L071 - Mon 16 Dec 1985 / Lun 16 déc 1985
CORPORATIONS TAX AMENDMENT ACT (CONTINUED)
RETAIL SALES TAX AMENDMENT ACT
CORPORATIONS TAX AMENDMENT ACT (CONTINUED)
INCOME TAX AMENDMENT ACT (CONTINUED)
The House resumed at 8 p.m.
House in committee of the whole.
CORPORATIONS TAX AMENDMENT ACT (CONTINUED)
Resuming consideration of Bill 45, An Act to amend the Corporations Tax Act.
On section 17:
Mr. Chairman: We are in the middle of an amendment by the member for Lincoln (Mr. Andrewes) to subsection 17(1) of the act. Is there any other member who wishes to participate in the debate?
Mr. McCague: The amendment my colleague proposes makes abundant sense to me as it did to the now Treasurer (Mr. Nixon) in a previous incarnation in his speeches and in his dedication to the campaign. I cannot think of an amendment which would lead to more employment in the province than the one proposed by the member for Lincoln.
I have a notion that the Treasurer is hiding behind a couple of words. We had indication of that today when my leader put a question in three different ways and there was still no answer. That is typical, but I do not think he should hide behind a couple of words which he thinks are wrong. I do not believe the amendment is wrong. Why do we not agree that the idea is a good one, as it was proposed originally by many people, and that a word change would be helpful?
In the past, I have heard Treasurers get up and say if the member would only change a word or two it would be great and they could go along with that. Why does this Treasurer not do that and get on with the amendment? It makes sense, and I commend it to him.
Hon. Mr. Nixon: Before the spokesman for the official opposition gets his enthusiasm running too high, I will point out that the acceptance of the amendment would cost the Treasury about $100 million. The idea is a good one, but for now it is too expensive. It will take a lot more than the adjustment of a word to get me to accept it. If our economy is buoyant enough to support it as an initiative to make work in the future, which is very important, and if it is possible to bring it in, I hope the member will be as enthusiastic in its support.
For good reason, I am not prepared to condemn the amendment. It comes from very good sources. No one can question the thought processes that went into it at all, but we are not accepting the amendment at this time. That is our judgement. We will be prepared to listen to the arguments, but I hope there will not be too many.
Mr. McCague: I could accept the Treasurer's explanation if he would answer the question I asked at least a month ago. What kind of windfall will the Treasury get from the miscalculation he made in increasing the income tax for the province? He will not answer that question. His staff answered it and said the Treasury would get $150 million. The Treasurer says somewhere between $20 million and $70 million, maybe and maybe not.
When I asked that question, the Treasurer launched into the one about how he was being buffaloed by the federal government on transfers, established programs financing and all that jazz. However, if he would answer the first question, then I might agree with him on the proposition he is putting forward now. Until he does that, I think, as his leader keeps saying, he is out to lunch.
Hon. Mr. Nixon: Mr. Chairman, I do not know how far you want to pursue the question of how far off the mark the projections for personal income tax revenues are going to be. The member was Minister of Revenue. Was he Minister of Revenue? No, he was Chairman of Management Board. That is where I see his lovely mug looking down from the wall. They have these lines and lines of Tory former cabinet ministers all looking down and glaring at us. It is very hard to do business.
However, being a sensible person, the member would know the federal revenue experts are the ones who make the projections on our expected revenues from personal income tax. These projections are made on a regular basis, month by month, quarter by quarter. They vary, depending upon the buoyancy of the economy.
I am glad to report to the House, and I know members will be glad to hear it, that with the initiatives which came in the budget of October 24, not only have the sales tax revenue projections increased, but the corporation income tax revenues are more buoyant than expected; and also the revenues from personal income tax, which has nothing to do with this bill, are expected to be more buoyant.
The buoyancy is going up with each report. We expect the revenues to be about $50 million more than projected. However, at the rate at which the initiatives from the budget are stimulating the business community, it is expected it might even be greater than that.
Mr. Andrewes: We will come back to the subject of personal income tax at some point in the evening. I want to tell the Treasurer, if he does not already know it, my mug will not bother him. i appear on neither the walls of the boardrooms of Management Board nor those in Treasury.
The Minister of Energy (Mr. Kerrio), the Minister of Health (Mr. Elston) or perhaps the Minister of Agriculture and Food (Mr. Riddell) might cast their eyes downward at the sight of my mug on the wall, but certainly the Treasurer does not need to fear that.
The Treasurer said the amendment is too expensive. We are quite aware it was by his own party's calculation that we arrived at the $100-million figure. I think the point is that the Treasurer said the economy is now buoyant, or he hopes it will become buoyant enough that he might contemplate this kind of amendment in the future.
The point of the argument we are trying to make is that one creates the kind of buoyancy one is after by these kinds of measures. If the economy is buoyant, one does not have to do it. This is the time when one has to keep that economy revitalized; one has to keep it charged up; one has to keep it generating the kinds of tax revenues the Treasurer has described here to some degree as a windfall.
The point of our amendment is that the economy is now in a very delicate recovery, particularly for small businesses. We want to generate the kind of economic activity that keeps things rolling.
8:10 p.m.
Hon. Mr. Nixon: We really debated the whole matter before the adjournment the other night. In my opinion, we might very well have completed it. However, I am not the arbiter of these matters.
In response to the argument made by the member for Lincoln, I think I pointed out the employment statistics are gratifyingly good. In November alone, 51,000 new jobs were created in Ontario, which reduced the unemployment levels by a full half of one per cent. The reduction in all of Canada was 0.1 per cent. The Prime Minister of Canada is very proud of that. The effects were even more concentrated in this jurisdiction, and we are very pleased about that.
I am not indicating by any means that unemployment problems are solved -- far from it -- but they are improving. We have the lowest level of unemployment in Canada. I am very proud of that and I hope we maintain that. In fact, I hope the downward trend in unemployment continues right across the nation.
As far as I am concerned, I do not have anything else to add on the amendment. We are not supporting it.
Mr. McCague: Mr. Chairman, I am sure you want to get on with other bills, but I am sorry the Treasurer is worried about the fact that my mug is over there and that it bothers him.
Hon. Mr. Nixon: It does not bother me at all. The member earned it.
Mr. McCague: He said it bothered him.
Hon. Mr. Nixon: When I am there, it bothers me. It is not bothering me now.
Mr. McCague: I am sure it does not; he does not carry it around in his wallet. However, there will be people in the future who will not be worried that my mug is there, but who will be worried that the Treasurer mugged them. His picture will be there some day too.
If it is a good program, which the Treasurer admits, and if it does cost $100 million in this very buoyant economy, of which he has single-handedly been the author --
Hon. Mr. Nixon: I never said that.
Mr. McCague: I could take that from what the Treasurer said. He did not give anybody else any credit; so why would I not assume he wants all of it?
Mr. Foulds: Was the member not here during the last debate on this clause?
Mr. McCague: Yes, I was. I heard it all, including my friend's contribution.
Why would the Treasurer not consider, or has he considered, 15 per cent, for instance, something he could afford in view of all his windfall revenues? He still has not answered my question about the personal income tax, but I do not think he ever intends to. I will leave that to the member for Lincoln to pry out of him. Why would the Treasurer not consider something lesser? That is what I mean when I say perhaps we could agree on an amendment.
Hon. Mr. Kerrio: Does the member want an amendment to the amendment?
Mr. McCague: I said that earlier.
Mr. Chairman: All those in favour of Mr. Andrewes's motion, will please say "aye."
All those opposed will please say "nay."
Is there unanimous consent to stack the vote until 10:15 p.m.?
Vote stacked.
Mr. Chairman: As far as I can remember from the last time, that ends the sections on which members wish to comment, ask questions about or move amendments upon. Is that correct?
Hon. Mr. Nixon: Correct.
Mr. Chairman: Apparently, it is.
Sections 18 to 37, inclusive, agreed to.
INCOME TAX AMENDMENT ACT
Consideration of Bill 46, An Act to amend the Income Tax Act.
Mr. Andrewes: While the new experts from the Treasury are arriving in their places, I seek the minister's clarification so that we know what we are voting on. I see quite clearly that section I starts off, "The Income Tax Act, being chapter 213...." Then section 2b begins, "Every individual shall, in addition...." We then go to section 2. Is that out of place? Perhaps the Treasurer will clarify that.
Hon. Mr. Nixon: I do not think it is out of place. The draftsmen were simply implementing the decision to increase the basic rate from 48 per cent to 50 per cent and to add a surtax of three per cent on incomes estimated to be above $50,000. There are certain other changes, but those are the two specific changes. It may seem awkward, but that seems to be the appropriate way this should be done according to the draftsmen.
Mr. Chairman: What section would you like to refer to?
Mr. Andrewes: I would like to refer to section 2b and subsection 2(1).
Mr. Chairman: Are there any other sections the members would like to refer to or comment on or amend?
Mr. Foulds: I would like to comment on section 1 of the act.
Mr. Chairman: Fine.
On section 1:
Mr. Foulds: As I understand it, section 1, which includes the new section 2b of the statute itself, is the surtax section. Is that correct?
Hon. Mr. Nixon: That is correct.
Mr. Foulds: How did the Treasurer arrive at the figure of $5,000 as the amount of tax payable? How did he decide to institute the surtax at that level, which I gather is roughly $50,000 of income?
Hon. Mr. Nixon: I believe the experts looked at the averages and the calculation was that it was people with incomes above approximately $50,000 who would pay this surtax.
Mr. Foulds: I am sorry.
Hon. Mr. Nixon: It is what the member said, incomes of $50,000 and more. That is the level indicated here. The member may remember that at the time of the provincial election one of the issues debated was the need for a minimum tax. Actually, on one occasion I looked for a way whereby we might impose a minimum tax. We looked at a number of alternatives.
While I said in a previous debate that the experts at Treasury and the Ministry of Revenue could accomplish almost anything, they pointed out that, particularly since the federal government had promised it was going to implement that, it was not essential. However, we did feel a surtax of the type described was appropriate.
I should point out that I have been joined by Richard Gruchala, who is the senior project leader, structural analysis unit, revenue and operations research branch at the Ministry of Revenue; and by Harry Newton, senior economist of the taxation policy branch of the Treasury. They are assisting me in answering questions.
Mr. Foulds: I take it the Treasurer decided to implement the surtax in lieu of a minimum tax because he found it unnecessary or impossible to implement the minimum tax.
Hon. Mr. Nixon: If it would have been convenient under the federal-provincial taxation agreement, we might have moved for a minimum tax ourselves, since it was very much an issue in the provincial election. However, we were also looking to balance the increases in corporation revenues, which we discussed in the previous bill, with increases in revenues from personal income tax.
I do not want to spend a lot of time saying they are balanced because they are not, but they are not far off roughly in dollars. Lest I provoke the honourable member to embark on a lengthy dissertation about that balance, I would say at least we had it in mind. We did provide amendments that would give substantial revenue increases from personal and corporate income taxes.
We thought it appropriate in one sense to follow the lead of the federal government and to repeat what the government of Ontario did three or four years ago when it had a similar surtax. That one was a bit richer, but we felt this was adequate for our needs in response to our commitment to undertake finance on a basis of fiscal responsibility.
8:20 p.m.
Mr. Foulds: I have a couple of simple questions. Can the Treasurer inform me what other provinces have surtaxes of this nature and at what rate? Can he tell me what revenue -- it has slipped my mind; I do not have my budget with me -- he expects to get from this tax?
Hon. Mr. Nixon: At the time of the budget I probably could have answered that directly. I will have to get some advice on this, if the member does not mind waiting for a minute.
Mr. Foulds: No.
Hon. Mr. Nixon: British Columbia, Manitoba and Saskatchewan have income surtaxes, I am informed.
Mr. Foulds: At what rate?
Hon. Mr. Nixon: At reasonable rates. It is 10 per cent in British Columbia, 20 per cent over $25,000 in Manitoba and 12 per cent over $4,000 in Saskatchewan.
Mr. Foulds: The Treasurer had better try --
Hon. Mr. Kerrio: The member had better quit while he is ahead.
Mr. Foulds: No; the Treasurer makes my point, I believe.
Hon. Mr. Nixon: I know what the point is: make the rich pay.
Mr. Foulds: The Treasurer made it as succinctly as I could have, although perhaps a bit more floridly.
If the bastion of free enterprise, beautiful British Columbia, has a surtax rate of 10 per cent, surely it is not unreasonable, since the Treasurer did forgo the minimum tax, to implement a surtax on a higher floor -- i.e. a floor of $5,000 as opposed to $4,000 -- at a slightly higher rate than the three per cent he has indicated.
In other words, if he is serious about fiscal responsibility -- pace the party to my right, which wants to give away every tax increase I have heard talked about and which still talks about fiscal responsibility and about trying to get the deficit down and deliver programs -- surely it would make some sense to look at this a little more seriously and, without being vindictive, vicious or anything like that, implement a five per cent tax, say, on a level of $5,000, because the floor is relatively high.
Hon. Mr. Nixon: One has to compare the surtax in these jurisdictions with what their basic tax is. British Columbia, which has a 10 per cent surtax and which is not what one would call a progressive taxation jurisdiction, has a basic provincial tax of 44 per cent; but Manitoba, which has the 20 per cent tax that the honourable member thinks is so good, also has a 54 per cent basic tax.
Mr. Foulds: They have no health plan premiums, though.
Hon. Mr. Nixon: They have a general, overall grab in that socialist province.
Mr. Foulds: However, if I may say so, the Treasurer has a general giveaway here in his basic free-enterprise province. What is happening? He has a higher general tax rate than British Columbia has. Therefore, he is hitting middle-income people more, and for high-income people he is taxing much less. That is inappropriate.
I am supporting the section, obviously, because it is a very tiny step in the right direction, but I argue quite seriously that the floor is too high and the rate is too low.
Hon. Mr. Nixon: Noted.
Mr. Foulds: Noted. We will have a change in the next budget.
Mr. Barlow: On the same point, does the Treasurer have any idea when the BC surtax of 10 per cent came into being?
Hon. Mr. Nixon: Four years ago.
Mr. Barlow: I am trying to relate that to something else. Does the Treasurer have any idea when the Saskatchewan surtax came into being?
Hon. Mr. Nixon: In the 1970s.
Mr. Barlow: In the 1970s, under the previous administration. The point I am trying to make is that it seems this is a socialist tax that relates to a socialist government. I do not know why the Treasurer would want to be associated with that.
Hon. Mr. Nixon: I do not want to be unnecessarily unfriendly with the socialists at this time.
Mr. Barlow: I can understand that.
Mr. Foulds: I have one other question on this section. When the Treasurer estimates the income at $50,000, how is that income earned? Is it earned through straight wages or labour or is it a combination of wages, labour, dividends, interest payments and so on? In other words, when the Treasurer uses the figure of $5,000 payable, he arrives at an average income of $50,000; how much difference does it make how that income of $50,000 is earned?
Hon. Mr. Nixon: It does not make any difference at all, and the net revenue will be about $25 million in a year.
Mr. Andrewes: We will be supporting this section of the bill. Our reasons are quite simple. Having received the figures and the advice of a gentleman, a friend of the Treasurer, on surtaxes in other provinces, perhaps we should be grateful for small mercies. Nevertheless, our reasons are quite simple. We have a fairly basic belief that those who have a little more should be prepared to pay a little more.
The members of this chamber who enjoy the perks of two jobs, the ability to carry on their professional practices while they are serving their constituents and this chamber, probably fall into this bracket. Those of us who try to carry on our professions out in the country do not, unless we are privileged enough to find ourselves in the government and occupying the hallowed halls at the end of the second floor.
Most reasonable people go along with this proposed surtax as long as they know where the extra money is going to be spent. I understand that extra money in 1985-86 is about $2 million, not a significant amount in the balance of this fiscal year, but I assume it will a significantly greater amount in the next fiscal year.
When it comes to these extras, what is the appropriate use for these funds? Many people view education, health care and cleaning up the environment as the right kind of things on which to spend dollars. All of us feel very strongly about those things. The Attorney General (Mr. Scott) talks about the justice system and new courthouses in Windsor. All these things cost money, but they are all very reasonable necessities for our society today and they are certainly endorsed by reasonable people.
8:30 p.m.
As well, the same reasonable people want to see us building an infrastructure that allows us to maintain that tax base and to generate the dollars for these programs. The same reasonable people want to see business stimulated; they want to see growth, they want to see greater exports and they want to see greater trade between provinces. That is the element of this budget that is missing and that is the concern that we have.
Reasonable people will endorse a judicious policy of taxing to pay for the necessities of education, health and the environment, as long as that is balanced on the other side by that very important infrastructure. We have spoken at length about the inadequacies of this budget in addressing those concerns. There is just nothing there. We will, however, be supporting this section.
I want to place one further inquiry with the Treasurer. He announced at some point that the Liberal Party would implement a minimum tax -- I quote his words -- if in his government's opinion, the federal minimum tax was appropriate. The Treasurer could start by defining what he means by "appropriate" and then tell us whether the proposed minimum tax by the federal Minister of Finance is, in his terms, appropriate.
Hon. Mr. Nixon: I will do that backwards and begin by saying yes, I believe it is appropriate. We expect the minimum tax announced by Michael Wilson last week to accrue a bit more than $40 million as our provincial share. It is a parallel tax, which was not specifically the one I would have chosen and there are those in the Treasury who have indicated to me that they feel it is more complex than is necessary.
I had the chance last Friday to discuss this with the other treasurers from across Canada in a meeting chaired by Mr. Wilson. We indicated to him that we thought it was an appropriate fulfilment of the Conservatives' election promise. Under the federal-provincial tax collection agreement, we get the 50 per cent part of that which they would collect in this province. That will give us the $40 million I spoke about. I do not have any problem with that.
If they had not proceeded, I would have asked the federal authorities to grant us the flexibility under the tax collection agreement to implement a minimum tax. I have read quite a bit about minimum taxes since assuming this new responsibility -- for me, it is not so new any more -- and I understand that it does not replace far-reaching, thorough tax reform.
Over the years a number of tax preferences -- that is, loopholes -- have been built into the system, all of which were designed by the federal and provincial governments to direct private funds into investments which were then relieved of taxation in part or in total for what was considered to be good and proper public policy reasons.
With these tax preferences, it is possible for people with large incomes to order their affairs so they have no tax payable. The intricacies of so doing usually leave them with a rat's nest of investments -- which must drive them crazy -- as the balancing load for not paying a direct income tax. The money is invested in those things which governments of the day and previously, considered worthy of a tax preference.
A further review of taxation is necessary. We are urging the government of Canada to undertake this, and I hope we will be able to do this in a co-operative and productive way.
Mr. Andrewes: We urge the Treasurer to parallel anything the federal government does or not to do it at all.
Hon. Mr. Nixon: I cannot hear the member very well.
Mr. Andrewes: There are too many interjections. I recall reading somewhere with respect to criticism of the federal government's proposal, that there is a large number of individuals, probably 3,000 or 4,000, who are high income earners who currently do not pay any tax. However, if those people are assessed accumulatively over three or four years, it is then narrowed down to about 100 individuals who do not pay any tax. The Treasurer is nodding; so I assume I am correct.
Hon. Mr. Nixon: I read the same thing the member did. Some people who would avoid tax one year might get caught the next. It would take a particularly persistent income earner, probably with lots of advice from a lawyer and an accountant, to keep out of the tax files for four years in a row. It is possible, and some do, but not many.
Mr. Andrewes: The only concern I have is that it seems like a tremendous bureaucracy to monitor the small number who do not escape the net at some point. Perhaps the minister wants to comment on that.
Hon. Mr. Nixon: I guess federal people do that because we do not do it. We get reports of the type my friend from the potato and sod belt finds so irritating. They do the monitoring and they give us their projections; we check those out, but not in the same meticulous way. Because we are members of the tax collection agreement and quite enthusiastic supporters of the concept, as long as it is a two-way street and we do have some input, we leave it to the federal authorities to do this and we do not overlap that rather intricate and expensive responsibility.
Mr. Andrewes: I agree it is intricate and expensive. My only thought flowing from this discussion is that among those 4,000 people it seems apparent that those who are not paying tax make their tax saving by what is now a legitimate measure. The only comment I will make is that we should be very cautious when addressing what my friends to the left would describe as those few rich who refuse to pay and get out of pulling their part of the sled up that long, difficult slope
Mr. Foulds: Uphill.
Mr. Andrewes: Uphill?
Mr. Foulds: The member was talking about the long, difficult pull of the sled.
Mr. Andrewes: Absolutely. We must make sure that free ride does not take us away from what have been, over the years, legitimate exemptions.
Hon. Mr. Nixon: I know my friend the member for Port Arthur is anxious to comment on this, but I agree with the member for Lincoln to some extent. I have always thought the political impact of the corporate welfare bum criticism was a bit unfair since the corporate welfare bums had been led into the tax preferences by government policy. Since it was largely Liberal policy, I could not find it in my heart to damn it totally out of hand.
However, I do think that while it is fine to have an array of preferences that are part of government policy and that individuals across the nation and here in Ontario can take their preferences, one should not be allowed to go Scot-free from pulling one's part of the sled uphill, as the member for Lincoln so graphically described it. Therefore, I find the idea of a minimum tax attractive. Perhaps it is my unsublimated populous prejudice that I want it both ways, and I guess we can have it both ways, because we do.
8:40 p.m.
Mr. Foulds: I was not going to speak any further on this clause, but both the Treasurer and the member for Lincoln have provoked me by some of the things they have said. Let me make a couple of points.
At present, in our society in Ontario, people who earn roughly between $8,000 a year and $40,000 a year pay more than their fair share of income tax; those who earn $40,000 and over do not pay their fair share. This bill does not address that balance. When we get to the next clause, we notice it is the single person with two kids, earning $25,000, who gets hit with a much greater tax increase proportionately than the person earning $50,000 or more.
The Treasurer diverted to talking about corporate welfare bums -- which this bill is not about -- it is not about corporations tax and so on. Never the less, he sort of apologized to these people by saying that government had led them into these tax preferences.
That is complete and utter nonsense, to use a polite word. Anybody who has ever studied the Senate committee on finance and the influence it had, the people who have influenced it and the influence it has had on our tax laws, knows damned well it was the other way around. The major corporations and high-income earners, most of whom were appointed to the Senate by the Liberal government, were by and large those who persuaded the federal Liberal government to create those tax loopholes that they could exploit so well and which were paralleled by their provincial cousins here in Ontario in the last 50 or 60 years.
Section 1 agreed to.
On section 2:
Mr. Andrewes: I want to indicate to the Treasurer we will not be supporting this section, principally because it is quite a grab.
In combination with the surtax, it generates $28 million for the rest of this fiscal year and a projected $321 million in the next one. It is quite clear what is happening here is that the Treasurer has decided to pick the pockets of every individual in this province who pays income tax and leave less of that discretionary spending he and others in this House have talked about over the years that will cause the kind of economic stimulus he is looking for.
I have heard the Premier talk about that discretionary spending; I have heard the Treasurer; I have heard the former member for Rainy River, who has now gone on to other rewards.
Hon. Mr. Nixon: A fine fellow.
Mr. Andrewes: Yes.
I am concerned that what has happened here is a general grab that has really placed the same type of limits on that discretionary spending for which the opposition was so quick to criticize a former Treasurer, the member for Muskoka (Mr. F. S. Miller), when he broadened the sales tax base. We had those committee hearings and a parade of individuals came in and said they could no longer buy hamburgers and so on. What they were essentially telling us was that the discretion they had and were able to exercise in their spending was now impinged upon by this somewhat difficult tax.
Before the member for Port Arthur (Mr. Foulds) starts to climb all over my back, I know I am probably drawing a bad parallel talking about two types of tax here, but it is the same kind of argument we heard in that discussion.
Once again, I have to speak up on behalf of the beleaguered taxpayers of this province and say that these individuals who are going to pay the extra two per cent really want to know what they are getting for their money. It is a concern to them that they look at a budget here that is long on rhetoric and short on direct programs.
The Treasurer is going to rise and tell us again about Futures, the renamed youth employment program with a glitzy advertising budget and a busy phone. He will tell us about the new programs for agriculture, for which we are very grateful. In the presence of the minister, I say we are very grateful for the Ontario family farm interest rate reduction program and the tripartite program, but remember they were all part and parcel of the previous government's program.
The Treasurer is going to tell us about hospital funding, how on page 9 of this document the Ontario budget said the total allocation for the operation of hospitals for 1986-87 will be increased by 8.3 per cent: "This increase includes four per cent for the basic allocation for the operation of hospitals and the necessary funding to accommodate additional costs associated with higher demand for hospital services. It also includes provision for new, approved hospital programs, the details of which will be announced by the minister."
We are assuming those are capital programs that hospitals and the ministry have been planning and budgeting for a number of years and they rolled that figure together to come up with 8.3 per cent. That is getting back to the theory of people wanting to know what they are getting for their money.
We come back to our basic concern that what we see here is a bit of a war chest. We see a windfall gain from the federal government, $700 million in extra taxes and a rising deficit, but we do not see a lot of programs coming out of that.
I am sure the Treasurer will argue this is a progressive tax. I have heard that discussion before and I tend to agree because it really asks people to pay proportionately with what they have for what they are getting. It does not ask them to use proportionately because that is not part of our system, but it asks them to pay proportionately, according to their means. It is a principle I personally can find somewhat appealing, because it allows people who share in the benefits to share in the costs, and again I stress proportionately.
The Treasurer will argue he has offset the income tax increases with some of these sales tax exemptions, such as the 99-cent pizza at Cortina's in North Bay. We found there was a 99-cent pizza, the best one can obtain in the area. Some people might agree the effects of the tax increase would have been offset to some degree by tax exemptions if the Treasurer had kept his promise of the $4 meal rather than the $1 meal.
Mr. Ramsay: The $4 pizza is beautiful.
8:50 p.m.
Mr. Andrewes: It is very good, is it? It is not tax free. Only one slice is tax free.
I do not think there is a hope of buying off these same people's concern about $320 million the Treasury is going to grab out of their pockets without doing a little more in a substantive way than he proposes to do in this budget.
This may not be my final point, but I have asked the Treasurer to respond to this one in particular because this increase appears to be only part of the story. Apparently the province will benefit from the federal government's moves to partially de-index certain tax brackets.
We are told this will enable the federal government to collect more taxes and the province will benefit as well by piggybacking on federal taxation measures. The Canadian Tax Foundation estimates these federal changes would increase Ontario's provincial income tax revenues by $115 million. These are the kinds of things my colleague the member for Dufferin-Simcoe (Mr. McCague) was getting at earlier. It is a question that remains unanswered.
Hon. Mr. Nixon: The additional revenues from the government of Canada are included in table C2 of the budget, which is the general one showing the revenues from each tax source. The amount in the other table shows the specific additional revenue our tax adjustments will bring about.
I do not want to spend a lot of time responding to the comments of the member; they stand on their own from his philosophical point of view. I believe the sales tax cannot be compared with the income tax and, as a matter of principle, we left it alone.
It is a very attractive source of revenue for a Treasurer. It is so easy to pick up another $650 million with one per cent. One can say, "It is just one per cent." The point is that it does take money from lower-income and higher-income taxpayers at the same rate and we felt we could not do that. As the member has already pointed out, we have brought forward rather generous and broad exemptions, which we appreciate the member and his colleagues will be supporting.
Mr. Foulds: We will be supporting this section a little reluctantly. The Treasurer gave me a quizzical look with his furrowed brow. I say "a little reluctantly" because, as I said in my previous remarks on section 1, the increase gives a special increase in revenue that hits low- and middle-income taxpayers.
As far as I can tell, the Treasurer has not addressed the question of progressivity in the income tax in the budget. He has not introduced an enrichment of tax credits for those who are relatively low income earners. I suggest very strongly to the Treasurer that with the increased revenues because of the buoyancy of the economy and all that stuff, the next budget be looked at not so much with respect to lowering or increasing taxes in terms of taxation rates, but with respect to looking at an increase in tax credits for property tax, sales tax, the whole area that actually has some potential for increasing the progressivity of an across-the-board tax increase.
Mr. McCague: Will the Treasurer repeat what he just said, that the $321 million for 1986-87 in his budget is the increase from 48 to 50 per cent, which is four per cent? A lot of people like to talk about that as being two per cent.
Then he says table C2?
Hon. Mr. Nixon: Table C2 indicates the budget plan for 1985-86 and projects the personal income tax revenue as $6,777,000,000. This is the net amount that is expected to be refunded to us under the federal-provincial tax collection agreement, not only with our increases here but also with our share of federal increases. It may not contain our share of the minimum tax that was announced just last week.
Mr. McCague: I think this is a fair question: Why did the Treasurer not tell me that when I raised it a month ago? As I recall, this is the issue on which he accused somebody of sending me a brown envelope.
Hon. Mr. Nixon: May I say something before the member continues?
Mr. McCague: Yes.
Hon. Mr. Nixon: The $6,777,000,000 was our best projection at the time the tables were prepared, about a week before the budget of October 24. Since then there has been an indication that personal income tax revenues will be somewhat more buoyant than the projections that were given to us by the government of Canada, and I have already spoken about that. The number, we trust, will be somewhat higher than that, but it contains our projections at the time.
If the member looks at what was said in the House of Commons about the employment rates, I think the Prime Minister and a couple of the ministers made it quite clear in responding to questions from their own members that their own federal revenues were more buoyant than had originally been expected. This is a good thing, something that does not fill me with displeasure.
Mr. McCague: I thank the Treasurer for the clarification. What he said is not what any normal person, even one of his own members, would have got out of his statement a couple of minutes ago. However, I now know how to get an answer from him: I will ask one of his members to ask him a question and probably the Treasurer will give him an answer.
Mr. Dean: I want to speak very briefly on this subject, not because I have any great, new blinding flash of inspiration beyond what the people in our party have already so revealingly described to the Treasurer.
By the way, may I inquire whether his eminence is here in the guise of the Treasurer or the Minister of Revenue?
Hon. Mr. Nixon: Minister of Revenue.
Mr. Dean: Okay, I will refer to him as the Minister of Revenue.
Mr. Stevenson: What is this "eminence"?
Mr. Dean: Should I have said "imminence," perhaps? He is about to arrive.
Mr. Barlow: Is it just two cars he drives, or three?
Mr. Dean: Oh, he has three. He has a third one as House leader.
Mr. Barlow: Oh, I see. It is three he drives.
Hon. Mr. Nixon: I just got the reconditioned ordinary car of the member for York Mills (Miss Stephenson).
Mr. Andrewes: They never refer to "his eminence" down at Earl's garage.
Mr. Dean: I do not know what they would say down there; "his evidence," maybe.
Hon. Mr. Nixon: They fixed a flat on that old car this morning before seven o'clock.
Mr. Dean: Might I inquire whether his eminence the Minister of Revenue would stop being a flat tire in the House? We would get along a lot better.
I want to make sure everyone clearly understands that we are not just being handed a piddling little rate increase on our personal income taxes. It will hit us all right in the solar plexus and in the pocketbook. It is a four per cent increase; two percentage points.
I know it has been said before, and it is probably boringly repetitious to the minister, but there may be some people around who still have not got it through their heads that this is a very large grab. It is four per cent of the federal income tax. I believe the minister already agreed and pointed out that any increase in the federal income tax would automatically produce more here. It is similar to the way the ad valorem tax works.
9 p.m.
This is one of those ad valorem taxes, which are so eschewed by the minister when he happens to be talking about one he does not like, but which is so conveniently useful when there is something worth while going after, such as our income. Our incomes as members and ministers are not any more worth going after than those of the rest of the public. I assume this is going to apply to everybody, except the few who are fortunate and have enough credits that they do not have to pay it.
I am not one of those who objects to being taxed to pay for something we need. Probably a good bit of what is going to be raised by the tax will go to useful services the government is providing, which members of the public cannot provide for themselves. However, I do not like to think of our apparent failure -- I say "our" because I hate to say "your" apparent failure to the minister -- to make an impression on the deficit, which under our activities had shown signs of decreasing.
The Minister of Revenue will no doubt have an answer for that, but I think this large yield should go at least partly towards decreasing the deficit if we are going to set a good example for the federal government, which certainly needs all the help it can get to reduce its deficit, as well as do other things.
The minister should not look at me like that. He reminds me of my dog when I do something bad and he wonders if he should bite me.
Hon. Mr. Nixon: I will just bark. It is more sanitary.
Mr. Dean: I will join my colleagues on this side of the House in voting against this subsection. I wish it were everybody on this side of the House, but some of them seem to be fainthearted.
Hon. Mr. Nixon: I can assure the honourable member that if the tax were not imposed, the cash requirements would go up by just that amount. We can say every bit of it will go to reduce cash requirements, if we want to look at it that way.
Another way to look at it that might make the member feel better is that with this $321 million, which is made up of the increase in the general rate plus the surtax, reduced by $10 million for the Ontario tax reduction program -- which we are very proud of and which no one has mentioned yet -- we expect to provide health services in the province for 14 days.
Mr. Chairman: Are there any further questions or comments on section 2? Shall section 2 stand as part of the bill?
All those in favour will please say "aye."
All those opposed will please say "nay."
In my opinion the ayes have it.
Vote stacked.
Sections 3 to 13, inclusive, agreed to.
RETAIL SALES TAX AMENDMENT ACT
Consideration of Bill 47, An Act to amend the Retail Sales Tax Act.
Mr. Chairman: Are there any questions, comments or amendments on sections 1 to 15?
Mr. Andrewes: We would like to make some comments on subsection 3(3). It is the one on the top of page 3 on the exemption that the Treasurer has ruled out on the gold-leaf coin.
The Deputy Chairman: Are there any questions or comments on sections 1 and 2?
Section 1 agreed to.
On section 2:
Mr. Andrewes: Section 2 deals with the individual exemption, am I correct?
Hon. Mr. Nixon: Yes.
Mr. Andrewes: My comment is simply that we expected to see a much broader list of exemptions, given the commitment the Liberal Party made to the province in the last provincial election. We see a list that includes prepared food products that sell for less than $1, including a slice of pizza. We had a number of daily reminders to the Treasurer about the 99-cent Nixon lunch over the course of the earlier debate on this legislation.
We have an exemption for feminine hygiene products. Hotel/motel accommodation is an exemption that was in place, but this extends it to an unlimited length of time. We have an exemption on children's car seats. Those would be my preliminary comments until we get to the other relevant sections.
Hon. Mr. Nixon: I am sorry. Was there a question there?
Mr. Andrewes: I do not have any specific questions other than to ask, why does the government persist in doing this? Why does it go around making these promises? I remind my colleagues in the New Democratic Party of those election promises, because I think the answer to my question as to why it goes around doing these things is that it never thought it would be the government.
Mr. Wildman: The Conservatives never thought they would be the opposition.
Mr. Andrewes: The member is right. Here we are. The Liberals are the government, we are the opposition and they are the eunuchs. It reminds me a little bit of the beehive theory.
Mr. Newman: What section is the beehive?
Mr. Andrewes: Any section the member likes.
The queen is looked after by the drones and then there are the workers who do the building of the hive and maintain the cells. When the queen has finished with the drones, the workers sting them and throw them out of the hive.
Here we are, the only legitimate opposition in this House. The Treasurer and the Liberal Party will have to live with the consequences of their election promises, because our job in opposition is to be their conscience in a reasonable and constructive way.
9:10 p.m.
We will therefore support the exemptions in the bill, meagre and cosmetic as they are. I come back to my original question. Why does the government persist in doing these things? There is enough cynicism today about politicians. There is the ever-popular theory that politicians are cheaters and liars in all we do. By persisting in making these kinds of promises, which we have no intention of keeping, we add to that cynicism.
Hon. Mr. Nixon: I want to reiterate what the honourable member must have heard me and my colleagues say. We intend to keep our promises. This is the first budget, just two or three months after the drumming out of the Tory party and the election of the Liberals, and we think we have moved rather effectively to keep the promises we can at this time.
I know the member is aware that the $1 exemption in prepared food, which he refers to in a somewhat disparaging way, is sufficiently widely used to cost the Treasury of the province about $36 million and that the implementation of the full $4 promise would have cost, I believe, about $170 million. While I wish we could have done it just like that, I think I was probably more responsible than any one of my colleagues for saying that I thought at this time that was a bit rich, particularly when we were faced with some of the unforeseen and unexpected requirements on our revenues that were left behind by our predecessors. I hate even to mention that, because it is liable to take a few hours to get it worked out in discussion.
The other exemptions were promises, except for the car seat one. That was something we thought was reasonable and rational at this time, and I certainly do not apologize for it. I hope in the future, as our revenues permit, exemptions can be improved in line with the commitments made. However, once again I cannot make any promises for next year's budget, other than that we will continue to do our best to serve the public in a responsible way.
Mr. Andrewes: As unforeseen and as unexpected as the demands on the government's revenues might have been, the Treasurer has had unforeseen and unexpected revenues to meet those demands, as my colleague pointed out earlier. I think he would have to acknowledge that.
I congratulate the Treasurer on the exemption on car seats; it is an excellent exemption. I do not know why we did not think of it, quite frankly. There is every bit of logic to that particular exemption, but how much is it going to cost?
Hon. Mr. Nixon: It will cost $500,000.
Mr. Andrewes: One other issue I would like to raise with the Treasurer is something called the Queen's Park Letter put out by the Association of Large School Boards in Ontario. The acronym is ALSBO, a familiar acronym, I am sure. It talks at length disparagingly about this Minister of Revenue, the Treasurer, the House leader; it talks at length disparagingly about a former Treasurer, the member for Muskoka. It refers to the seven per cent sales tax on education supplies. I would not want the section that details the exemptions to slip by without bringing some of these comments to the minister's attention.
It says, "Mr. Miller estimated that in the first year of implementation of this action the tax would generate $25 million." I assume that was back in the spring of 1983, when that tax was first implemented. "The current government's support for the sales tax on education supplies and services demonstrates that the province remains uncommitted to its fiscal responsibility for education." Shame on you.
It goes on to detail all the various flaws in the funding programs that exist between the government and various school boards in the province.
It has this remark: "The sales tax on classroom furniture and equipment, paper, chalk and almost everything else purchased by school boards causes the local property taxpayer to contribute the purchase price of the items plus seven per cent to be forwarded to the province.
"ALSBO is concerned that Nixon's maintenance of the indirect route to the school board tax base signifies his acceptance of property taxes as a source of revenue for the province.
"It is ALSBO's position that sales tax on all school supplies purchased by school boards must be removed and that the province must resist further encroachment, direct or indirect, on the school boards' tax base."
Finally, it says: "Sales tax is a significant portion of the board's nonsalary operating costs, so boards must borrow money to pay the tax. This means local property taxpayers ante up.
"In 1985, estimated provincial sales tax burden borne by sampling of ALSBO member boards: Carleton, $914,500; Metro Toronto, $2,703,000; Peel, $1,635,000; York region, $910,000; and Durham, $600,000." The final note is, "MPPs are encouraged to find out how much money the school boards in their ridings lose to the sales tax payments."
I wonder whether the Treasurer might comment on this issue in the light of the rather enthusiastic approach he and his government took in the past, when they sat where we are now sitting, towards the funding of school boards. Will he comment on the particular allegations contained in this document?
Hon. Mr. Nixon: I think the person hired by ALSBO to write that release makes a good point. I wish we did not have to tax those things. It was introduced by the member for Muskoka when he was broadening the sales tax base. He broadened it tremendously and was responsible for the largest single tax increase in a year in recent Ontario history, probably in all of Ontario history.
I wish we could back down on those things. We have to look at it because we also charge gasoline tax on the fuel city buses use. We charge sales tax on the vehicles they buy, the dump trucks that spread sand on city roads and so on. My own feeling is that I wish they could all be exempt, but the tax cost would have to be borne more directly by individual citizens and at present that balance remains uncorrected. It is one of the few things that did not move towards perfection in this budget.
What I am really saying is there are many of these anomalies and as long as we are here we will be talking about them and trying to remove them or compensate for them in some way. As far as compensation is concerned, we make substantial transfer payments to the school boards and the municipalities and they were increased this year by a rate greater than has been customary, not dramatically greater but substantially greater. We have also indicated what those transfers will be next year and, in basic principle, the year after.
While the member may say that amount of money is being paid out of property tax, I might say it is being paid out of the transfers and it is out of one pocket and into the other, which does not sound very administratively efficient. It is very difficult to follow the tax dollar through the system.
I simply respond directly to the member's question by saying I wish we could do better in that regard, but it is an extensive process we have inherited where many of the goods used at the municipal and school board level, by conservation authorities and by universities and colleges, are taxed, and I guess they will continue to be for a while.
9:20 p.m.
Mr. Foulds: Which section are we on, Mr. Chairman?
Mr. Chairman: Section 2.
Mr. Foulds: I will wait for section 3 then.
Section 2 agreed to.
On section 3:
Mr. Chairman: The member for Lincoln wants to discuss section 3. Which portion of section 3 does the member for Port Arthur want to talk about?
Mr. Foulds: All of it, starting at the beginning.
Mr. Chairman: I think the member for Lincoln wants to talk about subsection 3(3). Is that correct?
Mr. Andrewes: That is correct, the subsection that deals with the Maple Leaf gold coin.
Mr. Foulds: As I understand it, section 3 deals with the exemption on food products for human consumption; in other words, what the previous speaker was speaking about in section 2.
I want to make a couple of points. The extension of the retail sales tax in 1982 was probably the biggest tax grab the province has seen in a long time, if not ever. What I regret is that this has released only one little pinkie from that grab. The baby finger has been pried slightly loose, in spite of the Liberal promises in the campaign.
Hon. Mr. Nixon: Let us not carry it. Why do the members opposite not vote against it?
Mr. Foulds: The Treasurer should not provoke me. We gave the government confidence this afternoon. That may be all they get today. The Treasurer should not be provocative.
Two interesting facts have come to light. First, as I said during the course of the budget debate and in the second reading debate on this bill, the fiscal pain the Treasurer feels, the $36 million, in return for his political gain has been unbalanced, because he has not gained much politically.
Most people have made a lot of fun about the raising of this exemption to $1. The member for Lincoln and his colleague the member for Nipissing (Mr. Harris) refer to the 99-cent pizza, and I have referred to a single ice cream cone scooped out of the bucket. What was interesting, however, was the Treasurer's rationale for not raising it to the full $4, which would have cost $171 million, I believe the figure was.
That does seems a lot of money, and it is a lot of money; but if I may say so, if we had increased the surcharge on the personal income tax by a number of percentage points, we could have made up a little ground there. Instead of raising the corporate income tax by 0.5 per cent to compensate for the loss of revenue that was gained because the government gave the large corporations the small business exemption as well, if we had raised the corporate income tax by a full one per cent, we could have had several million dollars there.
In other words, the Treasurer had an opportunity not merely to meet an election promise, which is all the members on my right are interested in, but also to bring some progressivity into the sales tax, which most people call a regressive tax, by raising the exemption to $4. I suggest he look at that very seriously in the next budget.
I will be supporting this clause because it takes a symbolic step in the right direction; it does not take the step far enough.
I am being fiscally responsible, because I have made suggestions about where the Treasurer could get the revenues, as an alternative. My honourable friend and colleague the member for Beaches-Woodbine (Ms. Bryden) has been advocating an exemption on car seats for children for some number of years.
Hon. Mr. Nixon: Why does the member not give her a standing ovation?
Mr. Foulds: I will; as soon as she enters the House, I will stand and ovate.
The other point I would like to bring for the Treasurer's consideration at this time, and I was reminded of it, is an entirely self-serving argument on my part. I happened to be in downtrodden but politically enlightened Manitoba a weekend and a half ago; that is, not last weekend but the one before. Much to my amazement, my wife was able to buy some clothing for my 12-year-old son, who happens to be taller than I am and therefore takes adult sizes, without paying sales tax. Is that not remarkable?
We are unable to do that in Ontario when we are genuinely purchasing clothing for children who are large and sensitive to clothes. We have not found a mechanism for exempting that clothing from taxation. It seems to me we could. It is a very simple system. All my wife had to do was sign a little document which said this clothing was purchased for a child. I do not see why we cannot do that in Ontario.
Frankly, I and people such as myself can afford to pay a seven per cent sales tax on our kids' clothes, but there are a great many people in the province who have children who take adult sizes and find that particular sales tax quite regressive. I commend that idea to the minister.
Mr. Chairman: Minister, have you any comments? Is there any other member who wishes to speak to subsections 3(1) and 3(2)?
Shall subsections 3(1) and 3(2) carry? Carried.
On subsection 3(3), the member for Lincoln.
Mr. Andrewes: This subsection deals with the famous Maple Leaf coin, which up until this budget had been tax-exempt. I wonder if the Treasurer could tell me how long that exemption had been in place?
Hon. Mr. Nixon: It was granted in 1983.
9:30 p.m.
Mr. Andrewes: I want to refer the minister to this clipping out of Saturday's Globe and Mail. The heading is "US Coin, Ontario Tax Threat to Maple Leaf Sales." I will paraphrase some of these comments simply to say that Robert Huot, vice-president of marketing at the Royal Canadian Mint, in a telephone interview from Ottawa said, "It's as if both barrels of the shotgun are loaded and pointed at us." The Treasurer's fall budget "would cause `gold Maple Leaf sales in Canada to plunge.... Why bother buying a coin if one can get a bar or wafer cheaper?'"
The theory there is that no tax applies to a bar or a wafer of gold. The article goes on:
"A survey conducted by the mint shows that sales will plummet if Ontario's new Liberal government implements the tax. Gold bars, wafers and certificates, which are not taxed, will be purchased by investors instead.
"Once the buying of gold coins becomes an investment decision versus a novelty purchase" -- I am told it is about 70:30 in the balance, and perhaps others who are closer to this subject will correct me if I am straying from the facts there; about 70 per cent of the purchases are made as an investment, about 30 per cent are made as a novelty and it is on the investment side that the tax becomes a consideration -- "`people won't buy something with a tax on it,' said Henry Brehaut, president of the Ontario Mining Association."
The article goes on to talk about the impact of a similar coin the United States has put into circulation in an attempt to gain a greater share of the world gold market in competition with the South African krugerrand, which the US has now banned from the country. Their purposes in seeking this greater market share are somewhat less predatory in the marketing of their coin, but it still appears to be a threat.
"The US coin was originally proposed as a means of taking market share away from the krugerrand, thus dealing a blow against apartheid in South Africa. The recent US ban on the importation of krugerrands" -- as I said earlier on in these discussions, because I am no longer reading. I want to quote directly from this article only when it appears propitious to do that.
The article goes on to quote Mr. Huot and Mr. Brehaut again and then says:
"The Ontario sales tax would hit a province that generates 50 per cent of Maple Leaf sales in Canada. Forecast figures show that about 90,000 troy ounces of the coins will have been sold in Ontario by the end of this year." We assume the 50 per cent sold by other provinces remain tax-exempt. If I am wrong, I am sure the Treasurer will correct me.
It goes on to quote a Treasury spokesman, James Vincze. Is he hiding under the gallery somewhere? No, not tonight. He says:
"The coin will do as well with the tax as without it. And the minister felt the sales tax exemption had reached its objective." The article adds, "That objective was to stimulate Maple Leaf sales in the province."
The exemption "was also approved because this fall an arbitration panel in Geneva found Canada had violated international trade rules when Ontario gave the Maple Leaf gold coins exemption from the provincial sales tax."
That is the part I have some concerns about, because the same government reacted very quickly to remove South African wines from the shelves of the Liquor Control Board of Ontario, and yet it caved in very quickly to the same kind of pressure from South Africa on the krugerrand.
I am quite aware of the power of the General Agreement on Tariffs and Trade, and I am quite aware of the legality of the arbitration panel. Before the member for Kent-Elgin (Mr. McGuigan) gets too enthusiastic, I remind him that other products sold in Ontario enjoy a similar benefit to what the gold coin enjoyed against the krugerrand, the most notable of which are Ontario wines. The Treasurer maintains a preferential markup for Ontario wines as opposed to wines from foreign nations.
Before I move away from the issue of the GATT panel and the Treasurer's response to that panel, I want to say this. If the Treasurer is prepared to accept the panel's decision on the gold coin, what do I tell the grape growers in my riding? What does the member for Kent-Elgin tell the grape growers in his riding, the member for St. Catharines (Mr. Bradley) in his riding or the member for Brock (Mr. Partington) in his riding? What do we tell those grape growers about the preferential markup now in place for the Ontario wine industry?
Hon. Ms. Caplan: What does that have to do with this?
Mr. Andrewes: Coming back to the subject at hand, so the Chairman of Management Board does not have to draw my attention to the fact that I may have strayed a wee bit from that subject, I want to give a little background on the gold and mining industries.
Hon. Mr. Kerrio: What gold and wine? It is the same thing.
Mr. Andrewes: There is no relation. As the minister will know full well, the total value of minerals mined in Ontario in 1984 -- and his colleague the member for Cochrane North (Mr. Fontaine) will want to pay attention to this as well -- amounted to $434,207,000. This information comes from no better source than the Ministry of Natural Resources, an unquestioned source, I am sure.
The first two stages of the mineral industry employed 37,000 men and women in 1983, and there was a very significant increase in exploration activity in Ontario in 1983 and 1984. I want to refer more specifically to the employment figures and the wages and salaries paid to the sector that comes under the category of gold-quartz mines. In 1983, that sector employed 3,578 people and those people received $98,282,696 in wages.
Coming back to this article, I checked with one or two knowledgeable people in the industry. They tell me the article makes sense. Common sense dictates that in regard to sales of the coin, investors in bullion, wafers and other types of gold standard will simply go and buy these other products rather than the gold coin.
9:40 p.m.
I mentioned we had a 70:30 relative split between investor purchases and novelty purchases. The tax exemption on the Maple Leaf coin was an attempt to give it some advantage over the krugerrand. We understand the krugerrand is currently not being produced but is still very much in circulation. At one point, this 70:30 ratio that we understand exists now came about as a result of fairly heavy advertising on the part of the industry to boost sales to those levels.
I want to give members a couple of other thoughts on this subject before I listen to the minister's comments. This article is the 1984 annual report of the Ontario Mining Association. This is the report of the executive director Patrick Reid.
Mr. Foulds: Who?
Mr. Andrewes: Patrick Reid. Members will remember him as the former member for Rainy River representing the Liberal-Labour party. In this article, Patrick Reid talks about the industry very eloquently. If I might read quickly from one paragraph:
"The Ontario Mining Association believes strongly that it is essential, however, that these gains" -- and these are economic gains within the industry -- "not be viewed by different levels of government as opportunities for increasing tax burdens either by direct or indirect taxation. All productivity gains will be wiped out and the industry will cease to be internationally competitive unless governments fully understand the implications of punitive tax policy." So says Patrick Reid, executive director of the Ontario Mining Association.
I would not question that authority, nor would the minister, I am sure.
Mr. Foulds: The member always did when he was in here.
Mr. Andrewes: I never did. I got along very well with the former member for Rainy River, as I do with the current member for Rainy River (Mr. Pierce).
I want to touch briefly on an article of November 4 in the Financial Times. It is headlined, "Mining Faces Year of Unsatisfactory Improvement," with the subheading, "Firms' Financial Results Reflect Poor Outlook."
Hon. Mr. Kerrio: Who wrote that?
Mr. Andrewes: This is written by Eric Reguly of the Times staff. That is the Eric Reguly.
Hon. Mr. Kerrio: Is he a Republican or a Democrat?
Mr. Andrewes: I expect that he is a journalist.
Hon. Mr. Kerrio: What about before he was a journalist? The member told us what Patrick Reid was before.
Mr. Andrewes: Prior to this? He was probably a researcher for the Liberal Party.
I touch briefly on this article because Mr. Reguly says that for any sort of real turnaround, mining needs industrial production increases of about five per cent. "Analysts say in the second half of this year and well into the next year, OECD growth will fall to three per cent or so. Next year will be a year of improvement, but it will still be an unsatisfactory year."
That is a direct quote from analyst Tom Byrne of Toronto-based McLeod Young Weir Ltd. Members know that company well. The Chairman of Management Board (Ms. Caplan) --
Hon. Mr. Nixon: Some of my best friends work for McLeod Young Weir.
Mr. Andrewes: Yes. Towards the end of this article, it talks specifically about gold. "No great improvement is expected in the precious metals side either." It is a prediction by another noted authority whose name I cannot pronounce, so I will not bother. He predicts: "Gold will average US$316 an ounce in the first nine months of 1985 and will weigh in at $350 an ounce or more next year. At that price, virtually all gold producers are making a profit, but certainly not a fortune."
Finally, I refer specifically to one other piece of information which comes out of another unquestioned source, the Ministry of Natural Resources. Members will never know where I got this.
It says the demand for metals in general is likely to rise less than average industrial output, but gold in particular is the bright spot in Ontario. The minister will be aware of that, as will his colleague the member for Cochrane North. Between these new mines -- and we are talking about three new Hemlo gold mines and mills that opened in 1984 and the one at Detour Lake -- and expansion of existing mines, Ontario gold producers' capacity will double. Staking and exploration is taking place at Sturgeon Lake, Geraldton, Sioux Lookout, Beardmore, Timmins and Kirkland Lake, as well as at Cameron Lake in the greater Hemlo area and Wawa.
All the predictions are hedged with such hopes as that, first, South African production will fall off; and second, inflation is not controlled. That is a concern.
The 1985 low to date was $284.25. If there is no recovery to or beyond the $400 or $420 level for several months, exploration activity in northern Ontario is likely to decline.
I will conclude my brief comments there. I know some of my colleagues have additional words they might wish to add.
Hon. Mr. Nixon: I listened with attention to what the honourable member has been saying about the section that would impose the seven per cent sales tax on Maple Leaf gold coins.
His description of the General Agreement on Tariffs and Trade situation is not far off the mark. We were instructed by the government of Canada, the Honourable James Kelleher, Minister for International Trade and member for Sault Ste. Marie, not far from the gold area, that we had to do something to avoid a GATT judgement against Canada. Ontario is not a signatory of the GATT treaty but Canada is and, as a province, we are certainly supporting the concepts of GATT.
In this instance, since the complainers were from South Africa, while that did not please us very much, it still meant the GATT panel was about to reach a very expensive decision against us. The honourable member, having been in the ministry previously, was probably aware of the actions of GATT both in this product and in wine and other things. Since his government took no positive and effective action in those days, many of these things were precipitated on us and it was our judgement that, in response to the direction of the Minister for International Trade, we had to take some positive action.
I might as well tell the member that krugerrands were still very much in the market at that time. The alternative was to take the sales tax off them, which I was not prepared to do. Also, the removal of the sales tax, which the honourable member pointed out was an initiative of his government, assisted the Maple Leaf coins to establish a market niche, which has grown quite large in Ontario, Canada, the United States and around the world. It is a very attractive coin. It should not be considered something one can buy the groceries with, even if one buys a lot of groceries. I do not think it is designated as money one can buy and sell with. It is a beautifully minted piece of gold.
I was assured it would not interfere with the sale of gold mined in Ontario in any way, in spite of the extensive information read into the record by the member. I felt it was only appropriate to apply the sales tax. I would like to have somebody give me a couple of those coins for Christmas, but if they have enough money to buy them for me they should be asked to pay the seven per cent tax. So I did not have any bad feelings about that.
9:50 p.m.
By the way, there has been no complaint from the gold mining community whatsoever because, as the member pointed out, people can buy wafers or chunks of bullion if they want to invest in that rather nonproductive source of savings; although many people have made a lot of money out of it, including gold miners and investors in gold mines. It is a very important part of our economy.
We have announced that we are removing the old regressive, stepped tax in the mining community that was imposed by my predecessor about five back, the Honourable John White, that I think has been a drag on development of the mining industry in this jurisdiction for a decade and longer. We have said we are going to remove it and replace it with a simply applied flat tax of about 20 per cent.
There are certain other aspects of that tax that are under review. My honourable colleague, the northern caucus of the Liberal Party, has undertaken to review it. The members know he has the facility of commanding the attention and confidence of northerners, particularly miners. There have been no complaints about this.
It is not a big revenue producer. I must admit that the tax on gold coins is not big. I think it will return us $3.5 million in a full year. I do not think there is a problem. It did get the General Agreement on Tariffs and Trade problem off our back just before it made a finding against Canada, which I can assure the members would have been not only embarrassing but also costly.
I do not have the energy at this time to respond to the other matter the member raised having to do with GATT problems about wine. If there were ever an enigma and a conundrum in a ravelled-up ball of wax, that is it. We may have to retain Robert S. Welch, former QC, to assist us in unravelling it because it is a colossal balls-up. GATT is not about to; it currently is empanelling a panel. Is that not what one does with panels?
This is extremely costly because the panel members are selected from around the world to go, with all their expenses, to Geneva at $300 or $400 a day to contemplate the awful thing that is happening in the Niagara Peninsula, where it is alleged our farmers have a small advantage over their competing wine producers from Alsace-Lorraine and other areas.
This panel is going to work for $300 a day, plus, plus, plus, in Swiss francs. One can imagine they are not going to be very quick in coming to a conclusion, but when they do, there is an off chance they may find that we are violating GATT agreements. That is a bad thing and we do not want it to happen.
We are contemplating what is sometimes euphemistically called the final solution, but so far I have not cast my vote in that direction because we all respect and admire the wine industry and all associated with it, all the friends of the member for Lincoln who have persuaded politicians properly at all levels to give most earnest and careful consideration to this difficult problem.
I am confident that in the fullness of time we will have a rejuvenated wine industry continuing to sell one of the best products anywhere in the world at a price that is attractive to our sophisticated consumers --
Hon. Ms. Caplan: In the corner stores.
Hon. Mr. Nixon: In the corner stores; that is right.
We are also going to get GATT off our back. Even the President of the United States is on the verge of informing Congress that the bit of wine we sell here is somehow unfairly in competition with New York and California wines. If he informs Congress of that, we do not want that to happen either. It is a very delicate matter and only a sensitive government such as the one now in charge of the affairs of the province can possibly keep these balls in the air.
Mr. Foulds: I want to speak briefly on subsection 3(3). I believe the arguments put forward by the member for Lincoln on this clause are a load of codswallop.
Mr. Andrewes: What?
Mr. Foulds: I think that is parliamentary for a word I cannot use that is more familiar to farmers than it is to an urban dweller in northern Ontario such as myself.
However, we do not make gold coins in Ontario; we mine gold. It does not matter whether the gold we mine goes into wafers, bars or coins as long as the price of gold is sufficient for the miners to mine it.
It really does astound me that a Treasurer who could slap a sales tax on feminine hygiene products could exempt gold coins from it. It really does amaze me that the present official opposition was able to slap sales tax on kids' candy, on chocolate bars and on essential items like feminine hygiene products and exempt the gold coin, aside from all the international arguments the former Treasurer put forward.
If one reads the articles the member for Lincoln quoted, they have no direct bearing on the gold coin. The phrasing was very careful, particularly by the executive director of the Canadian Mining Association. Actually, it was more careful than his phrasing was when he was a member of this House. If one looks at it very carefully, he said, "As long as it does not inhibit mining activity." I suspect the member for Lincoln is about to pass the article to me for my contemplation, which I will do later.
I would point out that the tax on gold will not inhibit the sale of Canadian gold coins. Although this article indicates that there may be a downturn in Canadian sales, I have read articles that said not only that the krugerrand is effectively dead but that the Canadian gold coin has established its place in the world market and a piddling little tax by this province will not inhibit its sale.
Mr. Harris: As a northern member who is concerned about development in the north, about the mining industry and about any move in the direction of constraining that industry, whether by a small amount or by a large amount, I would be remiss in representing my constituents in Nipissing if I did not speak on this subject.
As members know, we are not directly involved in the mining of gold in my riding, although we have had little flourishes of staking here and there, and there is some activity at a property called Golden Rose, which is actually just outside my riding. It is in the riding of --
Mr. Rae: Is gold so fragile that a seven per cent tax is going to knock it out? Give me a break.
Mr. Harris: Listen, Golden Rose is not creating quite the excitement on the Vancouver Stock Exchange as Golden Hope and others these days. The property is actually in the riding of the member for Sudbury East (Mr. Martel), but it impacts tremendously on my riding, because the main road into the property comes through my riding.
In fact, when this property comes on stream, some funds probably will be required for the development of further roads into the property from my riding. I know the Minister of Northern Development and Mines will not cast aspersions on me, as he has on others, and will look favourably upon access to this road through the village of Field and the very small unorganized township that we call River Valley.
10 p.m.
River Valley is known now as a tourist area. There is a significant tourism value found there. The roads are not quite what they should be to enhance the tourism values there. They could be improved. The gold mining development that is taking place in there with a company called Golden Rose is very important to my riding and to my area.
The Treasurer (Mr. Nixon) might argue that the tax on the Canadian Maple Leaf coin is one of principle. He talks about the General Agreement on Tariffs and Trade and about the principle of living up to the GATT obligations. Let us go strictly to the principle and then we will get to the money, because $3.5 million is a lot of money. It is a lot of money to the member for St. David (Mr. Scott) when he talks about the difficulty of getting funds from the Treasurer for the judicial system in Ontario and when we talk about facilities for the judicial system, projects such as the Nipissing courthouse.
When we are talking of facilities such as the Nipissing district courthouse, $3.5 million is a lot of money. When we are talking about lakefront development in a town in northern Ontario, such as North Bay, $3.5 million is a lot of money. It is not fair and it is not becoming. I do not think the Treasurer is the member I used to know when he says $3.5 million is a piddling amount of money.
I want to come back to what $3.5 million is after I talk about this principle, this great GATT principle the Treasurer has seen fit to put forth in the argument. It is almost as though he was forced to impose this seven per cent tax on the Canadian gold coin. The member for -- all I can remember is flooding, lack of automobiles and what not; I never get the riding straight, but I will get it -- Essex South (Mr. Mancini) says it was forced on the Treasurer and that he had no choice in this matter.
If members want to talk about principle, I do not mind talking about principle for a while. If the Treasurer feels it was forced on him, I have to stop and think of what country in the world would possibly have been concerned about the GATT implications. I come to South Africa. I wonder why we are so blooming concerned about the concerns of South Africa. I wonder whether we want to talk about the mining industry in South Africa, about employment practices in South Africa, about fair competition, about how they get the gold out of South Africa, about how much they pay the miners and about who are the citizens of South Africa who are being disadvantaged in the mining activities.
I know those people are really concerned when it comes to their own interests, but all of a sudden they are concerned about GATT and about South Africa, complaining --
An hon. member: No, we are not. We never mentioned that. Let me get back to my seat.
Mr. Harris: Get into your seat if you want to interject.
Who else? I want to know whether there is somebody, if there is another country other than South Africa, that is concerned about the GATT implications of our not charging the seven per cent sales tax on the Canadian Maple Leaf gold coin. In fact, the tax is charged on the krugerrand that comes from South Africa. Perhaps the government knows of another country involved in GATT that is concerned.
Hon. Mr. Nixon: The only other country is Canada. We did not sign GATT. Canada did. It was Kelleher, your buddy from the north.
Interjections.
Mr. Chairman: Order. Will the Minister of Revenue (Mr. Nixon) and the Minister of Natural Resources (Mr. Kerrio) please stop their interjections. It might also be a good time to say to the member for Port Arthur that because he has taken his seat, it does not automatically mean he can interject.
Mr. Harris: There may be some other country that has complained to GATT, but I doubt there is. I assume it is South Africa. When we are talking about principle, I wonder why Ontario is so concerned about South Africa and its practices.
Mr. Wildman: It is Mr. Kelleher they are concerned about, not South Africa.
Mr. Harris: I do not answer to Mr. Kelleher. I answer to the people of Nipissing and I answer to this Legislature. It is this Treasurer who appears so concerned and who says he was forced into imposing this seven per cent tax.
Mr. Foulds: The federal Conservatives also thought it was a good idea.
Mr. Harris: It may wash in Port Arthur, Sudbury, Nickel Belt and those ridings, but it does not wash in Nipissing.
Mr. Foulds: Is that where they mine gold?
Mr. Harris: Since the member seems concerned, no it is not where they mine gold. I will tell the member why I am concerned. It is true that we have no gold mines in Nipissing, but we have many companies in the riding of Nipissing that depend on the mining industry.
The only game in town in the mining industry right now is gold mining. Everybody else is cutting back or facing noncompetitive prices. They are facing competition that in some cases is subsidized by governments that do not deal in hard currency or they are facing competition from countries such as South Africa, where there are very questionable labour practices supporting the industry, the gold that is mined and the gold krugerrand.
Nipissing riding is very dependent on the mining industry. Many of the contract drilling companies in my riding such as Longyear Canada Inc.; engineering companies such as J. S. Redpath Ltd., Du Pont Canada Inc. which sells explosives to the mining industry, The Craig Bit Co. Ltd. which is active in there and many smaller companies that set diamonds are very concerned about what happens in the mining industry.
Pilot Diamond Tools Ltd. is a company which carried on from the foundings of R. J. Minogue and Co. Ltd. This company started in North Bay and was very instrumental in diamond bits. On the death of Mr. Minogue, H. Norman carried on and started a company called Pilot Diamond Tools, which employs many people in my riding. They are all very concerned with what happens in the mining industry.
To keep a country such as South Africa happy, we do not understand why we have to impose a further tax on gold coins, which affects the mining industry throughout Canada and especially here in Ontario. I get into some difficulty when I hear the Treasurer talking about paralleling what is happening around the country. I have not noted that the Maple Leaf gold coin is taxable in Quebec. There may a different relationship with Mr. Kelleher in Quebec to what there is in Ontario. If there is, it is not one I know about.
10:10 p.m.
It bothers me that this Treasurer feels it is important that we tax the Maple Leaf gold coin in Ontario. if it is not, the Treasurer may make some argument that it is not to comply with GATT, because of Mr. Kelleher or because South Africa is complaining. We may just talk about the $3.5-million grab the Treasurer wants, which is a lot of money. It is a lot of money to any individual, a lot of money to any company and a lot of money to any government.
I will not bore the House with why I object to any tax increase, but I am not comfortable with the way the government is spending the money. I have been through the arguments several times. I refer the members to Hansard for those arguments and I make them again in that way.
I was concerned when, about 10 minutes ago, I heard the Treasurer state to this Legislature that it is a piddling $3.5 million. I am sure his colleague sitting behind him, the member for Kitchener-Wilmot (Mr. Sweeney), would be delighted to have an extra $3.5 million in his budget. It is not a piddling amount to him.
Hon. Mr. Sweeney: It is going right into my budget.
Mr. Harris: I am sorry. If I had known it was a tax dedicated to his ministry, I might have had some sympathy. If the member for Kitchener-Wilmot, the Minister of Community and Social Services, is now telling me this is a straight dedication tax to his ministry, I am far more impressed with what this tax does. I am also impressed with his influence in cabinet because it would be the first dedicated tax we have seen directly.
Notwithstanding that the Minister of Natural Resources will be trying to make the case very strenuously over the next year to get him off the hook of how he can dedicate the tax for the residents' fishing licences in Ontario, if he is able to achieve the dedication of that tax directly into his ministry and if he is able to achieve within his ministry a direct dedication of those funds into fisheries, he may extract himself off the hook from attacks and from a position I can tell him will be very unpopular with many of the people in Ontario.
I suggest he might want to make claims on this $3.5 million that the Treasurer is going to bring in by acceding to the request of South Africa that for some reason or other we are not treating South Africa fairly. That is probably one of the most contemptuous things the residents of Nipissing will have to deal with, if that is the case that is being made by the Treasurer.
I oppose the move in this bill to slap a tax on a struggling industry, as exciting as gold is to many people and as much as many people feel that those who are involved in gold are somehow or other wealthy. In fact, those involved in gold at this time in the history of Canada and Ontario are in a very risky business. They are in a very fragile market.
I am sure the Minister of Natural Resources could comment on the very difficult decisions facing Detour Lake at this time in its history. While seven per cent might not seem a lot on the Maple Leaf gold coin, and it is only one of the markets that Detour Lake would be searching for to take its gold products to, it is a very critical point. I am sure the Minister of Natural Resources would confirm that, if the Treasurer were to give him the opportunity. They are facing very crucial decisions. Every penny and every little influence can tip the balance on a major decision as to whether they will go underground for the next phase of the gold extraction planned at Detour Lake.
Mr. Chairman: I draw the member's attention to the clock. It is 10:15 p. m. and the time has come for the stacked votes.
Mr. Harris: Mr. Chairman, I appreciate your drawing my attention to the clock. Are you suggesting I adjourn the debate and be prepared to start again another day?
Mr. Chairman: No. Just be seated. By unanimous consent, we have stacked the votes.
10:25 p.m.
CORPORATIONS TAX AMENDMENT ACT (CONTINUED)
Mr. Chairman: Mr. Andrewes has moved that subsection 33a(1) of the act, as set out in subsection 17(1) of the bill, be struck out and the following substituted therefor:
"(1) Where a new employee is hired, 25 per cent of the salary of that employee may be deducted from the tax payable by the corporation hiring the employee if the corporation is eligible to claim and has claimed, with respect to the taxation year, a deduction under section 125 of the Income Tax Act (Canada)."
The committee divided on Mr. Andrewes's amendment, which was negatived on the following vote:
Ayes 38; nays 63.
Section 17 agreed to.
Mr. Chairman: Shall the bill be reported without amendment?
All those in favour will please say "aye."
All those opposed will please say "nay."
In my opinion the ayes have it.
Bill ordered to be reported.
INCOME TAX AMENDMENT ACT (CONTINUED)
The committee divided on whether section 2 should stand as part of the bill, which was agreed to on the following vote:
Ayes 63; nays 38. Section 2 agreed to.
Mr. Chairman: Shall the bill be reported without amendment?
All those in favour will please say "aye."
All those opposed will please say "nay."
In my opinion the ayes have it.
Bill ordered to be reported.
On motion by Hon. Mr. Nixon, the committee of supply reported two bills without amendment and progress on another bill.
The House adjourned at 10:31 p.m.