LAND TRANSFER TAX AMENDMENT ACT (CONCLUDED)
SMALL BUSINESS DEVELOPMENT CORPORATIONS AMFNDMENT ACT
RETAIL SALES TAX AMENDMENT ACT
The House resumed at 8 p.m.
House in committee of the whole.
LAND TRANSFER TAX AMENDMENT ACT (CONCLUDED)
Resuming consideration of Bill 14, An Act to amend the Land Transfer Tax Act.
On section 12:
The Deputy Chairman: The Minister of Revenue (Mr. Ashe) has moved an amendment to section 12, and I am about to recognize the member for Huron-Middlesex.
Interjection.
The Deputy Chairman: We can come back to the member for Riverdale (Mr. Renwick). We will be sure to recognize him.
Mr. Riddell: Mr. Chairman, I indicated in my remarks during second reading of Bill 14 that we would support any amendment that would make this legislation retroactive.
Having said that, I want to inform the minister that we find any kind of retroactive legislation to be offensive. It was not necessary. When the minister introduced the bill he should have indicated then that the legislation would become effective on the date the bill was introduced for first reading. Now he has bombed out, or his ministry officials have bombed out, and I think the minister recognizes that fact at this time.
Hon. Mr. Ashe: Are you going to support it or not?
Mr. Riddell: I indicated that we are going to support it, but the minister stands to be condemned for bringing in this kind of legislation when he could have made the legislation retroactive to the date when it was first introduced. He also stands to be condemned for pretending that he had not made a decision on retroactivity until he heard from the opposition parties. The minister knows full well he had that amendment in his possession before he ever came into the House to debate this bill, and I find that most offensive.
The reason my party is prepared to support the amendment for retroactivity is that we do not happen to feel that what the foreign investors have done to avoid the land transfer tax has been a very acceptable practice.
They have surreptitiously been able to avoid for years now -- more prevalent within the last two or three years -- the payment of the land transfer tax by forming a numbered corporation, and I can show the minister offers to purchase where it is stated on the form that the farmer selling his land has to incorporate before the foreign investor will buy his farm. I can show the minister that kind of an offer to purchase. I find that most offensive.
I find it very unacceptable that the foreign investors and their agents would operate in this manner for no other reason but to avoid paying the land transfer tax. That is why I do not have a great deal of difficulty in supporting the amendment making it retroactive inasmuch as I find it very offensive legislation. I again repeat that it was not necessary.
If the minister had his wits about him when he introduced the bill, he would have made it effective at the time the bill was introduced in the Legislature. Yes, we are going to support the amendment because we do not feel the foreign investors or their agents have been playing the game either; they have taken steps and manoeuvred to avoid paying the land transfer tax.
But one does not hear the lawyers talking about that, because the lawyers in many cases are acting on behalf of these foreign interests. The lawyers can get up and talk all they like about retroactivity of legislation and how offensive it is but, by God, why do they not get up to talk about the very system the foreign investors have been using to avoid paying the land transfer tax?
Interjection.
Mr. Riddell: That is right. They can talk out of both sides of their mouths and that makes me a little provoked as well.
Yes, we are going to support it, but I am going to tell the minister he stands to be condemned for introducing this kind of offensive legislation.
Hon. Mr. Ashe: Mr. Chairman, I think the record must be cleared immediately rather than at the end of committee of the whole --
Mr. Renwick: Mr. Chairman, I do not recognize the process that is going on tonight. I was on my feet before six o'clock; I was on my feet again at eight o'clock, before the member for Huron-Middlesex, and now the minister has stood up. I do not mind when I speak; my only point is that the longer I wait, the longer I speak.
The Deputy Chairman: The honourable member does not have the spirit of the chair either; he can speak for as long as he wants in committee. What we have here is the minister responding to a question raised by the member for Huron-Middlesex. It seems natural for him to do it at this point. Immediately following, the member for Huron-Middlesex could well ask a supplementary, but we will recognize the member for Riverdale.
Hon. Mr. Ashe: Mr. Chairman, I think it is important that I answer the charges, concerns -- have it as you will -- of the member for Huron- Middlesex and I definitely recognize we are going to hear from the member for Riverdale very shortly. I will be happy to attempt to cover any points he may have.
Two things have to be put on the record in response to the concerns expressed by the member for Huron-Middlesex. First, I can stand up and say in all honesty that I had not decided one way or the other as to whether to go with any retroactivity.
I had our legal counsel draft an amendment which was also perused and approved by legislative counsel. That is what one would call reasonably sound planning -- to have something that is technically correct if we are going to use it. Based on the consensus there seemed to be in the chamber for some retroactivity, albeit for a different period of time in some cases, I decided to proceed with the amendment I had already prepared. There is no doubt about that at all.
As far as the second issue raised, the offer to purchase, that is exactly what this legislation is all about. There is no doubt transactions have been taking place on a fairly regular basis, if not in the offer to purchase then in a side agreement to that kind of procedure, and that is the exact loophole that Bill 14 will close.
8:10 p.m.
Mr. Riddell: I have one final comment. Having listened to the member for Ottawa East (Mr. Roy) and having no doubt conferred with his legal advisers after his remarks, does the minister think that if this retroactive legislation passes the House it might be challenged in the constitutional courts?
Hon. Mr. Ashe: As the honourable member knows, I am not a lawyer either. Maybe that is how we can sometimes get some dialogue going on a more rational basis --
Mr. Kerrio: It might be an advantage. It doesn't necessarily have to be a disadvantage.
Hon. Mr. Ashe: I think that is exactly what I just said. It is my advice that you can never say that something will not be challenged, because I think we would all agree that there are learned counsel out there who will take a case for any reason; whether they think they can win or lose is sometimes not very relevant. In this case I am advised that it could be challenged but that the chances of success are extremely limited, if not nil.
The references made by the member for Ottawa East pertain to sections in the new Constitution that relate to criminal law. We are not talking about criminal law here at all, and on that basis it is again my advice that the retroactivity in this legislation does not fit into that slot vis-á-vis the protections and the rights.
Mr. Elston: Take a look at the penalty section.
Hon. Mr. Ashe: We are not talking about the penalties.
The Deputy Chairman: I take pleasure in recognizing the member for Riverdale, and would ask the member to take no offence in the fact he was not called on earlier.
Mr. Renwick: Mr. Chairman, I never take offence, except dramatically and rhetorically.
I want to say to the committee of the whole House, not on any partisan basis at all, simply that it is a very bad precedent for the committee of the whole House to accept an amendment to create retroactivity in a tax statute. One might have wished that, when the minister introduced the bill, he would have included the date on which the tax would become effective in the bill itself.
That did not happen. But to introduce that retroactivity at this late date offends a very simple principle. It is not a question of whether or not we like what people do. People are entitled to arrange their affairs to minimize the tax consequences of the work of the Legislature, and it is just that simple; there is nothing wrong with that, there is nothing invidious about it and there is nothing that draws down the opprobrium of any member of the assembly on it. So there is nothing wrong with what people have been doing in the light of the existing law.
The problem is that the minister did not have the date on which the tax would take effect in the tax bill when he introduced it. That is his mistake, and I do not think we as a committee should fall into the trap of accepting that principle. It is doubly flawed in this particular instance because, of course, on December 10 last year he signalled to the community what the intentions of the government were, and that bill, Bill 204, introduced in the last session of the assembly, is identical to Bill 14, which is before us tonight.
That told all of the people who wanted to deal in a way that would avoid the impact of the tax, as they are quite entitled to do, to rearrange their affairs, because that bill also said it would come into effect when it received royal assent. That bill was not proceeded with, so for some six months it has been known abroad to those who are interested in doing so, that they could arrange their affairs to avoid the impact of this tax up until the time the bill received royal assent.
They were reassured on that point when this bill was introduced on April 21 of this year. It would be quite wrong for this committee of this assembly to now, for whatever might motivate us, say, "Yes, we would like to he able to stop what has taken place." To now say, at this late date, that the tax will be retroactive to April 21 seems most unwise and most inequitable.
It is quite strange that those who, from December 10 through April 21, rearranged their affairs were quite entitled to rearrange them. But now we, at this late date, on May 24 are in a position where we are saying, "Oh, no."
But if we arranged our affairs after April 21 -- when this assembly received an identical bill from the minister -- if we arranged our affairs, as we are entitled to do to avoid the impact of a tax, then suddenly the committee of the whole House, at the behest of the minister, accepts this kind of an amendment, I think it is a most unwise principle.
I would have preferred the bill to have carried the retroactive date of April 21 when the bill was introduced, just as I would have preferred Bill 204 to have carried a December 10, 1982, effective date. After all, the House came back into session in January. We could easily have dealt with this bill had the matter been properly referred to it.
But at this late date, altogether apart from any feelings we may have about the bill, it is a very unwise precedent for the committee of the whole House to accept. Indeed, in the light of the way I feel about the bill and the offensiveness of it, at this late date, I would seriously ask the government to consider withdrawing the proposed amendment.
Hon. Mr. Ashe: Just two brief items, Mr. Chairman. One, this bill is not identical to its predecessor bill. There is no doubt the major principle of the bill is identical. I do not challenge that. There are some other changes that were put in the bill, so it is not identical.
Second, and I am not sure whether the member for Riverdale was in the Legislature this afternoon when I made reference --
Mr. Renwick: Yes, I was.
Hon. Mr. Ashe: No, when I made reference to the fact that any solicitors or prospective purchasers who checked at any of our offices, whether regional offices or head office, as to the possible retroactivity, were told that was a possibility. Granted, they were not told it would or would not be, but they were put on notice it was a possibility that could happen in the process.
Last but not least, why did we not go back to last December? Again, I addressed that before. But that was a different bill and a different session. I could go into the reasons why it did not pass last time; I would suggest we were all part of that fault. I was prepared to go forward with that bill on one or two occasions. It was, unfortunately, some of the members opposite who were not prepared to go forth at that particular time.
In terms of the special session at the beginning of the year, of course, the same thing applied there. I am not suggesting anybody is exclusively at fault. I suppose one could say we all were, with the length of time that was used on other items.
Again, I make no apology for what is before us. I think it is fair, it is reasonable and it is equitable. Again, we are not talking about retroactivity to last year; we are talking about to April 21, 1983, which was the date of first reading of Bill 14.
Mr. Renwick: I would like to make a very brief comment. I do not want to get into an argument about whatever minor changes there may be in the bill. The fact of the matter is the sections of the bill relating to the retroactivity are, so far as I can read the bills, identical.
Section 2 of Bill 204, which was read for the first time on December 10, 1982, is identical to section 2 of Bill 14, which is before us now, it is basically that same retroactivity.
8:20 p.m.
I am not interested in arguments with the minister. I am simply saying to the members of the committee, of all parties, that it is an extremely unwise precedent. It is not a question of who could telephone the minister's office and be given an ambiguous or equivocal answer by the ministry. That is normal. That is what one generally gets from the ministries of the government.
The important point to me is that people who in good faith rearrange their affairs on the basis of the state of the taxing statutes in this province should be entitled to rely on the state of those taxing provisions. It is just that simple. If the minister will not consider it I would ask the government members, sitting as members of the committee and in a nonpartisan sense, to defeat the amendment.
Mr. Breaugh: Mr. Chairman, I have listened with great care to the argument put forward by the member for Riverdale and others that the retroactive aspect of the amendment is unfair. I appreciate their arguments are put forward with a finely honed legal mind but I, as someone who does not deal with matters in that way, really do not care about those arguments.
The government in this case has done what I anticipated it would do. Some appear to he shocked that the minister could not make up his mind. That does not shock me. Some appear surprised he did not have the foresight or the ability to put in the original legislation that he wanted it effective back to this date. That does not surprise me. Perhaps because I have known the minister longer than some other members, his stupidity does not shock me at all.
A couple of things should be made clear. For all his faults -- and he has lots -- the minister made the government's intentions clear when it tabled the previous bill. No matter which side of the House or argument one is on, one would have to acknowledge the government put forward legislation last December that was slightly different from the bill now before us. It put the world on notice they intended to plug this loophole and that tax advantage would no longer be there.
It is my recollection that all three caucuses were prepared to deal with the legislation in our January session -- whatever name one wants to give it -- but for a variety of circumstances that did not happen. It was clear in my mind. It was clear to people who talked to me and asked when it might come in, that the law was to change in December, January or shortly thereafter. That intention was clear no matter how they wanted to do it.
I admit it poses some awkwardness for us when the minister comes in during second reading and goes through the kind of routine he did today -- saying he would listen to arguments about retroactivity and trying to get some sense of whether opposition members would support it. I said earlier this afternoon in debate on second reading that I would, and I will. Our agriculture critic during question period today indicated his support. If the minister chose a roundabout and somewhat awkward mechanism to do it, at least he did elicit some measure of support from the opposition parties.
There is an awkwardness about it. There is no question about that. I suppose the only defence for it is to say no bill is law until it finally has been dealt with by the Legislature. In this instance there was sufficient notice given to establish that the intent of the government was known last December. That is sufficient advance warning for anyone who might have been dealing with it.
I readily concede there is a point to he considered about retroactivity in a bill such as this which essentially plugs a loophole. Such a bill means someone has taken advantage of a situation that was not intended by the government and I do not have any qualms about the minister saying we should avoid extending that loophole. That is fair game. No one acted improperly when he took advantage of the loophole.
Most of us will recognize that was not the intention of the original legislation. It certainly was not our intention when we dealt with this matter earlier this afternoon.
It seems to me it is both fair and reasonable to support this amendment. By and large, if one looks at the other side of the coin and says, "You should not do that," one has to look at a group of people who are fairly, legally and reasonably exploiting a loophole in the law. I do not intend to defend that on principle, in theory or in any other way. I think that was unfair.
Deeper than the surface of this act, I believe there is a major problem of foreign ownership of our farm land in Ontario. If I want to be fair to any particular group, I would like to be fair to people who purchase that property. More important than that, I would like to be fair to everybody else in this province who is losing a very valuable resource.
I think we should leave it that way. All members have now had an opportunity to address this amendment and the stickiness of it being retroactive. I want to be straight about it. I believe it is reasonable to support this amendment. I will do so and I hope most of my colleagues will as well.
Motion agreed to.
Section 12, as amended, agreed to.
Section 13 agreed to.
Bill, as amended, ordered to be reported.
On motion by Hon. Mr. Ashe, the committee of the whole House reported one bill with certain amendments.
TOBACCO TAX AMENDMENT ACT
Hon. Mr. Ashe moved second reading of Bill 35, An Act to amend the Tobacco Tax Act.
Hon. Mr. Ashe: Mr. Chairman, this bill to amend the Tobacco Tax Act enacts proposals of the Treasurers budget to increase the rate of tax on tobacco products to 45 per cent of the taxable price per cigarette or gram of tobacco effective May 11, 1983.
In addition, the bill contains two items of administrative legislation which are required to clarify the application of the act. The amendments permit the Lieutenant Governor in Council to provide by regulation the rate and thie method of calculating interest payable and for the delegation of the powers and duties of the minister.
8:30 p.m.
Mr. Speaker: The member for Brant-Oxford-Norfolk.
[Applause]
Mr. Nixon: Mr. Speaker, I carry my personal claque with me wherever I go, and I am not going to question their judgement if you do not.
Mr. Conway: It was not always so.
Mr. Nixon: Fortunately, it always was.
The bill increases the ad valorem tax on tobacco from 40 to 45 per cent which, in itself, is insupportable as far as I am concerned. In conjunction with that, the government has decided to apply the seven per cent sales tax overall. They have increased this tax to 45 per cent and then slapped an overall seven per cent on top, which will increase the revenue from tobacco taxation by $135 million.
Last year the revenue from tobacco tax was $449 million, so my calculation indicates that the additional $135 million will net a 30 per cent increase for the Minister of Revenue (Mr. Ashe). I do not recall him asking for an exemption from the House from the five per cent guidelines we have argued about for so many months. Frankly, I find it unacceptable that members on so many sides will simply say: "It is a tobacco tax and nobody cares about that. If people want to smoke and injure their health, that is their business."
I would like to point out that this extremely large increase should be compared with what the government is spending on all its agriculture programs put together. The reason such a comparison has validity is that tobacco is one of the major agricultural products of Ontario. By value it is the major agricultural product. This year, when we expect to net $584 million from both the taxes put together, we are spending just $295 million, in all, on our agricultural programs. Thus, instead of increasing that by 30 per cent, which would have been a sensible initiative for the ministry to take, the commitment to agriculture is a decrease of no less than 10 per cent and considerably more, depending upon which programs are included.
The minister may not like to have those two figures put side by side, but I can assure members that the constituents of Brant-Oxford-Norfolk, who grow the bulk of the tobacco and certainly tobacco of the highest quality -- as they would be prepared to tell members, and so would I -- are very much concerned that in these times of their rapidly increasing costs, and I suppose the sensitivity that some of them feel when they are maligned by spokesmen for governments and in other places, the government is still prepared to use the tobacco industry as such a tremendous and rapidly growing source of revenue while putting them down in almost every other way, particularly with regard to the provision of agricultural programs for their reasonable support.
We might also make a comparison on the basis of the number of acres of tobacco grown in the province. Approximately 120,000 acres produce tobacco and this number varies depending upon the market and the decisions of the flue-cured tobacco marketing board. That is the largest percentage of tobacco grown, although there are some other types. There are at least two other types. If one was to do a little simple arithmetic, one would find that the government nets from tobacco tax just under $5,000 per acre from the work the farmers do. It is interesting to note that the gross the farmers make out of the same acre is only $2,800 and out of that they have to pay their expenses.
It is interesting that the government seems to have decided that the tobacco tax is completely elastic and no matter what level of taxation it imposes, the consumption is not going to change. It is interesting that they have not established this with any particular policy to reduce the consumption of tobacco, because obviously they are depending on it more and more as a source of revenue. I believe this increase is unconscionable. I can well recall not too many years ago when tobacco was completely untaxed provincially. With the introduction of the sales tax about 1961, the original three per cent tax was levied on tobacco along with any other commodity that was sold across the counter. Tobacco certainly was not exempted.
A few years later, the decision was made to remove the sales tax from tobacco and impose something the government chose to call a tobacco tax. It was at exactly the same rate as the sales tax so there really was not much difference. If the minister would look up the debates of the day -- and they make great reading because some of the same material was put before the House then as he is hearing tonight if he is listening -- at the time it was predicted the government was going to use the new vehicle to increase largely the revenue from the sale of tobacco. Of course, they did that, raising the original tobacco tax from three per cent to its present 45 per cent. Then to slap a seven per cent overall sales tax on top is, I suppose, the cruellest cut of all.
The farmers themselves are quite concerned that the government's judgement about the consumption of tobacco is incorrect. This will do a good deal to depress the somewhat depressed economy they are concerned with right now. Frankly, I believe the goverment might make the tax more palatable, as far as the producers are concerned, if it could enunciate some new programs to improve export trade in tobacco and ancillary products, but such is not the case.
While it is very effective to send the member for Elgin (Mr. McNeil) to Siam and points southeast to sell tobacco, that really does not take the place of a co-ordinated export program, which surely is a real need as far as the tobacco producers in this province are concerned.
It is not possible for me to support this bill in principle. I voted against it on first reading. I do not believe any members of the House should support an increase of 30 per cent on this tax, which I believe, and I have already said, is unconscionable, unjust and unfair.
Mr. Breaugh: Mr. Speaker, we intend to oppose this bill. Though some might find that a little surprising since it falls into that lovely category of the sin tax and we are supposed to he able to tax sin wantonly --
Mr. Bradley: I thought the New Democratic Party was against sin.
Mr. Breaugh: I would not go that far. I do not believe I have ever said that.
I think there is a basic problem at work here. No one in any of the caucuses would object to taxation techniques that the public at large can see, understand and relate to. One of the problems I am having a lot of difficulty with lately is that this government has perfected the art of taxation without people really knowing they are being taxed, and this is an extension of that.
We look at a very moral government so heavily dependent now on cigarettes, booze and the numbers racket that it now elicits literally billions of dollars a year out of people in Ontario from these three sources. They started as relatively simple ideas that probably were supportable at one time. A bit of taxation here and there probably did not hurt, but the government has turned them into art forms and it does not do very much to turn that money over either.
If the Minister of Revenue were making an argument this evening that he wanted to increase substantially this tax on tobacco products because he wants to do a lot of cancer research, or introduce a lot of new programs along health lines that would convince people to stop smoking, or do something that would take those tobacco producers and growers and convert their energies, soil and farm equipment into some other line of work, we would all have to sit and listen to that, but I know he is not going to do that.
What we have here, front and centre, is a simple grab for money. What the government likes about this technique is that most consumers out there do not understand that when they go to the corner store to buy a pack of cigarettes it is the province that is grabbing the largest chunk of their cash. One could look around the store and see that in a sense the merchant is acting as a tax collector for the province. On the surface, when one walks into the store it looks very much as if the guy runs the store; he does not look like a tax collector. Yet we are turning people who run corner stores and smoke shops and places such as those into one of our largest sources of tax collection.
8:40 p.m.
The reason this government loves it is that most citizens do not see the tax. For example, on a bottle of liquor one does not see a tag that states, "Eighty or 90 per cent of the price of this article is taxation." When one goes to the gas station and the attendant fills the car's tank with lead-free gasoline, one does not see a taxing agent clicking away on the meter. If one took some time, one could think it through and see the biggest single factor in the price of a litre of gasoline is actually two levels of government working like mad to see how much money they can extract from the public.
The government loves this because most of us do not see it as a taxation device; we see it as a simple purchase. Another reason the government loves it is that someone else collects this money for it. One does not sit down and fill out a form that states, "Out of the $2 I paid for this deck of smokes, this amount goes to the province of Ontario, and here is your cheque." It happens every day. What the government has is a kind of art form at work, a taxation device of which nobody is aware, and it loves it.
Again, the government loves it because people do not sit down and pay this tax once a year; they pay it several times a day in several different ways. I think the government has taken that technique and expanded it into promotional ideas. One has to run and hide to get away from the government's numbers racket these days. They are very up front about handing out cheques and showing a little old lady playing Lottario. The ads are all over the place. If one looks at it, one can see the government has turned the corner smoke shop into a kind of taxation centre, and that I object to.
I think, as the previous speaker put it, there is an unconscionable amount of money being raised as a tax revenue of which most people are not aware. I think the time has come to say:
"Enough. That is unfair. If you want to tax people, fine. Put an income tax on them. Tax them by the fairest method possible, and make them aware they are being taxed." I know somebody will respond by saying, "If you read the cigarette package, and look for the licences that are on display in the stores, you will be aware of it." I would reply, however, that the government does it very subtly, and in a manner most people are not made aware of.
While most people sit down once a year and figure out their federal and provincial income taxes, more often than not the provincial government has found another way to elicit money from them. It is taxation, an unfair form of taxation,and one which is spreading throughout our society. I believe there is not a member here who likes taxes. It is human nature to say one does not like taxes, but I think we should also be prepared to say there are fair ways for governments to raise revenue, and unfair ways. It strikes me this bill promotes an unfair form of taxation, and I will oppose it.
Mr. G. I. Miller: Mr. Speaker, I too rise to speak against Bill 35, because tobacco plays a tremendous role in my riding of Haldimand-Norfolk. I believe the former county of Norfolk produces 50 per cent of the tobacco in Ontario. I do not think any farmer is against fair taxes. But when one is presented with a tax such as is proposed here, an unfair tax increasing to the percentage they have suggested, it is like killing the goose that lays the golden eggs.
Sooner or later people cannot afford to make purchases. I have had calls from people on unemployment insurance who smoke, and I think everyone has that right, in moderation. When one is paying $1.57 for a package of 20 cigarettes, 99 cents of which is tax -- 52.8 cents provincial, and 43.2 cents federal, adding up to 99 cents or almost $1 per package -- I think that is a little extreme.
One sees the results from the production of tobacco going down. We have reached a peak this year when the use of cigarettes and tobacco has almost levelled off. There is no growth, and sooner or later the government is going to lose on the overall income because of the high cost to the user.
I might point out, too, that tobacco as a crop provides a tremendous amount of employment. This became very clear only last summer when we had an early frost and about 50 per cent of the harvest was wiped out. Unemployment insurance was not adequate to cover the workers. Consequently, they had to go on welfare, and our welfare rolls were expanded considerably.
It gives me a lot of pleasure to stand up and speak on behalf of the tobacco farmers, the producers. I might also indicate that the farmer himself receives only five cents for every package of 20 cigarettes. Again he is being put in a financial squeeze just to finance his crop because his input costs are increasing.
I just hope the members opposite -- and I know there are members on that side of the House who represent tobacco-producing areas -- will use their influence to encourage the government not to kill the goose that lays the golden eggs, so that we can have a viable industry. Otherwise we will be importing much of our tobacco. Even now cigars are being imported and rolled right here in Toronto, and on an individual cigar that sells for 51, 50 cents goes towards the tax revenues of Ontario. I think everyone should have the right to sit in his easy chair and have that cigar at night if he sees fit, but I do not think we should have to put all our money into the coffers of this province.
Mr. McGuigan: Mr. Speaker, I want to begin by pointing out to all members that I do not have any conflict of interest in speaking out for the tobacco growers of Kent and Elgin counties whom I represent. The possible conflict of interest was that not very many years ago I grew a fairly large acreage of tobacco. It was not the type of tobacco my colleague the member for Brant-Oxford-Norfolk (Mr. Nixon) speaks about, Virginia tobacco, which is a very mild-smoking form of tobacco. In our part of the country we grow black tobacco, which is used in cigars. and I think some of it has been used for making chewing tobacco or what we used to call snuff tobacco.
I grew that tobacco for a number of years, and I gave it up really for two reasons. One was that the acreage gradually dropped as the flue-cured tobacco took over a greater portion of the market. The other was a human imperfection -- and I do have human imperfections in that I have a slight colour-blindness between green and brown. I always have to ask my wife what tie to put on if I am wearing a brown or green outfit. I found I really was not very good at grading tobacco. There are something like 60 breeds or shades of green and brown. I could look at one and could not tell whether it was number 49 or number 51, so I gave up growing the crop.
A number of people in our riding do grow this tobacco, and it is a pretty big enterprise, especially on soils that are really not suited to other crops. It is grown on sandier soils that really do not excel at producing food crops and yet are the very type that grow tobacco.
If the minister were using the increased tax to put through a research program that would try to do away with the alleged health effects of tobacco, or if he were using the money to discourage young people from taking up the practice of smoking tobacco, or if he were in any way trying to promote the health of our populace, about which we are all concerned, I think we on this side would have a very difficult time arguing against the tobacco tax. I would have a difficult time arguing against an increase in tobacco tax were any of that money being redirected into a special fund or if the government were, even in its general fund, directing a good or increasing proportion of its money into these efforts.
8:50 p.m.
But we do not seem to be doing that. We are in an area where, as the member for Oshawa (Mr. Breaugh) has pointed out, people buying the product may curse under their breath but really do not consider the millions of dollars collected that way as a tax. The hypocrisy of it is that rather than attack our tax problem and do it on a scale where the richer people pay a greater percentage of the tax -- I believe it is called progressive taxation -- and really face the electorate with the issues, it is attacked in this underground and underhanded manner. This to me seems hypocritical for a government that so often points itself out as the guardian of our morals, giving good management and government to Ontario.
I would like to tell the minister that an operator of a rest home called me recently. He pointed out the increase in cost for the people in his rest home who smoke a pack per day amounted, within a penny or two, to an extra $5 a month. I think most of us would agree a pack a day is not excessive consumption, especially for people in rest homes of the type he operates. By and large, these people are burnt-out alcoholics with very little to keep them busy; they need something to do with their hands and really depend upon tobacco products for their comfort.
He said the comfort allowance -- I know that is not the ministers area, but I wanted to use this opportunity to point it out -- has really been diminished for these people. Practically every person in such a rest home is a user of tobacco, and the allowance has been diminished by about $5 a month, according to the figures he supplied to me.
I join with my colleagues in opposing this bill. which I think is unfair and hypocritical and a very underhanded way to raise taxes.
Hon. Mr. Ashe: Mr. Speaker, I find it very difficult to respond to the various points made by the members opposite. Frankly, they did not do anything other than criticize the government for raising revenue in a very legitimate and acceptable fashion. Tomorrow they will be criticizing the same government out of the other side of their mouths for not spending enough on particular programs. The money this tax will raise will help to facilitate that other side of governing.
Mr. Nixon: Why does the government not raise it on Minaki or Suncor?
Hon. Mr. Ashe: All investments are, in the long run, for the betterment of this great province of ours.
Reference has been made to pricing tobacco products away from the consumer; it has been said there is not complete elasticity in the market. Frankly, I would go along with that particular reference: I do not think there is complete elasticity there either. At some time that market, one would think, will break down.
The industry will say, on the other hand, that in the past as the price of the product has increased for whatever reason, invariably there has been a very temporary drop in consumption, followed shortly thereafter by a resumption to the marketplace as it stood before.
I know the other side of that argument is, "It used to be growing at X per cent per year and that growth is not as great, so that really is a decline." That is the same argument the members opposite use when we talk about an increase in transfer payments. They talk about there being a decline when the payments do not go up as much as they thought they should. One cannot have the argument both ways.
This change in the legislation brings the ad valorem tax rate on cigarettes, cigars and cut tobacco to the same rate that has been in effect since last year. It is uniform. It is reasonable. I would even go so far as to say -- and this is a personal opinion, right out front -- that if, over a period of time, there is a reduction in the consumption of these products and hence a reduction in the revenue, I am sure there will be some offsetting savings in the budget and the expenditures of the Ministry of Health.
I am not sure that the people of Ontario are hard done by in the long run at all. Again, this is a fair part of the budget -- the fair, reasonable and responsible budget brought down by my colleague the Treasurer (Mr. F. S. Miller) a couple of weeks ago -- part of the fiscal restraint and responsibility that this province has shown for many years. I will be very surprised if it does not have the complete support of all the honourable members.
Motion agreed to.
Bill ordered for third reading.
SMALL BUSINESS DEVELOPMENT CORPORATIONS AMFNDMENT ACT
Hon. Mr. Ashe moved second reading of Bill 36, An Act to amend the Small Business Development Corporations Act.
Hon. Mr. Ashe: Mr. Speaker, the bill implements the proposals in the Treasurer's (Mr. F. S. Miller) budget as well as a number of amendments of an administrative nature to ensure the effective administration of the act.
Briefly, the budgetary proposals can he summarized as follows:
The maximimum investment in any one project by one or more small business development corporations will be limited to $5 million.
The definition of a small business in which a small business development corporation may invest will change from 100 to 150 employees, with the small business being able to expand to 300 instead of 200 employees before ceasing to be an eligible investment.
The definition of an eligible pension fund will be amended in certain instances to include a limited partnership.
The production of animated films will now qualify as an eligible manufacturing and processing activity.
Some of the administratise amendments provide for expanded powers to the Lieutenant Governor and the minister with respect to the making of regulations, prescribing of the rate of interest and its calculation, and the delegation of authority.
Another proposed change is to prohibit a small business development corporation from investing or maintaining an investment in a small business or a former small business if the small business development corporation, either alone or together with its shareholders, associates or affiliates, holds more than 49 per cent of the equity shares of the small business.
There are also some minor amendments of a housekeeping nature.
These amendments to the Small Business Development Corporations Act just carry on, streamline and bring up to 1983 a very successful program that was enacted by this government a number of years ago, and recognize the success of that program with increased funding and changed criteria.
Mr. Sweeney: Mr. Speaker, I want to stand and be supportive of Bill 36. I think everything that is in it, as has been explained by the minister, is appropriate. I want to begin by saying the SBDCs are one of the more successful programs introduced by this government. There is an opportunity or a provision for small businesses to involve others in their business without the others ever having the ability to gain control of the business.
9 p.m.
I notice in subsection 4(4) that is repeated and, as the minister has indicated, even if there are several groups involved, they cannot in common or together control more than 49 per cent. I can only presume, and perhaps the minister can speak to this later, that there may have been a problem creeping up whereby groups in conjunction with one another have been able to get more than 49 per cent. I do not know that, but I presume there must have been some kind of problem of that nature, otherwise this amendment probably would not have been required.
I want to go clearly on record as saying to the minister that I highly support this section. I have worked with a few small businesses in my own constituency and have persuaded them to examine the possibility of using a small business development corporation, rather than borrowing more money. I feel this is a different way of infusing more capital into businesses. I have clearly indicated to them they cannot lose control of their businesses in this way, because those coming in can never have more than 49 per cent.
Perhaps the minister can briefly explain to us why this amendment was necessary. As I say, I can only presume it was because of some problem they were encountering.
I suspect the same thing is true of the $5-million limitation. As I understood it before, the only difference between the wording of the existing act and the new wording is the substitution of the word "all" for the word "the." I presume, unless again I am misreading it, that the "the" referred to a single SBDC whereas "all" refers to the possibility of more than one. Once again, the $5-million limitation applies, as I understand it, whether there is one or more than one.
I would agree with that amendment, but perhaps the minister could very briefly indicate to us what were some of the problems they were facing that prompted him to bring in that amendment. I am not objecting to it; I would just like a little bit more information.
The third point is the increase from 100 to 150 with respect to beginning the SBDC and allowing a growth from 200 to 300. Once again I support this move, particularly because it seems to me it would open the option of providing or setting up an SBDC for more businesses than is possible at present.
Again looking at some of the businesses in my own riding, we have run into a couple of situations where they fall in between the cracks in this case. They do not qualify for the SBDC and yet they are not big enough to qualify for other kinds of programs. I would say to the minister that obviously somewhere along the line there has to be a limit to this growth, otherwise we are no longer really talking of small businesses.
I do not think either of the 150 and the 300 limitations put in here goes over that limit. I am not suggesting that. I am suggesting that in my judgement the SBDC is a powerful instrument, simply because it helps the small business sector, the very sector that has difficulty getting funds from other sources. We know that in most cases large businesses, and even reasonably healthy medium-sized businesses, do have other sources of funding. These are not available to small businesses, simply because the small businesses are a little bit riskier, they are often owner-operated, they are often at the very point of trying to decide whether they should expand or whether they should hold the line. Therefore, they are in a particular point of need.
Speaking for my party and as a member of this Legislature, I want to see to it that the SBDC does not reach the point where it becomes watered down. Whatever funds are available -- and the minister knows better than I that there is a limit to the funds available for these kinds of things -- if they get spread around too many kinds of businesses, the ones that need them the most may lose out.
I do not have any concerns with these numbers; I think they are reasonable, and I want to indicate support for going up to 300.
The message we are sending out is that not only do we want to see these businesses get rolling well but also we want to see them continue to grow. We want to say to them: "We want you to expand. We want your small business eventually to become a medium-sized business, and if the market and your management expertise are good, you will eventually become a big business."
In the past we may have unintentionally sent out the message that we would help when it was a small business but if it started to expand we would not want to have anything more to do with it. I suspect this is probably what the minister and his advisers had in mind when they changed these numbers.
All in all, I approve of the $5-million limitation, whether it be one or more than one corporation. I support the increase in the employee limitation numbers, the 150 and the 300, because it will show our support for expansion. I am pleased to see thc minister is reiterating the 49 per cent holding. The other housekeeping measures the minister spoke about speak for themselves and I have no objection to them.
Mr. Breaugh: Mr. Speaker, we will support Bill 36 essentially because there is a great deal of work that does need to be done in that sector of the economy called "small business."
One thing concerns me slightly. There would appear to be a great run now: for some reason, federal and provincial governments seem to have discovered the small business sector. They seem to have put a great deal of hope and faith into that sector, I think with some measure of justification. But this bill is a good example in highlighting some of the problems people have in that field trying to develop a business from a relatively small size and getting it into something that is a going operation.
From our point of view, we are very much concerned about the opportunities for employment that are provided in that sector. Recent studies have shown dramatically how important small business is to the Canadian economy as a whole. They have pointed out rather remarkably that the small business sector is one of our largest employers. According to some studies, small industry is far and away the largest single provider of employment. We do support any kind of move, such as this one, that attempts to direct some government support to the small business sector.
Many of us will have some reservations about the exact way in which the development corporations function. I know that in my own area and around Ontario a number of people in many instances have been drawn to the development corporations as something that will be of assistance to them.
On a couple of occasions in committee, we have gone over how the development corporations function and what support this government really does offer to the small business sector. Although the government seems to have discovered that it is there and that is a sector that needs some assistance, it does seem to be fumbling around for ways in which to provide that assistance.
Many of us had high hopes for the new high-tech centres around Ontario. In that crystal of an idea, there appears to be some great difficulty in making it work inside the industrial sector, whether it is small business or large. We hope this bill and related moves by the government will do something that will foster in this province businesses of a smaller size that will offer some measure of stability in employment and economic growth. That is essentially why we will support this legislation.
I have some reservations about whether the government is operating a piece of public relations show business here or whether it really is attempting to foster and build a small business sector in our economy that is strong, healthy and long-term. My personal goals for this type of legislation are that it will put in place the support systems that would make a difference as to whether or not a small business stays alive in the first instance and second, whether it does grow to provide the long-term job stability which all of us want.
To that end, these amendments appear to provide a hit more flexibility and the extension of a program that has the potential to give small businesses what we want for the economy as a whole, which is stability, growth and assistance of the proper kind at the right time. That is what this program purports to do, and we hope these amendments to Bill 36 will allow that to happen.
9:10 p.m.
Hon. Mr. Ashe: Mr. Speaker, I appreciate the support indicated by spokespersons from both the opposition parties. We can agree that this has been an extremely successful program. I concur with the comments by the member for Kitchener-Wilmot (Mr. Sweeney) in the context of the fact there are not unlimited resources.
The honourable members will recall that the Treasurer (Mr. F. S. Miller) indicated the concept of the small business development corporation should be reviewed to make sure it still does and will continue to serve a useful purpose with the limited resources we have. It has been extremely successful and well used and has provided, as members pointed out, another source of capital without having owners give up control of their businesses and without going further into debt in some cases.
During the period of high interest rates which we have gone through recently, I know of several businesses that were saved because of the SBDC program. They would have gone out of business otherwise. They had no capacity to raise capital through further debt financing. In some cases if they had not reduced their debt financing they would have been unable to carry it at the interest rates in effect at that time.
The question about limiting the size is the change. Before, any one small business development corporation could invest up to $5 million, but one could have two, three or, in theory, an unlimited number that could invest up to $5 million each in a target investment. Frankly, it has happened on only one occasion to date that there have been two maximum investments of $5 million, totalling $10 million. There seem to be several others on the horizon which seem to put the whole program in jeopardy in this context.
If one had, as in this year, even with the increased funding, $30 million available, in theory one could end up with maybe only two targeted businesses with six SBDCs putting in $5 million apiece and the money would all be gone. It was felt that was not the spirit of the SBDC program. The $5-million maximum total investment into a targeted business is still a very reasonable size.
As the member pointed out, the increase in the number of employees is up to 150 for the start of a program. That will still be considered a small business: a 50 per cent increase from 100. I know of several where there were 100, 105 or 110, and that was a problem. They can now be accommodated. More important, we are trying not only to maintain a business and make it successful but also to give every indication that the growth potential can still be there, albeit the percentages are the same.
In other words, the growth from 100 to 200, or 100 per cent, is now 150 to 300 people, similarly 100 per cent; but there is a lot more room with 150-employee potential for growth than there was before with the same percentage, in that case growth of 100 employees. It does offer a lot of incentive for a business not only to be basically successful in maintaining its position in the marketplace but to grow as well.
Frankly, the 49 per cent business is a matter of clarification of the previous wording of the act. There were some situations where it was being interpreted that an investment would remain eligible for two years after a significant change in the status of the business or the shares held in a small business. There was a conflict, because of the way it was being interpreted, between subsections 12(1) and 13(3) of the act. It is strictly clarifying: it is not closing a loophole. It is just making abundantly clear the complete intentions about the lack of control and material change in the status of an SBDC.
I think I have covered the various points raised. I appreciate the support of the members opposite on this legislation. With the additional funding that has been made available this year, I hope the program will continue to prosper as it has in the past.
I might point out that on two occasions during the past fiscal year, we have had to go back to Management Board of Cabinet for additional funding, which was made available. With a higher amount to start with, I hope that will take care of the demand for the coming year.
Honourable members might be interested in a brief summary of what has happened to the end of the past fiscal year. There has been a total investment of $147 million in 327 businesses under the SBDC program, with the average investment being $451,000. Again this is spread throughout all parts of the province, no doubt predominantly in the central Ontario and Metropolitan Toronto area. However, there are significant investments in eastern Ontario and southwestern Ontario and, unfortunately, a smaller number but still a significant investment in northern Ontario.
I think this has been a successful program that has benefited all sectors of the small business economy and all geographical parts of the province.
Motion agreed to.
Bill ordered for third reading.
RETAIL SALES TAX AMENDMENT ACT
Hon. Mr. Ashe moved second reading of Bill 37, An Act to amend the Retail Sales Tax Act.
Hon. Mr. Ashe: Mr. Speaker, this bill implements the proposals contained in the Treasurer's (Mr. F. S. Miller) budget as well as some administrative amendments.
The exemption for production machinery and equipment purchased by manufacturers is expanded to parallel the exemption for such machinery and equipment under the Excise Tax Act of Canada.
Also, the definition of a manufacturer is amended and now applies to a person who manufactures or produces goods for sale or their own use in excess of a value of $50,000 per annum.
Certain heavy trucks are exempt from tax effective with deliveries made on or after May 11, 1983.
The bill also provides for temporary exemption from tax on new major household appliances and new furniture for household use.
The proposal for exemption from tax is extended to purchases of audio and audio-visual educational publications by schools, school boards, universities and public libraries, to purchases of Maple Leaf series of gold coins and to prices of admission not in excess of $4.
Vehicles converted to operate on alternative fuels and required to be licensed under the Highway Traffic Act will qualify for a tax refund provided the conversion is made within 30 days from the date of purchase.
Other budgetary amendments include the change of tax rate to 12 per cent on liquor, beer and wine purchased at retail stores, effective today, May 24, 1983, and the withdrawal of the retail sales tax exemption on purchases of tobacco products effective May 11, 1983.
As I mentioned before, the bill also contains certain administrative amendments. A number of those are intended to tighten various penalty provisions and thus discourage noncompliance. For instance, under the existing legislation the penalty for understating the fair value of tangible personal property subject to tax is not less than $25 and not more than $500. The proposed amendments increase such penalty limits to $50 and $2,000, respectively.
Other proposed changes relate to such items as exemptions for purchases of firefighting vehicles, parts and accessories for exempt equipment for chronic invalids and the physically handicapped, and a number of housekeeping adjustments.
9:20 p.m.
Mr. Mancini: Mr. Speaker, I can see that the power brokers of the Conservative Party are having a short meeting. I am sure that is following up on the visit of the Right Honourable Charles Joseph Clark. I am sure they are deciding right now who is going to get their vote on the second ballot.
Mr. Speaker: I thought they were discussing Bill 37.
Mr. Mancini: Since about seven o'clock
Mr. Kerrio: He is our guy. We are supporting him.
Interjections.
Mr. Speaker: The member for Essex South.
Mr. Mancini: We will have to ignore the political plight of Charles Joseph Clark for just a few moments and talk about Bill 37 at present.
I want to make it very clear that our party opposes and condemns the economic policies of the Conservative government of Ontario. It has been this Conservative government that has presided over the most difficult economic times since the Great Depression and has contributed to the economic decline of this province.
As an example, today in our great province 551,000 people are unemployed. Of that figure, 228,000 or 22 per cent are young people. The Conservative government of this province is creating a class of people who may not know the self-satisfying feeling of work and being self- supported.
How does the Conservative government of Ontario deal with this problem? Part of their answer is Bill 37, a bill designed mostly to raise sales taxes on some items and to fiddle around with the sales tax on other items in a temporary fashion.
We all know that many sectors of our economy need tax relief. They need permanent tax relief and a permanent tax structure that in a way will strengthen the particular industries so that they can compete with foreign products and make goods available to consumers at an affordable price.
What we see from this government is a 90-day suspension of taxes on some items, on trucks, which I believe are not in high demand at this time, and on gold coins. I do not believe that in the past year I have talked to a single constituent who was interested in the suspension of the sales tax on gold coins.
Mr. Nixon: Just a few Tories on their way to Minaki.
Mr. Mancini: That is right. Just a few Tories on the way to Minaki Lodge are interested in the suspension of the sales tax on these Maple Leaf gold coins.
My constituents are interested in economic policies that will be able to put their children and their neighbours to work so they can earn a livelihood and be part of the mainstream of this province.
The retail sales tax suspension on some items such as furniture and, as I mentioned earlier, trucks and other items is very temporary and will do very little for the general economy. The only benefit that we can see this temporary sales tax exemption having will be to assist a number of small businesses in being able to move some of the stock they have in place. That is also in question, because the five per cent hike in the provincial income tax literally takes away whatever benefits may be accrued by the suspension of sales tax in buying home furnishings.
For example, a family in the $20,000 income bracket will have its provincial income taxes increased by approximately $50. If the same family goes out and purchases household furniture or appliances with $300, if it can afford to, it will save $21. As a result of this government's economic policies, that family will have a net loss of approximately $39 through the tax system.
What we have here in Bill 37 is nothing but a charade. It pretends to assist the consumer, it pretends to assist the people who make their livelihood out of selling furniture and appliances and certain items such as trucks, but in the overall economic scheme of things the government has done nothing for those people, absolutely nothing.
The sales tax is the most regressive tax we have in our system. We should be very careful before we raise sales tax on some items and tax new items. The millionaires who are going to stay at Minaki Lodge pay the same sales tax as the working poor and the unemployed.
The general economic situation this government has placed Ontario in is such that one would have to demand action by this government. We have done that; we have demanded action on many fronts. Their response to our demands is Bill 37, which in effect raises sales tax for millions of individuals across Ontario and gives comfort to very few.
We cannot support the Conservative government and its economic policies; therefore, we cannot support Bill 37.
Mr. Breaugh: Mr. Speaker, it is with some reluctance that I announce our wishy-washy, lukewarm and somewhat tentative support for Bill 37. We do so because it is difficult to look at a bill such as this, which is a bit of a mixed bag, where the government is purporting to raise some --
Hon. Mr. Snow: That's the way you usually are; you are wishy-washy.
Mr. Breaugh: The Minister of Transportation and Communications should not get too loud or we will get offside.
The government is purporting to raise some retail sales tax on a couple of items -- tobacco products and beverage alcohol which I think, in line with the remarks we made earlier tonight, is a continuation of a rather far-reaching and unfair program.
But when one does go down here one finds the government is making some attempt to do something that would remove the retail sales tax, which I believe to be probably one of the most unfair forms of taxation.
In general principle, any time the minister does anything, however pitiful, that would remove the retail sales tax from whatever items, it seems to me he has at least recognized that it is an unfair tax and at least for a short period of time should be withdrawn.
I do not think anyone -- at least among the people I have talked to recently, both consumer and retailers -- has any illusions that there is going to he a great boom in any of the exempted areas here.
For example, if one were looking to buy a heavy-duty truck, such as outlined here, I am not sure the sales tax is the critical factor. It seems to me that those rigs, some of which are running now between $60,000 and $100,000, are in a price bracket where a seven per cent difference is not going to make you run out there. If you could not afford to buy the rig in the first place, the sales tax is not going to make the difference; but it may change the time of purchase for those people who normally would be in the market for such a product; people may make that purchase over the next 90 days.
It may also do something, as it would in a number of other areas here, for the retailers. Part of the problem was put to me by a local furniture dealer, who said, "This may do something in the 90-day period to clear the stock I have on hand." He was anticipating, and I think quite rightly, that initially in the announcements made around the budget there was some stimulation for sales as people became aware that there was an exemption. He said, "In the latter part of the exemption period, we will obviously do some promotional work," which is the traditional sale about the last chance to beat the sales tax. He was anticipating there would be some changes in buying patterns, but he put to me that he felt in this short period of time it would be unlikely one would go back into ordering more furniture from the factory. If one were coming out of a sales period which had pretty well cleared inventories, it might be conceivable that it might happen, but in that short a time frame, it would be unlikely to do much more than take stock off the floor or from his warehouse.
9:30 p.m.
At the very best. I think what one might get here is some short term stimulation which might do some good for small businesses, which is a reasonable thing for a government to do. We could look at some of the things that are included in the grab bag. Some I believe are supportable notions, in particular the exemptions to school boards, universities and public libraries for certain types of purchases, such as audio and video and educational publications. It always strikes me that it is not a very sane idea to have one level of government paying money to another level of government and then repeating the cycle by trying to get more grants.
It seems to me that exemption is just plain common sense, and there are a number of other things in here which reflect that. It gets a little silly, as I believe some members have already pointed out to me. After the government says in rather hold terms that it is going to have an exemption, it then has to go about, in the way all governments work these days, and put out some detailed examination of exactly what is meant by furniture: what is new and what is old; which kinds of appliances will have the sales tax removed from them and which will not.
There are the usual pieces of stupidity floating around in this area. I think one could make a reasoned argument by saying, for example, that appliances made in Canada should he one of the areas which would have this kind of stimulation applied to them, or furniture made in Ontario.
Obviously, when the Treasurer (Mr. F. S. Miller) went through his shopping list of what he might exempt, he tried to move into areas where it was fairly clear the industry was in a rather serious downturn. Ontario, for example, does have some rather outstanding furniture manufacturers and they are falling on hard times. This may do something to help the retail outlet clear its inventory. I suppose the hope is that further down the line that will back up into the places that produce furniture of this kind and will provide some kind of stability there.
I think the words I used initially are rather apt to this bill. This is not the kind of bill which is going to do much for anybody. All that is here is the potential to do a little bit -- perhaps, maybe -- for a small segment of the market. I do not know anybody who is all excited about the exemption for the Maple Leaf gold coins, but I am sure, somewhere, there is someone who is.
Mr. Cunningham: Mr. Makarchuk is happy.
Mr. Breaugh: Mr. Makarchuk is busy in other areas, he is running the socialist navy for us now. His staff is tied up.
I do think there is marginal benefit in the proposals in this bill. I would not want anyone to think we are not grateful for small mercies, but I do want to point out that the mercies are, indeed, small.
Mr. Martel: I would like to make a few comments on the bill, in particular as it pertains to gold coins. I recall the Treasurer saying it was going to help the industry in the north, and I am sure the member for Sudbury (Mr. Gordon) was really excited that the sale of gold coins was going to do something for the mining industry in northern Ontario. He shakes his head and I do not blame him --
Mr. Gordon: On a point of privilege, Mr. Speaker: I hate to contradict the member for Sudbury East but I did not shake my head. He likes to drag me into everything, because he does not have any ideas of his own.
Mr. Martel: I knew it would not take much to get the plagiarizing member for Sudbury to rise to his feet, but I thought if I suggested that --
Mr. Gordon: Mr. Speaker, on a point of privilege: I wonder if the member would repeat the term he used.
Mr. Martel: Plagiarize.
Mr. Gordon: That is the kind of term that should be withdrawn by the speaker opposite.
The Acting Speaker (Mr. Cousens): I did not hear the statement he is alleged to have made. That is very normal around here.
Mr. Martel: The member has a tendency to plagiarize. Having taught in a high school. I might know what the word "plagiarize" means.
The Acting Speaker: Is the honourable member speaking to the bill?
Mr. Martel: I was. He was the one who intervened, Mr. Speaker, not I.
The Acting Speaker: I was just trying to bring you back.
Mr. Martel: I was just indicating what a magnificent gesture it was taking the exemption off gold coins. I was pointing out what that is going to do for the mining industry in northern Ontario and particularly in the Sudbury basin.
There we now have something like 1,020 men at Inco who are never going back to work, at least not in that industry. There are also some 1,400 at Falconbridge who are not going back to work, that is men with nine and a half years' seniority and under. At Inco it includes men with seven and a half years and under. I just think it is such a magnificent addition to the budget to stimulate the economy of the north by taking that sort of stance.
Some of us were suggesting this government, to keep Sudbury working, might stockpile some nickel and it was interesting it did not see fit to do that. Now it suggests taking the sales tax off gold coins is going to do something for someone. I do not know who it is will be helped. I do not think there are too many of my constituents who run out and purchase gold coins for more than $600 per set. Their primary concern right now is survival, based on a year of unemployment insurance.
This government initiative was really exciting to those whose unemployment insurance is going to run out within the next two months, who are not being called back. They really saw some development in the north related to secondary industry from that exemption. They could see it was going to provide jobs for them so they would not lose their homes.
It would not have taken much imagination if this government, for example, had indicated it was prepared to put about $3 million into Jack Clark's mining equipment company. That firm is prepared to come to the north and create 225 jobs permanently. The government did not see fit to do that and it has been wrestling with it for two full years.
The government was prepared to put $45 million into that white elephant, Minaki Lodge, to create 30 full-time jobs. but it will not commit $3 million to $4 million to create 225 permanent jobs to produce mine equipment which we now are importing. We could produce that equipment; the producer who is supplying it from the United States is willing to come to Sudbury to produce it. But this silly government will not indicate, after two years of negotiation, that it is prepared to put $3 million or $4 million into that development so that we could have 225 jobs. It seems ridiculous when at the same time it is prepared to put $45 million into Minaki.
Probably the highest-priced megaproject I know is Minaki. I think it has been suggested the average cost per job is in the neighbourhood of $245,000 to $250,000. Minaki certainly outdid that with 30 permanent jobs at a total cost of $45 million. Yet the budget does nothing for Sudbury where we have such desperate unemployment. We cannot get the government to indicate it is prepared -- I see my friend the member for Nipissing (Mr. Harris) standing; the argument between Sudbury and Nipissing has disappeared with the demise of CIL, better known as Jarvis Clark, in North Bay. It is relocating its headquarters and its production capacity, whatever it is, to Burlington. We have lost that argument and we have not received the federal grant either.
There could have been something in the budget that would have created 225 permanent jobs producing mining equipment which we now import from the same company in the United States. So it amazes me that what we get from this Minister of Revenue and the Treasurer is a reduction in the sales tax on gold coins.
Mr. Harris: Who is "we"? You say, "We could have got it."
Mr. Martel: The people of Sudbury. They have been asking for two full years.
Mr. Harris: I met with them two weeks ago and they got everything they asked for.
Mr. Martel: Who was the member meeting with?
The Acting Speaker: There is enough of this dialogue back and forth. The member for Sudbury East has the floor.
9:40 p.m.
Mr. Martel: I am prepared to respond. My friend asks, "Who is 'we'?" and I say it is the people of Sudbury.
The Acting Speaker: He has an opportunity to respond as well. We are speaking to Bill 37, An Act to amend the Relail Sales Tax Act.
Mr. Martel: I would consider it discourteous if I could not answer the member. When I say "we" I am talking about the unemployed people in Sudbury who want those jobs. There is an outlet in this country and we would really start down the road to some diversification and some import replacement. The member's friend the Minister of Industry and Trade (Mr. Walker) is still not prepared after two years to indicate the government of Ontario is prepared to put its money into it.
The government comes in with a grandiose budget that says we are going to reduce sales tax on gold coins. I am sure my friend the member for Nipissing agrees with me that is not going to do much for the mining industry or the diversification of northern Ontario.
I would urge this minister, if he comes through with this tax exemption, to be more realistic. If one is going to do something for the mining industry to create employment in the north, one could use a little imagination.
I do not want to accuse this government of being shortsighted, but when I see this type of project in the hopper for two years and the budgetary response to that problem, then I can say with some degree of certainty that imagination is terribly lacking in the Treasurer, in the Minister of Industry and Trade and in the Minister of Revenue. Even if they were to direct what they are going to save -- some of the long green -- into a project that would create 225 permanent jobs, the saving to Ontario just in creating jobs would probably be much greater than the amount we are going to save on gold coins, and we would not have to play around with these Mickey Mouse things. We would have some sort of meaningful development.
The minister might consider that and convey the message to some of his colleagues who are obviously so blind.
Mr. Stokes: Mr. Speaker, very briefly I want to explore with the minister for a few moments the implications of the imposition of a retail sales tax which my constituents feel is the most regressive form of taxation any government could impose.
As the members well know, a sales tax is based on the retail price of a given article. The minister will know that almost anything one wants to talk about that is purchased in northern Ontario is more expensive than in the south -- perhaps not so much so in Parry Sound, which is considered to be in the north; or Barrie, which is considered to be in the north; or even in the gateway to the north which is North Bay, where the price is fairly consistent with the price down here, given a few pennies for transportation; but that is not the case in many of the remote communities in the real north of Ontario.
I am talking of areas along Highway 17 in northwestern Ontario or along the north line of the Canadian National Railway; all of those areas are a very real, a very important and a very significant part of this province. But the minister's colleague the Minister of Education and Colleges and Universities (Miss Stephenson) will tell him how much more it costs to heat a school in northern Ontario and how much more it costs to build a school in northern Ontario than in southern Ontario. Literally everything one does in northern Ontario costs more. Generally speaking that is something we accept as a fact of life.
We know geography creates problems. We know that where there are small concentrations of people where one cannot effect economies of scale by having large wholesale outlets or large retail outlets, those people have to have a higher markup to survive. Therefore the cost of given items in northern Ontario will be more. I cannot think of any items -- I am sure there are some, to be fair, but I cannot think of any right now -- which are cheaper in my own home town of Schreiber, or in Kenora. Perhaps accommodation is cheaper but any consumer item I can think of --
Mr. Harris: Pickerel.
Mr. Stokes: I am not sure that is the case. Can the member buy them commercially in North Bay?
Mr. Harris: Nice try.
Mr. Treleaven: What are you talking about?
Mr. Stokes: That is right. He is just harassing me.
The Acting Speaker: The member for Lake Nipigon is begging some participation and he is having this great opportunity to speak to Bill 37.
Mr. Stokes: The point I am trying to make is that any time there is a retail sales tax based on the price of a given article, and given the disparities in price -- most of them justified -- the government is imposing an undue hardship on top of the regressivity of the provincial sales tax.
I took the trouble to make a comparison of items that are taxable from the Canadian Tire Corp. catalogue. I found the catalogue it distributes to its associate stores in northern Ontario is different from the one distributed to customers on Davenport Road or in Scarborough or in Etobicoke.
There are no uniform prices across the province as is the case with, for instance, wine and beer. Because they both come under agencies under the control of the Minister of Consumer and Commercial Relations (Mr. Elgie), or for whatever reason, it is possible -- and wise -- to distribute liquor and beer at a uniform price to everybody in Ontario. It is the same wherever people live or wherever they purchase those items for consumption.
But that is not the case with gasoline. It is not the case with the price of an automobile. The government is providing some relief here in terms of certain household items and that is appreciated. As my colleague the member for Oshawa (Mr. Breaugh) said, that is one of the reasons we are tempted to support this legislation --
Hon. Mr. Ashe: He said you were supporting it.
Mr. Stokes: That is right.
Mr. Breaugh: Don't get too mouthy. We may not.
Mr. Stokes: Why is the government not consistent? If it wants to treat everybody in Ontario fairly, why does it not take a look at the effect of the seven per cent retail sales tax on people. If native people who live on reserves purchase something on the reserve, or if they purchase something off the reserve for use on the reserve, it is possible for them to get the exemption from the seven per cent retail sales tax. That is something that has been an accepted practice, I suppose, ever since we have had a retail sales tax in Ontario.
9:50 p.m.
I do not know whether it was a part of the Indian Act and the way in which we looked upon our taxation system as it affected our first citizens, but I am wondering whether this minister has ever done an analysis of the effect of the retail sales tax on residents in northern Ontario as opposed to residents in southern Ontario.
If it goes by weight -- I made a comparison of items that were contained in the Canadian Tire Corp. catalogue -- if it was something that was relatively cheap but relatively heavy and it meant it would cost more to transport that item from Toronto, or wherever it was manufactured, or to ship it from a warehouse to an outlet in northern Ontario, one would find the price was proportionately as much as 30 to 40 per cent greater because of the cost of transporting that item up there.
One does not need much imagination to see that if there was a 30 to 40 per cent difference in the retail sales price, legitimate or otherwise, the fact is there was that discrepancy between the price of that item in southern Ontario and northern Ontario. What happens is the minister adds insult to injury.
Let us say an article in Toronto sold for $1 and it was a taxable item, the Minister of Revenue would get seven cents on that item. If it sells for $1.50 in the north, he gets 10.5 cents for that same item from a resident in northern Ontario. If it sells for $2, he would get 14 cents. What is more discriminatory and what is more regressive than the way in which the government applies the retail sales tax in the province?
Had I deliberately gone out to get the current price of these taxable items, as I have done for previous speeches in this House, I am sure I could have made a persuasive case for most reasonable members of this House to have the minister look at the regressivity of such a tax. I have done that on three or four occasions in the last 16 years.
Mr. Martel: They do not listen very well.
Mr. Stokes: They do not listen very well. A former member for Sault Ste. Marie, our good friend the late Honourable John Rhodes, supported me, not to the extent that he was prepared to change the legislation, but he called for a commission of inquiry to look into the very thing I am talking about.
I have raised it on subsequent occasions and some of the hatchet men in the Tory party from southern Ontario -- some of them are looking at me right now; some are denying it; some, like Pontius Pilate, are wiping their hands of it but they were the hatchet men -- were sent out to block it. It was not a bill, it was a resolution just asking them to consider it. It did not even come to a vote in this House.
Let me give members an example right here in the explanatory notes: "The exemption from tax for tobacco products is withdrawn and tax is applied at the rate of seven per cent." I happen to have the vice that I do smoke occasionally. Before the implementation of this tax one could go up to the third floor and buy a pack of 20 cigarettes for $1.45. It is now $1.60. But up north it was $1.80 a package. If one adds the seven per cent on that, one does not have to be much of a mathematician to see how the government is further discriminating. It should be taking pity on me and saying, "That poor fellow has got this terrible vice and we should not be adding insult to injury by taking money out of his pocket at the same time."
Interjection.
Mr. Stokes: When did the Minister of Education quit?
Hon. Miss Stephenson: Four weeks ago.
Mr. Stokes: Four weeks ago. Well, I'm pretty close to that myself; as a matter of fact, I just may not buy another package. But I have a lot of constituents who do. Who among us is without sin? With me it is cigarettes.
Hon. Miss Stephenson: Is that all?
Mr. Martel: The rest is in the confessional.
Hon. Miss Stephenson: I think you had better clarify that.
The Acting Speaker: Would the honourable member direct his attention more specifically? You are invoking --
Mr. Philip: Your parish priest doesn't say that, Jack.
Interjection.
The Acting Speaker: Anything provocative, yes.
Mr. Stokes: You really don't have to say anything, Mr. Speaker. You really don't.
The Acting Speaker: You have got me worried, too.
Mr. Stokes: I got myself into it and I will get myself out of it.
The point I am trying to make is, there is no tax ever conceived by human beings, whether it be at the local level, the provincial level or the federal level, that is more regressive than a sales tax uniformly applied across the province as a percentage of the retail price of an article. I do not know how often we have to say this to a succession of Premiers, Treasurers and Ministers of Revenue.
The member who is standing up just now, the member for Cochrane North (Mr. Piché), can make the case much more persuasively than I can if he wants to take the trouble to, because he has communities that are just as remote, if not more remote, where this disparity in the price of consumer goods is even more pronounced than in the areas I happen to represent.
As a matter of fact, as he leaves the chamber he has a problem of his own. He thinks he is discriminated against with respect to the kinds of amenities and perks that northern members get just to serve their constituents in the far north. I happen to have some friends in the flying business and I do not have to rely on government aircraft to the extent he does. But he has a problem because his constituency is remote. He serves a succession of small, isolated communities where the retail outlets have to charge a larger markup because they do not do the volume of business. They cannot take advantage of economies of scale. And the people across the floor, those rascals, those devils over there take advantage of that.
They might say, "If you do not want that, you can all move to southern Ontario." Who would produce the $2 billion of new wealth that collectively people in the north produce by way of their orderly, I hope, exploitation of our forestry resources; or those who dig for gold and base metals; or those who keep our transportation systems going, whether it be in railways or the employees of the ministries of Transportation and Communications and Natural Resources?
These are the very useful and necessary things people in the service and the primary resource sectors do. That is what keeps the economy of Ontario and Canada going and feeds the industrial megalopolis in the south that stretches all the way from Windsor to Oshawa. We are the people up there who create new wealth, and what does the government do? It gives us a kick in the head for it.
10 p.m.
Mr. Sweeney: Don't bend over, Jack.
Mr. Stokes: Pardon.
Mr. Sweeney: Just do not bend over.
Mr. Stokes: No.
I do not understand the mentality of people such as the members for Sudbury; Nipissing; Cochrane North; Kenora, the Minister of Northern Affairs (Mr. Bernier), or Cochrane South, the Minister of Natural Resources (Mr. Pope).
Their constituents experience the same kind of discrimination by way of taxation as my constituents, which they talk to me about all the time. I am wondering whether it is ever discussed in caucus. If it is discussed in caucus and there is a consensus that it is a discriminatory practice, does it ever get to cabinet? What happens if it gets there?
We have 125 members in the Ontario Legislature and only 15 represent geographic entities north of the French River, even though it is five sixths of the geographic entity of the province. Those of us who care a darn about what happens to those who live in the north must talk louder, longer and more persuasively on a regular basis for the things that trouble northern Ontarians. I do not know just how insensitive the government members can be when it comes to the application of this task.
Why could they not say, "Let us give those people in the north a break and let us not say seven per cent north of the French River; let us say five per cent north of the French River" -- a differential. They recognize we are entitled to a break when it comes to booze and beer, but when it comes to the real essential of keeping body and soul together, they ignore it completely.
As my colleague said, we will support this bill, but I am wondering how often, how long, Oh Lord, must we remind the government members they have discriminated against northerners from the moment they brought in the Retail Sales Tax Act in Ontario. They are perpetuating it in this bill this evening.
Ms. Bryden: Mr. Speaker, when this measure was introduced as part of the budget, I believe it was considered to fit in with the overall theme, which was a job creation budget, a stimulative budget. I fail to see how the tinkering with the sales tax in the way it has been done is going to he very stimulative.
It would have been much better to have had a general across-the-board reduction in sales tax so the pensioners and people on low incomes would have got some benefit and would have had more money to spend. That would have been stimulative.
I fail to see how it is going to stimulate the economy to exempt the Canadian Maple Leaf gold coin and other gold coins as the minister may prescribe. This hardly seems to be putting a great deal of extra stimulation into the economy. It may be stimulating the sales by the Royal Canadian Mint, which might add something to the federal coffers, but I do not think it will help Ontario's economic situation at the present time.
I think it would have been so much more sensible if the minister could have looked at the reactions he got to his sales tax tinkering in the budget of 1982, which came out in the public hearings that were held. Dozens of people told him it was not fair to tax household cleansers, feminine hygiene products and other essential commodities that the poor and pensioners have to buy. It made the sales tax that much more regressive. Last year the Treasurer got additional revenue in the sales tax by extending it to commodities that the poor, and middle- and low-income groups used.
In my riding report, I put the following question: "Do you agree with the removal of the exemptions in the sales tax last year? If not, what do you think should have been left exempt from the sales tax?"
The answers came back: "Not on sewing patterns and textiles, because people who make their own clothes should be encouraged; not on fast food because many people have to dine out quickly these days, particularly when both partners are working, but also the teenagers, who are working to help the family make ends meet; and certainly not on household cleansers and feminine hygiene products."
It would have been so much better if the minister had heeded that advice, put the exemption back on those essentials and generally reduced the rate from seven to six per cent to stimulate the economy. That might have stimulated it more than his exemption on furniture and household appliances.
If we ask people what they are going to buy, most low-income people say, "Nothing, unless it absolutely wears out." Middle-income people are also saving their money rather than spending it on furniture and appliances. If they do buy anything under the minister's exemption for furniture and household appliances, it will simply be moving ahead a purchase they would probably have had to make in the next year. So there will not be a net gain in revenue, production or sales.
About the only people who will benefit from this exemption are the rich who can afford to buy additional appliances at this time, or people who will have money from their registered home ownership savings plans which the federal government is now freeing up for the buying of furniture and household appliances. Those people are getting a double benefit under the Ontario sales tax and under the federal budget. It seems to me those are the people whose spending will benefit them, but it will not stimulate the economy to the same extent that giving benefits to the large number of people in the low- and middle-income groups would have done.
I feel this tinkering with the sales tax, while it has some exemptions and changes we would support, is not really the way to restore growth and prosperity to our beloved Ontario, the stated objective in the windup to the budget. I find it difficult to understand why the minister cannot get it into his head that the way to change the sales tax is to reduce it gradually and use other, more progressive taxes.
Mr. Cooke: Mr. Speaker, I have a couple of questions for the minister which I think we as members of the Legislature should consider.
10:10 p.m.
First, at what point does it become ridiculous that we continue to raise taxes on tobacco and alcohol? The increase in taxation on tobacco this time around works out to about 15 per cent when it is combined, because one is on top of the other, and on alcohol the tax goes up again. At some point we have to come to the realization that we cannot continue to raise taxes on these two items year after year. I am not sure it does much to diminish consumption, and the taxes are a penalty on low-income people much more so than on middle- and high-income people.
Second, I would like to have the minister comment on the one section of the amendments that removes the sales tax for school boards, universities and public libraries for their purchases of audio and video educational publications. I certainly support that move, but that sales tax was just introduced in last year's budget. It was something many groups that came before the committee studying the sales tax amendments last year wanted to see changed. I know the minister or his government has received many letters from public libraries and from school boards in the year since we had public hearings.
To me it would have made much more sense had the government accepted at least that amendment in last year's public hearings. They have obviously understood that this was a tax that should never have been imposed and decided a year later to make an amendment rather than back down on any aspects of last year's amendment to the Retail Sales Tax Act. I would like the minister to indicate to us why that amendment was not made last year, since it was very clear it was a mistake in last year's budget.
Finally, I would just like to point out to the minister that these few exemptions that are put in place in this particular budget represent about $55 million. The amount or ratio of money that is being taken out of the consumer's pocket by this budget works out to $7 for every $1 that is being granted in this particular bill, which means this bill will have very little effect, if any, on consumer confidence and stimulation of the economy.
The only possible effect it will have is that some of the small businesses that sell these particular products will have their inventories decreased. Therefore, it will be helpful in the short term to get a cash flow in those particular businesses.
As the minister realizes, when the sales tax was taken off automobiles a couple of years ago -- and that was done two or three years in a row -- the Treasurer indicated very clearly the last time it was done that it had nothing to do with stimulating the automobile industry, but it had a lot to do with assisting the dealers because the dealers had to get rid of their inventories or else they faced bankruptcy.
The minister should level with members of the Legislature and the public and indicate the only purpose of these particular exemptions is to assist those small businesses. It has nothing to do with stimulating the manufacturing sector because all it really does is move up purchases. It has no long-term beneficial effect for jobs in the manufacturing sector.
Hon. Mr. Ashe: Mr. Speaker, in the few minutes remaining I will try to cover some of the points raised by the honourable members. I think six members participated in the debate.
Some of the issues were raised in more than one case. The first thing it is fair to put on the record is that this Retail Sales Tax Amendment Act in itself was not designed as part of the Treasurer's overall additional revenue-raising. As a matter of fact, from the bill itself, frankly there is actually more decline in revenue than there is an increase in revenue, to the tune of an estimated $30 million.
The things that were done in here were designed with very specific purposes in mind. For example, there was considerable mention of the sales tax on gold coins. That is not to give a big break for the average person to run out and buy a gold coin or two. There is no doubt about that at all. Part of the prebudget deliberations that the Treasurer goes through is to listen to submissions from different parts of our total economy -- consumers, manufacturers, people in the basic industries, etc. There was a concern expressed that, on the gold coins in Canada, the tax was having and was perceived in the future to have a negative impact on our gold production capacity in Ontario.
I am told that about 50 per cent of the gold that is mined in Canada is mined in Ontario so that in itself is a significant percentage. I am also told that 50 per cent of the gold that is mined is used for gold coins, so if fewer gold coins are bought, fewer gold coins are manufactured and there are fewer jobs at the mines that dig out and refine the gold. It was no big deal; the estimated revenue loss is something in the order of $300,000, but it was put in there to be an assist to the gold mining industry in Ontario. It was not meant to give any great big plus to the mint in Ottawa by any stretch of the imagination.
There were two references made by the member for Essex South (Mr. Mancini), and also by the member for Lake Nipigon (Mr. Stokes), that I find a little difficult to buy. I wrote down exactly what one of them said: Sales tax "is the most regressive in the system." On another day that same member, or certainly members from the party he represents, will stand up and tell the government that property tax is the most regressive in the system. Those fellows should get together; they both cannot be the worst. One might be the worst and the other the second worst; that is fine, but they both cannot be the worst.
I do not consider sales tax to be at all regressive. In my view, it is probably very comparable overall in fairness, frankly, to income tax. It is fair to say everybody, regardless of purchasing power, pays on what he buys. I cannot disagree with that at all. But I think everybody would agree that as the person earns more money, more or less he pays more income tax. Similarly, the person who earns more money spends more money and hence pays a lot more sales tax, so it is very progressive in my view, not regressive.
Mr. Cooke: He does not know what progressive means. Flat rate is not progressive.
Hon. Mr. Ashe: I think I know: I am not quite sure the member knows.
A mention was made by the member for Oshawa (Mr. Breaugh) about furniture and appliances, that it may have been productive if the tax holiday had been identified with furniture made only in Canada. I am sure the member will recall that the Treasurer had exactly that in mind a few years ago with automobiles and found that frankly he could not, and we as a government, could not do that. It is for the same reason it is not in here. The majority of furniture for household consumption and the majority of the major appliances included in the tax holiday are in fact made in Canada and a big percentage of that is domiciled and manufactured right here in Ontario.
I do not agree that this was designed to just clear the stock of the retailers. As a matter of fact, high interest rates over the last couple of years did more than anything to clear the generally large stocks of retailers. Although it is only a 90-day push on the sales of furniture and appliances. I think we will find it beneficial and we are already hearing the feedback from retailers and manufacturers that it is starting to show. If retailers do clear what they have on the floor they obviously will order more goods from their suppliers. If more goods are ordered they have to be manufactured. That goes right along the chain. It helps the retailer, the wholesaler and the manufacturing sector at a cost of some $55 million in this budget.
The member for Lake Nipigon (Mr. Stokes), in all sincerity -- and I do not belittle that, believe me, in any sense of the word -- talked about the unfairness of taxes in general, but retail sales taxes in particular, in the north. I am sure the member is aware that we have to do it at the retail level because that is the only place we can have a sales tax. We cannot move it down in the system and say, "Let us do it before they send it out." We are not allowed to do that by our constitutional taxing authority.
10:20 p.m.
A different rate? Well, I am sure that is technically feasible. I am not sure it is the same comparison as the exemptions the Indians get. That is something that goes back to the protection of their rights. I would like to point out to the member for Lake Nipigon some of the other items that are in fact somewhat more advantageous to the north. I think he would agree it is cheaper to go to a movie in the north. As a matter of fact, I think he acknowledged that transient accommodations, hotels and motels, are generally cheaper. I think he would also agree that, generally speaking, it is cheaper to buy food and beverage at his local restaurant in the north.
Mr. Stokes: That is just not in keeping with the facts.
Hon. Mr. Ashe: I think the member has been staying at home too much up north. I have been up north a fair bit lately, and I am amazed at some of the lower prices. Granted, some of the commodities are significantly more, no doubt about that, but one also gets a reduced licence plate --
Mr. Stokes: The government just doubled that in its last budget.
Hon. Mr. Ashe: It is still half. It is not $10 compared with $40 or $50 or $60, but it is still half compared to what it is in the south. We give that area the advantage in our ad valorem rates of only sampling in the south. I would suggest to the member that some of the additional revenue goes back to the north. Their property taxes are considerably lower. I would suggest the area would not turn down the additional grants that are made by the province to the north -- the northern Ontario special, the density grant, the resource equalization grant -- which are higher in the north. Granted, some of it is paid back by way of extra sales tax.
I do not belittle that, but one cannot look in isolation at one form of taxation. One has to look at a tax package, and the revenues that go out from the receiver of those tax revenues hack to the part of the country, in this case the north. I think the member would find that the various grants available are quite generous, to say the least.
I would like to address some questions asked by the member for Windsor-Riverside (Mr. Cooke). Frankly, I think we touched upon them somewhat earlier when we were discussing the Tobacco Tax Act. He made the reference both to alcohol and tobacco, and asked, "Does one ever get to the optimum point of losing elasticity in the marketplace?" As I mentioned before in the debate on the Tobacco Tax Act, I think that is possible, but the market will generally indicate in both of those, shall we call them sin tax areas, that it is not so. In actual fact, there is a temporary decline in purchases that is usually offset in very short order and the normal buying pattern gets back to exactly where it was before.
I would think, and I indicated before in the debate on the Tobacco Tax Act, that in fact as a government, we would not mind a decline in that area of our revenue producing capacity, because I think there would be offsetting savings in health care costs in Ontario.
Regarding audio-visual, there were many representations over the year and good cases were made by various educational institutions as to the inequity in this area. They had a good case, and a good lobby. It was not a big revenue item, an estimated $300,000, and in the Treasurer's wisdom that was one of the areas in which he said, "Yes, we put it on last year, we looked at it again, we listened to you, and we took it off this year." I am not making a excuse for that. Frankly, I think the facts speak for themselves.
As far as the purpose of exemptions being only for the retailer are concerned, that is not so. Why are there only relatively few exemptions in the bill? The exemptions in the bill are very significant tax items. The big item, and nobody has touched upon it -- it is extremely important in this province where the manufacturing sector is so important -- is an additional $80-million decline in revenue from the changes in the production machinery tax rate. That is very significant. It affects all parts of our economy, affects practically everything one buys on a daily basis. So it is very significant. The furniture and appliance temporary tax holiday represents a further $135 million, which is more than the increases that are proposed or expected to he derived from the increase in the alcohol and tobacco taxes.
All in all, I think the changes in the Retail Sales Tax Act are very stimulative to the economy and still serve the purpose for which they are designed. It will help on a permanent basis the manufacturing sector generally, and on a temporary basis the manufacturing sector in terms of appliances and furniture. Overall I think this particular piece of legislation and the tax measures that have come out of the amendments to the Retail Sales Tax Act have been generally very well received within the community across Ontario.
Mr. Speaker: Mr. Ashe has moved second reading of Bill 37. Is it the pleasure of the House the motion carry?
All those in favour will please say "aye." All those opposed will please say "nay." In my opinion the ayes have it.
Motion agreed to.
Bill ordered for third reading.
The House adjourned at 10:27 p.m.