ORDERS OF THE DAY
House Business
Hon. Jim Ernst (Government House Leader): Madam Speaker, by leave, I would like to make some changes in the sequence of Estimates for the Committee of Supply.
From the House, I would like to move to Room 254 on a permanent basis the following: Government Services, the Estimates of the Department of Environment, the Sustainable Development Innovations Fund, the Department of Labour and the Civil Service Commission.
In Room 255, I would like to place before the Status of Women, the Department of Energy and Mines on a permanent basis.
Madam Speaker: Does the honourable government House leader have leave to change the sequence from House to 254, Environment, Sustainable Development Innovations Fund, Labour, followed by Civil Service Commission, and Room 255, Energy and Mines to precede Status of Women. [agreed]
Mr. Ernst: Madam Speaker, would you call for second reading Bill 28. Following that, would you call Bill 24.
SECOND READINGS
Bill 28--The Statute Law Amendment (Taxation) Act, 1995
Hon. Eric Stefanson (Minister of Finance): I move, seconded by the Minister of Justice (Mrs. Vodrey), that Bill 28, The Statute Law Amendment (Taxation) Act, 1995 (Loi de 1995 modifiant diverses dispositions législatives en matière de fiscalité), be now read a second time and be referred to a committee of this House.
Motion presented.
Mr. Stefanson: Madam Speaker, in the 125th year of Manitoba's history as a province, this government presented its eighth Budget Address. I was pleased to announce the attainment of a goal we had worked hard to secure since our election in 1988, a balanced budget with the first planned surplus in over 20 years.
This major achievement was accomplished without any tax increases and while continuing a tax freeze of major taxes for an eighth straight year.
Bill 28, The Statute Law Amendment (Taxation) Act, 1995, provides legislative authority for the strategic tax reductions I announced in the Budget Address of March 9, as well as for minor technical and housekeeping amendments.
Today I will briefly describe the contents of Bill 28, and I will invite all members to express their position on its content during the subsequent debates. As has become the recent custom, I will provide opposition critics with detailed explanations of the provisions of this bill prior to the committee stage.
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Madam Speaker, the measures contained in this bill will bolster investment and the creation and maintenance of jobs in Manitoba. It will also help improve the fairness of our tax system.
The Income Tax Act. Changes to The Income Tax Act will encourage investment in manufacturing and processing and simplify the determination of expenditures eligible for the research and development tax credit and correct an anomaly in the application of net income tax to mutual fund trusts.
The manufacturing investment tax credit, equal to 10 percent of eligible new capital expenditures on manufacturing plant and equipment in Manitoba, will be extended for another year. Qualified property acquired before July 1, 1996, for first-time use will be eligible for the 10 percent credit.
The research and development tax credit. Eligible expenditures for the research and development tax credit will include proxy amounts as used for federal income tax purposes. The proxy amount is a simplified method of calculating overhead expenses which qualify as a qualified expenditure for purposes of the federal act. The definition of eligible expenditure for provincial purposes will more closely parallel federal legislation.
Mutual fund trusts. The net income tax introduced in 1987 applies on the net income of individuals and trusts. Mutual fund trusts, unlike testamentary or other intra vires trusts, act as conduits between investors and corporations in which the trusts invest. Unlike regular income tax, in certain circumstances a mutual fund trust may be subject to net income tax on dividend gross-ups even though the underlying dividends have been allocated to unit holders. This is a problem unique to Manitoba as the only other province, Saskatchewan, with a net income tax does not have mutual fund trusts.
In order to provide a level playing field for mutual fund trusts resident in Manitoba, a credit based on unused dividend tax credits of the mutual fund trust will be allowed. This measure also removes the potential for double taxation of Canadian dividends in the trust initially and in the hands of unitholders when units are redeemed.
Madam Speaker, Bill 28 provides changes to provincial sales tax legislation under The Retail Sales Tax Act and The Revenue Act.
Rebates for first-time buyers of new homes. A rebate of up to $2,500 of retail sales tax to first-time buyers of a new home, introduced last year, is extended to the end of December 1995. The amount of $2,500 approximates the average provincial sales tax amount paid on the materials used in construction of an average new bungalow. Since its introduction last year, almost 340 Manitoba families have benefited from rebates totally over $737,000 and many other families have gained from employment in building qualifying homes.
Bad debt allowances. Bad debts are a concern to all businesses, particularly where a vendor is held responsible for sales taxes on uncollected amounts. Bill 28 fulfils our budget commitment to forgive the retail sales tax and tax on electricity and natural gas which has not been collected on bad debts.
School yearbooks. School yearbooks, even those containing advertisements, will be exempted from the retail sales tax.
Drill bits and explosives. Since 1992 these items were exempted from sales taxation where they were used in mining for production purposes. Bill 28 extends the exemption where drill bits and explosives are used in exploration and development.
Used vehicle sales. The simplification of sales tax collection and processing of refunds where applicable has been a goal of my department for a number of years. Under current rules, an individual who purchases a replacement vehicle and sells his or her current car privately is required to pay sales tax on the full price of the replacement vehicle and may apply for a refund of sales tax on the value of the vehicle sold. Procedures governing payment of retail sales tax on used vehicles at the time of registration are being simplified to allow an immediate tax credit on the private sale of the vehicle being replaced.
Gasoline taxes. Our government supports job creation in the key area of air cargo transportation. Since July 1, 1993, we have provided an exemption from aviation fuel tax on international cargo flights. Bill 28 will expand the exemption to include the cargo component of intercontinental passenger flights. Together these exemptions will strengthen Winnipeg's efforts to become an international intermodal cargo centre.
Health and post-secondary education tax levy. A technical change to the payroll tax legislation will clarify the wording of the payroll tax exemption presently allowed to trucking firms in respect of interprovincial and international transportation.
Land transfer tax. The land transfer tax is being amended to help simplify land claim settlements. Bill 28 provides an exemption from land transfer tax on the transfer of land for the benefit of an Indian band, for the transfers and settlement of a Treaty Land Entitlement and the province and the federal government agree to the transfer without tax as a settlement of a claim.
Mining tax. In our continuing commitment to improvement of services and fairness to taxpayers, The Mining Tax Act is amended to allow a taxpayer to appeal an assessment or reassessment to the Tax Appeal Commission. The commission's decision may also be appealed to the Minister of Finance and, ultimately, to the courts.
Madam Speaker, I look forward to the debate on these measures and to hearing the position of the opposition on these matters. Thank you very much.
Mr. Daryl Reid (Transcona): I move, seconded by the member for Brandon East (Mr. Leonard Evans), that debate be adjourned.
Motion agreed to.
DEBATE ON SECOND READINGS
Bill 24--The Tobacco Tax Amendment Act
Madam Speaker: To resume debate on second reading of Bill 24 on the proposed motion of the honourable Minister of Finance (Mr. Stefanson), The Tobacco Tax Amendment Act; Loi modifiant la Loi de la taxe sur le tabac, standing in the name of the honourable member for Transcona.
Mr. Daryl Reid (Transcona): Madam Speaker, I had been saving this opportunity to speak on behalf of our Finance critic, and I will let him put the comments of our side on the record with respect to this piece of legislation.
Mr. Leonard Evans (Brandon East): Madam Speaker, I just have a few words to say on Bill 24, The Tobacco Tax Amendment Act. The minister introduced it last week and explained the need for this particular piece of legislation.
I guess we have to recognize the problem that the Province of Manitoba faces is one that arises from federal government policy whereby the federal government cut tobacco taxes seriously or substantially a year or so ago and, of course, the subsequent capitulation by the provinces of Quebec and Ontario, with therefore pressure being put on the rest of Canada, including Manitoba.
I note that the efforts of the province to date have generally been successful by and large in terms of thwarting illegal importation of tobacco products, and I appreciate that this is a great challenge, and I appreciate the fact that there is a lot of criticism of the province in how it has been administered. I understand that there has been a fair backlog develop in court, with various court cases pending dealing with matters arising from the government's policy of banning the importation of tobacco products from eastern Canada.
So I appreciate the fact that the amendments we have here allow for greater flexibility and should answer many of the questions, many of the problems that the province now faces.
I think we have to recognize, Madam Speaker, that we are faced with a dilemma, and the dilemma is this. On the one hand, we want to protect our revenue source, because indeed tobacco taxes do provide a substantial amount of revenue, but on the other hand, we do believe in freedom of trade among the provinces of Canada. I do not think anyone, including the Minister of Finance (Mr. Stefanson), wants to interfere or interrupt the free flow of goods and services, but this has to be considered a special case for many reasons, including the fact that it does affect an important tax revenue, but also, I think, because there are, in my view at least, health considerations that one has to recognize.
The fact is that higher-priced tobacco products do cut back on consumption of such products, particularly by young people, but there is a lot of evidence to show that there is a direct correlation between prices of tobacco products and the rate of consumption by the citizens and particularly by young citizens. So, to that extent, I suppose, one could argue that we should do everything possible to maintain a high tax regime on tobacco products, including the efforts that are now being taken to thwart the illegal importation of tobacco products into Manitoba.
At any rate, Madam Speaker, we are prepared to let this matter go to committee, and we look forward to seeing what representation there might be, providing the government, providing the Legislature with any advice that the public might have with respect to these amendments. Thank you.
Madam Speaker: Is the House ready for the question?
Some Honourable Members: No.
Mr. Kevin Lamoureux (Inkster): Madam Speaker, it is with pleasure that I can stand and rise today to talk on Bill 24. I am somewhat concerned in the sense that I would have appreciated some notice that the government was hoping to pass this thing into committee stage in that I would have likely been in a better position to be able to give more comment on what could be a fairly significant piece of legislation.
Having said that, I have gone through the Estimates process both in Finance and in Health where I have had the opportunity to ask questions regarding this particular issue, and I was somewhat pleased, to a certain degree, with the Minister of Finance's (Mr. Stefanson) response with the whole question of smuggling of cigarettes. In that issue, the Minister of Finance made reference to the fact that the loss of revenues, and I believe it was quite marginal, and he had implied--
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An Honourable Member: A loss of revenue that we are paying because the people in Quebec and Ontario are not paying their share.
Mr. Lamoureux: Madam Speaker, it is the member for St. Norbert's (Mr. Laurendeau) concerns that he attempts to put on the record that really would cause me to add a few more words.
This is what my concerns are. You have the member for St. Norbert who tries to turn this into a political issue by saying, in the province of Quebec, the province of Ontario, there was a smuggling problem. As the direct result of that smuggling problem, the Chretien government then reduced the tax levels for cigarettes. As a result of that, there were a lot of people that were quite concerned. Individuals in government and opposition, and even the Liberal Party provincially, expressed concern that, as a result of those actions, we might have seen a substantial increase in tobacco usage from young people in the province of Manitoba, that we were going to be experiencing excessive amounts of smuggling from the province of Ontario and the province of Quebec. I, too, was quite concerned about that. That is the reason--
An Honourable Member: All provinces, not individual provinces. Let us treat all provinces equally, Kevin.
Mr. Lamoureux: The member for St. Norbert says--and then I will get on to why that is the reason--treat all provinces equally. Well, I believe that the Chretien government did treat all provinces equally. The Province of Manitoba, from what I understand, could have opted in if it chose to. Fortunately, the Province of Manitoba did not opt in, and I applaud the government on doing that, on choosing not to opt-in, but it still raised a concern in terms of whether this is going to result in, as I pointed out, an increase in tobacco usage amongst our young people and increasing the smuggling of cigarettes.
My concern led me to questioning the Minister of Finance during the Estimates, because I felt that it was a legitimate concern back then. The Minister of Finance (Mr. Stefanson) did respond to the questions, and I was overall fairly pleased with the response. If the Minister of Finance had chosen, he could have commented by saying, look, we have had a decrease in tobacco prices as a result of that, or that came about because of the dropping of taxes in the East, and then could have taken that opportunity to dump all over the federal Liberals.
Rather, Madam Speaker, and I applaud the Minister of Finance (Mr. Stefanson) on being straightforward and trying to take some of the politics out of that particular issue--and the Minister of Finance--and I advise the member for St. Norbert (Mr. Laurendeau) to sit down and talk to the Minister of Finance or read Hansard because it is already printed. He will find that--and using the Minister of Finance's word, I believe he said something of the nature of that it has been minimal, that it has not turned into what they had believed that it might have. [interjection]
I do not know why the member for St. Norbert is so exercised and wants to be able to say so much on this particular issue. All he needs to do is to talk to the Minister of Finance, and I am sure that the Minister of Finance will share the concerns that he expressed with me to the member for St. Norbert.
Madam Speaker, if this is in fact a bill that will accommodate the Minister of Finance and this government and move us that much closer in terms of eliminating as much as possible what smuggling there is currently going on from eastern Canada into the province of Manitoba, we would be in support of that. That is the reason why, even without notice of this bill wanting to go into the committee stage, in fact we would be prepared to allow it to go into the committee stage as opposed to adjourning it today, because we do believe that we want to co-operate as much as possible with the Minister of Finance with respect to this piece of legislation and maybe possibly in third reading I will be able to add some more words if it is felt at that time that it is necessary.
Again, thank you, Madam Speaker, for allowing me to put a few words on the record.
Madam Speaker: Is the House ready for the question? The question before the House is second reading of Bill 24. Is it the pleasure of the House to adopt the motion? Agreed?
Some Honourable Members: Agreed.
Madam Speaker: Agreed and so ordered.
House Business
Hon. Jim Ernst (Government House Leader): Madam Speaker, in light of the action that was taken by the House with respect to second reading on Bill 24, I would call the Standing Committee on Law Amendments for tomorrow evening, Tuesday, June 27 at 7 p.m. for consideration of Bill 24.
Madam Speaker, I move, seconded by the Minister of Finance (Mr. Stefanson), that Madam Speaker do now leave the Chair and the House resolve itself into a committee to consider of the Supply to be granted to Her Majesty.
Motion agreed to, and the House resolved itself into a committee to consider of the Supply to be granted to Her Majesty, with the honourable member for La Verendrye (Mr. Sveinson) in the Chair for the Department of Government Services; the honourable member for Sturgeon Creek (Mr. McAlpine) in the Chair for Energy and Mines and the Status of Women; and the honourable member for St. Norbert (Mr. Laurendeau) in the Chair for the Department of Urban Affairs.