CORPORATIONS TAX AMENDMENT ACT
SMALL BUSINESS DEVELOPMENT CORPORATIONS AMENDMENT ACT
SMALL BUSINESS DEVELOPMENT CORPORATIONS AMENDMENT ACT
The House resumed at 8 p.m.
ASSESSMENT AMENDMENT ACT
Hon. Mr. Gregory moved second reading of Bill 71, An Act to amend the Assessment Act.
Hon. Mr. Gregory: Mr. Speaker, two weeks ago today on May 17, 1984, I made an introductory statement on Bill 71, which contains amendments arising out of the budget of the Treasurer (Mr. Grossman) of May 15. The bill has two main purposes.
First, the bill allows for the inclusion of the disabled and seniors in the community program. This program exempts from property taxation those improvements, alterations and additions undertaken to allow disabled or senior citizens to continue living in their homes rather than in special care facilities. This measure will further ensure the continued wellbeing and independence of the province's handicapped and senior citizens by helping them to stay comfortably in their own homes.
In addition, it will encourage other property owners to undertake alterations, improvements or additions to their property to provide residential accommodation for either disabled or senior citizens who would otherwise require institutional care.
The second purpose of Bill 71 is to raise the general ceiling which allows property owners to make repairs and modest improvements to their homes without incurring increases to their assessments and subsequently to their tax bills. This ceiling will be raised from the current $2,500 market value level to $5,000.
The $2,500 ceiling was established in 1971. At that time, it was considered a reasonable dollar level to allow property owners to undertake repairs, maintenance and modest improvements without a tax penalty. Today the ceiling has been so eroded by inflation that it is difficult to distinguish between nonassessable maintenance activities and more substantial alterations and additions. This new $5,000 limit will be more reflective of today's property maintenance and construction costs.
Finally, this bill contains administrative amendments necessary for the implementation of the disabled and seniors in the community program. This concludes my introductory remarks on second reading of Bill 71.
Mr. Epp: Mr. Speaker, we certainly cannot disagree with certain amendments the minister has proposed, particularly the one whereby handicapped and people of 65 years and over can make improvements to their homes. That is in keeping with the fact they will then not have to go to institutions, thus saving the taxpayers of this province a greater amount of money.
Another factor is helpful. People often want to stay in their homes. There are other people to look after. They will be happier at home with their loved ones rather than living in an institution either a short or long distance away. We cannot disagree with that. We only wish the government would give credit to the municipalities where credit lies because they are the ones who are going to subsidize the senior citizens, not the provincial government. This is not going to cost the provincial government one red cent except for printing the legislation, making the amendments and paying the salary of the minister. Aside from that, the provincial government is not going to contribute one cent to this particular change.
It means only that the addition of the improvements, which otherwise would be borne by people over 65 years of age or by the handicapped people of the province, will now be spread over the taxation base of the rest of the municipalities, so the province really is not out one cent. I have not heard the Minister of Revenue (Mr. Gregory) or the Treasurer give credit to the municipalities, where the credit really lies because they are the ones who are going to subsidize this.
We support this change. It is somewhat overdue; nevertheless, it is here now, and we obviously are grateful to the government for finally bringing it about.
We do have concerns about other parts of the bill. I must draw the members' attention to clause 1(1)(b) of the act. This particular clause says, "The Lieutenant Governor in Council may make regulations, defining any word or expression used in this act that has not already been expressly defined in this act."
This seems to be a new power the ministry is taking upon itself. It means the ministry can define words as it wishes. I hope the minister in replying later on will be able to clarify why he needs this power all of a sudden. I think it will give him sweeping powers to define words as broadly or as narrowly as he wishes and, secondly, it can lead to a lot of abuse. We will be introducing an amendment later on to delete this clause from the bill unless there is good clarification of the need to retain it.
Another clause we are concerned with is clause 1(1a)(b), which says, "The minister may make regulations, prescribing any form that is required by this act or the regulations under this act or that, in his opinion, will assist in the administration of this act, and prescribing how and by whom any form shall be completed and what information it shall contain."
The minister already has part of that clause in the present bill prescribing forms for the purpose of this act. I do not know why he has to go to such great lengths to ask for additional clarification of this particular section. I hope he will be able to indicate in quite concise and clear terms why he needs this section broadened. What kinds of situations have arisen in the past in which he has not been able to deal effectively with those situations because he has not had the powers to do so and which therefore lead him to ask for increased clarification of this section?
8:10 p.m.
Another concern has to do with subsection 1(1b), which says, "A regulation made under this act is, if it so provides, effective with reference to a period before it was filed." We are asking for retroactivity here. Why are we interested in the retroactivity of this legislation? There must be an important case that has come up; otherwise, the minister would not be asking for retroactivity. Is it going to affect some case that is before the courts right now? Is it going to affect a case before the Ontario Municipal Board right now?
We obviously should know this. If there is such a case and if it does mean an important change, then the minister should have been open with us from the beginning and told us it would affect a case and that therefore he needed this retroactivity. I am not saying it is affecting the case, but I would like to know whether it is, as legislation sometimes does. I want to draw to the minister's attention again that I am talking about subsection 1(1b) which is in the middle of page 2 in Bill 71.
The other concern we have is with subparagraph 2(22)(ii), which allows for an exemption provided that "the land is assessed as residential and comprises not more than three residential units." That has to do with the exemption for senior citizens and handicapped people. In dealing with this, I wonder whether it also applies to condominium units. If it does apply to condominium units, there may have to be an amendment because there would be more than three residential units in a building. Can the minister clarify that change to the present legislation?
Those are my primary concerns with this legislation. As I have indicated, we will support this bill. In particular, we support the sections with respect to the handicapped and the seniors, which will aid them in their desire to stay in their homes. We have concerns about some of the other sections and amendments the minister is proposing. Unless there is a clear indication as to why those sections have been included and what the implications of those sections are, we will be putting forward an amendment.
Mr. Breaugh: Mr. Speaker, tonight I am going to vote with my heart instead of my head. For many years now we on this side have talked about doing simple things that would help the handicapped and senior citizens stay in their own homes because much of what this government has done to them is punitive in nature. It raises their income tax, raises their property tax, gives them back a portion of that and attempts to pretend that in the long run the government always has their best interests at heart, when those of us who have studied the workings of this government know that is not necessarily always the case.
My heart tells me we should do whatever we can to help seniors and people who are handicapped and that we ought to support this bill. My head tells me a different story. I want to put that on the record because I think, oddly enough, six months from now my head is going to tell my heart it was wrong tonight, but I am going to let my heart take precedence.
My head tells me this is a bill that allows the municipalities to give a tax break to seniors and handicapped people. While that is a nice thing to do, in talking to people who serve on municipal councils, I find that nobody bothered to tell them, prior to the announcement of the Treasurer, of the wonderful gift of an assessment break for seniors and handicapped people.
To be fair and to try to make this thing work, this government should have done it in consultation with the municipalities. Most of the municipal people I talked to about this matter took an attitude much the same as mine. However faulty the bill might be, however crude it might be for one level of government to tell another level of government to give these people a break, even people at the municipal level are prepared to say, "There are people in our municipality who deserve whatever break they can get, the handicapped being one group and seniors being another." There are others, I might add, that are not on this list.
In looking through the act, my head tells me there is a little looseness about it. I imagine there will be some arguments about who qualifies for this assessment break. In other words, who makes the decisions about people needing institutional care? Is it a medical decision? It probably is, by most measures these days. Is it a decision of an assessor? If so, it seems a rather strange domain for the assessment department in any municipality or region to have to delve into.
How retroactive is this? It looks as if it is retroactive to the date of the budget. What happens to all the people who got a building permit in the first part of May and began some renovations to their houses, for example, to provide access for a wheelchair? Are they out of business? Do they get the tax break? As I read the bill, they do not.
I imagine there will be some difficulty trying to explain to the people of Ontario exactly why on one magic day they qualify for this break on their property taxes when a week before they did not. What about dealing with those people who would not, by any stretch of the imagination, normally be considered suitable for institutional care, yet who require devices to assist them to get in and out of a house or require special equipment that necessitates a bit of renovation in a house? Who is going to call those shots?
Quite frankly, the government has left that up to itself. At some point later on, it will devise the regulations, put them on the books and publish them in the Ontario Gazette. Then we will find out whether this bill will actually do what the government says it wants to do. I have some doubts about that.
I wish my head would not remember this government's treatment of senior citizens over the years. I wish it would not remember that, primarily, it uses seniors and handicapped people in this province as a device to get votes. The structure of its program spends a lot of money on public relations, on public advertising, telling the seniors the cheque is coming, telling them the cheque is there, telling them they got the cheque. That is a heavy emphasis on all this ministry has to do whenever it gives anybody a break.
In conclusion, I simply want to put on the record that, in principle, for a long time we have said the government should not punish people who are trying to stay in their own homes because of a handicap or because of their age. The truth is that the government of Ontario, through its assessment programs, has been doing just that for some time.
We should also get on the record that there is a certain exemption provided here, which will probably cause a reassessment to occur. It remains to be seen whether seniors and handicapped people will actually receive very much in the way of a total tax reduction. The application for a building permit, as the minister knows, will most likely cause a reassessment to take place in most municipalities. That reassessment has, at least in my experience in recent years, caused property taxes to escalate on an individual unit. While the minister purports to provide them with a break in their assessment here -- at the expense of the municipalities, but none the less a break -- it remains to be seen how much of a break it will be.
This is a bill whose stated intentions are good. Those of us who are a little cynical question whether it will actually achieve the practical purpose of giving those people a reduction in their property taxes. That may transpire, but it remains to be seen. On the principle of the bill, however, I will bet there is not a member in this Legislature who is not in favour of providing some tax relief to our seniors and to our handicapped citizens.
What we are voting on tonight, unfortunately, is a series of proposals that are not exactly nailed down as yet. It remains to be seen whether they will do much good for many people. Letting my heart take precedence over my head, I am prepared to support the bill in principle on second reading, but I want to serve notice that we intend to monitor the progress of this bill and the application of this program.
We will be very interested in seeing two or three simple things: first of all, what it does to municipalities. My first reading of the bill and my first examination of what it might do suggest it will have a minimal impact in most of our municipalities, but I think in some places, such as the west end of Toronto, it is going to have a fairly substantial impact on the mill rate. That will have to be monitored.
The second thing I think we should pay some attention to is exactly how much tax relief will result from it. We are going to have to wait some time to see that. We are going to have to wait some time to see how fair the regulations turn out to be, how they are applied, how the appeals are heard and so forth. For debate on second reading, we are prepared to say we agree with the principle behind the bill. It is a concept most of us on this side of the House, certainly in the New Democratic Party, have supported for some time.
We did not anticipate a bill would be devised in this way which, in effect, would say the province is not going to do anything for anybody here. It is unfortunate the province is going to cause municipal tax people some reduction in income. To be fair, one would expect Ontario to offer some form of compensation to the municipalities for this loss of income.
Finally, we want to watch the implementation of this program because my head tells me one thing and my heart tells me another.
8:20 p.m.
Mr. Nixon: Mr. Speaker, the bill is not particularly earth-shaking. The assistance provided to pensioners and a few of the handicapped who otherwise would require care in an institution does not amount to that much. I do, however, think the principle is a good thing and seniors and a few others can undertake improvements in their property without having their taxes increased.
At the same time, though, the minister who is in charge of assessment knows how complex this procedure has become and how confusing it is even to his officials, let alone the senior citizens who attempt to make some sense out of the assessment and the tax bill itself.
I have a feeling that the minister, falling in line with the procedures that have become so much an important part of government procedure, will be including a notice -- probably with his picture, his signature and maybe an election button in case they need it some time in the future -- to explain what he is doing for the senior citizens.
The cheque to assist in the payment of taxation probably will be delivered at another time, just before an election, along with the various other little goodies. They do not really amount to very much, but they are not quite small enough to send back with a letter of refusal and not quite big enough to make much difference. They sort of form the basis of Tory policy in this province in dealing with assessment taxation and particularly with the senior citizens.
While they are doing this, they are gradually reducing the provincial share of education costs so the school boards will have no alternative but to raise their funds by putting it on the tax bills; they will simply increase the taxes by that amount.
The Minister of Transportation and Communications (Mr. Snow) is as usual being squeezed out by his colleagues in the cabinet. He has less and less to spend on roadbuilding and less and less to spend on grants to municipalities. There is nothing the municipalities can do but turn to their one source of revenue, the property tax, to make up that deficiency.
As the cost of welfare goes higher and higher, we find the provincial government, in passing on the grants from the government of Canada, gets slower and slower in making those payments. The municipalities have to borrow money at high interest rates to pay out the amount that should be paid by direct subsidy and grant from Ontario for all these things.
This is just a very short list indeed. Mr. Speaker, having been as closely associated with these matters in Peterborough, as you have been and still are, you will know this is simply a short list.
The costs of municipal government are going up day by day because of the laxity in provincial policies. The senior citizens have to pay their share of these increased costs. In most instances this special favour to senior citizens, allowing them to improve their property without it going on the assessment roll or without triggering reassessment, is an interesting piece of window dressing. There are instances where it will be of value. A specific one is where handicapped people have to put on special additions, such as ramps, which otherwise might trigger a reassessment. If they did not have them, they would have to go into some institution. That is just common sense.
We have no hesitation in supporting the principle of the bill, but we should not get carried away with the generosity of the government to the senior citizens, because they end up paying through the nose anyway. Many of them have an increasingly difficult time in maintaining themselves in their own home. There is increasing pressure to give up and move into an institution. In many instances that is not a bad thing, but in general the pressure from assessment and taxation is a very serious pressure indeed for senior citizens. We in the Legislature ought to be designing programs that are more generous than this to assist them.
Mr. McClellan: Mr. Speaker, the principle of the bill is an important one, at least in part. We have tried to argue with Ministers of Revenue for a long time that it makes sense to move towards a notion that is common in many European jurisdictions. They grant people what one might call an assessment holiday if they make certain repairs to their homes.
This is the first step, or we hope it is the first step, with the government adopting the principle that it is a legitimate and important piece of social policy to grant assessment holidays to people if they make certain kinds of repairs. This is a very limited application of the principle of the assessment holiday. It applies to only two categories of people: senior citizens and those who have a physical handicap. There are even limitations imposed within those two categories.
Nevertheless, we welcome the adoption of the principle that people should be granted relief from increased assessment if they take the trouble to do certain kinds of repairs. I would have to say in parentheses that while it is laudable the government has accepted the principle, it is entirely characteristic that it has made a gift with somebody else's money. The actual money that will be paid to make up for the lost assessment will come essentially from municipalities rather than from the provincial government.
If the government is serious about using assessment holidays as an incentive for people to do certain kinds of things, it is incumbent on the provincial government to make grants in lieu of assessment to the municipalities. It is all very well to say the municipality of Metropolitan Toronto can afford to pick up the tab, but I would dispute that. Some parts of Metropolitan Toronto will have enormous difficulty picking up the tab.
The city of York will have an enormous amount of trouble paying for lost assessment. As we reviewed during question period today, the city of York cannot make the kinds of essential repairs to its sewer system that would prevent the pollution of Lake Ontario. The city of York is already in a state of crisis on a number of fronts because of its inadequate assessment base. Every time the provincial government makes adjustments to the assessment formula that impact on municipalities such as York, it seems the provincial government is failing to provide appropriate financial assistance.
That is the first point that has to be made. We welcome the acceptance of the principle of relief from assessment, but we wonder where the grants in lieu of assessment are. When the Minister of Revenue winds up on second reading or when we get to discussion in committee, I would like him to deal with the question of why he has not provided grants in lieu of lost assessment as part of this program.
Second, the member for Oshawa (Mr. Breaugh) remarked that this needs to be monitored very carefully. I hope the Minister of Revenue will establish some kind of impact study to carefully monitor the success of the program; for instance, the number of people who take advantage of it and the amount of assessment that is involved as the program operates. Then, at the end of a year's operation, we will have a reasonable idea of how many people are making use of it, how helpful it has been and what the financial impact of the program has really been.
8:30 p.m.
I do not pretend to be an expert on the Never Never Land of assessment; however, as I understand the program, there is no limit on the amount of repairs or renovations which are covered in section 2 with respect to improvements for seniors and handicapped persons. I hope I understand that correctly, that the $5,000 limit does not apply to seniors or handicapped persons.
Hon. Mr. Gregory: No.
Mr. McClellan: That is what I thought. I was trying to read the minister's lips. It is not always easy. One has to be selective in here when one reads lips. However, I am pleased that there is no dollar value on the limit of improvements for seniors and handicapped persons.
This leads me to a third and final point. The minister has also adjusted the basic exemption in the bill for improvements within, in the language of the bill, "the amount for an erection, alteration, enlargement or improvement to a house." This is something that is long overdue in communities like mine where the majority of the housing is 50, 60 or 70 years old and older.
The minister realizes that unless there are major provincial initiatives, we are going to have a major problem in deteriorated housing stock. I believe the Minister of Municipal Affairs and Housing (Mr. Bennett) has done a very comprehensive study of Ontario's housing stock within the past two years. He has established and documented in some detail that most of the housing stock in Ontario is in need of major repairs and major restoration.
There are a number of ways the government can proceed to preserve that housing stock for succeeding generations, and one of those is through the wise use of assessment policies. A $5,000 investment in a house that is 50 or 60 years old is not going to go very far. I am sure the minister must realize that.
There may not be very many old houses in Mississauga, but the minister knows how much it costs to put up drywall or to do brick or concrete work and how much it costs simply to paint a place if one is not able to do the work oneself. It is not very much money for the kind of work required for a lot of houses if they are to be preserved for future generations and not allowed to deteriorate beyond the point of no return.
I hope the government will take a good, hard, second look at that $5,000 figure. Perhaps the member for Oshawa can recall whether the $2,500 figure was originally established in 1971. In any event, the minister knows as well as I do the kind of inflation that has taken place since 1971-72, particularly with respect to the cost of building materials and the cost of labour in the renovation trades. He doubled the grant, but I venture to guess the costs have more than doubled since 1971-72. I am not sure he is even restoring the purchasing power of the 1971-72 dollar.
Again I am not an expert by any means, but I know how much things cost when one goes to the lumber yard and how much it costs to have a room drywalled, and $5,000 is not going to go very far. I do not think it restores the loss of purchasing power that has occurred just from inflation.
To make a constructive suggestion, I think the minister should be setting up some kind of work group with the Ministry of Municipal Affairs and Housing to try to address the problem that I know is a concern of officials in the housing branch of that ministry. That is the urgent problem of saving an awful lot of our present housing stock for the use of future generations.
I am not sure this government has its various policies and programs co-ordinated by any means. In fact, I am quite sure it does not. I expected not just an assessment relief program or an assessment holiday for senior citizens or handicapped persons, but some kind of assessment holiday for low-income people across the board to help them to absorb the cost of repairs and renovations that would bring their homes up to building standards.
A couple came into my constituency office on the weekend; they are pensioners with a combined income of about $10,000. They have been hit with a work order for an older house in the south end of my riding; it will probably cost them somewhere between $25,000 and $40,000.
These were hard-working people whose only sin is that they are low-income pensioners. They cannot afford to pour money out of an $11,000 pension into house repairs of that magnitude. Their only crime is that they cannot afford to stay in their own home.
We used to have programs in place that would help such people to obtain low-interest money or grants. These programs are winding down, and we still do not have programs in place that would give them meaningful relief from the escalated assessment that would result.
The government has to understand that this is not an unusual problem in downtown, inner-city neighbourhoods where the housing stock is old and deteriorating. Quite frankly, it requires either a major infusion of a great quantity of cash to stabilize the house physically or a regular infusion of great gobs of money to stave off the deterioration bit by bit.
Without belabouring the point, I think the government has taken an important step, but it is a very tiny step in terms of the distance that needs to be travelled. I hope the minister will sit down with his colleague and that his officials will sit down with officials in Municipal Affairs and Housing and work out a co-ordinated and integrated strategy for dealing with the issue of housing conservation in the province.
Mr. Newman: Mr. Speaker, I would be remiss if I did not make a few comments concerning Bill 71, An Act to amend the Assessment Act. I am going to speak particularly to one section in the act, and I did bring this to the attention of the minister several days ago.
I made comments in this Legislature 20 years ago on a similar concept to that being incorporated into this bill, and I commend the minister and his officials for bringing that in. Actually, I think I made those comments in the early 1960s and not on March 18, 1964. Some comments were also made by the Liberal member for Dovercourt, Andrew Thompson.
8:40 p.m.
At that time I suggested that rather than putting elderly people in various facilities, where it would be substantially more expensive than it would be to follow the scheme that is being adopted here, funds should be provided to the children of the family so they could put an addition on their homes to accommodate their parents or the individual needing attention, rather than putting them into a nursing home or some other type of facility that would be substantially more expensive to the government as well as to the individual.
The minister is not doing it in exactly the same fashion as I had mentioned, but the concept is essentially the same and it is correct. I would like to commend the minister and his staff for looking back on it and seeing there are cheaper ways and as good, if not better, ways such as the family taking care of the individual, the grandmother or grandfather. That would be by assistance, as I have mentioned, with a grandfather bonus. It is not necessarily a bonus to the grandfather, but it is assistance to children or someone to provide accommodation for grandparents.
That is the extent of my comments. I appreciate very much that the ministry has adopted that concept, but we have waited 20 years. We have punished our senior citizens over that time as a result of not adopting something that comes from an opposition member. Even opposition members have good ideas.
Ms. Bryden: Mr. Speaker, we can consider this bill to be very much a part of what has become known as the smoke and mirrors budget, that is, a budget in which the government pretends to deal with a very serious problem but really is only giving a crumb and not meeting the main part of the problem.
One may have noticed that the day after the budget there was an advertisement in the newspapers telling people about this great concession they would get to reduce their taxes by putting in improvements for seniors or handicapped people in order to enable them to stay in their own homes. The ad must have been prepared long before the budget speech, but it was kept under lock and key in the newspaper vaults and it was ready for publication the day after.
I wonder how many senior citizens and handicapped people read it the next day and thought, "At last we are getting some real help in adjusting our homes so we can stay at home." But when we look at the fine print in the bill, we find we do not really know who is going to qualify or how much help they will get.
For one thing, this bill has the great tendency of this Conservative government to do everything by regulation. Under the regulations, the government can determine the types or classes of improvements or additions for which an exemption can be given. It will also be able to determine the classes of persons who may apply and businesses or undertakings that may apply to receive an exemption under this paragraph and prescribe the form and method of application and documents required. It is all going to be done by regulation.
We really do not know how many people will qualify. It may turn out to be like some of the other programs the government has brought in, such as the one to help parents with the costs of keeping a handicapped child at home, for which, when we looked at the tests applied before they could collect, we found very few people qualified.
By not writing into the legislation the exact details about who will be covered, what kind of improvements and adjustments will be covered and how much red tape will be required before one can qualify, the government is not being honest with us.
As my colleagues have pointed out, it is also part of a budget where the government pretends to solve major social problems without spending any money. In this case, the people who are going to spend the money on these improvements are the taxpayers. If exemptions are given for assessments for other taxpayers, the remaining taxpayers will have to pay the shot because their taxes will go up to cover the total municipal cost.
I certainly agree with my colleague that we must urge the government to bring in some sort of compensation program for municipalities that have citizens applying for and receiving this assistance. It may be that the incidence of assistance needed would vary widely from one municipality to another. I think that is one reason for the provincial government to bear the cost, and not load this on to the municipalities as another cost while it takes the credit for giving great concessions to help seniors stay in their own homes.
This is only a drop in the bucket of the services that are needed to help seniors stay in their own homes. We still do not have an assistive devices program for anybody over 19. We do not have adequate Wheel-Trans to enable handicapped or older people to get around and enjoy the amenities of urban living. We have a long way to go before the government can really say it is encouraging people to stay in their own homes and out of institutions.
The cost of keeping people in their own homes, even with the assistance I am suggesting, would be so much less than putting them in institutions. I really cannot understand why the government is so stingy with this kind of assistance, yet continues to pay lipservice to its desire to help seniors and the handicapped stay in their own homes.
The final point I want to make is that the raising of the exemption for alterations to one's own home from $2,500 to $5,000 is not a concession at all, as my colleague has pointed out. It simply brings the $2,500 figure somewhere up to present costs, but not as far as costs have escalated since 1971. It is really not a gift at all. It is an adjustment that was long overdue. It should really be raised to a figure based on the increase in the cost of construction since 1971.
I think the government should go even further than that. As an incentive to encourage home owners to improve their properties, to fix up rotting porches, replace windows that are causing a loss of energy and things like that, there should be a five-year moratorium on any tax increase for improvements up to a certain level. Then there would be a real incentive.
Many home owners are discouraged by the fact that if they make improvements, the next year their taxes go up substantially. They often go up because the assessor has taken a quick look and made his own determination of how much the value of the property has increased. The home owner does not have time to appeal it. Perhaps it is not a big enough amount to justify hiring a lawyer. The assessor gets away with raising the taxes, the home owner feels aggrieved and his incentive to improve his property in future is greatly reduced.
That is another area where I would like to see the minister bring in an amendment to put a five-year moratorium on any increase for improvements up to a certain level.
Hon. Mr. Gregory: Mr. Speaker, I heard a somewhat repetitious discussion from across the House, all of it valuable, mind you.
Mr. Piché: What else is new?
Mr. Nixon: Where did that come from?
Mr. Breaugh: Do not heckle the minister.
Mr. Piché: I was talking about the opposition.
Mr. Breaugh: Such as it is.
Mr. Boudria: It is not nice to speak to the minister like that.
8:50 p.m.
Hon. Mr. Gregory: I have my parliamentary assistant with me; that is nice.
I appreciate the unanimous support I sense, at least from that side of the House. I have heard the concern from both parties that we are taking away the taxing ability of a municipality by giving this benefit to seniors and increasing the benefit for everybody to $5,000. Yet I keep hearing recurring arguments that we have not given enough. I know this is called sucking and blowing at the same time, but I am just wondering which way the members would like to have it.
Interjections.
Hon. Mr. Gregory: Please let me finish. I did not interrupt you.
Mr. Speaker: Order.
Mr. Breaugh: Mr. Speaker, just to correct the record: What I said and what I think I heard the Liberal critic say was that it was very nice of the minister to use the municipal assessment rolls to give away this particular form of relief. We do appreciate that the relief should be given, but it would have been even nicer if he had given away his own money.
Hon. Mr. Gregory: Mr. Speaker, I was not commenting on whether the member is right on that point; I am saying we cannot have it both ways. We cannot say we are not giving enough in the way of assessment exemption and at the same time say that by giving any at all we are penalizing the municipalities. This seems somewhat strange.
However, the fact is that what we have is what we are offering in this bill. I do sense support from both parties. There are a few minor problems and I would like to address them.
The member for Waterloo North (Mr. Epp) is concerned about clause 2(1)(b) of the act as set out in subsection 1(1) of the bill, which concerns the power to define. The problem there is that we did not want to be too inflexible with this at the start because we are dealing with a group, old people and the disabled, with which it is pretty hard to get a firm definition of just what we are after. We did not want to be too structured in this, particularly because, it being a budget item, we did not have the opportunity to discuss the matter with the Ontario Advisory Council on the Physically Handicapped. That is precisely why this clause is necessary at this point.
I hope the member will accept that, because we certainly are not trying to be too loosey-goosey with the bill at all. We do want to allow certain flexibility so we are able to--
Mr. Foulds: Is that parliamentary?
Hon. Mr. Gregory: I think so. It depends how you want to accept it.
Mr. Breaugh: I think Lucy is okay, but the goosey has got to go.
Hon. Mr. Walker: That is "loosey."
Hon. Mr. Gregory: At any rate, that is the explanation.
There were many things. We were talking about retroactivity.
Mr. Kolyn: Is that parliamentary?
Hon. Mr. Gregory: This place is wild tonight, is it not? It is all over here.
Most of the discussion, if we analyse what was said over there, was to the effect that the province is not giving away anything, and that is not the nature of the bill. We are talking about assessment. We have heard members of council, particularly in Toronto, many of whom the members opposite identify with, say we should be doing this sort of thing. Now we are doing it. Which way will the members opposite have it? Are we penalizing the municipalities or are we not being good enough to the people? I think we have struck a fine balance here; I think we have done something for both.
The member for Bellwoods (Mr. McClellan) was the one who was stressing that the $5,000 was certainly not adequate. It might not be, but bear in mind that when we talk about $5,000 market value, it is not necessarily the same thing as $5,000 spent on a house. In other words, a $5,000 market value increase on assessment could well be a $20,000 expenditure or maybe even a $10,000 expenditure.
Mr. Foulds: How are you going to do that?
Hon. Mr. Gregory: Wait a minute now. Let us say, for example, that we spend $10,000 improving a house; it does not necessarily increase the market value of that house by $5,000 or $2,000. So what I am saying is that just because we say we are going to increase it from $2,500 to $5,000, that does not necessarily mean a person can improve his house by only that much. Will the member accept that?
Mr. McClellan: I do not know.
Hon. Mr. Gregory: All right. Take my word for it. Have I ever lied to you before?
Mr. McClellan: I do not know if I understand that.
Hon. Mr. Gregory: At any rate, I do not think there is a lot more I can add. As I said, we did seem to zero in on those couple of points. If I missed something, I apologize, but I seem to hear the recurring theme. I believe I covered it, at least I hope I have.
Motion agreed to.
Bill ordered for committee of the whole House.
Mr. Breaugh: It was my understanding that if we had only one amendment to deal with on Bill 71 we would go into committee of the whole House to deal with that one amendment. Since we have only one amendment it would seem to me that would be an expeditious way to proceed.
Mr. T. P. Reid: As usual, the work is expanding to fill the time available for its completion here. I thought we were going to do second readings on all three bills. I thought that was going to take a lot shorter period of time than the first one has taken and then I thought we would go into committee of the whole House and do the three bills in committee. It does not seem to make sense to be switching back and forth from second readings to committee of the whole House, back to second readings and back to committee.
Hon. Mr. Gregory: I had it from the House leader that we were to complete the second readings. I agree with the member for Rainy River (Mr. T. P. Reid). However, I am not going to make a great big argument of it. I would prefer to keep to the second readings and then move to committee after that.
The Deputy Speaker: Our normal procedure, with due respect to the member for Oshawa, has been to deal with the second readings and then go into committee and deal with them.
Mr. Breaugh: I was trying to help the government.
The Deputy Speaker: Fine. Then let us proceed with the next bill.
CORPORATIONS TAX AMENDMENT ACT
Hon. Mr. Gregory moved second reading of Bill 72, An Act to amend the Corporations Tax Act.
Hon. Mr. Gregory: Mr. Speaker, this bill, An Act to amend the Corporations Tax Act, contains amendments arising out of proposals in the budget of the Treasurer (Mr. Grossman) of May 15, 1984. Some amendments are required as a consequence of the recent changes to the federal Income Tax Act, and other amendments are of an administrative or technical nature.
The budgetary measure being implemented by this bill relates to the income tax exemption for a new qualifying corporation on its active business income up to a maximum of $200,000 annually for each of the first three taxation years of the corporation.
The income tax holiday for small businesses, which was first introduced in 1982 for two years, and extended for one more year in the last budget, will expire as scheduled on May 13, 1985. The new program, which is targeted towards helping with startup and young businesses, will come into operation after that date. However, a corporation incorporated prior to May 14, 1985, may qualify for exemption under the new program if it has not completed three taxation years prior to that date.
The budget also included a proposal which would limit the deduction in respect of loan loss provision and contingency reserves claimed by banks for Ontario purposes. A bank will not be allowed to claim a deduction in excess of the amount claimed and allowed for federal purposes. The bill provides authority for the minister to make regulations for this purpose.
Another amendment relating to the small business income tax exemption programs arises out of the recent changes to the federal loss application rules and the Ontario tie-in with those rules.
9 p.m.
Under the new federal rules, a corporation does not have to apply the loss for a particular year against the income of the first eligible year. It can choose the years in which the losses will be applied. The bill changes this to make it clear that for Ontario purposes the available losses must be deducted from the income of the tax-exempt years. The losses that are applied in this way will not be available for setoff against the income for any other taxation year. This is in line with the 1982 budget statement of the Treasurer when the tax holiday program was first announced.
The federal government has made a number of other changes to the federal Income Tax Act, with which the Ontario Corporations Tax Act is closely tied. Some of the federal amendments have given rise to corresponding amendments to the Ontario Corporations Tax Act, and these are included in this bill.
Currently, if a taxpayer does not agree with the notice of assessment raise, he has to file a notice of objection within 90 days of the mailing of the notice of assessment. The federal act also requires the filing of a notice of objection within 90 days. However, the federal government in its budget of February 15, 1984, has announced that this period will be increased to 180 days. In anticipation of this federal change, this bill contains an amendment to provide that the time period for filing a notice of objection will be increased from 90 to 180 days.
In addition, the bill contains some technical and housekeeping amendments.
Mr. T. P. Reid: Mr. Speaker, we will be supporting this bill. It is one that probably no one in the chamber fully understands, including the minister, with respect.
I would like to express my concern with respect to the compendium of information. I do not say that in any unkind way, but there are some very technical things in it, which leads me to my first point. I do not know if I am particularly satisfied with the full information that is provided.
The three-year tax holiday for new corporations has been criticized by numerous people -- by one of the small business organizations in particular -- because the statistics indicate small businesses take anywhere from three to five years before they show a profit, so these corporations will not gain much assistance from this measure.
It is somewhat related to the last measure we heard about, where the government seems to be doing something, but in fact is doing very little. I forget the exact figure that was in the budget as to what this would cost the province. The figures I have been given say it will cost about half, if that much, in foregone tax revenues to the province.
The other section indicated by the minister was the amendments to parallel the recent amendments in the federal budget. There are a number of these share purchase tax credits that were in the 1983 federal budget, which basically allow companies to sell unused tax credits to investors in return for equity. There is a whole series that the minister indicated. I wonder if he has any indication or can indicate to the House if there are any costs to the Ontario Treasury of paralleling or getting in sync with the provisions under that 1983 budget. Is it going to cost the revenue coffers of Ontario any money to follow along and parallel the changes that were made in the 1983 federal budget?
There are a number of administrative changes with which we have no quarrel. There is the extension of time for filing and so on, as the minister has indicated, in parallel with the federal act.
Other than those few words, we are not happy with the provisions relating in particular to a tax holiday for these new companies. It seems to me anyone who started a new company in the last two or three years is entitled to a little more help than has been provided under this particular bill. As we and small business in this province are used to, a little is better than nothing from this government.
Mr. Breaugh: Mr. Speaker, as a number of articles responding to this proposal and the budget in general have pointed out, there are those who think the budget for small business people is great and others who think it stinks. I think I would fall into the latter category. Therefore, we will not support the bill on second reading.
In great measure, I think there are a couple of comments about this that must go on the record. In general, my objection to this particular bill centres on the fact that there is not very much in it which would assist most of what many of the members of this Legislature would consider to be small businesses.
A tax concession or a tax holiday would apply to small business for a three-year period. If one wants this as a great theoretical breakthrough and if one is talking philosophy instead of pragmatic financial assistance, then one would probably be happy with this bill.
The government has paid lipservice to the needs of small business. It has identified one area where it could provide small business with some easing of the taxation process. For many -- and I notice John Bulloch is one of them -- this approach lets one's political philosophy get ahead of one's ability to examine the reality of the situation.
Bill 72 is a combination of the many things I think are wrong with government. First, it is a very complicated piece of legislation, as the members know by just looking through it. It parallels federal legislation. It appears to do something that would tax the banks. It remains to be seen whether this government is prepared to do very much in that regard.
I think the bottom line is whether it helps some guy or some woman who runs a small business in my community. The truth of it for that unfortunate citizen is that a tax holiday for the first three years of the small business is not much of a holiday since no tax would have been paid anyway. In many respects, the member for Rainy River (Mr. T. P. Reid) is right on. It parallels the previous legislation. It forgives taxation which would not have been paid.
One of the difficulties we have in dealing with this type of legislation is probably that from both sides of the House we approach it with our kind of political philosophies in tow, so to speak. I tried to look at it and talked to small business people in my community and said: "This is a bill which amends the Corporations Tax Act. What does it do that will assist you to stay in business? What would it do in a really concrete way to help you?" Their response to me was it would do nothing.
It is a nice theoretical win if one is a free enterpriser. However, if a free enterpriser reads this legislation, he will see this is hardly free-enterprise legislation. This is not legislation that allows a business to grow unfettered. This legislation puts a great many controls -- forms to fill out, limitations -- on businesses as they try to function.
Oddly enough, the two groups I discussed this with came from different philosophical bases. I would describe one group as being fairly avid free enterprisers. They were rather upset that there is a continuation of regulations and that it is a very complicated way to proceed. They made reference to an article--
Mr. Boudria: Are those the member's corporate welfare chums?
Mr. Breaugh: I do not have any corporate welfare chums, thank you. I will just quote briefly from an article in the Toronto Star written by George Brett. "This is the kind of thing which perplexes business people, particularly small ones starting out, trying to get in where the big fish are swimming. They have some difficulty in understanding, for example, that often the first taxation year, the period between incorporation and the first year-end, is less than a year.
9:10 p.m.
"If this happens under the Grossman tax holiday, you may find yourself with a smaller amount of income eligible for the holiday. So consider the tax holiday in choosing your year-end. If you think you are buying into business by buying an existing business, you should consider buying the assets, rather than the shares of the company."
These are the skills of the corporate world interpreted in legislative terms here. Many of the people I know who have begun a small business have not yet learned the corporate game. They do not have tax people sitting around at their beck and call. They do use accountants and lawyers, but they do not have them sitting around figuring out things to do. Their most common complaint is a valid one, that legislation such as this is written for the business person who has in his office or at his immediate command a battery of lawyers, accountants and advisers to keep his business in tune with new legislation.
For someone running a small operation with 10 or 15 people, starting out in the business world, it is all very new and all very confusing. The most common complaint is that there continues to be legislation written that is okay for the big, corporate world, which understands that legislation, is equipped to handle it and can afford the staff and the expertise to handle it all. For people beginning the process, this is a whole new world in which they admit they are inexperienced. What they want to do is to start a small business and make it grow, but it seems the laws in Canada and in Ontario are written against them.
In addition to getting a business under way, they also have to learn the corporate mindset and the legislative mindset that are around. They are immediately, although not of their own volition, entrapped in a snare of legislation, forms and regulations. Even when a government sets out to do something to help them, very often they have difficulty understanding what the written word is.
I am not at all unhappy to oppose the legislation. I wish we had something that would go to the corporate world and do two things. One is at the bottom end of the corporate world where people are beginning the process in order to assist them in a concrete way. In a theoretical way, this bill does that. In a practical, pragmatic, concrete way, it does not. I think that is unfortunate because it may well have been the intention of the minister to do that. At that end of the business world, it seems to me governments ought to be doing things to simplify their lives and assist them in a direct way.
Time and time again in my constituency office, and I am sure many members face this, somebody will come in and say: "I am trying to start up a small business. What can I do? What help is available to me?" I have to explain to them all the development corporations and tax proposals that are now law or might become law in the foreseeable future. Their most common response is: "I am not equipped to handle that. If I were General Motors, I could handle it with ease, but I am not. I am one person with some initiative, trying to get started." They cannot cope with that.
At one end of the scale, where people are beginning or the business is relatively small in nature, it seems to me the laws are written against them, and I think that is unfortunate. At the other end of the scale, for people who do not need the government's help, it seems to me the help is there. I think that is a sign of a government which, as in this bill, has let its political philosophy get directly in front of its desire to do something positive for small business.
It is unfortunate that this bill does not help small business. I wish it did. It is unfortunate that it does not provide assistance to small business, as we very often do in this Legislature and in the federal parliament for big business.
It is not unfair to say that the reality is that governments in Canada and the United States did a great deal to turn Chrysler Corp. around. I just wish they would do as much, or an equivalent amount, to turn around small businesses that, in my community and every other community across Ontario, are starting up like mad. The initiative is there, but it is also dying like mad and that is unfortunate.
There are people who are working 18-hour or 20-hour days trying to get something established and trying to hire people in their community. They are interested in making a good product and providing a good service but they find that the first day after they open up the door, they step into a maze of corporate law, such as this bill, which says on one side, "We are here to help you," but in practice is probably one of the major things that puts them under.
That is why I object to this bill. It says it does one thing, but in my view it works directly the opposite way. It says it helps people, but it helps those who would not pay the taxes anyway. It says it will go after banks and increase taxation on them when it really does not. When one looks at the parallels of taxation there, it is really quite wrong.
My major opposition to this bill is that it perpetuates what I think is wrong with government in this nation. Government has not yet learned that it is the small business starting out that needs assistance. The large, established corporations do not need help. It should stop catering to them and turn its focus to those that could actually benefit by assistance.
Many of us believe that in the long run our big corporate citizens are important to our economy. They certainly are in my town, but there must also be a place for someone who runs a small business operation. The tax laws should not be written to confuse that person and tax breaks should not be in place that are of little use to that person. That is where the assistance should go. Unfortunately, this bill does not do that.
Hon. Mr. Gregory: Mr. Speaker, the member for Oshawa (Mr. Breaugh) has mentioned the legal problems a small businessman can get into. Having been a small businessman in the past, I can appreciate what he is saying.
The small business people have never been able to have the expensive, sophisticated legal help large businesses have. That is not to be; we know that is going to happen. However, under the taxpayers' services in the Ministry of Revenue we think we offer a high degree of assistance to those people in sorting through the so-called red tape.
I will see that the member receives a copy of a report written for me by my deputy minister, which I would recommend he read to see the extent to which our taxpayers' services operate. I think he will be quite impressed, if he has not seen it before. I will be surprised if he has not; it is a best-seller. We are very conscious of the plight of the small businessman and we are going to do everything we possibly can to assist him in maintaining his small business, except for making it grow a little larger.
The point was made by the member for Rainy River that this change does not affect small businessmen because they do not make profits for the first three years. What he is losing sight of is the older small businesses that become corporations. This gives them an advantage, an opportunity to extend the building of their businesses over the next three years. It is hard to dismiss that and say it is not a benefit. It certainly is. It is true that it is not a benefit to every small business, but it is there and it is a help to them.
The experience of the small business tax holiday has been much appreciated, contrary to some of the remarks I have heard. I could quote from an executive of the Canadian Organization of Small Business, Mr. Geoffrey Hale, who is very high on what we have been able to do for small businesses.
Mr. T. P. Reid: The minister did not hear his comments after the budget.
Hon. Mr. Gregory: Mr. Hale is very supportive of what we have been able to do in this ministry and through our Treasurer. If the member reads carefully, he will see he has been very supportive of many things.
The member for Rainy River asked a difficult question about what the cost would be to put the provincial government programs in sync with the federal programs. I am told the cost is very minimal. It is more administrative than anything.
Mr. T. P. Reid: No lost revenues.
Hon. Mr. Gregory: No lost revenues; that is the best knowledge I have on the subject.
Motion agreed to.
Bill ordered for third reading.
9:20 p.m.
SMALL BUSINESS DEVELOPMENT CORPORATIONS AMENDMENT ACT
Hon. Mr. Gregory moved second reading of Bill 73, An Act to amend the Small Business Development Corporations Act.
Hon. Mr. Gregory: Mr. Speaker, this bill implements the proposals contained in the May 15, 1984, budget of the Treasurer (Mr. Grossman) and contains some administrative amendments that are required for the effective operation of the act.
For the purpose of enhancing the performance of the resources allocated to the program, the budget included several proposals which are being implemented by this bill. Briefly, these proposals can be summarized as follows.
The total funding allocated to the program will be subdivided into three separate funds: one for investments only in northern and eastern Ontario, one for investments only in new small businesses anywhere in Ontario and a general fund which will be available for any eligible investment.
The maximum investment in one small business by any one or more small business development corporations will be reduced from the present $5 million to $2.5 million. One or more SBDCs combined will not be allowed to hold more than 49 per cent of the voting shares of a small business.
The definition of associate and members of the family will be amended to ensure that SBDC investments are directed to businesses whose shareholders are operating at arm's length with the SBDC investors.
The budget statement also stated that a small business receiving investment funds from an SBDC will not be allowed to use that money to repay any debt owing by that small business to a shareholder of the SBDC or to any associate of a shareholder. This measure will be implemented by an amendment to the regulation.
The federal government recently introduced a scientific research tax credit and a special recovery share purchase tax credit, which are available to investors in certain types of corporate securities. This bill provides that an investment by an SBDC in this type of share will not be considered an eligible investment under the SBDC program. At the same time, it also provides that shares issued by an SBDC will not be eligible for a grant or tax credit under the program if they also qualify for any of the federal tax credits. In this way, the two programs will not be allowed to piggyback on each other.
The bill contains other minor amendments of a housekeeping nature.
Mr. T. P. Reid: Mr. Speaker, we are reasonably pleased with this bill and will be supporting it. This is one of the few programs the government has come out with that has been fairly successful. We are not happy with the fact that the budget allocation has dropped from $30 million to $25 million. However, we are happy to see that some of this money is targeted for northern and eastern Ontario.
I have a question about that money. I presume it will be for businesses or corporations either resident or operating in northern or eastern Ontario. For example, they would not be able to have a head office in northern Ontario and operate in southern Ontario. I do not know whether that is a particular problem, but I presume we are trying to get investment in those areas and that to fall under the provisions of this act, the SBDC requirements will require them to operate in northern and eastern Ontario and not simply to have an office there.
We are happy to see the government has reduced the ownership to 49 per cent. We are pleased that there has been a broadening of the definition of associate. I presume this was brought to the government's attention primarily because, amongst other things, of the Lake Rosseau proposition where a number of people were involved. The minister has already talked about the maximum investment in a single company going to $2.5 million from $5 million.
There is one amendment we will be putting forward that relates to the managerial fees. The Clarkson Gordon report mentions this, and on page 41 of that report it says:
"Based on our survey, in 49 per cent of the cases where managerial assistance was provided to the ESB, the SBDC or an affiliated company charged fees for that assistance. These fees vary from a few hundred dollars a year up to thousands of dollars a year based on normal hourly rates for management consulting. The average fee charged for 1983 was $11,000 and in 14 per cent of the cases exceeded $30,000."
It goes on to say, "The extremely high fees for managerial assistance would appear to defeat the spirit and intent of the SBDC Act."
One of the intentions of the act was to provide some managerial assistance for some of these small firms; but I think the minister would agree there gets to be a limit on this. It would appear the investments of some of the people investing in these companies are contingent upon receiving a contract, or providing services or materials, in return for the investment in the eligible small businesses.
I am going to be recommending an amendment that would require that any excessive management fees would have to be looked at and would ban the purchase of the management service as a condition of a small business development corporation investment in the small business.
For instance, I think this should be reported on form 10. That form could easily be amended, not by changing the legislation but simply through a regulation that would require that any managerial or consultancy fees to an ESB from an SBDC be noted on the form. If it appears to the regulators in the ministry that these fees have been excessive, then action can be taken by the ministry to see that the ESB is not being ripped off, for want of a better phrase, by the people who are operating the SBDCs.
There are some other matters that have not been touched upon by the minister in this bill in relation to the Clarkson Gordon report; for instance, the public SBDCs that were referred to on page 36. Again to quote the Clarkson Gordon report:
"In theory, public SBDCs are a sound idea. They bring together small investors who cannot afford the large outlay of capital necessary to invest in a private SBDC. Public SBDCs could channel funds into Ontario venture capital that would otherwise be invested elsewhere. They could raise larger pools of capital, which could be invested in several small business, thereby spreading investment risk should one of those businesses fail."
The report goes on to indicate, as the minister knows, that the consultants in this case do not hold out much hope that these public SBDCs will be successful. I think this may be unfortunate, particularly when I think of the experience in the small towns I represent in northern Ontario, where they could be of great value.
It is interesting that in Atikokan, which suffered the loss of a couple of mines about five years ago, a number of small businesses have sprung up within the town itself. Of course, their problem had been one of capital formation, which seems to be the major problem for all small businesses. It might be that a better understanding of this part of the program might go some way to promoting that.
It might behoove the minister not to put his ads in the paper, because some of these ads are either incomprehensible or too complicated for people to understand. Seminars, perhaps in conjunction with the Ministry of Industry and Trade, might be a way of getting this message out.
9:30 p.m.
As I said at the outset, this seems to be one of the few programs that has had any success with respect to pooling capital and providing assistance to small business. Despite the fact that it has been relatively successful, with one or two problems, the program's budget has been cut back rather than expanded. I do not know whether that is because of bad experiences the ministry has had, but I want to devote a few seconds to talking about another fact.
Clarkson Gordon indicates that sometimes these companies or small business development corporations have waited for a year or two before having their audits done. In the meantime, the funds have often been released on receipt of an affidavit from the company or the SBDC saying the necessary investment has been made per the requirements. The funds then have been released from the trust funds to the individuals or companies involved.
A quicker audit of these things might catch some things such as the Lake Rosseau proposition and some of the others the government has had a problem with. I realize the minister can charge the companies with fraud under the act or whatever the provisions are in there for that. However, sometimes by the time the regulators on that side get around to it, as we saw with the trust companies -- Astra/Re-Mor and a host of others -- the money is gone and the taxpayers and investors are left holding the bag.
With those few comments, I would ask the minister why some of the other recommendations of the Clarkson Gordon report were not followed. The one that attracted me in particular was the startup for young entrepreneurs. There should be special provision under the SBDC program for young entrepreneurs who, because of their youth, relative inexperience and lack of track record, have a problem in raising funds. This might be a vehicle for them. For them, it might be extended to the service sector, which is not eligible under the act at present. Then these young entrepreneurs we are all so fond of, and who otherwise may well be unemployed, might have an opportunity to get into these kinds of businesses; and they could grow up to be balding Progressive Conservative supporters.
Perhaps the minister in his comments will indicate whether he is contemplating further amendments to this act. I realize we are trying to get these matters through as quickly as possible following the budget, to put them in legislation and make the new amendments operable. But I would also like to know whether some of the other recommendations related to the Clarkson Gordon report will be implemented.
There is one further question I have dwelt on about the amount of funds available. This is a reasonably good program, but $25 million does not seem to be a lot of money. If we can believe the Clarkson Gordon study, supposedly it has created 11,000 jobs or better. Also, according to the report and from my own knowledge, it has been an inexpensive job creation plan relative to some of the other programs at the federal and provincial levels. For instance, I think of Minaki Lodge and what that $43 million created -- but that is another story; we will not go into that one.
Since it was presumably such a success, and since it did supposedly create 11,000 jobs at a relatively low cost to the province -- and presumably these are also long-term jobs -- I cannot understand why we are being so niggardly with this program. I wonder whether the minister is prepared, if the demand for this is out there, to go to his cabinet colleagues and ask for an expansion of this allocation in his budget.
Mr. Breaugh: Mr. Speaker, this is another bill which seems to have polarized a great many people in the business community. Some think it is great and others think it stinks.
Hon. Mr. Gregory: Which side is the member on?
Mr. Breaugh: Make a guess. I thought it was interesting to go through newspaper reports of this. I will give you two quotes that stand out. John Bulloch, of course, is well known as the president of the Canadian Federation of Independent Business. His comment on the budget in general, and this bill in particular, was, "If I was any happier, it would be immoral and disgusting." In his own quaint, turn-a-phrase way he may have put his finger on what is wrong with this bill.
Mr. McClellan: Immoral and disgusting.
Mr. Breaugh: The words "immoral and disgusting" are not exactly ones that pop into mind when doing some noble deed.
The minister, in reply to the last bill, was bragging about Geoffrey Hale of the Canadian Organization of Small Business. I thought he had some good things to say about the Treasurer's efforts in this bill. He said, "His gimmick-a-day approach to youth employment and high technology amounts to little more than window-dressing while resulting in a lot more red tape." That gives both sides of the argument. It nails down that there are problems with approaching things in this way.
One of the reasons I oppose this bill is that I looked at the background material, which gave me some indication that from some perspectives this program did do some things. I think it is worth while to take a look at the Clarkson Gordon report and to examine how it works and what it does. One thing I was not able to get was a good breakdown of the purported 11,000 or so jobs. What kind of jobs are they? Are they long-term jobs or short-term jobs? What is the rate of pay? What is the job security? What are the benefits?
My guess, and I will put it on the record as a guess, is that they will tend to follow a national pattern that shows we are moving away from long-term, stable employment at relatively high rates of pay, comparatively speaking, with benefit packages and job security, towards short-term employment, usually in service industries, usually at much lower rates of pay and with much less job stability.
The only point I want to make is that it is nice to say that some act of the government assisted in the creation of X jobs, but I think it is more accurate, and necessary, to examine what kind of jobs were created. Which sector of the economy were they created in? What do they do to the economy in general?
Even the most rabid free enterpriser I know understands the basic business fact that if there are a lot of people who are employed -- let us stop there and say we are grateful they are employed at any job these days -- but if they are paid low wages, they do not buy new cars, for example.
In my community there are a lot of rabid free enterprisers at General Motors, but they understand that somebody in a minimum wage job is not going to be buying a new Corvette this year or perhaps even a new Chevette. Those people are not a part of its marketing strategy; it is not possible to reach them. People in the furniture and large appliance industry understand that their market excludes those who may be employed but are employed at lower-paid jobs. There is an effect there.
9:40 p.m.
When one looks at this act, it depends on the perspective one uses. If one uses the perspective of small business enterprises, one of the most common complaints I get is that there is no financial assistance for them. If somebody wants to borrow $1 million, there are sources for that. If somebody wants to borrow $150,000, there are sources for that. If one wants to open up a plant that will employ 200 people, there are sources of financing for that. But if one wants to open up a business and employ 10 or 15 people, there is no place to get the money. If one can get the money, one can get it from a bank or a trust company just as easily as one can from any other source, such as this type of investment.
So from the business consumer's point of view, if you like, there are problems with it. Where you get support for this kind of legislation -- and probably the reason it is written in such a way -- is that from an investor's point of view the biggest bang for the bucks is available, and this type of legislation provides it.
I think it is important to note here that the basic purpose of the legislation is not to provide small businesses with financial investment moneys; the purpose of the exercise is to provide a good investment venue for groups of investors or governments or whoever. I think that is the problem. I could even set aside my arguments about this if somebody would show me where the small business can go now for investment moneys. Can it go to a bank? Sure it can, but can it get any money there? Can it go to a trust company? Sure it can, but will it get the money? Will the small business development corporations do very much for it? That remains to be seen.
One of the unfortunate things about trying to analyse legislation like this is that it is often difficult to determine whether this concept works. I know the old rabid free enterpriser will take this concept and accept it as being traditional, workable and good for people who want to invest money. It is written in that venue; that is the purpose of this kind of act. But if you examine it from the other perspective -- of which, frankly, I would be an advocate -- that of either workers who need jobs or small business people who need some financial investment in their businesses to make them run, the judgement I would make is it does not fulfil this function very well at all.
I am not saying for a moment that it does not do anything for anybody; it does. But I am saying it is legislation and a concept that is written around that oldest of jingles, the biggest bang for the bucks. That is the purpose of the exercise; that is how this act is written; that is what it does.
As a byproduct, it may create some jobs, but we do not have a very good set of definitions of what kinds of jobs are to be created. For example, we do know that some good jobs are created at the management level; but if we are looking at an employment strategy that provides people with jobs of some stability, decent-paying jobs, with all the other ramifications in our local and provincial economies, I do not think this approach does that.
The consensus I reached among the people with whom I discussed it, and the reading I did, at least did leave the question open; it has not been proven to be a program that really does this. If you read the act, I think it not unfair for a moment to say this act is not written for small businesses; this act is written for investors. That is the purpose of the exercise, and the hope is that incentives to investors through small business development corporations will eventually flow down, trickle down -- whatever the current, trendy phrase is -- to real people who will achieve some benefit from it.
I have great difficulty with that philosophy; but, more important and more pragmatically, I have greater difficulty with trying to determine whether that approach to it really does work. I have yet to find a small business that sings the praises of this particular concept, and I have yet to find one that has really benefited very much by it. I am sure there are some out there, and while I am sure the minister could take some time and read us chapter and verse, on balance, I cannot support the act. We will not support it on second reading.
Hon. Mr. Gregory: Mr. Speaker, at the beginning of a very short response I would like to read a summary note from the Clarkson Gordon report, which has been quoted extensively here.
In the report's conclusion it says: "The small business development corporations program is successfully meeting its objectives of supporting small businesses in Ontario through the encouragement of new equity investment by the private sector. The program is well received by participants, is lauded by major small business organizations and the efficient administration by the Ministry of Revenue contributes to its success."
I would say --
Mr. Breaugh: Who paid for the report?
Hon. Mr. Gregory: That is the report the member has been quoting from, but he did not quote that part.
Mr. Breaugh: Answer the question. Who?
The Acting Speaker (Mr. Cousens): Order.
Hon. Mr. Gregory: I said I read from the report's conclusions.
Mr. Breaugh: Could the minister answer the simple question of who paid for the report?
Hon. Mr. Gregory: I see; who paid for it is a part of the member's acceptance. The New Democratic Party of Ontario paid for it. Does the member believe it?
Interjections.
Hon. Mr. Gregory: Actually, it was commissioned by the Treasurer. That brings me to whether--
Mr. Breaugh: I can find some of our employees who might take a different view.
Hon. Mr. Gregory: Whether or not the member respects that report, he used part of it to make some of his arguments.
The Acting Speaker: The minister will not allow himself to be distracted by the member for Oshawa's interruptions.
Hon. Mr. Gregory: The member for Rainy River (Mr. T. P. Reid) asked me if some of the recommendations would be implemented or studied? I can only say we will continue to be guided by this report and other experiences to improve the program as we go along. I too regret there is not more money to put into this program because it is highly successful. However, that is the way it is this year.
I was also asked to comment on whether the share of the funds which go to northern Ontario would have to be used there. Yes, this is so. The theory and aim is that the bulk of the money will be spent there. I understand at least 75 percent of those salaries must be paid in northern Ontario. I think the answer is there. We are intending this program to do precisely what we are saying it is going to do.
We did get into the Lake Rousseau experience and whether we are properly auditing these. I can tell the members, as I have said before in the House, the Lake Rousseau experience is a good demonstration of how well the program is working. Even though the investment in Lake Rousseau has not turned out to be totally as it should be, the funds advanced by this government into the trust fund are still part of the fund and have not been released. As a matter of fact, there has been no request to release them. They are still there and frozen. We do not have too much to worry about that; we might have worries with the Lake Rousseau project in its entirety, but not with our contribution to it.
Mr. Breaugh: Could the minister consider making it a Minaki South?
Hon. Mr. Gregory: Either the member for Rainy River or the member for Oshawa asked if I would be prepared to ask for additional help to make it function if the program proves successful. I am not above asking for additional help from the Treasurer, Management Board of Cabinet, or anybody else. Whether I will get it is another matter. However, I would be prepared to ask because I do believe in this program.
It is a program that is being copied by many other provinces. I heard today that Alberta has adopted a totally identical program, even to the point of legislation, without giving any credit to the government which showed them how to do it. Saskatchewan has also done very well; even Prince Edward Island. They are all copying our program which is so excellent in its approach.
Mr. Shymko: What about Manitoba?
Hon. Mr. Gregory: I do not know about Manitoba. Manitoba is a little behind the times these days. They are not quite up to scratch on these investments. After a change in government, they might well make a change.
With those short comments--
Mr. J. A. Reed: How about management consultants and fees?
Hon. Mr. Gregory: Yes, I have something on that if the member can give me a minute. I cannot find it. Can I get back to the member on that? I think I can comment. I cannot lay my hands on it right at the moment, but I will get back to him on that.
9:50 p.m.
Hon. Mr. Gregory moved second reading of Bill 73, An Act to amend the Small Business Development Corporations Act.
Motion agreed to.
Bill ordered for committee of the whole House.
House in committee of the whole.
ASSESSMENT AMENDMENT ACT
Consideration of Bill 71, An Act to amend the Assessment Act.
On section 1:
Mr. Epp: Mr. Chairman, as I indicated earlier, this section of the bill seems to give extraordinary powers to the minister. That has not been necessary before. We are dealing with one small new section regarding the handicapped and people 65 years of age and over, and it does not seem to be necessary to have a whole new section for definitions.
Mr. Breaugh: Mr. Chairman, on a point of order: Are we discussing an amendment that has not yet been moved?
Mr. Chairman: I thought he had a little preamble in preparation for moving the amendment.
Mr. Breaugh: The member is just warming up, as they say.
Mr. Chairman: I thought he might be.
Mr. Breaugh: Would he let us know if there is an amendment?
Mr. Epp: Of course; I thought he was bilingual and had read my English version earlier.
Mr. Chairman: Mr. Epp moves that subsection (1)(b) of section 1 of the bill be deleted.
Mr. Epp: I would like a fuller explanation with respect to the use of the extraordinary new powers the minister has taken upon himself. I do not see the need for it when one considers that there is, as I see it, just one small addition, for the age category 65 years and over and the handicapped, for the break in assessment on their properties up to $5,000.
Mr. Breaugh: Could I get some clarification from the chair as to the exact meaning of this? I seem to have some confusion. Perhaps I do not have the proper amendment here.
The amendment I have is that subsection (1)(b) of section 1 of the bill be deleted. My reading of the printed bill before me is this amendment would take out the minister making regulations and prescribing forms for the purpose of this act. There seems to be a bit of confusion.
Mr. Chairman: As I read it, clause 2(1)(b) of the act under subsection 1(1) of the bill is "defining any word or expression used in this act that has not already been expressly defined in this act." The mover of the motion might clarify that.
Mr. Breaugh: I would like some clarification as to exactly what the amendment means.
Mr. Chairman: Are we correct? Is the committee correct in its understanding? Clause 2(1)(b) of the act reads "defining any word or expression used in this act that has not already been expressly defined in this act." The amendment by the honourable member is that the clause be deleted.
Mr. Epp: That is the section we are talking about.
Mr. Chairman: The honourable member is then saying that--
Mr. Epp: If that is what the chair wants, then it is the same section I am talking about and we would like that deleted.
Mr. Breaugh: Would someone please put on the record exactly what it is he is deleting? It would be a help.
Mr. Chairman: Perhaps the member for Waterloo North (Mr. Epp) could help us.
Mr. Epp: The chair says that is clause 2(1)(b). I will read it, "defining any word or expression used in this act that has not already been expressly defined in this act." That is the section I want deleted.
Mr. Chairman: We do have a motion before the committee. Would it be correct then to say -- and the mover of the motion might help us with this -- it is the member's intention to remove section 1 of clause 2(1)(b)?
Mr. Epp moves an amendment that the clause that reads, "The Lieutenant Governor in Council may make regulations...(b) defining any word or expression used in this Act that has not already been expressly defined in this act," be deleted.
Mr. Breaugh: Mr. Chairman, you will have to excuse me. I could not hear what you said. I have not seen what has been moved but whatever it is, I ain't for it.
Hon. Mr. Gregory: Mr. Chairman, I believe there is some confusion. The amendment I have says "subsection (1)(b) of section 1 of the bill be deleted." With great respect I believe what the member wants is section 1, subsection 2(1)(b).
Mr. Chairman: It appears we have exhausted all discussion.
Hon. Mr. Gregory: We cannot accept the amendment.
Mr. Chairman: All those in favour of Mr. Epp's amendment will please say, "aye."
All those opposed will please say, "nay."
In my opinion the nays have it.
Motion negatived.
Mr. Epp: I asked the minister earlier for an explanation and he did not come forth with it. That is another reason I asked for this to go to committee. I refer to an explanation for section 2 of the bill which says, "Section 3 of the said act is amended by adding thereto the following paragraph..." Under that we have a section on page 3 of Bill 71 -- so the member for Oshawa (Mr. Breaugh) is clear -- which says, "The land is assessed as residential and comprises not more than three residential units."
Earlier, I asked the minister whether this refers to condominium units and whether that means any building that has more than three condominium units is therefore not eligible for this break in assessment. He did not reply earlier and I wonder if he is going to respond to that now.
Hon. Mr. Gregory: I do not think I heard that question, but no, we are not referring to condominium units.
Mr. Epp: Is the minister saying if one is a senior citizen or if one is a handicapped person and in a structure with more than three units in it, one cannot make any changes to the condominium unit because there are more than three units in it?
Hon. Mr. Gregory: That is not quite what I said. I said one can make application wherever one lives. However, the point is there are certain rules and regulations, one of them being it must be not more than three units. We are referring to rental units, not condominiums.
10 p.m.
Mr. Epp: But they are still part of a building, a structure that has more than three units. Is the minister saying that if one has a condominium unit and there are 40 condominium units in that building, which has a common hall and corridor, or one has a town house with a number of units, one is eligible or not?
Hon. Mr. Gregory: If they are condominiums and there are three units or fewer, they will be applicable.
Mr. Epp: I am sorry, I do not want to belabour the point, but it is very important. There are apartment buildings that have more than three condominium units. They are condominiums owned by individuals and there are sometimes common areas in those buildings. They are like apartment buildings but they are condominiums. Are they exempt or not? I appreciate that the minister does not understand what a condominium unit is.
Hon. Mr. Gregory: Mr. Chairman, I can do without the sarcasm of this member from the boonies. I know exactly what a condominium is.
Mr. Chairman: None of that language is necessary.
Mr. Breaugh: On a point of order, Mr. Chairman: People from Mississauga cannot call anybody "from the boonies."
Mr. Bradley: Wait until they hear that in Waterloo North.
Mr. Chairman: With all due respect, all honourable members, we have had discussions on language in the House and in committee--
Interjections.
Mr. Chairman: Order. Would the minister wait one moment please. We know language that is likely to incite and create disorder is not appropriate. The minister has made a comment. Do you have a comment?
Mr. Epp: Make him withdraw it. Waterloo is not the boonies.
Mr. Chairman: The minister would help the process if he would withdraw it.
Hon. Mr. Gregory: Mr. Chairman, if the member feels bad about my referring to Waterloo North as the boonies, then I do withdraw it, with great apologies, but I think he should watch his sarcasm as well.
I have asked my staff to help me with this problem because it is a rather fine point. I am told that in the definition under this act, condominiums are single units, separately owned. The number of units does not matter, and it includes all sizes under condominiums.
Mr. Epp: This is very important because the point will come up. Does that pertain only to the actual condominium unit, or does it pertain to a common hall which might have to be changed to accommodate handicapped or senior citizens, if they need to change the hall, staircase or ramp? That is the kind of thing I am trying to find out.
Hon. Mr. Gregory: My understanding of condominiums, much as I am told I do not understand them, is that they are individual units and their owners also own part of the common areas. I would expect owning part of the common areas would make them part of the unit owned by the condominium owner. That being so, I expect it would be applicable to all the members who own condominiums and if all are seniors and jointly apply. At least that is my opinion, with my lack of understanding.
Mr. Epp: Therefore, they would be exempt.
Hon. Mr. Gregory: Yes. I can repeat it again if the member wants.
Hon. Mr. Walker: But he will not take yes for an answer.
Mr. Breaugh: I would appreciate the opportunity to nail this down. There are a number of types of residential accommodations, condominiums being one. Co-op units also come to mind as units that might be hazily dealt with under this bill. I want the record to show clearly the minister has said that the intention is, if I can put words into his mouth, that if the rules and regulations do not follow that intention, they will be changed subsequently.
The intention is to include a house, condominium or co-op unit, whatever the nature of the unit; is that the approach the government is looking at? It is not saying that because there are 50 co-op units or condominiums in a building, the people will all be disqualified. I want it clearly on the record that the intention of the minister is that an individual property owner, whether in the co-operative sense, or in the condominium sense, which is somewhat different, all those people will be considered under this exemption.
I will give the minister a chance to gather his kind thoughts before he replies.
Hon. Mr. Gregory: Mr. Chairman, the same rules would apply to a co-op as apply to a condominium. They are the same thing.
Section 1 agreed to.
Sections 2 to 8, inclusive, agreed to.
Bill ordered to be reported.
SMALL BUSINESS DEVELOPMENT CORPORATIONS AMENDMENT ACT
Consideration of Bill 73, An Act to amend the Small Business Development Corporations Act.
Sections 1 to 5, inclusive, agreed to.
On section 6:
Mr. T. P. Reid: Mr. Chairman, I have an amendment to section 6.
Mr. Chairman: Mr. Reid moves that section 6 of the bill be amended by adding thereto the following subsection:
"(3) Section 12 of the said act is amended by adding thereto the following subsection:
"(2a) Subsection 2 does not apply to the purchase of management services by the small business from the small business development corporation, any of its shareholders or any of its associated or affiliated corporations of any of its shareholders, unless:
"(a) the fees paid for the management services are excessive, or
"(b) the purchase of the management services is a condition of the small business development corporation's investment in the small business."
Mr. T. P. Reid: Just a word of explanation. This simply follows along with what I said during discussion of the bill on second reading. Obviously, part of the idea behind the SBDCs was to provide some managerial expertise to a small firm that otherwise might not be able to acquire it.
As we have seen from Clarkson Gordon, I think 14 per cent of the firms so involved had managerial fees of more than $30,000. I do not know what the total revenues of those particular companies were, but it seems to me that $30,000 for managerial fees is somewhat excessive.
The point of this amendment is to ensure that those managerial fees can be charged, but if they are excessive, then it would appear the investors in the SBDC are saying to the eligible small business, "Listen, if you do not use our consulting or managerial services, we are not going to invest in your company." What might loosely be termed as some blackmail may be involved.
I just want and expect that the ministry, in doing its audit, would keep track of these managerial fees and, if they are excessive, would require that the SBDCs should not be forcing the companies in which they are investing to pay excessive rates for this kind of service.
Mr. Breaugh: In my view, the member for Rainy River has proposed an amendment that is supportable. It does plug one little hole in the dike. It seems to me the minister would be well served to consider this amendment. It is a friendly amendment. I do not believe it would destroy the principle of the bill at all and it would be a very useful amendment to have accepted. We will be happy to support it.
Hon. Mr. Gregory: Mr. Chairman, we cannot accept the amendment in view of the fact that we have only just received it and have not had an opportunity to study the implications.
I do have some remarks, if the members can bear with me. I can give some information regarding management fees and the view of the ministry.
One of the objects of the program is the provision of management services to small businesses. If it is the intention of the small business development corporation to provide services, the ministry requests a copy of the draft management agreement. The draft is reviewed to ensure that the fees are reasonable and that the services to be provided are specified.
In some cases, the principal of the SBDC works full-time for the small business applicant and fees in the $30,000 range, such as mentioned by the honourable member, may not be unreasonable. The Clarkson Gordon report--
Mr. Breaugh: This is one of the minister's better speeches.
Hon. Mr. Gregory: Am I convincing my friend? It has taken me quite a while to write down these notes while I have been listening to the members; I hope they appreciate it.
The Clarkson Gordon report suggested the fees could be negotiated at the time of the investment by the SBDC. The approach by the ministry ensures that the management fee is acceptable and will be evaluated as part of the overall return to the SBDC on its investment.
The ministry uses its power under -- I cannot read this word; what does that say?
Hon. Mr. Baetz: "The ministry uses its power under its spirit and intent..."
Hon. Mr. Gregory: --under its spirit and intent to turn down proposals involving inordinately high and excessive management fees.
I can suggest one thing as a result of this great debate: The personal staff of the minister from here on in is going to take writing lessons.
Mr. T. P. Reid: Perhaps the minister should take reading lessons.
Mr. Shymko: Or else he needs new glasses.
Hon. Mr. Gregory: I could not even read it with my glasses.
Unfortunately, we cannot accept the amendment.
Mr. Chairman: All those in favour of Mr. Reid's amendment will please say "aye."
All those opposed will please say "nay."
In my opinion the nays have it.
Motion negatived.
Section 6 agreed to.
Sections 7 to 10, inclusive, agreed to.
Bill ordered to be reported.
On motion by Hon. Mr. Gregory, the committee of the whole House reported two bills without amendment.
The House adjourned at 10:14 p.m.