Hon. Darren Praznik (Government House Leader): Madam Speaker, if you could please call for second reading Bill 19, The Agricultural Credit Corporation Act, and following that, I will be putting the motion to go into Committee of the Whole to consider its work with respect to the Statue Law Amendment Tax bill.

SECOND READINGS

Hon. Harry Enns (Minister of Agriculture): Madam Speaker, I move, seconded by the Minister of Rural Development (Mr. Derkach), that Bill 19, The Agricultural Credit Corporation Act (Loi sur la Société du crédit agricole), be now read a second time and be referred to a committee of this House.

Mr. Enns: Madam Speaker, The Agricultural Credit Act incorporating MACC was passed first on November 7, 1958. At that time, MACC's mandate was to provide financial assistance to Manitoba farmers to establish, develop and operate their farms. The emphasis was on young, beginning farmers. The Agricultural Credit and Development Act replaced the original act on May 25, 1968. At that point the focus was on loan guarantees, and direct loans were no longer available from MACC.

The agricultural act underwent a further change in 1969 and returned to direct lending. Today MACC remains focused on providing support for young beginning, lower equity and expanding farmers. It also facilitates farmers' access to credit under reasonable terms and conditions through its guarantee programs. MACC is ready at all times to administer provincial emergency and special programs as well. Although MACC's mandate has remained essentially unchanged for 40 years, its programs and services have changed dramatically. MACC has experienced more program growth in the past five years than the previous 35 years. I take a small measure of satisfaction out of that fact, having been the minister responsible for MACC during these last five years.

These are but some of the programs that MACC is involved in: introducing the direct financing of nontraditional livestock, i.e., bison and soon to be elk; direct loans available to financing unbred heifers; increased level of financing available to smaller-scale, entry-level hog operators; increased direct loan limits that have been increased to $325,000 from their existing $250,000 for individuals and sole proprietorships and to $650,000 from the previous $500,000 for corporations, partnerships and co-operatives; increased net worth limitation for new borrowers to $500,000 from $400,000; increased financing limit for farm housing to $100,000 from the previous limit of $80,000; increased off-farm income limit to $70,000 from $60,000. I say that this is important, although I say it with some regret because too many of our farmers require off-farm income to maintain their presence on their farm operations.

We have introduced stocker loans to finance unbred heifers, nonlactating cows, feeder bison, equine growers; increased financing cap for bison breeding stock; introduced financing for the purchase of equity shares in agriculturally based new generation co-operatives as a further means of encouraging diversification and value-added initiatives. We have enhanced in 1999–they reduced the interest rate for the first five years of a loan to 6.5 percent from a previous level of 9 percent. An additional $5 million loan fund was made available for this purpose.

Our Diversification Loan Guarantee Program which was announced in the 1995 election is a level of support that this government directed specifically at the post-Crow-era expansion of value-added initiatives across Manitoba. Ten million dollars in guarantees has leveraged over $40 million in direct private sector financing in Manitoba and of course significantly greater investments and resulting in multiplier benefits, introduced four eligibility requirements enhancements in 1998, and provided an additional $20 million available in guarantees to generate an additional $80 million in private sector lending. This is where the corporation guarantees a certain portion, 25 percent of what is otherwise a private loan arranged by the proponents through their credit unions or through their banks.

We will continue to review different programs as they arrive, such as the potential of a bison feeder association with our growing number of bison farmers in the province. Other regulations will have to be amended from time to time as agriculture continues its changing. One of the things that I am proud about is that MACC has made its expertise available to other nonfarm programs when so directed by government. Flood proofing, a loan assistance program, for instance, which was deemed to be necessary to provide some loan assistance to the residents of the Red River Valley during the disastrous '97 flood, has meant that the MACC corporation has extended over $20 million in loans to these persons within the Red River Valley, greatly helping and adding to the support that was there and provided by my colleague the Minister of Government Services (Mr. Pitura), as well as the federal government in restoring the Red River Valley to its previous position.

The Manitoba Producers Recovery Program was introduced as an assist to producers during this current farm income crisis that farmers are experiencing, and I am pleased to report that the full $25 million that was announced back in January when I introduced that program has been subscribed to. As questioned earlier today during Question Period, I will be seeking greater expansion of that loans authority so that we can continue in assisting Manitoba farmers in need in this particular area. MACC has been operating under an act that has been essentially unchanged since the inception of the co-operation in 1958. The present regulations were established in 1988.

The face of agriculture in Manitoba and of rural Manitoba itself has changed dramatically, and in the last 20 years there have been significant changes that affect agricultural financing needs. Agricultural production units will continue to increase in size to take advantage of economies of scale and size. Between 1976 and 1996, average capital investment per farm increased by some 350 percent to an average of $418,000. In the last 20 years, the number of acres per farm increased by some 130 percent. I want to make it very plain, this is not as a result of government policy or direction of this particular minister. It demonstrates the fact that farming today continues to be high risk, capital intensive, and also, and I say this with some regret, that new entries into farming are finding other choices all too often more acceptable and more lucrative. That is what is driving the increasing size of our farms and, ergo, increasing needs for capital to manage those farms.

In order to assist agriculture in rural Manitoba as a whole, MACC needs to be able to respond quickly and proactively to changing needs and conditions. Agriculture continues to be, as I already indicated, a high-risk industry. Complicating factors include adverse climate, commodity price fluctuations, environmental issues and global economic conditions. Processing agricultural products at a local level has become a necessity for a viable agricultural industry and for rural Manitoba. A number of agricultural processing initiatives have begun or are being proposed throughout rural Manitoba. MACC can be said to play the role of an economic tool impacting on the entire provincial economy. There are significant economic spin-offs in terms of job creation and support of local businesses associated with projects established under the Diversification Loan Guarantee Program.

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MACC has played a significant role in provincial programs such as the Flood Proofing Loan Assistance program. These programs assist Manitobans in recovering from special emergency situations. MACC's Guaranteed Loan Program makes agriculture financing an attractive option for private lenders. This encourages financial institutions to maintain branches throughout rural Manitoba. A comprehensive rewrite is needed to streamline The Agricultural Credit Corporation Act and tidy up the results of amendments made on a piecemeal basis. That is what I am presenting to this House: in effect, a newly rewritten Agricultural Credit Corporation Act. Modernized wording is needed to dispense with outmoded definitions and concepts and recognize present-day realities. MACC's operations have a heavy regulatory base.

Currently, MACC experiences obstacles and inefficiencies in program developments due to demand of the regulatory process. A reworking of the act is needed for MACC to respond quickly to programming demands. Amendments to the act are needed to enhance MACC's ability to provide or facilitate credit for a broader base of value-added diversification activity and emerging business structures. Agricultural enterprises has been added to the Definitions section. This flexible definition relates to farming and value-added activities with regulatory power to designate additional kinds of agricultural enterprise. It reflects the reality of what is happening in rural Manitoba. The involvement of primary producers with value-added perhaps nonprimary producers is occurring out there, and the act to date, as it has been written in the past, has not been able to accommodate that.

The Objects section is broadened to cover direct and indirect benefits to farmers and agricultural enterprises. MACC will have the capacity to consider a broader base of value-added diversification initiatives.

The proposed section referring to regulations refines the existing regulation-making power. This section covers all matters for which regulations may be made. As regulation power is more permissive than the obligatory, MACC will have greater flexibility as it develops its regulations.

As a lender and a guarantor, MACC must be responsive to the changing needs for financing in agriculture and agricultural production and processing as Manitoba moves into the 21st Century. Although MACC's mandate has remained relatively unchanged over the years, its programs and services have changed significantly. MACC has experienced more program development in the last five years than in its entire previous history. Implementing the necessary program changes has been the challenge, due to the outmoded condition of the governing legislation. Manitoba's provincial framework emphasizes development of a dynamic economy, an improved quality of life and fiscal management.

The driving forces for MACC are this framework and its client-focused mandate. In order to successfully achieve its goals, MACC must be able to change and change quickly. A comprehensive rewrite of the existing Agricultural Credit Corporation Act will streamline the legislation and enable MACC to respond quickly to changing needs in the agricultural finances.

Madam Speaker, I recommend the bill before the Chamber to all members and for scrutiny at committee and, hopefully, for its speedy passage. Thank you.

Mr. Steve Ashton (Thompson): I move, seconded by the member for Swan River (Ms. Wowchuk), that debate be adjourned.

Hon. Darren Praznik (Government House Leader): Madam Speaker, I would move, seconded by the honourable Minister of Finance (Mr. Gilleshammer), that this House now resolve itself into a Committee of the Whole for the consideration of Bill 22, The Statute Law Amendment (Taxation) Act, 1999 (Loi de 1999 modifiant diverses dispositions législatives en matière de fiscalité).

Mr. Chairperson (Marcel Laurendeau): The committee will come to order, and the staff can enter the Chamber at this time.

The Committee of the Whole will come to order, please. The committee has before it for its consideration Bill 22, The Statute Law Amendment (Taxation) Act, 1999. We will be dealing with clause-by-clause consideration of the bill.

When the Committee of the Whole last met, it was considering Clause 5 of Bill 22.

Clause 5–pass; Clause 6(1)–pass; Clause 6(2)–pass; Clause 7–pass; Clause 8–pass. Shall Clause 9 through to 13 be passed?

Some Honourable Members: No.

Mr. Chairperson: No?

An Honourable Member: We have an amendment on 10.

Mr. Chairperson: Okay, Clause 9(1) and 9(2)–pass. Clause 10.

Hon. Harold Gilleshammer (Minister of Finance): We have an amendment, as I had indicated in my speaking notes,

THAT the proposed subsection 11.6(1) of The Income Tax Act as set out in section 10 of the bill be amended

1. in clause (h) of the definition "eligible share", by striking out "and before that time"; and

 

2. in clause (i)1 of the definition "eligible share", by striking out "$10,000,000." and substituting "$5,000,000."

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Mr. Gilleshammer: I would like to explain this. The purpose of clause (h) is to ensure the total number of eligible shares issued in a given year does not exceed $20 million, limiting the tax cost associated with credit. Clause (h) limits eligible corporations to issuers that applied first to the minister for approval until the $20 million in issued share limit is reached. The removal of the phrase "and before that time" clarifies that the $20-million limit applies to each year of the program and not cumulatively.

Secondly, Clause 1 of the definition of "eligible share," which limits the maximum annual amount of eligible shares issued and outstanding by eligible corporation at any time, is reduced from $10 million to $5 million. This change is made in accordance with representations by industry stakeholders who were concerned that the higher cap would limit the benefits of the credit to too few businesses.

Mr. Chairperson: Shall the amendment pass?

Mr. Tim Sale (Crescentwood): Just a question or two, Mr. Chairperson. Would the minister be able to tell the committee roughly the number of Manitoba-based companies that would be potentially eligible? I realize that there are steps that companies would have to go through to actually become eligible, but what is the pool of eligibility, and what is the estimated cost of this tax credit on an annual basis to the Treasury?

Mr. Gilleshammer: It is estimated that there may be a couple of thousand companies that would be part of that pool and the cost to the Treasury, over three years, between $7.5 million to $9 million.

Mr. Sale: The majority of those companies would not now be listed with the Winnipeg Stock Exchange. Is that correct?

Mr. Gilleshammer: That is correct.

Mr. Sale: Of the currently listed companies, what would be the pool that would be eligible? The reason I asked that question is that the process of going to an IPO and going through all the securities regulations to register has to be worth the company's while in terms of the public market. I understand the purpose of this tax credit basically is to encourage that. Nevertheless, it is not a trivial matter to take a company public and to list on a small exchange like WSE. So of those currently on the exchange, what number of companies might be eligible for this tax credit?

Mr. Gilleshammer: We do not have a number with us, but I can get that information for the member.

Mr. Sale: I thank the minister for that. Perhaps during his department's Estimates, we will be able to explore that.

I want to say that we are in support of this proposal. The reason, of course, is that we have met with various venture capital organizations. In particular, the Crocus Fund management and staff brought this suggestion to our attention. It fills a niche, a gap that currently is difficult for many companies. I think the credit is appropriately scaled. It basically is something that we have already agreed would be a good idea. I know it is part of our platform. So it is a useful proposal that the government is bringing forward.

Mr. Chairperson: Shall the amendment–

Mr. Leonard Evans (Brandon East): We are still on clauses that affect Part 2 of The Income Tax Act. In the budget document the minister shows the small business rate reduction corporate income tax costing the Treasury $24 million in a full year and also the Manufacturing Investment Tax Credit extension costing about $13 million.

I wonder if the minister can tell us whether there have been any estimates made of the impact these rate reductions will have or tax credit extensions will have on the activity in these sectors. There is a reference, of course, in the budget to the Film and Video Production Tax Credit extension, which is going to cost $5 million in a full year. I think many of us, through the media, are aware of the very positive impact assisting the film production industry, video production industry, has in this province which we welcome and support.

My question is–we do not hear much about the impact of these types of rate reductions. We talked on both sides of assisting small business development through the tax system and hear some specific proposals, so my question is, and I am just repeating: To what extent do these particular credits or rate reductions stimulate the small business or the manufacturing sectors?

Mr. Chairperson: Okay. Before the minister answers that question, what were you referring to on that question? Did you say that was within this amendment?

Mr. L. Evans: Well, we are under Part 2, as I understand it.

Mr. Chairperson: We are under Clause 10 at this time.

Mr. L. Evans: But that is still under Part 2. Part 2 includes several clauses from Clause 4 right through to whatever it is.

Mr. Chairperson: That is a clause in Part 2.

Mr. L. Evans: It is a clause in Part 2. I do not know specifically which clause it is.

Mr. Chairperson: Which clause are you referring to in 2? You are talking about 6.(1), which has already passed.

Mr. L. Evans: It is difficult to read this.

Mr. Chairperson: The video tax credit, you referred to in your question.

Mr. L. Evans: I was making reference to the small business rate reduction which is included in the budget as a cost of $24 million. That is the small business rate reduction.

Mr. Chairperson: Which are Clauses 6 and 7, are they not? Okay. In that case, could we just pass the amendment at this time, and then I will see if there is leave to go back to Clause 6.

Mr. L. Evans: Is it in Clause 6?

Mr. Chairperson: I believe it is in Clause 6.

Mr. L. Evans: I thought we were dealing with the whole of Part 2.

Mr. Chairperson: Amendment–pass. Is there leave for the honourable member to ask a number of questions not relating to the clause we are in at this time and referring back? [agreed] The honourable minister, to respond.

Mr. Gilleshammer: If I understand the question, the member for Brandon East (Mr. L. Evans) wants to know what impact lowering the small business rate is going to have. This is the income earned by smaller companies who have $200,000 or less active income, and we see this as encouraging new investment by these companies and creating some jobs in small businesses. It will improve the tax competitiveness of these firms. I am told that this will relate to approximately 8,600 firms that operate now in Manitoba. I am not sure that we have exact projections here on exactly how this lowering of this rate and making them more competitive is going to be transferred into a specific number of jobs or a specific number of expansions, but we note that members opposite have spoken in favour of this and we will have to see the results.

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Similarly, with the Film and Video Tax Credit, we knew that it was going to stimulate movie production and create jobs here in Manitoba, but to see the dramatic change from about $1 million to $50 million, I think, was beyond everybody's expectation.

So these tax credits do stimulate job creation, and we believe in this particular sector with these 8,000 or 9,000 firms we are going to see additional jobs created, additional activity. It reduces revenue to government of just over $5 million in 1999-2000, and as the member indicated, upwards of $24 million when it is fully implemented.

Mr. L. Evans: I wonder if the minister could indicate, has he received representation from any specific group requesting this type of rate reduction, for instance, the Manitoba Chamber of Commerce or some such organization?

Mr. Gilleshammer: This was something that came up during the budget consultations that were supported by the Manitoba and the Winnipeg Chambers. I spoke with them after the budget, and they felt that this was a very positive move. Certainly, the Canadian Federation of Independent Business made representation on this matter as well as individuals during the budget consultation process.

Mr. L. Evans: With respect to the Manufacturing Investment Tax Credit extension, it is an extension, and yet the budget document shows no expenditure of that in this year 1999-2000, whereas it is estimated to be $13 million for a full year. That would be the following year, I presume. I do not quite understand why there would be no estimate of expenditures for '99-2000. Is that because it does not take effect until the following year?

Mr. Gilleshammer: The current program runs until the end of fiscal year 2000. The extension takes place beyond that.

Mr. L. Evans: I would just make the comment that obviously business welcomes these credits and rate reductions, but I would suggest that it is very difficult to estimate with some precision what the impact is going to be. It may be taking you in a direction that you want to go, I agree with that, hopefully, for an expansion and so on. But, with regard to the Manufacturing Investment, you have figures in your own budget document showing a reduction of manufacturing investment–this is on page 15 of your economy section of the budget, where '98 has fallen from the '97 level. Then, again, there is a projection of '99 being quite a bit lower than '98.

So I suppose you could make an argument: Well, it is time to have this sort of a tax credit extension to sort of help boost the level of investment spending, but I would submit that probably what affects the level of manufacturing investment in this province, or any jurisdiction, is the demand for the output of that sector. If there is an increasing demand for the goods provided by manufacturers in Manitoba, then there is the inclination to want to expand your plant, your capacity, so that you can meet the increased demand. I submit that is probably one of the most critical factors in determining the level of investment, much more so than tax credits, as welcome as they may be as incentives and so on, and there may be marginal cases where this has an impact.

I would submit that we can provide these dollars of assistance, $13 million, but I do not know to what extent it will impact on the level of investment spending in the province to any significant extent at any rate. I just wanted to make that position that the most critical factor determining level of manufacturing investment spending is the demand for the output of that sector.

Mr. Chairperson: Clause 10 as amended–pass; Clause 11–13–pass; Clauses 13, 14–pass.

Mr. L. Evans: Mr. Chairman, I wanted to ask a question about The Mining Tax Act, which are 12 and 13.

Mr. Chairperson: Oh, I am sorry.

Mr. L. Evans: Mr. Chairman, again this tax rate reduction looks to be rather minor. At least its impact on the budget is minor. It is no dollars for this year, but $1 million for the subsequent years, so I again ask the minister: what does he expect to happen as an outcome of this particular rate reduction?

Hon. David Newman (Minister of Energy and Mines): Mr. Chairman, certainly the prices in the mining sector have fallen over the last number of years. I think it is important to indicate our support for both the development and exploration in this area. As the member knows, this tends to be somewhat cyclical and that the prices will come back. We, I think, send a signal to the mining community that they are a valued part of our economy and that they will continue to invest and employ people in this industry in Manitoba.

Mr. L. Evans: Again, I think the minister would likely agree with me, as welcome as this is, it is a very minor reduction. No dollars this year, a million dollars next year would be welcomed by the industry but, again, the fate of that industry is in the hands of world markets, assuming of course that we have the raw material here. It is in the hands of the international market for nickel or copper or zinc or whatever the mineral may be. Indeed I agree with the minister, it is subject to a lot of fluctuations, as commodity prices tend to be. They tend to be very volatile. We have our ups and downs. Our mining industry is certainly not sheltered from this volatility. It impacts very directly on us. We see it, for instance, in the level of employment in Thompson, just to use one example.

So, at any rate, we do not oppose this, Mr. Chairman, we are just commenting on it, that it looks rather modest, but so be it. I assume the Mining Association is happy with it.

Mr. Chairperson: Clauses 13 and 14–pass. Clause 15(1)

Mr. L. Evans: You are slipping past very quickly here. I just wanted to ask the question, under this section, The Motive Fuel Tax Act, reference to exemption for fuels sold to international ocean-going ships. I wonder if the minister could elaborate that. Again there is no money shown for this, so I gather, I just do not know why is it here if we do not expect any financial implications.

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Mr. Newman: Currently international vessels do their fuelling in other areas where they do get an exemption, so this is not a question of lost revenue for us, but it is an opportunity for those in this business in Churchill to work towards expanding their business and providing fuel on a level playing field with other jurisdictions. I think all governments over the years have tried to find ways to make the Port of Churchill more modern and more viable. This is just another step in hopefully allowing entrepreneurs in Churchill to go after some new business and to be on the same level playing field as Montreal or wherever these ocean-going vessels are refuelling.

Mr. L. Evans: I am certainly not opposing this whatsoever. I gather then it tends to be perhaps more symbolic than anything else at this point.

Mr. Gilleshammer: Well, it is symbolic for sure. I know it met with the enthusiastic approval of mayor of Churchill. You know, I think anything that we can do to make Churchill more viable–we have seen positive signs in recent years, and this can just be another piece of the puzzle.

Mr. L. Evans: Just by way of a commentary, a bit of history, I would agree that governments for some years, at least since I have been here, of all persuasions have done whatever they could to stimulate opportunities for Churchill. I recall we were successful in getting the Hudson Bay resupply through Churchill using a tug and barge operation in the early '70s. Prior to that time, the supply to the outports on the Hudson Bay was from the Port of Montreal, and we were successful in persuading the federal government to transfer that activity, as it did, to Churchill. Of course, it had a benefit on Winnipeg as well.

Then, of course, there have been other things that governments have tried to do, including encouraging the use of the port for other commodities beside grains. I think at one point, we had our Liquor Commission bring in a load of Scotch whiskey from Scotland through the Port of Churchill. This was way back, as I recall. I do not know how much whiskey is going through there now, but there were attempts made–

An Honourable Member: They were symbolic too.

Mr. L. Evans: Yes, mostly, apart from one shipment.

Also, another commodity that was looked at was sulphur. I recall visiting there, once again in the '70s, there was this huge mountain of yellow material, and it was sulphur that was to be shipped out. This was from a by-product of our oil industry in Alberta and Saskatchewan; it was to be shipped through the port for Saskatchewan.

I might comment, Mr. Chairman, when we are on the subject of other provinces and the Port of Churchill, the other provinces–and I hope this is still true–of Saskatchewan and Alberta were very supportive of helping to enhance the Port of Churchill in Manitoba. I know for various reasons, we recall getting support from Premier Lougheed to Premier Blakeney in years gone by. I hope that support still is there, supporting Manitoba in its continued efforts to develop Churchill. It is just a historical commentary.

Mr. Chairperson: Clause 15(1)–pass; Clause 15(2)–pass; Clause 15(3)–pass; Clause 16–pass. Clause 17.

Mr. L. Evans: Mr. Chairman, did we pass by the section in which we are talking about children's clothing exemption increase?

An Honourable Member: The children's clothing is 18.

Mr. Chairperson: Clause 17–pass. Clause 18.

Mr. L. Evans: Again, I wonder if the minister could elaborate on the impact of this particular exemption increase. Was this an outcome of the budget consultations specifically? I know many, many items are covered by retail sales taxes and I am just wondering why this particular item. Again, we are certainly not opposing it; we would support it, but I am just wondering why this particular item of all the hundreds and thousands of items covered by retail sales taxes.

Mr. Gilleshammer: Yes, this was brought forward in discussions that were held in some of the communities, and the member and I are past that stage where we are raising children of this age and buying children's clothing, but–

An Honourable Member: Grandkids.

Mr. Gilleshammer: There are grandchildren, too, right, but this is to give some relief to parents and grandparents, I suppose, who are making these expenditures.

Mr. Chairperson: Clause 18(1)–pass; Clause 18(2)–pass; Clause 19(1)–pass; Clause 19(2)–pass; Clause 19(3)–pass; Clause 20(1)–pass; Clause 20(2)–pass; Clause 21(1)–pass; Clause 21(2)–pass; Clause 21(3)–pass; Clause 21(4)–pass; Clause 21(5)–pass; Clause 21(6)–pass; Clause 21(7)–pass; Clause 21(8)–pass; preamble–pass; table of contents–pass; title–pass. Bill as amended be reported.

Committee rise. Call in the Speaker.

Mr. Marcel Laurendeau (Chairperson): Madam Speaker, the Committee of the Whole has considered Bill 22, The Statute Law Amendment (Taxation) Act, 1999 (Loi de 1999 modifiant diverses dispositions législatives en matière de fiscalité), and reports the same, with amendments. I move, seconded by the honourable member for La Verendrye (Mr. Sveinson), that the report of the committee be received.

Hon. Harold Gilleshammer (Minister of Finance): Madam Speaker, I move (by leave), seconded by the Minister of Family Services (Mrs. Mitchelson), that Bill 22, The Statute Law Amendment (Taxation) Act, 1999 (Loi de 1999 modifiant diverses dispositions législatives en matière de fiscalité), as amended and reported from the Committee of the Whole, be concurred in.

Hon. Darren Praznik (Government House Leader): Madam Speaker, I would ask that you could call for third reading of Bill 22, The Statute Law Amendment (Taxation) Act, 1999.

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Hon. Darren Praznik (Government House Leader): Madam Speaker, I would move (by leave), seconded by the honourable Minister of Agriculture (Mr. Enns), that Bill 22, The Statute Law Amendment (Taxation) Act, 1999; Loi de 1999 modifiant diverses dispositions législatives en matière de fiscalité, be now read a third time and passed.

Mr. Leonard Evans (Brandon East): Madam Speaker, I would like to just add a few words to the record on this debate of this important bill that puts into effect or legalizes the tax changes referred to in the budget brought in recently by the Minister of Finance (Mr. Gilleshammer).

As is on record, we have supported the budget, the official opposition, for various reasons, but this does not mean, of course, Madam Speaker, that we agree with everything, every last line, every last figure in the budget–far from it. There are a lot of things that we are very concerned about in the budget; in fact, probably, mostly, because of what was left out of the budget rather than some of the changes in it. [interjection]

Well, as I said, Madam Speaker, there are many things we agreed with, but that does not mean we agree with every last paragraph, every last number. The one problem we have with the budget is the lack of action on property taxes. We believe that the people of this province are suffering unduly because of very heavy property taxes. The reason they are suffering from heavy property taxes is because of the inability of this government or the lack of action of this government to take on more responsibility for the cost of education in this province.

This is well documented as to the amount of additional dollars that are being collected by school divisions because of the lack of support by the government. The amount of school division tax collected in 1988, for example, in Manitoba was $208 million, and by the year 1998, this had risen to $377 million.

Well, Madam Speaker, that is an enormous increase in the amount of taxes having to be levied at the local level because of the cuts that have been put into place by this government. Our estimate is that this government has cut over $482 per pupil in purchasing power from our public schools. Since '93, '94, however, provincial revenues have increased by over $1 billion.

This impact can be seen, Madam Speaker, in looking at the individual cities and towns in this province of ours. The average home in the city of Winnipeg has seen an increase of over 55 percent in school division taxes since 1990. In Brandon, the Brandon School Division taxes jumped by 14 percent in 1998 and then again 9 percent this year. In Neepawa, the Beautiful Plains School Division, the people of Neepawa saw an 8 percent increase this year on top of 11 percent in 1998. Another example is Thompson, where the residents saw their bill increase 10 percent in 1998, followed by a 4 percent hike in 1999.

So, Madam Speaker, we believe that this is one area that this government has failed to address and should be addressing in a way that is going to provide positive support for our public school system. What we have seen because of the lack of adequate support by the government is a deterioration in terms of increasing class sizes. We have seen it in terms of lack of basic supplies. I spoke to one teacher who said we simply do not have enough money to buy the textbooks that we are required to purchase for whatever course. So we have some money; we can buy some textbooks one year; we have to wait for another year to buy the remaining supply of those textbooks.

There is a long list of examples that one could provide showing the deterioration of the public school system because of the schools being insufficiently supported by this government over the years that it has been in office.

You can see also the impact of heavy property taxes in urban sprawl in the city of Winnipeg. One of the reasons why we have urban sprawl could be because of the heavy property tax burden as it is levied throughout the city and other communities. The Winnipeg Free Press has written on this subject. There is other material on it showing this phenomenon, which really costs all of us as a society.

There is no question, Madam Speaker, as well, that the lowering of property taxes is far more equitable than attempting to lower income taxes. Income tax is built on a progressive system, but when you reduce it by a certain number of points it is the wealthier people who obviously get more benefit from that than the people on the lower end of the scale, whereas, if you reduce property taxes, we suggest one way of doing it is by reinstituting the property tax credit that was eliminated by this government back in 1993. You would have the reverse effect. You would have a very equitable effect. You would be helping people basically on the lower end of the income scale. Of course, it depends on how you implement it, but it could be implemented in a way that the lower end of the income scale would be assisted more than the higher end of the income scale.

I might note again in passing that the reduction of the property tax credit from $325 to $250 in 1993, that is, that $75 elimination, was equivalent to two and a half points of income tax. In effect, by doing that in 1993, this government raised income tax by two and a half points. It was amounting to $53 million at that time. Of course, we know other things were done at that time such as broadening the sales tax, which was equivalent to increasing income tax by two points. Other measures were taken, such as the elimination or reduction of the Pensioners' School Tax Assistance Program for certain seniors.

However, what I am suggesting is that we would like to see obviously the property tax credits reinstated, thus our amendment and, as our Leader has explained, the advantages to the people of Manitoba of doing so.

I just want to make this point before closing. That is, not only is a property tax credit more equitable than an income tax cut, but it also has a greater economic impact. It is well demonstrated in economic principles that if you provide additional funds to people on the lower end of the income scale compared with those at the higher end of the income scale, you will have a greater impact on spending because, to use a technical term, the marginal propensity to consume is much, much higher with lower income groups than with higher income groups. For every additional dollar you put in the hands of someone at the low end of the income scale, you would be assured that they will spend if not all of it, most of it, whereas if you give that additional dollar to those people at the higher end of the scale, a greater percentage of it is likely to be saved.

So there are all kinds of good reasons why property tax credits should have been reinstated, the impact on property taxpayers across the province, bringing about a more equitable tax situation and certainly affecting urban sprawl in the city of Winnipeg and perhaps the city of Brandon. Certainly it has an economic impact as well.

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I just point out in closing that the people in this province do feel burdened by taxes by this government. The fact is that, and I mentioned this the other day in debate, I can understand that, because the people of this province collectively are paying much more in income tax now than they did a few years ago. That can be explained in large measure by bracket creep. So, even though the rates have not changed, the bracket creep phenomenon has been at work. We can read off these figures–I will not bother–but I could tell you it is millions of dollars.

At any rate, Madam Speaker, with those few words, we will sit down and let others speak and participate in this debate.

Mr. Gary Doer (Leader of the Opposition): Thank you, Madam Speaker, and I thank the member for Brandon East. We, of course, passed and voted for the tax bill last session of the Legislature. We are disappointed that the government has rejected our proposal, our alternative, for property tax credits. They could argue with the rules prohibiting such a proposed amendment from an opposition member, a nonminister. But, on one score, certainly the fact that it was revenue neutral to the government's own proposal would have allowed the consistency of the budget in terms of revenue declines and the substance of property tax credits. If they were so inclined to look at the merit of our argument, they could have moved the amendment themselves. They had moved other amendments themselves in this tax bill, and they could have moved the amendment themselves as a minister which would not affect the overall revenues, expenditure items in the budget. Our amendment was very consistent with the revenue items in the budget. If their concerns were, if they would argue that the minister should be the only one to move the amendment, then I challenge the minister to move that amendment. If they do not want to choose to go with that amendment, then they are saying they are doing so on the basis of merit.

We believe, for example that for seniors–let us look at the issue of seniors. Many seniors are living on fixed incomes, living on pensions. They have also struggled for years to own a home. When the government in the highest deficit year decided to raise taxes through a reduction in property tax credits, they did so in two ways, or three ways really, but I will not technical on the progressivity issue. They also lowered the property tax credit for seniors by $75 and for everybody else by another $75. Now, seniors on a low income will not get the same benefit as a property tax reinstatement of a straight $75 for a homeowner that we have proposed. So, how do you have balance between the income tax reductions and property taxes? Well, our way of suggesting the amendment that the government could themselves move and would therefore be in order, would have achieved that. It also does something for people on lower incomes in the inner city of Brandon, the inner city of Thompson, or the inner city of Winnipeg.

So let not this government say no to this. They can move it today right now in committee. This minister can move it, and we will accept it. I challenge the minister to move it. It will not affect the revenue decrease in the income tax cut for January, the year 2000. I dare say for many MLAs across the way that have a lot of seniors, like the member for Rossmere (Mr. Toews), this would have a balance in the constituency of Rossmere, in the community of Rossmere between income tax cuts and a break for seniors.

Madam Speaker, I have made these points before at second reading. I know the member for Brandon East (Mr. L. Evans) has also made these points. I just wanted to reiterate that the minister himself could move this. We have supported the idea of the small business tax reduction. It was in our alternative budget last year. We have suggested, like the Canadian Federation of Independent Business, that there be an offset on some of the corporate grants, some of the Shamray grants. I would have liked the government to follow through on the recommendations of the Canadian Federation of Independent Business.

If the government is committed really to listening to the public on the fair tax commission or Lower Tax Commission, I would challenge them, I would challenge this government to look at the issue of an income tax decline for the year 2000 and a property tax credit decline as part of that tax commission. What a fairer way to go. Let us let the people also be involved in this issue because every time you make a reduction, you also lose revenue, and losing revenue obviously has an impact on future budgetary decisions.

Madam Speaker, we agree with the overall thrust of the tax reductions. We agree with the thrust of the revenue sustainability, but we would have made a different decision on the second one and a half, a decision that we regret the government has not accepted on its merit. If it believes in the substance of it, it could move it itself. It has moved other amendments. If it does not, so be it. It has the option today.

But we are committed to the alternatives we put forward within the revenue declines in this bill. We will be voting for this bill, but we would have a different way of balancing the tax reductions than the members opposite. Thank you.

Madam Speaker: The honourable Minister of Finance, to close debate.

Hon. Harold Gilleshammer (Minister of Finance): I appreciate the support of the House for this tax bill. We truly did consult with Manitobans in bringing forth the budget, and, certainly, in the consultations that took place, Manitobans indicated very clearly what their spending priorities were and also where they felt we could be more competitive on the taxation side.

I am pleased that we were able to incorporate the ideas we heard through that consultation process into this budget and that the budget has received near unanimous support in the House. I am pleased to hear the Leader of the Opposition (Mr. Doer) say that they will also support Bill 22.

Thank you very much.

Madam Speaker: Is the House ready for the question? The question before the House is third reading, Bill 22, The Statute Law Amendment (Taxation) Act, 1999. Is it the will of the House to adopt the motion?

Some Honourable Members: Agreed.

Madam Speaker: Agreed? Agreed and so ordered.

Hon. David Newman (Deputy Government House Leader): Madam Speaker, may we now have leave that the Chair and the House resolve itself into a committee to consider of the Supply to be granted to Her Majesty, moving and seconded by the honourable Minister of Finance (Mr. Gilleshammer).