. Mrs. Scrivener: Members have been debating fiscal policy within this bill as if the bill was the cure-all, the miracle paper, the bible which will embody all the prayer and hope we want in our taxation and in our economy. Of course it cannot do any of these things. This bill is simply a simplification, a rewrite, of a much more complex statute. So if members are of the opinion that this bill can be revised and restated to do things other than what our original policy was, I say to them the bill is not designed for that at all.

Mr. Foulds: Tell me what it does do.

Hon. Mrs. Scrivener: The member for Beaches-Woodbine (Ms. Bryden) referred to how welcome the bill is with its simplification, its time-saving devices, its labour saving, its paper saving. She said it would reduce our bargaining power, but she also thought it might increase our bargaining power. One of the questions she asked was, “Could we now dissolve the corporation tax administration within the Ministry of Revenue?”

I have to say to her we require this administration for its flexibility and ability to use the Corporations Tax Act for Ontario purposes, exactly as she saw it. We aren’t about to dissolve the administration. We’re probably going to strengthen it now and put the personnel to more effective use in terms of assisting taxpayers. I say this because the point was raised that the bills, the Corporations Tax Act and the Income Tax Act of Canada, are so complex that the average person or the average corporation cannot use them very handily. As I said before the supper recess this evening, the Ministry of Revenue, through its Corporations Tax Branch, is the tax consultant to about 75 per cent of corporations in Ontario. That is not a bold statement; that is just a statement of fact.

We help our constituents, we help our taxpayers, and that is just part of the service we provide. Simplification of this bill is another part of the service we are providing.

[9:30]

The member for Brantford (Mr. Makarchuk) raised a query concerning section 1 of the bill. He wanted to know why Ontario intends to extend television and radio advertising rights in terms of offshore activity, and I think his comment was a kind of tokenism. The bill is pretty good. He knows it’s pretty good. I think he is trying to find a flaw.

Mr. Roy: That’s not a bad point.

Mr. Foulds: And he found it.

Hon. Mrs. Scrivener: I hope he will agree with me this is not a flaw. When he understands the reason for it, I think he will appreciate why the tax policy difference has been highlighted so he could find it and understand it. If the bill hadn’t been revised he might not have been aware of it.

Mr. Foulds: Give us the reason.

Mr. Roy: Tell us why Ontario would allow something the feds won’t.

Hon. Mrs. Scrivener: In the first instance, Ontario to date parallels and will now tie to the federal legislation in disallowing foreign advertising in newspapers and magazines. Ontario does not parallel the federal government’s recent amendment to extend the disallowance to radio and television advertising and for this reason. This is a tax policy matter which Ontario did not follow because of retaliatory measures likely to be taken by foreign countries like the USA to counteract these measures which in part led to the disallowance of convention expenses incurred in Canada by US corporations in computing their taxes and which could cause an extensive loss in tourist business to Canada and particularly to Ontario.

Mr. Foulds: What has that got to do with advertising?

Hon. Mrs. Scrivener: I think the members will appreciate and agree with me that is a very valid reason for maintaining the Act in its present form.

Mr. Foulds: That’s a red herring.

Hon. Mrs. Scrivener: Not at all. It was the member’s colleague who raised it.

Mr. Foulds: He raised a good point. The minister’s answer was a red herring. What about other places like Iceland, Greenland and so on?

Hon. Mrs. Scrivener: It applies.

Mr. Samis: It is irrational.

Hon. Mrs. Scrivener: Several members have discussed venture investment corporation provisions within this Act. They debated the pros and cons of the principle of VICs but I would remind them that all of this debate was played out during the debate on the VIC Registration Act earlier this year, that is in July. Provisions in this Act merely set out the methods and provisions governing their taxation. The bill, in other words, provides the tax provisions necessary to make the VIC concept operate. Under the provisions of the bill a corporation investing in a registered venture investment corporation will be permitted to deduct 250 per cent of its investment from its taxable income with provision to carry any unused deduction forward against future income. Thank you, Mr. Speaker.

Motion agreed to.

Ordered for committee of the whole.

ASSESSMENT AMENDMENT ACT

House in committee on Bill 91, An Act to amend the Assessment Act.

Sections 1 and 2 agreed to.

On section 3:

Mr. Deputy Chairman: Mr. Swart moves that section 96(2) of the Act, as set out in section 3 of the bill, be amended by deleting 1979 at the end of the second line and substituting therefor 1978, so the said subsection (2) will read: “96(2). Section 71 continues to be not in force and remains inoperative until January 1, 1978.”

Before you speak to the amendment, I shall just ask the hon. minister to what section she has an amendment.

Hon. Mrs. Scrivener: Mine is in section 2; and it was an omission. I just can’t find the piece of paper; it’s in my book but I can’t find it.

Mr. Foulds: I think we will give unanimous consent to revert to section 2.

Mr. Deputy Chairman: We will revert to section 2 after we deal with section 3, if that’s in order.

Hon. Mrs. Scrivener: Thank you.

Mr. Swart: Mr. Chairman, I covered this amendment and the reason for it quite fully on the second reading of this bill. The intent is to make section 71 of the Assessment Act operative. That, of course, deals with the matter of equalization of the assessments within municipalities for the purposes of the provision of assistance to the municipalities from the provincial government, and for the purposes of sharing the cost between municipalities where the authority overlaps more than one municipality.

Because there seems to be some confusion about this matter I perhaps should read section 71 of the Assessment Act as it appears now, as amended and up to date January, 1977. Before I do, I want to make it perfectly clear to the members on my right that this in no way introduces by a back door, front door, side door, or even for the purpose of equalization, market value assessment. It simply lifts the freeze which has been applied to the equalization factors now for eight years. It lifts that freeze and will require the minister to undertake an equalization.

Anyone who is at all familiar, Mr. Chairman, as you are, with municipal operation, will know that during the last years, because of the growth in municipalities, or the lack of growth in municipalities, there has been a tremendous --

Mr. Conway: I remember it well.

Mr. Swart: I’m glad to see the member for Renfrew North has finally moved over, and we welcome him to our caucus.

Mr. Ashe: He is really heading downhill.

Mr. Swart: The assessment base in municipalities has changed rather dramatically, and this results in a change in the factors. I think it becomes obvious, it’s obvious to municipal people, that apartment houses for instance have been assessed at perhaps 25 per cent of value; single-family residences have been assessed about 12 per cent of value. Since 1969, since the equalization factor was frozen, there have been a lot of apartments built in some municipalities and they are using the same old factor; as a result those municipalities are in fact paying more than their share of the costs of operation for authorities which cover several municipalities, and are not receiving the grants to which they are entitled.

I would like to read that section of the Act, and again I point out that it has nothing to do with market value assessment. Section 71 reads: “The ministry shall examine the amounts of the assessments of rateable property in each municipality and locality on the last revised assessment role of each municipality…” Perhaps I should stop there to point out that the last revised assessment roll according to other sectors of Bill 91 will be not the market value assessment but the assessment which has been in force for many years. Section 71(1) reads: “The ministry shall examine the amounts of the assessments of rateable property in each municipality and locality on the last revised assessment roll of each municipality and locality and determine as nearly as may be what the total of the amounts of the assessment of such rateable property should be so that cost may be apportioned and grants provided on a basis which is just and equitable as between municipalities and localities.”

How could anybody really be against that section of the Act being operative? Yet, in Bill 91 it is proposed that that section be frozen for another year.

Section 71(2) reads: “The amount so determined under subsection 1 is the equalized assessment of each municipality and locality and the equalization factor of a municipality or locality is a percentage that the total of the amounts of the assessment of rateable property of a municipality or locality is that the equalized assessment of the municipality or locality, but neither the equalized assessment nor equalization factor of a municipality or locality should be taken into account in the assessment of any land except as provided in this or any other Act.”

I’m not going to read the rest of that subsection. It is 71(1) that is the important section, which would provide for the equalizations. Everyone in this House knows, and knows well, there are tremendous injustices now because of the freeze of the equalization factors. We’ve had the members from Windsor and Sarnia point out that there are something like 28 municipalities which they have checked and found that they are losing substantial amount in grants, of which Windsor is the greatest, I guess, $8.5 million. Sarnia, I think, is $1.2 million. St. Catharines is $1.2 million. They’ve been going cap in hand to the Treasurer of this province saying to him, “Please give us a special grant to make this up.” I say to you that if this amendment, which we propose, passes, you don’t have to go cap in hand any more.

Mr. Haggerty: Oh, come on. If you open the door, don’t be surprised if they flock to the Treasurer.

Mr. Swart: No, the Treasurer will be required to do an equalization and as a right those municipalities will get the money of which they are being deprived now because of an inaccurate equalization factor, a factor that’s very inaccurate to today’s conditions.

I would point out that section 71 is very broad. It would permit the minister to do a detailed equalization or a general broad equalization. You do not have to use the market value assessment. The minister could enact regulations which would permit almost any type of an equalization, but the municipality would have the right to have that equalization. I say that’s a right that they should have, after being frozen for eight years. Municipalities like Windsor are losing $8.5 million because it is frozen.

We in this party feel strongly that the minister should no longer continue that freeze. We are asking the party on our right to support us so that many of the municipalities which they represent will be able to get the money from the provincial government to which they are entitled. They will then be able to pay their fair share of the costs of education and regional government, and other costs, which are spread over many municipalities. We urge the support of the House in this amendment.

[9:45]

Mr. Haggerty: I would like to speak to the amendment put forward by the member for Welland-Thorold. Perhaps he does raise a valid point when he suggests there is a difficulty in one or two municipalities throughout the province of Ontario. One is Windsor. If we were to accept this amendment as put forward by the member tonight it would cause complete chaos in assessments in the other 800-odd municipalities in the province of Ontario.

If he continues to read section 71 of the Act as it relates to equalized assessment factors -- I’m well aware that in previous years it has worked successfully in municipalities, particularly in the former county of Welland. The member and I were both members of the assessment committee. We used to use the equalization factor, perhaps with an area municipality that wasn’t quite up to date on assessment practices; perhaps their assessor at that time was a young assessor who wasn’t too familiar with the formula and manual used in the county of Welland. But, it did provide measures to assist in a county form of reassessment through equalization.

If one was to accept this, as I said before, it would assist one or two municipalities but perhaps cause chaos in all those other municipalities. Here is the section in the Act, section 71(5) and (6), that says you have to have a hearing: “Upon receipt of a notice of application for review under this section, the secretary of the Ontario Municipal Board shall arrange a time and place for a hearing. The applicant shall send notices thereof by registered mail to the ministry and to the clerk of the municipality, the secretary of each school board of the locality concerned at least 14 days before a hearing.”

Mr. Swart: Only if they apply.

Mr. Haggerty: “If the equalized assessment and equalization factor tinder review are not just and equitable, the Ontario Municipal Board upon the hearing of the application shall determine a just and equitable equalized assessment and equalization factor.”

I can just see every municipality, every clerk, every treasurer will be making application to the Ontario Municipal Board for a hearing on a matter of equalized assessment. I feel you’re only going to open a can of worms, and perhaps cause a serious difficulty to the municipality and to almost every taxpayer in a community.

First of all, you’re going to have a person in a community say: “I feel I’ve always paid higher taxes than my neighbour and I want to appeal my assessment on that basis.” I can just see this assessment appeal tribunal flooded with assessment appeals under this particular amendment. I would sooner wait until after all the hearings being held now, after review of the Blair commission recommendations, and after review of tax reform in the province of Ontario. Based upon that, I could not support the amendment to this bill at this time.

I think there are ways the Treasurer can assist those municipalities that may be penalized through their present assessment practices. As it relates to Windsor, there is no reason they can’t come through with an additional grant to assist that municipality without having them go through hardship over the next year or so until we have all the known facts about tax reform and what the market value assessment will mean to local municipalities. I think, under the present system, hopefully, this will work.

I built a new home in 1970 and it’s been assessed today and is comparable to my neighbour’s assessment. In the long run I’m paying taxes comparable to those of adjoining property owners; in some cases I feel I’m paying more. Under the present system the assessors are trying to make it as equitable as possible.

Based upon that I feel we cannot support the amendment as put forward by the member for Welland-Thorold. It will just add further difficulties in the area of assessment in local municipalities. If we’re looking for market value assessment, there is no need for an equalization factor or equalized assessment. That removes it, and that is one of the reasons why we had the equalization factor: because we didn’t have market value assessment.

My comments are short. I feel this will not improve the situation at all. It will only compound the existing problems. As soon as the government gets on with the matter of bringing forth market value assessment, we can iron out the difficulties and problems we will be facing -- the shift in assessment from commercial to residential -- I am sure that eventually we will get around to it and assist the government in working out some arrangement that will lessen the inequities through market value assessment.

Mr. Bounsall: I would certainly hope the last speaker for the Liberal Party is speaking only for himself and not for the party as a whole.

Mr. Roy: Oh, don’t get excited now. He’s the critic and speaks with authority.

Mr. Bounsall: I certainly hope he doesn’t in this case. I am sure the members of your caucus from St. Catharines, Sarnia and Windsor sure hope he’s not speaking for them or that party.

Mr. Roy: Are you speaking for yourself?

Mr. Bounsall: I certainly am not. I am speaking on behalf of the party and, in particular at this point, in the interests of Windsor and the 20 other communities, nine of which are completely and easily identified, that are being discriminated against under section 71 of the Act which has not been operative since 1970.

The formula to determine the provincial resource development grant uses a factor that converts actual assessment to an equalized assessment. This factor was determined by the province and then frozen in 1970.

In May 1976 the city of Windsor urged the province to calculate the resource equalization grant using the already quite clearly available market value assessment data, which as far as I can determine is available throughout this whole province at the moment. As far back as 1973, the city of Windsor was in hand of data which pointed out the inequities of this equalization system. They now have, in detail, the calculations of that. Since 1973, to and including this year, the city of Windsor has lost in excess of $20 million in equalization grants. For the year 1978, it will be $8.5 million. In August of this year -- on August 8, 1977 -- Mr. McKeough stated in writing, “It’s a well known fact that the existing system of equalization for adjusting assessments leaves something to be desired. I agree further,” he went on, “that there is a particular problem in connection with the city of Windsor.” Eight point five million dollars worth of a problem in one year, 1978, and a backlog of $20 million.

The Treasurer in a speech in Sarnia indicated Sarnia was the second most disadvantaged locality in the province of Ontario at $1.5 million.

Mr. Roy: You have convinced your caucus. Now sit down and let’s get on.

Mr. Bounsall: Well, it’s going to be interesting. If the Liberal caucus votes against one of the only opportunities I can see to force the Treasurer to change this, go down to Windsor and explain it. Go to Sarnia and explain it. Go to St. Catharines and explain it. You obviously don’t have much concern because some of them are held by the Tories, but here’s another one. Go to London. This appears to be the third most disadvantaged locality.

Mr. Roy: No, no; Ottawa.

Mr. Bounsall: The cities also disadvantaged in a rather major way are Burlington, Sudbury, Kitchener, Kingston and Woodstock. Go to those cities from your caucus, particularly those of Sarnia and London.

Mr. Roy: Okay, you made your point. You have convinced your caucus.

Mr. Bounsall: Listen, I have more content in any five-minute section of my speeches than you put in your hour speeches. It would he good if you either did some research or did some reading, one or the other, or put your reading and your tongue together.

Mr. Roy: Good, good; you’ve made your point. You have convinced your caucus.

Mr. Bounsall: The last speaker from the Liberal Party indicated this would cause chaos across this province.

There is no way this would cause chaos across this province. It would require the officials in the ministry to do some calculations based upon data they already have and which, because the cabinet has decided not to make any changes until the government actually makes operative its market value assessment scheme in its entirety, the government refuses to equalize a system which was supposed to do precisely that -- equalize grants across this province.

We have seen postponement of the introduction of market value assessment from year to year, and there is no way that we can see early introduction of this system. In the meantime the inequitable position of these municipalities continues to grow. The inequality gets even larger year by year. Over the previous five years, including this year, it amounted to $20 million in Windsor; next year alone it will amount to $8.5 million. That same arithmetical progression continues to grow with the years. If we think it’s bad this year -- and it’s particularly bad for Windsor -- it’s going to be worse next year than it was this year for other municipalities, and the year thereafter.

This amendment will not produce chaos. The facts are in hand to make the calculations across this province in terms of this equalization formula. This amendment simply frees the formula for the proper equalization use, and it is the one way in which we can make the Treasurer become honest in terms of seeing that this equalization grant means what it says.

The Liberal Party had better think through quite carefully the position it seems to have taken on this and opt for some equality around this province, including four or five municipalities in which some of its own members live.

I am glad to see the member for Kitchener-Wilmot (Mr. Sweeney) in the House at the moment, because his city is one of the top nine municipalities disadvantaged by this frozen equalization formula.

Mr. Roy: You’ve made your point. Next.

Mr. Bounsall: He certainly should be convincing his colleagues to support this amendment, which represents the only chance we will have to cause the Treasurer to give a full equalization for the year 1978.

Mr. Bradley: Speaking to the amendment, Mr. Chairman, it has been stated by the member for Erie (Mr. Haggerty) that considerable problems would arise from the passage of this particular amendment. While we certainly see some short-term advantages in the passing of this amendment, and that it is one possible way -- and I emphasize “one possible way” -- of alleviating those municipalities adversely affected by the question that has been before the House in the last couple of weeks, precipitated by the cities of Sarnia and Windsor, it is not the only possible answer to this particular question.

Mr. Swart: Oh, yes, it is.

Mr. Bradley: Even though it is characterized by some of the members of the third party as being so, I don’t think it is necessarily the only step.

Mr. Roy: Political posturing is what it is.

Mr. Bradley: One of the problems we look at is that in any changes we see there are ultimately -- in the view of the Treasurer, no doubt -- to be winners and losers. If the Treasurer is truly going to make the system equal, that would mean some municipalities at present in a rather favourable position are going to find themselves in a less favourable position, while municipalities such as Windsor, Sarnia, St. Catharines and Burlington -- those listed previously in the brief from the city of Windsor -- would certainly benefit.

Mr. Bounsall: That’s what equalization is all about, you know.

Mr. Bradley: We feel ultimately, of course, that this is what will happen. I would hate to see the kind of chaos that would result, however, by the Ministry of the Treasury, Economics and Intergovernmental Affairs suggesting that some municipalities are going to receive less money in the coming year than they might at present expect, particularly in a year of restraint.

[10:00]

I was concerned this problem could have been alleviated. This amendment would perhaps not have been put forward if the Treasurer had agreed this morning when I asked him to convene a meeting of all the mayors and treasurers of the municipalities specifically affected by this particular disadvantage. I asked him to provide for those municipalities the information that’s available from his ministry on this particular problem.

If this could have been dealt with in an appropriate fashion we wouldn’t even be entertaining with any degree of seriousness this evening, and with necessity, the amendment of the member for Welland-Thorold, which certainly has good intentions in it. It seems to us it is possible the provincial Treasurer, in negotiation with municipalities, could find a formula whereby transitional payments could be made to the various municipalities adversely affected.

This, of course, was done in the regional municipality of Niagara when regional government was first introduced. There were transitional benefits over a period of some five years which alleviated the burden of potential property tax that would otherwise have existed in the regional municipality.

We in this party share the concern of the member for Welland-Thorold as well as the concern of the member for Windsor-Sandwich in expressing to the Legislature the fact we feel these municipalities have been hard done by and certainly deserve rectification of their problem by the provincial government. But to suggest this is the only way in which it can be done, I think, is being inaccurate. We feel strongly there are other ways of alleviating this problem without dealing with it in this specific bill.

Mr. Bounsall: Outline them. Give us a few examples.

Mr. Bradley: Well, I already have. The member should be listening, because I’ve already indicated, of course, the method of doing it is to have the minister call together the mayors and treasurers of these municipalities to discuss this formula.

Mr. Bounsall: He has already said no.

Mr. Deputy Chairman: Order, please.

Mr. Bounsall: Time and time again he has said no.

Mr. Bradley: Dealing with those municipalities which specifically have the problem rather than opening up the entire province to this situation. Then the Treasurer could beg off by saying he’s not prepared to deal with it on a province-wide basis, but might be prepared to deal with it in specifically affected municipalities.

Mr. Bounsall: You don’t know the Treasurer.

Mr. Bradley: I think there is far more chance of the Treasurer entertaining the possibility of providing transitional benefits to those affected municipalities --

Mr. Makarchuk: You haven’t got a hope.

Mr. Bradley: -- than there would to open up the entire can of worms across the entire province of Ontario.

Mr. Makarchuk: You can get blood out of a stone sooner than you will get it out of the Treasurer.

Mr. Swart: I guess I’ve been in this Legislature now about two years and two months, and I have to say I have never heard as contradictory or as absurd a speech as that given by the member for Erie in this House.

Mr. Cureatz: Never.

Mr. Swart: I also have to say that the other speeches I’ve heard --

Mr. Cureatz: Just listening to your side now and then, I don’t know about that.

Mr. Swart: -- from this quarter would lead me to believe that they are living in something of a dream world, too.

First of all, let us make no mistake about it; the Act we have before us provides for equalization of assessment even after we have market value assessment. We had equalization of assessment all those years when each municipality did it, then when the county did it. But when the province took over, they froze it even though the equalizations were the same as they were under the local municipality and under the county.

Now they have a section in the Act providing for equalization even under market value assessment. But they’re freezing it for the time being. So we’re in a transition period -- why, I have no idea -- and they are freezing the equalization factors. They’re freezing the equalization factors and creating these tremendous injustices against these municipalities.

Mr. Roy: Good; good point.

Mr. Swart: Also, I’d be interested in knowing where the member for Erie got his information that it would create havoc in the 800 other municipalities. I wonder if the member for Erie could tell us how much examination there has been of other municipalities. In fact, there have been very few that have checked; perhaps 30 or 40 or 50 out of the 800 have checked. There could be 400 that would benefit from this if an equalization study was made.

Mr. Roy: Good point.

Mr. Haggerty: Let’s have a study first before you bring in the amendment.

Mr. Swart: But in any event, maybe 425 would go up; maybe 425 would go down. I don’t know. But if it is going to be fair, then I think we should do it.

Mr. Roy: Good; you convince your guys now.

Mr. Swart: It could be two, three or four years before market value assessment is brought in. Even then of course they are going to have to have equalization according to this Act, which was passed -- well, the amendment was made back in 1974.

The member for Erie made a statement about the tremendous hassle there would be at the Ontario Municipal Board.

Mr. Haggerty: You know what it’s like there today. You can’t get a hearing.

Mr. Swart: They would be appealing it. I would suggest that if we have fair equalization there are no more municipalities going to be appealing it than there were in 1968 --

Mr. Haggerty: You don’t know that.

Mr. Swart: -- and 1965 and 1963 than there will be after the market value assessment is brought in, if it ever is. There won’t be any more municipalities appealing it.

But I want to point out the other side of this coin to the member for Erie.

Mr. Roy: Your party’s with you on that. You don’t have to convince them.

Mr. Swart: I want to read another section of that section 71 which I would like to see enacted. It says this: “A municipality or a locality may apply to the Ontario Municipal Board for a review of its equalized assessment and equalization factor and also the ministry may apply for a review.”

May I say to the hon. member for Erie and to other people in that caucus that what they are saying to Windsor, what they are saying to Sarnia, what they are saying to St. Catharines, is that we don’t want the right to correct the injustice?

Mr. Haggerty: No, I don’t say that.

Mr. Swart: We don’t want this section operative. We don’t want the right to apply to the Ontario Municipal Board to correct the injustice.

Interjections.

Mr. Deputy Chairman: Could we have order, please? I remind the members of the committee, only the member for Welland-Thorold has the floor. Would you please allow him to conclude his remarks?

Mr. Swart: As the member for Windsor-Sandwich said, you go back and tell the people in those municipalities and perhaps 100, or 200, or 300, or 400 other municipalities that find out that they are not getting the grants that they are entitled to -- you go back and tell them you had the opportunity to have an equalization, so they would pay their fair share and they would get their fair share of grants but you turned it down, because that is exactly what you are doing.

If you think the Treasurer of the province, as close as you are to those on the other side, as close as you are to the Treasurer philosophically, if you think the Treasurer of this province is going to set a precedent --

Mr. Roy: You have convinced your guys now.

Mr. Swart: -- in giving to one municipality some sort of out-of-pocket ad hoc grant, where there may be 200 or 300 or 400 more which will be in the same position, maybe not to the same degree, then I suggest you are living in a dream world.

I would just say to the people in that caucus there is no doubt that they are quite prepared to shaft the people in their own municipalities to go along with the Conservatives and keep this freeze on.

Hon. Mrs. Scrivener: It is a fact that if this amendment were to be incorporated within the bill it would create assessment chaos in Ontario.

Mr. Haggerty: And he knows it.

Hon. Mrs. Scrivener: Most definitely it would, Mr. Chairman, because it does introduce market value. The equalization must be based on market value and that is according to section 21 of the Act, as the member must know.

Furthermore, I am advised by my legal counsel that the factors must be based on the latest sales prices in accordance with section 27 which states that “land shall be assessed at market value.”

This is borne out by recent court decisions which were all based on market value and on sales prices and on ratios to market value. I have a piece here citing case after case in which it’s this sort of decision. “The board concluded the assessment should be the purchase price times the average ratio and so on.”

Just to recapitulate a little bit of the history, I looked back through what had happened in terms of the equalization factors in Ontario in recent years. The member was courteous and gave me a copy of his amendment about 10 days ago and I know he was intending to debate it this evening.

It’s a fact that in 1970, the government decided to take the action of freezing the equalization factors in order to maintain assessment rolls at the 1970 level of value and to limit the right of appeal to similar properties in the vicinity in order to stabilize assessed values until the revaluation of all properties was completed and new municipal tax policies could be developed. In retrospect I think this was a wise decision. The average price and hence the market value of single- family homes has increased much more rapidly during the period 1972 to 1975 than, say, did the value of other classes of property.

The equalization factors, were they introduced in those years, would have followed the trend. Regional government and county and district costs would have increased regularly for municipalities relying on housing units for a large portion of their tax base. That of course is precisely what would happen if Mr. Swart’s amendment passes.

Not only will this amendment impact adversely on many municipalities by increasing their share of the cost of a number of expensive programs and in reducing grants, it will have the most serious effect on rural and residential communities. That in itself should convince hon. members not to support this amendment.

There is, however, an even greater worry. As I stated earlier, assessments were frozen in the first place to protect the local municipal tax base and to legitimize certain assessment differentials within that tax base until tax reform is firmly in place. I also stated that the major attack was being mounted through the appeal process. That is exemplified in the kind of court cases we now see being decided upon, in which market value assessment most definitely is the underlying factor for the decision.

I now state most emphatically that the production of factors in 1978 will set the stage for renewed requests for equity through appeals. This point was also made by the member for Erie. At the present time the courts at every level, while hearing an appeal reach their decision by attempting to determine the market value of the property under review. They then adjust the market value to the prevailing level of assessment for that particular class of property in the municipality.

Mr. Swart: It hasn’t anything to do with individual assessment.

Hon. Mrs. Scrivener: I am convinced that if new factors were published in the Ontario Gazette, the courts would use them to adjust their determination of market value.

Mr. Roy: Good, we are with you on this, thank you.

Hon. Mrs. Scrivener: This would result in huge reductions to the commercial industrial sector and taxes would shift to single-family homes and to the rural sectors of the community.

I’ve outlined in detail the horrendous impact which revision of the stabilization factors would have at this time. Such a move would remove present stability from the assessment process, would cause immense disruption and confusion, and would inflict serious hardship upon thousands of home owners. The net result of the amendment by the member for Welland-Thorold would be a massive increase in taxes for virtually every home owner in this province.

Mr. Haggerty: That is what he wants; that’s what he wants.

Hon. Mrs. Scrivener: I ask all members of this Legislature to join me in defeating the amendment.

Mr. Swart: That wasn’t the issue.

Mr. Deputy Chairman: All those in favour of Mr. Swart’s amendment will please say aye.

All those opposed will please say “nay.”

In my opinion, the nays have it.

Amendment stacked.

Sections 4 to 6, inclusive, agreed to.

[10:15]

Hon. Mr. Welch: I wonder if I could have some indication from the committee. The Corporations Tax Amendment Act is next in committee. I wonder if it is going to take much time, because we were going to have a bell about now. Are there many changes to this Act? Could we do it and then have a bell finally?

Mr. Makarchuk: Mr. Chairman, we have one amendment for the Corporations Tax Amendment Act.

Hon. Mr. Welch: Let’s call that bill then and we can do them both together with one bell.

Mr. Deans: Can we ring the bell while we’re doing it?

CORPORATIONS TAX AMENDMENT ACT

House in committee on Bill 88, An Act to amend the Corporations Tax Act.

Section 1 agreed to.

On section 2:

Mr. Chairman: Hon. Mrs. Scrivener moves that section 2 of the bill be struck out and the following inserted in lieu thereof:

“2(1) Clause (c) of subsection 2 of section 2 of the said Act, as amended by the Statutes of Ontario, 1973, chapter 2, section 1, is repealed and the following substituted therefor:

“‘(c) disposed of taxable Canadian property within the meaning given to that expression by subsection 1 of section 248 of the Income Tax Act (Canada) if the reference in that definition to section 2 of that Act were a reference to this section or

“‘(d) carried on business in Ontario,’” and

“(2) Clause (c) of subsection 3 of the said section 2, as amended by the Statutes of Ontario, 1973, chapter 42, section 1, is repealed and the following substituted therefor:

“‘(c) disposed of taxable Canadian property within the meaning given to that expression by subsection 1 of section 248 of the Income Tax Act (Canada) if the reference in that definition to section 2 of that Act were a reference to this section or

“‘(d) carried on business in Ontario.’”

Mr. Makarchuk: Mr. Chairman, that was very clear to us and we understood perfectly what was said. I would like to suggest to the minister that in the future, when she sends her material out to the critics, she include a copy of the federal bill she is referring to in her amending bill from this province.

An hon. member: According to the rules.

Mr. Makarchuk: According to the rules.

Hon. Mrs. Scrivener: Mr. Chairman, as a matter of fact, this was discussed with the House leaders, I believe. We understood that all parties had copies of the large bill on their library shelves and that this was available to all the critics. I regret the omission if the member feels it should have been delivered to him, but the fact is that we all understood that the parties had it and that the copies were readily available.

Mr. Deans: You must have spoken to the Liberal House leader, because he is the only one not here. You didn’t talk to us.

Mr. Makarchuk: Mr. Chairman, what I’m referring to is a copy of the Canadian Income Tax Act. That was not part of the material that was provided to the critics. Since we are dealing with that specific Act, I think it is only sensible that that should have been included.

Motion agreed to.

Section 2, as amended, agreed to.

Sections 3 to 7, inclusive, agreed to.

On section 8:

Mr. Chairman: Mr. Makarchuk moves that subsection 7 of section 14 of the Act, as set out in section 8 of the bill, be deleted and that the following subsections be renumbered accordingly.

Mr. Makarchuk: Mr. Chairman, if I may speak to the amendment, the proposed subsection puts the Ontario Corporations Tax Act on the same grounds as the federal tax and it disallows advertising expenses by firms advertising on broadcasting stations in the United States; in other words, they would have to pay the same tax that they pay to the federal government.

Section 19(1) of the federal Income Tax Act reads:

“Subject to subsection 2 in computing incomes, no deduction shall be made in respect of an otherwise deductible outlay or expense of a taxpayer made or incurred after the section comes into force for an advertisement directed primarily to a market in Canada and broadcast by a foreign broadcasting undertaking.”

In effect, some of the minister’s statement earlier that this may interfere with the tourist trade or anything of that nature does not really apply because the federal Act specifically refers to when the broadcast is made for a Canadian market. If you’re talking about tourist trade, you’re dealing with a foreign market, or an American market, and that becomes a legitimate expense for corporation tax purposes.

Mr. Deputy Chairman: Could I ask the member for Brantford to please write out that amendment and have it delivered to the table?

Mr. Roy: Mr. Chairman, in answer to your request of the member for Brantford, he simply wants to delete that subsection 7.

Mr. Deputy Chairman: I’m aware of that, but the rules of the House are that all amendments have to be in writing and submitted to the Chairman.

Mr. Makarchuk: I will be right there.

Mr. Deputy Chairman: I’m accepting the amendment but I would ask you to write it out and send it up.

Mr. Roy: Mr. Chairman, I spoke in support of the principle of this bill and had some serious disagreements with the members to my left as to the principle of taxation and the type of tax atmosphere that should be created in this province pertaining to our corporations.

Pertaining to this amendment, the response by the minister to the request made by the member for Brantford, I thought, was totally inadequate. I can’t see why we are taking a different approach in this province than has been accepted by the government of Canada pertaining to section 19 of the Income Tax Act. If that type of expense is considered under this Act not to be deductible, I don’t see why we should allow it in Ontario, especially in view of the fact that the major expenses that can be deducted would certainly be under the federal Act and not under the provincial Act.

It seems to us that if we’re going to have consistent tax policies in this province, I see very good reason for supporting this amendment. I’ve not heard cogent and logical reasons to oppose it. I’ve discussed it with some of my colleagues, and it appears reasonable to us at this time that we would be supporting this type of amendment. It’s consistent with the federal Act. It’s consistent with the principle that we should be trying to encourage Canadian content, our Canadian media and firms. I really can’t see why we, in this party, would not support it.

What I found disturbing when this matter was put forward was the response by the minister. It was such that it was very unconvincing. In fact, it was treated in somewhat of a cavalier fashion. Yet I felt that it was an important contribution to the debate. It’s an important amendment. We’re talking about consistent tax policies, and I find this subsection inconsistent with the whole principle of the bill. So I can say that, at this time unless we have very good reason otherwise -- and as I say I’m not a tax expert -- but surely, consistently, we would support this amendment.

Hon. Mr. Welch: It’s obvious, Mr. Chairman, that we won’t be able to complete this discussion.

Mr. Roy: We’re finished.

Mr. Makarchuk: We can have the vote.

Hon. Mr. Welch: As you know, in all fairness to the minister, it is the general understanding that notices of amendments that are coming on Tuesday are given to us on Friday. You’re now asking the minister to comment on something which, I understand, has fiscal implications, and I think the minister requires some time to consider this. I think it should be noted that this is not the accepted practice. We should have had notice Friday with respect to this amendment tonight. So I move adjournment of the debate on this.

Mr. Makarchuk: Mr. Chairman, on the same point, there was no way we could give notice because we did not consider the bill. But when we came to second reading, I did state to the minister that we would be moving this amendment, and that was the earliest possible time that we could have moved the amendment. If you weren’t so anxious to get the bill through, then you would have had adequate notice.

Hon. Mr. Welch: Now wait a minute; the bill’s been on the order paper for several weeks and we decided at a meeting to call the bill tonight. There has been no undue haste. Let’s be reasonable. The discussion on this bill is therefore adjourned and then we can have our division on the Assessment Act.

Mr. Roy: On a point of order, Mr. Chairman, just before --

Mr. Deputy Chairman: May I point out to the hon. members that the hon. House leader has moved adjournment of the debate on Bill 88, and I understand that is a non-debatable motion.

Mr. Roy: Yes, but I want to raise a point of order before the House leader comes along and in what I consider --

Mr. Deputy Chairman: Order, please. I will have to hear the point of order.

Mr. Roy: Mr. Chairman, it was understood that we were going to pass this piece of legislation. We said we had only one amendment. The House leader proposed that we treat the bill. We have talked about the amendment. I say that in his approach right now he’s frustrating the original intent we all had to pass this legislation. It would appear that because he’s going to lose the amendment, he wants to do something and they want to scramble out of here. I am saying very simply that we, on this side, are prepared to pass this legislation, vote on the amendment and let’s get on with it.

Mr. Deputy Chairman: May I have the attention of the members, please. There is further debate required on Bill 88. There is a further speaker on the bill. The hon. minister wishes to speak.

The House leader has moved the adjournment of the debate on Bill 88.

Those in favour will please say “aye.”

Those opposed will please say “nay.”

In my opinion the ayes have it.

I declare the motion carried.

ASSESSMENT AMENDMENT ACT

The committee divided on Mr. Swart’s amendment to section 3 of Bill 91, An Act to amend the Assessment Act, 1972, which was negatived on the following vote:

Ayes 25; nays 62.

Section 3 agreed to.

Bill 91 reported.

On motion by Hon. Mr. Welch, the committee of the whole House reported one bill without amendment.

THIRD READING

The following bill was given third reading on motion:

Bill 91, An Act to amend the Assessment Act, 1972.

Mr. Speaker: We have a late show under standing order 28(4). The member for Scarborough-Ellesmere has the floor for up to five minutes.

NURS1NG HOMES

Mr. Warner: Thank you, Mr. Speaker. The Minister of Health (Mr. Timbrell) tells this assembly he is content that all is well for the residents of nursing homes in the province of Ontario. Therefore he says that a public inquiry into the operation of nursing homes is not needed. The minister is aware that inspections have been done and reports filed citing serious problems in nursing homes. He is also aware that only 10 revocations and three prosecutions have occurred since 1972, the remaining recommendations by inspectors having been ignored.

Not only does the minister realize what is going on, so does the director of the nursing home association. At least he, Mr. Malcolm Walker, openly admits it. I refer to the Globe and Mail, November 29; quote, Mr. Walker: “We’ve told them a number of times, look, let’s get tough. We tell the ministry that there are bad apples in the barrel and we want them improved, so get tough. There is no excuse whatsoever for a nursing home to have non-professional staff and have these people dispense medication, but at the same time there is no excuse for the ministry to soft pedal it.”

What is so disturbing is that for the most part the problems in nursing homes, mostly related to staffing, have occurred because the owners of the homes are cutting corners in order to enhance profits. Again, Walker confesses, and we must await a similar response from the minister.

The problems are there, likely in most of the 378 nursing homes in this province, but the minister knows as well as anyone that it is very difficult for an individual member of this Legislature to expose all of the problems because residents are afraid of reprisals. So are the relatives of residents. Employees are afraid of losing their jobs if they speak up. Every once in a while courageous individuals do stand up, as Sharon Husain did regarding Kennedy Lodge.

Since the minister denies that problems exist, let me give him a few more cases and assure him that I will raise these serious problems continuously until we get a proper resolve of the matter.

First item: The Pines Nursing Home it used to be called; it is now called the Pines Residence, situated in Mississauga. Unlicensed nurses have been giving medication there, and I am led to believe still continue to do so. An employee had hepatitis and continued to work. Nothing was done except that the residents were given shots; the employee was allowed to continue working.

There aren’t very many residents there, only 36, but after 6 p.m. at night there is only one employee, one nurse; it scared them all away. There is one nurse there and usually that’s an RNA, not a registered nurse to take care of 36 residents. That’s the Pines.

The second item is a letter which I received regarding Bayview Villa. In particular, the writer of the letter says, be sure to see the east wing, the senile ward. It’s very bad. This is a letter to me: “What a tremendous relief to note this morning on the news that you are launching a campaign to improve nursing homes in the province. My own alarming experience concerns a close friend who lived at Leisure World on St. George Street in 1976, and in Bayview Villa on Cummer Avenue from June to September of this year.

“The worst aspect seems to result from the employment of untrained, unsuitable attendants. The atmosphere of hostility towards patients and visitors is appalling in both of these homes. I shall focus in particular, however, on Bayview Villa.

“In Bayview Villa, a minority of the attendants did show attention, caring attitudes. The majority, however, were neglectful, hostile and bullying. When visiting Bayview Villa it is essential to realize that a large number of the attendants you will see are hired privately, that is over and above the regular payment. Some people had to pay as high as $900 a month in order to get adequate private nursing care in a home where they are already paying money.”

Thirdly, I bring to the minister’s attention the citizens’ panel report from St. Catharines, where items such as the bathing procedures are raised, residents receiving a bath only once a week; that the quantities of food are not enough, dishes of butter placed close to the floor, no hair nets are worn by the staff, cake was left to dry out for three quarters of an hour before being served.

The most disturbing part of that is that the administrator says that his home, which is highly criticized, is better than 200 in the province; heaven only knows what the other 200 are like. The quote from the administrator says: “It is not like running your own family home; if it was we would be out of business because it is not economically feasible.”

I ask the minister --

Mr. Speaker: The hon. member’s time has expired.

Mr. Warner: Okay, Mr. Speaker; I would like one last sentence. The human dignity of each resident of a nursing home needs to be protected; and that is not happening today, and won’t happen, until we have a proper inquiry into nursing homes. I have pursued this issue for two years now and will not be deterred by a lack of government concern.

[10:45]

Hon. Mr. Timbrell: Mr. Speaker, unfortunately I was not informed. I didn’t know until the member started to get on his feet that he asked for a late show. There may be some information, statistics and so forth that I might otherwise have had with me, that I won’t be able to use. Let me at the outset take exception to the very first comment which the member made which was to say that I have said that all is well.

The fact is that I ordered a review of the Nursing Homes Act and the regulations, very shortly after I took over this ministry. Recently I published the results of that in-house review, and sought public comment and contribution to those proposals. Comments were invited on what we proposed and, in addition, comments on what perhaps we haven’t proposed. The parties or interested individuals think we could go further.

The member again made certain broad sweeping statements that all other recommendations for follow-up on, I think he said, on inspection reports were ignored. That’s not true. I think he knows that’s not true. He talked about --

Mr. Grande: Come on; you know that it is.

Hon. Mr. Timbrell: It’s not true, otherwise you wouldn’t have 208 nursing homes closed in the last five and a half years, 10 of them through revocation and others through threat of revocation.

Mr. Foulds: How many prosecutions have you not done?

Hon. Mr. Timbrell: Mr. Speaker, I sat here, albeit I’m the only one on this side, but I sat here very quietly and listened to the member for Scarborough-Ellesmere; I wish that his colleagues would extend to me the same courtesy.

Mr. McClellan: Why is it you are the only one there? Because you are in big trouble; that’s why.

Mr. Laughren: You are in trouble. Keep digging.

Hon. Mr. Timbrell: Each of the points that the hon. member has raised previously, in addition to the ones that he’s discussed this evening, relate to specific parts of the regulations. I would argue, as I did earlier today in this chamber, that a thorough discussion in public of the review of the Nursing Homes Act and its regulations will do as much good, or more, than the kind of inquiry that he’s talking about. The kind of inquiry that he’s talking about would result in the kind of recommendations which we have already come forward with.

Ms. Gigantes: You don’t enforce the regulations you have.

Hon. Mr. Timbrell: His concern for the protection of human dignity I think is shared by all of us, at least I hope it would be shared by everybody in this House. My concern as minister is to convey to my staff, as I have repeatedly, that they have my full support to enforce to the fullest the existing regulations. Where they deem it necessary, they are to so advise me that they want to recommend either prosecution or moves to revoke.

Mr. Laughren: This never happens.

Hon. Mr. Timbrell: I suggest that the measure of the success of the program is not in how many court cases have been launched, but rather in how we have been able in the ministry in the last five and a half years to substantially turn around what was an unacceptable situation in the nursing homes prior to the change in the Act in 1972.

Ms. Gigantes: Not in Ottawa; not in Ottawa.

Hon. Mr. Timbrell: We will continue to improve that. All is not well; I know that.

Ms. Gigantes: It has got worse.

Hon. Mr. Timbrell: I know that we can improve it further. But I suggest to you that the way to go about it is the route which we have launched on --

Mr. Laughren: You have been that route.

Hon. Mr. Timbrell: -- not to get into a very expensive inquiry, which will not get us as far ahead as this will. In fact, it may even leave us further behind.

Mr. Warner: Try a select committee of the House.

The House adjourned at 10:50 p.m.