CROSS-BORDER SHOPPING

MINISTRY OF REVENUE

MINISTRY OF LABOUR

MINISTRY OF INDUSTRY, TRADE AND TECHNOLOGY

MINISTRY OF TREASURY AND ECONOMICS

CONTENTS

Thursday 6 June 1991

Cross-Border Shopping

Ministry of Revenue

Ministry of Labour

Ministry of Industry, Trade and Technology

Ministry of Treasury and Economics

Adjournment

STANDING COMMITTEE ON GENERAL GOVERNMENT

Chair: Mancini, Remo (Essex South L)

Vice-Chair: Brown, Michael A. (Algoma-Manitoulin L)

Acting Chair: Cordiano, Joseph (Lawrence L)

Abel, Donald (Wentworth North NDP)

Bisson, Gilles (Cochrane South NDP)

Drainville, Dennis (Victoria-Haliburton NDP)

Duignan, Noel (Halton North NDP)

Harrington, Margaret H. (Niagara Falls NDP)

Mammoliti, George (Yorkview NDP)

Murdoch, Bill (Grey PC)

O'Neill, Yvonne (Ottawa Rideau L)

Scott, Ian G. (St George-St David L)

Turnbull, David (York Mills PC)

Substitutions:

Bradley, James J. (St Catharines L) for Mr Scott

Cordiano, Joseph (Lawrence L) for Mr Mancini

Dadamo, George (Windsor-Sandwich NDP) for Mr Drainville

Daigeler, Hans (Nepean L) for Mr Brown

Kwinter, Monte (Wilson Heights L) for Mr Scott

Offer, Steven (Mississauga North L) for Mr Scott

Also taking part:

Sullivan, Barbara (Halton Centre L)

Sutherland, Kimble (Oxford NDP)

Clerk: Deller, Deborah

Staff: Rampersad, David, Research Officer, Legislative Research Service

The committee met at 1007 in room 151.

CROSS-BORDER SHOPPING

Clerk of the Committee: Honourable members, it is my duty to call upon you to elect an Acting Chair for today's meeting. May I have nominations, please?

Mrs Y. O'Neill: I would like to nominate for Acting Chair at today's meeting Joe Cordiano.

Clerk of the Committee: Are there any further nominations? All those in favour of Mr Cordiano taking the chair, please indicate. Mr Cordiano has been elected Acting Chair.

The Acting Chair: Thank you very much. It is my pleasure to be here this morning.

The first matter we have to deal with is the third report of the subcommittee. The subcommittee recommends that the committee give unanimous consent to withdraw the matter designated by Mr Turnbull pursuant to standing order 123. Does the committee agree? Agreed? Okay.

Now we will deal with the matter before us this morning, the matter designated by Mrs O'Neill relating to cross-border shopping, the current status of the interministerial review of the impacts of cross-border shopping, particularly with regard to the effect on job losses, decreased sales, tax avoidance, and that the committee consult with the following people.

MINISTRY OF REVENUE

The Acting Chair: The first people before us this morning are the Honourable Shelley Wark-Martyn and the Deputy Minister of Revenue, Michele Noble. Welcome to the committee.

Hon Ms Wark-Martyn: Thank you. I would like to thank all of you for the invitation this morning to come and speak with you. I would also like to introduce Burke Williams, to my right, who is the director of the retail sales tax branch with the ministry, and Bob Moxley, to my left, who is the director of motor fuels and tobacco tax.

My understanding from my invitation here this morning was that it was to talk with you and discuss the meeting that I had with Otto Jelinek, the Minister of National Revenue, on 16 May. I will provide you now with a summary of that meeting.

During the discussion, Mr Jelinek started off by saying that he regarded the cross-border shopping issue as a societal one and one that was neither a federal, provincial nor municipal issue. He said that the traffic is growing monthly; there was a 24% increase in traffic in April alone.

We also discussed the customs approach regarding the Peace Arch Customs Entry project in BC, the Customs 2000 document, and the meeting with the Ontario mayors that was held with Mr Jelinek. There has also been a small committee of federal ministers, made up of Mr Mazankowski, Mr Wilson, Mr Hockin and Mr Jelinek, who are trying to develop a broader response to the cross-border shopping issue.

Mr Jelinek has agreed to attend another mayors' meeting in mid-June to put on record shareholders' concerns and what can be done. He explained that, contrary to certain media reports, he is not organizing the upcoming meeting.

I emphasized to him the concerns of the Ontario government for the effect on border communities and indicated that I was also willing to meet with the mayors at any time they desired that meeting to take place.

We raised and discussed the possible collection of retail sales tax by customs, putting in also the returning-resident exemptions and other measures to simplify the collection by customs officers. This was refused by Mr Jelinek in that he said he did not believe it would be cost-effective. He was more concerned with relieving congestion at the border points by becoming more efficient through better technology and programs under the PACE project.

Mr Jelinek said that there could be no border collection without the GST and RST harmonization, but allowed that there could be other options, namely, the exchange of information. Our understanding is that this would go under a B-15 form we would get. There would be some costs involved by us, and because these forms are not checked for accuracy by the customs officials as they are going through the border crossings, we are not sure at this point how efficient and what the revenues brought back to the province would be by doing it this way. We are still looking into this with the Ministry of National Revenue.

We also talked about other possible areas of co-operation, namely, with the tourist rebate forms, because there have been some problems with tourists not understanding and having to go through a lot of paperwork to get the rebates from us. The federal government was talking about a simpler way of doing those kinds of things.

We agreed that we would look at the exchange of information that was brought on to the table by the Minister of National Revenue, and my officials are working on that right now.

At the close of the meeting, after much discussion, Mr Jelinek made it very clear that border collection of the retail sales tax at customs would not take place without RST and GST harmonization. No matter what simplifications we were prepared to offer at border points so that this could happen, he would not do it unless it was offered throughout the province.

Mr Bisson: I find that somewhat interesting in regard to the response you got from the federal minister on the harmonization question. If we were as a province able to put into place the mechanisms to assist the federal government to collect that tax, is it the opinion of the ministry that it would be basically what the federal minister is saying, that it would be too difficult, or do you just think that is a copout on his part?

Hon Ms Wark-Martyn: I think it is sort of a copout.

The other thing we have to understand is that, because of the increase in cross-border shopping, the federal government is also not staffed at the border points to collect its own GST and its own taxes coming through. That was also a concern that he said. "Before we start looking at your problems, we have to deal with our own right now, and that is that we are losing some of our own revenues because we are not accurately and appropriately staffed to be collecting our own revenues as people are coming back through the borders."

Mr Bisson: If the provincial sales tax was collected at the border along with the GST, we would obviously, hopefully, keep them separate. Are there any kind of estimates about what that would mean in regard to curtailing, stopping, the amount of cross-border shopping? Is there anything along that line that has been done?

Hon Ms Wark-Martyn: Stopping? No. My officials and I do not believe that if the tax were collected at the borders we would actually stop the problem.

Mr Bisson: No idea on how much it would curtail it?

Ms Noble: We do not have any estimates of how much of the shopping volume would be curtailed, because what that really is doing is trying to predict a consumer response to an additional 8% on a percentage of the goods they are bringing back, and at this point the ministry has not been in a position to work through a predictor of what the impact would be on consumer decisions in terms of going across the border to shop.

I think the other issue there is the degree to which consumers are going across the border for items such as gasoline or food purchases, which of course would not attract the provincial sales tax, and therefore collection at the border point of provincial sales tax would not impact those consumers who are going across for those items.

The Acting Chair: Members of the committee, I just want to point out at this time that we are going to rotate questions on an equal basis, so I am going to go from one party to the other and each party will have its designated time. I will call on Mrs O'Neill at this time.

Mrs Y. O'Neill: Mr Chairman, I have some difficulty with that ruling you have just made, because usually in a 123 the party that brings it does get as many questions as it wants. Certainly that is the way we did the PC 123 when we had the Treasury officials in. But I will abide by your ruling and I hope I can get my answers quickly.

The Acting Chair: In response to that, I have worked on other committees and we --

Mrs Y. O'Neill: This is a different matter. This is an opposition day type of event.

The Acting Chair: No, no, the matter I am talking about that I have dealt with was an opposition 12-hour time slot, and the clerk informs me that we do have to divide the time equally among all three parties.

Mrs Y. O'Neill: Okay. I maybe could be corrected on that.

The Acting Chair: It is subject to the committee's consent.

Mr Turnbull: Mr Chair, I would like to support Mrs O'Neill in her request. It is their opposition motion, and to the extent that we are allowed to get some questions in, I think it is only fair that, since they brought the matter, they should be able to get a suitable number of questions in.

The Acting Chair: Again, I am subject to what the wishes of the committee are. We can go on that basis if all are in agreement. Do we have agreement for that?

Interjections: No.

The Acting Chair: There you go. We will proceed on an equal basis.

Mrs Y. O'Neill: I will work within the parameters of the Chair.

Would you consider your ministry the lead ministry? You have said in the House that this is a complex issue, it is interministerial. Would you consider your ministry the lead ministry, or has the Premier given you that kind of responsibility?

Hon Ms Wark-Martyn: No. The Minister of Industry, Trade and Technology has been given the lead on this issue as the lead minister.

Mrs Y. O'Neill: You indicated, and you indicated in an answer to one of my questions, that you have been offered exchange of information with the feds. You seem to be telling us you have not made a decision on that; is that correct?

Hon Ms Wark-Martyn: That is correct.

Mrs Y. O'Neill: I hope you will pursue that, simply because other provinces seem to be doing it and it certainly is what has been recommended to you by more than one group in this province.

Was there any indication in your meeting with Mr Jelinek about the location of the express lane in Ontario? I understood that decision was very imminent.

Hon Ms Wark-Martyn: We discussed the express lanes in Ontario, and some of the mayors, as you probably know, are asking for express lanes, but they are asking for express lanes for tourists and buses and truckers only. But the express lanes that would go in, from my understanding, would cover all people and not just the ones that the mayors have asked to be covered.

Mrs Y. O'Neill: You have no indication of where those would be, or if the one would be in Ontario this year?

Hon Ms Wark-Martyn: He said that he would work with the community and I asked that we also be in on the discussion so that we also would know which community it was going into.

Mrs Y. O'Neill: Will that be in 1991?

Hon Ms Wark-Martyn: He has not given us a date on that; no specifics other than he would be working with the community involved.

Mrs Y. O'Neill: From what you have said to this point, and certainly you can help me understand if I am thinking correctly, you are not looking at any creative tax plan at this moment to deal with this problem, whether it be graduated gas tax, whether it be harmonization, whether it be collection at the border. You have not directed your staff to do impact studies or to examine what I consider very serious recommendations from several groups in the communities.

1020

Hon Ms Wark-Martyn: No, I have not personally and my staff have not. The Treasurer would have to initiate that and would ask his staff to do that, the changes of the taxes.

Mrs Y. O'Neill: All right, thank you. Mr Chairman, my colleague Mr Daigeler has some questions.

The Acting Chair: I am first going to turn to Mr Turnbull and then Mr Daigeler and Mr Bisson.

Mr Turnbull: Minister, you have stated that you have had discussions with the federal government and it has indicated that it is prepared to collect the taxation if you harmonize taxes.

Hon Ms Wark-Martyn: They have indicated that they would be prepared to discuss the collection of retail sales tax at the border if we harmonize as a province with the GST.

Mr Turnbull: But it is a fact they have already agreed with one province to collect. Not to talk about it; they are going to do it.

Hon Ms Wark-Martyn: Saskatchewan. They are going through the details now and they are expected to implement it in January 1992.

Mr Turnbull: Do you have any philosophical disagreement with the concept of simplifying taxes in Canada?

Hon Ms Wark-Martyn: No.

Mr Turnbull: Surely harmonization makes eminently good sense?

Hon Ms Wark-Martyn: No, I do not agree with you on that point. I think harmonization would mean applying the provincial sales tax to the same list of goods and services to which the federal tax applies, which would mean at this point expanding that tax in the province of Ontario in a time of recession. I do not believe that is a good thing to be doing.

Mr Turnbull: So you are saying that at a time of recession you are against applying extra taxes and yet you have brought in a budget which substantially increases the amount of gasoline tax. Is that not correct?

Hon Ms Wark-Martyn: My understanding is that --

Mr Turnbull: Is that not correct, minister?

Mr Abel: Let her answer.

Hon Ms Wark-Martyn: My understanding is that the Treasurer is coming in, and at that point you can speak to him about the gasoline tax because tax incentives and tax discussions come from the Treasurer and my role and my ministry's role is to implement those taxes.

Mr Turnbull: It is a fact that Ontario gasoline taxes are so high, the cost --

Mr Mammoliti: On a point of order, Mr Chair: He is relating to tax again. He got a specific answer from the minister referring to the Treasurer --

Mr Turnbull: That is not a point of order, Mr Chair.

Mr Abel: Let the Chair decide.

The Acting Chair: That is not a point of order, Mr Mammoliti, but I would caution members to stick to the subject matter before us. I believe we are veering off topic a little bit.

Mr Turnbull: Mr Chair, I would suggest that the question of taxation and the collection of it are so intertwined that it is impossible to discuss one without the other.

Mr Duignan: Feeble Tory minds.

The Acting Chair: Order, please.

Mr Turnbull: Mr Chair, I would ask you to request that Mr Duignan withdraw that remark.

The Acting Chair: Mr Duignan, would you withdraw that remark?

Mr Duignan: I have no intention of withdrawing that remark.

The Acting Chair: I would rule that kind of remark completely out of order at a committee meeting, or in the House, and I would ask that you withdraw that.

Mr Duignan: For the sake of getting on with the committee hearings, I withdraw the remark but I --

The Acting Chair: Thank you. Mr Turnbull, would you continue please?

Mr Turnbull: You have said that you are against raising extra taxes by way of harmonization and yet we have a government which has now raised gasoline taxes to a point at which it is a fact that federal gasoline taxes in Canada are less than federal gasoline taxes in the US. Is that not correct, Minister?

Hon Ms Wark-Martyn: Yes, it is.

Mr Turnbull: The problem we have seen with various reports is that one of the most attractive items in the US is gasoline. That is one of the main magnets that gets people to go across in the first place. Is that correct, Minister?

Hon Ms Wark-Martyn: That is correct.

Mr Turnbull: Yet at a time that you are saying you are not prepared to harmonize because of tax burden, you are increasing the gasoline tax so that now the gasoline tax is so high in Ontario we actually pay an amount which attracts people to go across to the US. By your nodding your head, I take it you are agreeing with that.

Hon Ms Wark-Martyn: I think -- and I must also note that the federal minister also agreed with me -- changing the gasoline tax either federally or provincially will not stop or decrease the cross-border shopping issue. We cannot compete with the US gas prices. Even if we decreased the taxes, the people would still go there to shop.

Mr Turnbull: We are looking at how we can cut down on the amount of cross-border shopping and the loss of revenue to this province, are we not? That being the case, surely if we were to accommodate the federal government -- which you may have some philosophical difficulty with, accommodating the federal government on anything -- by reducing the amount of gas tax and getting the tax harmonized and then collecting it as they come over the border you can have it revenue-neutral but at the same time more beneficial to this province.

Hon Ms Wark-Martyn: I am going to ask my person from the ministry on the gas to discuss that with you, because there are some points, and we have discussed those, and there are some reasons that would not go through or happen.

Mr Moxley: You are talking explicitly about a reduction in particular areas?

Mr Turnbull: No. I am saying that if we were to achieve, be it in a targeted area or across the board, if we were to move that amount of burden which is now on gasoline taxes over to those items which would be picked up if we harmonized, surely you could arrange a scenario where it would be revenue-neutral but at the same time would achieve the goal of getting the federal government to collect the taxes.

Mr Moxley: It would be very difficult for me to really comment on whether we could achieve that kind of scenario. You are suggesting reduce the gasoline tax and replace that revenue with the revenue that you would receive by taxing things under RST that are not currently taxed, by harmonizing.

Mr Turnbull: Yes, exactly. Look, at the moment we have two problems that we can identify.

One is that cheap gasoline in the US acts as a magnet to get people down there. There was a survey done by one of the major chartered accountant companies, and this was prior to the big gasoline tax hikes in the last budget. Prior to that, it was identified that gasoline was either the number one or number two item which initially attracted people. When they had a shopping list of things saying, "Which is your first choice as to why you go?" gasoline was identified as either the first or second item. Okay, that is a problem that is drawing people to the US.

On the other hand, your own government, Minister, has suggested that it would be good if taxes were collected at the border and yet the federal government is saying it will only do it if it simplifies things, if there is harmonization.

Surely the two objectives can mesh very nicely if there was some goodwill between your government and the federal government. I think this is one of the problems a lot of people in Canada are concerned about, that different levels of government are going at each other instead of studying in practical terms how we can achieve mutually beneficial goals.

Hon Ms Wark-Martyn: The other thing I have to add here is that we did offer to simplify it at the border points so they could collect it at the border points. The response was, "No. You have to do it throughout the whole province." I do not really know how much the goodwill is there to actually co-operate and do that.

Mr Turnbull: Possibly you need to do it across the whole province, because we have the problem with gasoline taxes right across the province. The people in northern Ontario are certainly suffering from this.

The Chair: Mr Turnbull, one quick response and then I am going to move on to other members' questions.

Ms Noble: I was just going to add one additional piece of information to what the minister indicated. I think if we are looking at the collection of retail sales tax at the border, the issue is goods. As the minister indicated, the province did identify a willingness to look at some adjustments in terms of the taxes on the goods sector. Obviously, full harmonization with the goods and services tax would imply that the province would in fact have to harmonize the tax base to bring the services sector in, and I think it is that issue which is of concern and which the minister has been expressing.

Mr Daigeler: Could you expand a little bit on that?

Mrs Y. O'Neill: Before you start, Mr Chair, could you tell us of the time frames we are working under at this point, how many minutes for each party?

1030

The Acting Chair: Okay. We started at 10 after 10. We have until 10 to 11 approximately.

Mrs Y. O'Neill: So we have some more time left?

The Acting Chair: We have about 15 or 20 minutes left.

Mrs Y. O'Neill: I was just wondering how many minutes each party has left. I guess, as you said, you were keeping very close touch.

The Acting Chair: We were allocated 45 minutes for this presentation.

Mr Mammoliti: Just on a point of clarification, I guess, are we going around? At this point, are we coming back to our --

The Acting Chair: As I stated from the outset, I am going to apportion time equally, to the best of my ability, of course, and I am trying to keep track of that. I will rotate on each round.

Mr Mammoliti: It is just that the rotation started with us.

The Acting Chair: Fine, but I do not think we need to be that strict. If you would like, we are going to have to set up a different system, but I am trying to do it in the best way I can and being as fair-minded as we can. Mr Daigeler had his hand up first. That means I will go to the next party that has its hand up and go back and forth and rotate it. That is what I am doing. Mr Daigeler.

Mr Daigeler: You just indicated that Ontario is willing to adjust its collection together with the federal tax on the goods side. Is that what you were just saying?

Ms Noble: What we were indicating, from the point of view of the collection of tax at the border, is that one of the issues obviously is the exemption levels which are allowed for purposes of the federal tax, the returning residents' exemptions. One of the items the minister went forward to discuss with Mr Jelinek was the possibility of giving consideration to that type of adjustment with respect to the application of the retail sales tax. In other words, we would parallel the exemptions. This would make it easier for customs officers not to have to worry about collecting tax on a full bundle of goods for purposes of the province while only collecting them on those above the exemption levels federally.

Mr Daigeler: So you would exempt what the federal government exempts.

Ms Noble: That is right. Of course, when you are dealing with purchases being brought in, you are dealing with goods. You are not dealing with the services sector, which is part of the GST issue.

Mr Daigeler: From your Ontario Ministry of Revenue perspective, how complicated in fact would it be for the federal government to do this work, simply from an administrative perspective? In other words, how valid is Mr Jelinek's --

Hon Ms Wark-Martyn: Administratively, I think it could be --

Mr Daigeler: If possible, I would like to have an answer from the administrators on this, because I consider this strictly a technical question. There is a political and philosophical question, whether you want to harmonize with the GST, but strictly in terms of paper-shuffling and people need it and everything else, is this making a reasonable request of the federal bureaucracy?

Ms Noble: I think what I was attempting to answer previously is that when the minister went to visit with Mr Jelinek, it was in recognition that there were certain items, such as the exemption levels, which would be of administrative concern. What the minister went to discuss with Mr Jelinek was his department's willingness to have officials examine those issues and come back with options that would allow for that. As outlined by the minister, the position of the federal minister was that in the absence of the province agreeing to a full harmonization of the two tax bases, which would bring in the services sector to the province's retail sales tax, the federal government was not prepared to discuss any option less than that.

Mr Daigeler: And Saskatchewan is doing that?

Ms Noble: Saskatchewan has fully harmonized their tax base.

Mr Daigeler: Is there not another province that is also --

Ms Noble: Quebec and Saskatchewan. In New Brunswick, which I believe is the subject of some --

Mr Daigeler: Right. Are they coming close to an agreement as well?

Ms Noble: No. New Brunswick has accepted the offer of the federal government, the same one that was made to Ontario. In other words, New Brunswick has not harmonized its tax base, but what it is going to be pursuing is the use of information which the federal government has as a result of collecting customs at the border. That information will be shared with the province of New Brunswick. New Brunswick will undertake to directly collect that tax from the individuals after they have returned home.

Mr Daigeler: What is wrong with that for us, then? I guess that would be a question to the minister.

Hon Ms Wark-Martyn: We are looking at the same offer. As I said, we are looking at that exchange of information and seeing how feasible it is and how much revenue we would actually get from that offer. I understand New Brunswick is doing the same thing we are doing now with the Ministry of Revenue and federal officials, and that is looking into the offer and seeing how feasible it is.

Mr Daigeler: So you are pursuing that at the present time.

Hon Ms Wark-Martyn: Yes, that is correct.

Mr Bisson: There are a couple of interesting things that we have talked about here, and for my own sake and I guess for the people out there watching, I would just like to clarify a couple of things.

One thing is that when we talked about the gas prices, if both the federal and provincial governments were to take all the taxes off gas, my understanding is the gas prices in Canada generally would still be higher than what is found in the United States. Is that correct?

Mr Moxley: That is probably true.

Mr Bisson: Okay. Being that basically we are in a market of 22 million people compared to 250 million, I take it that it is a market thing, it is basically the cost of transportation, production, based on a smaller market than the United States.

Mr Moxley: That is almost certainly one of the components, yes.

Mr Bisson: Does the private sector tend to take any type of responsibility in being able to assist this question of cross-border shopping? The problem I have is that people turn around, and I think rightfully so, and to a certain extent say the government has a role to play in this, and I certainly think that is right. What I am basically getting at is, is the private sector talking about doing anything in order to try to keep the gas prices down itself to a certain extent, to try to have this flow to a certain extent?

Mr Moxley: I am not aware of any discussion on it at the moment.

Mr Bisson: Basically they are leaving it up to us, as governments.

Mr Moxley: I am not aware that they are doing anything but that.

Mr Bisson: Okay. On the question of harmonization of taxes, if we were to harmonize both the provincial sales tax and the GST, basically the scenario would be that we would be applying our provincial sales tax items that are presently not taxed under our system. Is there any idea as far as the impact of what that would mean in regard to maybe even increasing the flow across the border is concerned if we have to pay more taxes on the services we are presently not paying on? Is there any idea on that?

Hon Ms Wark-Martyn: The speculation is that if we harmonize at this point, it would increase the flow, because they would see 15% and they would also be taxed on the services they presently are not taxed on. It would also give them another reason to go across the border.

Mr Bisson: Why would the federal government want us to go in that direction? I have a bit of a hard time trying to understand why they would want us to do that if it is going to add to the problem.

Hon Ms Wark-Martyn: It would also add to the dollars, though, that they would collect as the federal government.

Mr Bisson: All right. Is the GST currently applied to gas sales?

Mr Moxley: Yes.

Mr Bisson: Oh, that is even worse. If we harmonize the provincial sales tax with the goods and services tax, that would mean in fact we would be taxing gas another 7%.

Mr Moxley: Presumably what we would do -- and this is just speculative -- is drop the rate of Ontario gasoline tax by an equivalent amount. You could make it relatively revenue-neutral. It is essentially what the federal government did when it brought in the GST by dropping the sales tax component and adjusting the excise tax so that it was getting roughly the same amount.

Mr Bisson: But would the danger not be that if the people who manufacture the gas increased their prices on gas, automatically our tax would go up in proportion to that 7%? If gas is being sold right now to the retailer, let's say, at 50 cents a litre and they are reselling, let's say, at 56 cents, and that price goes up to 60 cents, what you would have is that our taxes would go up in proportion every time they increase their gas. Would that not compound the problem?

Mr Moxley: It would, as you say, increase the amount of our tax take when the price increase jumped.

The Acting Chair: Final supplementary. I have three other people on the list.

Mr Bisson: Very good. On the question of harmonization, if I understand it correctly, if you harmonize our tax with the goods and services tax, what we would then be doing is compounding the problem. As well, the question of gas would not be done.

As a final supplementary, in regard to increases in taxes on gas by the federal government in the last eight years or the past Liberal administration, how many times was that increased?

Mr Moxley: Over the last eight years?

Mr Bisson: Yes, federally and what has happened provincially.

Mr Moxley: I really would have to go back and look at the records.

Mr Bisson: More than once, twice, three times?

Mr Moxley: Probably more than three times in both cases.

Mr Bisson: So this is not a new phenomenon in regard to increases in gas taxes, both federally and provincially.

Mr Moxley: No, not a new phenomenon.

Mr Bisson: Thank you.

1040

The Acting Chair: I have three more members on the list. I will start with Mr Turnbull, then Mr Dadamo, and then Mrs O'Neill. We have 15 minutes left, so I am going to stick to the time allocations.

Mr Turnbull: Okay. I will have very brief questions, maybe just yes or no answers.

Minister, have you done an impact study on the effect of harmonization in this province?

Hon Ms Wark-Martyn: Yes, I think we have.

Mr Williams: The Treasurer has done an impact study on it. I believe that as far as the Treasury is concerned, the total revenue would be relatively neutral. But the burden would have been shifted from those paying now to others, mostly the consumer.

Mr Turnbull: Would it not be correct to say, Minister, that your party has always fought on a platform of saying some people were not paying their fair amount of taxes?

Hon Ms Wark-Martyn: Yes. We will continue to say that.

Mr Turnbull: In the interest of time, I am just pushing this along. Originally, when federal sales tax was brought in early in this century, about 80% of our gross national product was attributable to the manufacturing sector. It is now about a third of our GNP. In other words, there has been a progressive movement of tax burden just to industry and less has escaped the taxation. Surely, would that not be consistent with your stated goal of moving towards fairness, that taxes would be equally distributed across the manufacturing and service sector, in view of the reduction of the proportionate size of the manufacturing sector?

Hon Ms Wark-Martyn: In fairness, I have a couple of points to make. I think, for one thing, you should be talking to the Treasurer, who I understand is also coming in this morning to meet with this committee here. I also have to leave by 10:50, because I do have another meeting to get to and I was scheduled to be here until 10:45.

The Acting Chair: Could I just say I did not know that was the case and I apologize for telling members that we still had another 10 minutes. I am going to cut this short, Mr Turnbull.

Mr Turnbull: In that case, can we just simply have the Treasury table to this committee the impact study on harmonization?

The Acting Chair: We can ask the Treasurer when he arrives. I am going to go to the next two questioners, Mr Dadamo and then Mrs O'Neill. That question you can place, Mr Turnbull, when the Treasurer arrives. We do have only six minutes left.

Mr Dadamo: I will not take very long.

As the minister knows, the riding I represent is Windsor-Sandwich -- the Ambassador Bridge is there, the tunnel is there also -- so I live with the cross-border shopping quite a bit. One question I wanted to talk about and home in on, of the many I would like to ask, is whether you could sort of talk about the express lanes and how that would be set up. Would it be slowing traffic? We are allowing the Americans to come in quicker; is that what the scheme would be?

Hon Ms Wark-Martyn: The express lanes are to put people through faster, anybody who is going across the border. There has to be a permit that they have to purchase annually to go through and they fill out a form. Presently, it is for anybody who wants to use that lane.

Mr Dadamo: We are also limited to the amount of lanes we have already on the Ambassador Bridge. It is not like you can build more lanes up there. So I am wondering, does it impede traffic? Is it slowing traffic down at all? How much quicker will it be?

Mr Williams: As I understand it, the point you have brought up is the very issue, and that is that physically they cannot put any more lanes in. All it will mean is that once you reach the point at the bridge or the tunnel where it fans out, you would be able to go to a lane and go through faster than simply stopping at the customs officer and having him question you.

Mr Dadamo: But the truckers already do that now.

Mr Williams: That is correct.

Mr Dadamo: The left lane is, I guess, an express lane.

Mr Williams: That is correct.

Mr Dadamo: It gets them in and out quicker.

Mr Williams: This would only work for non-truckers. Non-truckers would now join the same lane as, say, truckers would, or they would have another lane assigned to them which would mean fewer lanes, then, for those who are declaring and who have not been a part of the so-called Peace Arch Crossing Entry project.

Mr Dadamo: Okay, very well.

Mrs Y. O'Neill: Madam Minister, and perhaps your deputy, I would like to know as we sum up these discussions what things you are working on within your ministry, what directions you have given to your deputy, what kinds of studies you are engaged in. I would just like a summary of that now as we are finishing.

Hon Ms Wark-Martyn: We are still working with the federal government in the exchange of information and what that will involve. My staff is still looking into that with them.

Mrs Y. O'Neill: That is the exemption lists, correct? Harmonizing the exemptions?

Hon Ms Wark-Martyn: No, that is the exchange of information.

Mrs Y. O'Neill: I know. I would like to know what kind of information, then. I thought it was exemptions.

Hon Ms Wark-Martyn: No.

Ms Noble: We had mentioned earlier the two provinces that have fully harmonized where the feds are prepared to collect at the border.

Mrs Y. O'Neill: Right.

Ms Noble: What the province of Ontario is pursuing at the level with officials at the moment is the option whereby they would give us information that they have on the slips of paper that people use for declaration purposes. They would give us information in terms of who has come back and brought back purchases upon which customs and duties and GST were paid. The province would then have to take that information and we would have to get in touch with those individuals directly from the province and assess them, essentially, the sales tax which they owe under the law.

That is the option that is being pursued and examined at the moment. It is really to see whether or not it makes sense from the point of view of the province of Ontario to participate, as the province of New Brunswick indicates it is prepared to examine. What we are looking at is the alternative that has been given to us by the federal government, given that it is not prepared to discuss any options around its actually collecting it at the border.

Mrs Y. O'Neill: Thank you for helping me with that. Is there anything else, Madam Minister?

Hon Ms Wark-Martyn: The other thing we are working on is tourist rebates to help out the tourists who come across the border crossings from across the country and other places. Those are the two specific things.

Mrs Y. O'Neill: Could you say a little bit about what you are doing in that area?

Hon Ms Wark-Martyn: We are looking at working with the federal government to give back the rebates that tourists are sending in. Right now they send them in to us and then we send back the slips and then they have to send them back to the federal government for a rebate. We are looking at working out a system so that the tourist only has to send it to one level of government. We will rebate the whole thing and then work with the other level of government for the rebate.

Mrs Y. O'Neill: I hope that process can be simplified, because the tourism industry really does need that boost.

Hon Ms Wark-Martyn: That is correct, yes.

Mrs Y. O'Neill: Is there a moment for Mr Offer to offer one question?

The Acting Chair: No, I do not think so. We are going to cut it off at that point and move on to our next presentation, since we have run out of time.

MINISTRY OF LABOUR

The Acting Chair: Moving right along, I am going to call on our next set of presenters, the Minister of Labour, the Honourable Bob Mackenzie, and his deputy minister, George Thomson. Would you come forward please?

Mrs Y. O'Neill: May I thank the members from the Ministry of Revenue for coming here and being co-operative in their answers.

The Acting Chair: Sure. Thank you.

Welcome to the committee, gentlemen. I am sure we will have an interesting half hour.

Hon Mr Mackenzie: There are always new firsts.

The Acting Chair: As I try to point out, we will divide the time equally. You have half an hour, so if you would allow some time for questions.

Hon Mr Mackenzie: I have very few comments. I certainly share your concerns and those of my colleagues here today about the effect cross-border shopping has on our communities and our provincial economy. There has been a substantial decline in retail employment this year in Ontario. In the first quarter of 1991, employment in the industry averaged 55,000, or 10% less than the same quarter of 1990.

There have been a number of reasons for this decline. A simple important reason is the recession, which has meant that consumers have less money to spend. It is important to recognize that this recession has been caused to a considerable degree by federal policies, particularly the high interest rate policy of the Bank of Canada. Cross-border shopping has certainly been a contributing factor to the general decline in retail business, but again, many of the key factors do not necessarily deal with this government.

The introduction of the GST in January 1991 has led to price increases across Canada, considerably more money being paid than was at first thought. The increase in the value of the Canadian dollar compared with the US dollar over the last several years has raised Canadian prices relative to prices in the neighbouring states. These factors are the principal causes of the problem of cross-border shopping. Similarly, while Ontario wishes to help find a solution to this problem, the federal government simply has to play a key role in any solution that is arrived at.

The issue of cross-border shopping gains special attention because Ontario's border communities are the same communities suffering the most serious depression due to the economic downturn. Cross-border shopping, plus additional constraints on economic recovery, puts additional constraints on economic recovery in the border communities.

I think the best thing from there would be to go into the questions.

1050

Mr Offer: Before we go forward, as a matter of procedure, and I apologize for this, do we divide up the time?

The Acting Chair: As a matter of policy, as I stated earlier, we are going to divide the time equally among the three parties. We will be rotating back and forth.

Mr Offer: Thanks to the minister for his presentation. You started out by indicating some percentage of job loss. Is that across the province or is that specific to the border communities? If not, could you please indicate the employment figures in the major border communities?

Hon Mr Mackenzie: I do not have the employment figures in the major border communities. The figure I gave you is, across the province, the decline in retail employment -- a number of employees in the retail trade, rather.

Mr Thomson: If I might add to that, MITT and Treasury have been doing this study and much of our information has come from them and I know you will be talking with them, but they have attempted to try to look at that decline and calculate what extent of it is related to shopping loss in the border communities.

Between 1988 and 1991, the figures we have been given indicate that, if you look at that overall loss, 14,000 of that total figure could be loss related to the retail sector and border communities, but it is a very rough estimate, as I understand it, based upon the best calculations they can do.

Hon Mr Mackenzie: I point out that these are not our figures. I am not disputing them, it is just they have been collecting the information on this. We have not been involved in the figures on the cross-border shopping.

Mr Offer: As it is an issue of such great importance, especially to those border communities, I hope the Ministry of Labour would have at least attempted through, if not the ministry, a variety of other avenues of opportunity, to obtain the type of devastation the border communities are experiencing in terms of employment. I have had an opportunity of going to a number of these areas and I can assure you that the percentages you have provided are a bit on the low side in comparison with the reality of what is going on.

However, one of the things brought forward are the initiatives that labour is attempting to do in terms of addressing some of the job loss in the border communities. I am wondering if you might want to share with us some of what your ministry has attempted to accomplish in order to fight this job loss in the border communities.

Hon Mr Mackenzie: First, I should make it clear that we have not tried to carve out the border communities per se in terms of specific programs. We have a devastation in a number of communities in terms of plant closures and unemployment problems. Our approach has been, one, to get the protective legislation in place; two, to get the training programs beefed up and in place to handle the additional workers who need the support. In terms of actual figures, we have not felt it was useful in having a third ministry do actual collection.

Mr Offer: In response to your answer, that is one of the concerns being voiced by the border communities. They suggest that the type of difficulties they are experiencing warrant some specific action by the government, the Ministry of Labour in particular. In this time of recession, they are looking for some specific action. It appears from your responses that you have just put them in the same pot as everyone else. I suggest the ministry should look at the unique difficulties being experienced by border communities and listen to some of the issues they are bringing forward and some of the solutions they say are necessary.

My third question is --

Hon Mr Mackenzie: Fine, go ahead, but there was a response that should be given, Mr Chairman.

Mr Offer: My third question is whether you see the Sunday shopping issue as one which is in some way related to the cross-border issue. The Solicitor General has, in fairness, indicated they are totally separate and distinct issues. I am wondering whether you as the Minister of Labour agree with your Solicitor General that they are totally distinct, or that there is some impact by Sunday shopping on cross-border shopping.

Hon Mr Mackenzie: I cannot tell you the extent of the impact Sunday shopping has on cross-border shopping. I do not think anything operates totally independently, but they are certainly two separate issues. The way we are taking a look at them is on a separation basis as well. With respect to your earlier question, I can tell you that our ministry has not ignored part of it. There is an interministerial group going on specifically charged with looking at the issue of cross-border shopping. Certainly, we will be part of that assessment of the situation. The only point I was making earlier is that we saw little reason to have two or three separate ministries collecting figures on this particular issue.

Mr Thomson: I would like to briefly add to that. The labour adjustment program that we have developed and was announced a few months ago that involves the establishment of the office of labour adjustment, substantially added resources to assist businesses going through layoffs and closures. While it is focused on the province as a whole, we have put a fair amount of emphasis on developing programs in communities close to the border. Windsor is a good example and one of the things we have done with the added resources we were given is to put extra money in the local help centre to work with smaller closures, with employees in smaller enterprises facing layoffs because the normal program focuses upon larger closures of 50 plus.

Many of the retail establishments that are affected are smaller operations to begin with, so we have been trying to develop special measures to assist employees in those operations. The labour adjustment program, and I could go into it in more detail, does in fact provide a fair amount of assistance to those communities.

We looked at the issue of the extent to which Sunday shopping is relevant to the cross-border shopping issue. Once again, the other two ministries have been carrying lead responsibility for that. We have not been able to find substantial evidence showing that, during the period of time there has been more open Sunday shopping, this has had a major impact on the growth or lack of growth of cross-border shopping in other provinces or here. But the evidence on that is pretty limited at this point.

Mr Offer: You have brought forward two points I want to explore now. The first, dealing with the labour adjustment measures, is one which I guess all members recognize the impact of. However, the issue in the cross-border communities is not so much the labour adjustment matters but rather one step removed, stating we want to have to go through those later. We want to continue to exist and we want to continue to expand. We recognize that for certain companies, labour adjustment certainly is one which we will all agree in direction, but the cross-border communities do not want to have to undertake those because they do not want to necessarily close, and they are having to close.

My second point --

The Acting Chair: And your final supplementary.

Mr Offer: And my final supplementary, Mr Chair. Time flies. I am trying to get the picture because when I travel to the border communities, they see a connection between cross-border shopping and Sunday shopping. The Solicitor General has indicated that there are two distinct issues; one has no impact on the other. In your response, deputy minister, I believe you have somewhat moved in that area, that they are two issues. We know they are two issues, but we are talking about the impact one has on the other. You are saying that according to the Ministry of Labour you see no real impact of one issue on the other, and I say this by rhetorical question because I dare say there are many hundreds of thousands of people who live in those communities who would severely disagree with you.

1100

Hon Mr Mackenzie: A very quick response to your comments. First, in terms of labour adjustment, just because they do not want to have to go into the adjustment programs where there is an increase in unemployment, whether retail workers or whoever they might be, then we have to do the best we can within our mandate to set up labour adjustment and retraining programs, and that we try to do.

The answers that might stop it, or the answers to the issue of cross-border shopping, probably lie a little bit more in the economic planning area and what we can do about it. That has not been the lead of our ministry, it has been the Ministry of Industry, Trade and Technology and the Treasury that have had that responsibility. We have no hard evidence -- although we have not been the main collectors of information -- that Sunday shopping has had any appreciable effect on the employment issue, but I also would say very clearly, and I do not think it is disputing my colleague's position, that I do not think there is any single issue that stands totally alone. What we are saying is that we have no hard evidence that Sunday shopping itself is a major part of the cross-border shopping problem.

The Acting Chair: On that note, I must move on to Mr Bisson, and then I have Mr Turnbull next on the list.

Mr Bisson: To start on a lighter note, it is nice to be in a position to ask questions in the committee. I remember being in a situation at a committee meeting when I was making presentations to the very committee on which the now Minister of Labour sat. So it certainly is a nice feeling.

Just a couple of things. I guess I have to start --

Mr Offer: Time is up.

Hon Mr Mackenzie: I am glad you were a friend at that time.

Mr Bisson: I have a series of questions, but before I ask the questions I just want to make a statement, because it will make a little bit more sense that way. One of the problems we find with cross-border shopping is that what you said is perfectly right, it is not any one particular thing that causes a problem with cross-border shopping. To say it is just taxes, Sunday shopping, prices, just this or just that is a very broad statement. It is a number of things and I think we all recognize that.

We had no Sunday shopping in this province for over 110 years where the problem with cross-border shopping was not the big issue. What I am getting to is that it seems to me part of the problem is that there have been a number of contributing factors that have made it not only financially attractive for people to go shop the other side of the border, but also socially acceptable. It started originally, I imagine, with very small price differences from one side of the border to the other, until finally it became the trendy thing. I can go to the United States and I tell my neighbour I can get something for two cents cheaper, and my next friend said it was four cents, etc, and a lot of that is blown out of proportion.

In the end we, as Canadians, are shrinking our own market. If I live in Windsor, Sarnia, Kingston or wherever, because we start going in more and more numbers, we decrease the local market on our side of the border so the retailers do not have the volume of sales to sustain their own businesses. In a sense consumers are adding greatly to the whole problem around cross-border shopping because not only are we decreasing our own local markets -- the effect being that retailers have to increase their prices to stay in business because they sell less volume -- we are also contributing to the joblessness in this province. By not buying goods within our own province, we are not only putting people out of work in the retail sector, but those who have manufactured goods for the Canadian market do not have as big a share of the market either. Eventually we are wiping ourselves into oblivion by doing that.

Speaking about that, I have a couple of questions. It has always been the thing in Canada, it is almost a pastime, that any time we have a problem in this nation we turn to our governments. Governments have to take the responsibility. I do not want to say otherwise, but as a Minister of Labour, in discussions you have had with the trade union sector and also the private sector, what is being done by the private sector itself in order to possibly do something to try to curve the mindset around cross-border shopping? Are they planning any education? Are they doing anything in concrete terms in the private sector to try to assist themselves, in co-operation with their government?

Hon Mr Mackenzie: I cannot speak for private business. Because they are hurt by the effects of cross-border shopping, particularly in the border communities, I suspect it is probably increasing the level of awareness of the need for the most competitive prices they can come up with, and that is sometimes difficult. I would be surprised if that is not a reaction of the business community. There is probably more of a feeling that an education campaign may be part of what is necessary, from the trade union movement side, but I also have no doubt in my mind that they want to see a more specific plan that has been planned by the government.

I do not know what this committee is going to be able to come up with itself. My own personal view, and I guess I am entitled to that, is that we are paying a heck of a price for the free trade agreement. I think it led to some of the belief that the border was just absolutely open. You could do what you want, go across, and it was not going to give you a problem.

I think it has led to one other problem that I hope the committee will look at. I personally do not know how widespread it is. I was sitting down with a small businessman in London who has been a friend of mine for years who was down here only because his wife had to have a rather serious operation that was taking place in Hamilton. He runs a fairly extensive auto parts business in the London area. He was telling me his next-door neighbour, who simply got a price for some renovations he was doing on his home, needed 24 sheets of a special panelling. The price for that panelling was in the $20 range in London. He was told by a friend that he could get it for $11 in Detroit. He took his own pickup, went down to Detroit, picked up the 24 panels at $11, brought with him the statement, because he expected to pay some differences on it, and was just waved through at the border.

I do not know how we deal with situations like that, but it seems to me that it is not only the perception of people that they can cross the border freely and shop, and that probably means some real education or a little bit more Canadianization of our own people and what it is doing to us. But it seems to me that we appear to have gotten rather loose in terms of enforcement of any payments or differences that should be paid as it stands now as well, and that is probably part of the mindset once the border communities and the border seem to open up with the cross-border shopping.

Mr Thomson: I would just to add two quick things. There is some evidence, clearly, of companies adopting different pricing strategies closer to the border to help their outlets be competitive. The point you make about whether people understand the real costs of going across the border to shop is a very valid one. My understanding is that there are some municipalities in particular that are trying to explore better ways to bring the true cost of cross-border shopping home to people, both the cost of the exercise itself -- getting there and other costs that people often do not factor in -- but as you say, the indirect costs that come from reduced revenues, which affect the quality, amount and costs of services here in this province when there is not the revenue coming from retail operations in this province that help to pay for those services. I know there is some thought being given to those kinds of educational efforts, and I think there is a real need for them.

Mr Bisson: My great difficulty with this issue, as with many others, is that often in our society we tend to look for quick fixes. We say we can fix this if we can get the federal government or the provincial government to do whatever, and I am sure those fixes are partial solutions. But on this issue especially, there needs to be a very large education campaign on the part of municipalities, retailers, labour, business and the governments in general to be able to get people to understand what this real issue is about and that if we, the shoppers, cross the border and shop in great numbers, we decrease our home market. If we decrease our home market, in turn, we are not only kicking people out of the retail sector, but our manufacturing sector will also shrink. We will lose because we are unable to sell.

I have a real difficulty with people who come to me, as a government member or even as a member of this Legislature, to say it is because retail sales tax is not collected or because of whatever. Sure, that is part of it, but that is not going to solve the problem. I think people have to be very clear. There are hidden costs that are far greater on this issue than what the actual costs are when we go and save $2 on something bought on the other side.

1110

Hon Mr Mackenzie: I suspect the biggest problem this committee is going to have, and once again it is only my own perception, is the fact that while there may need to be some real education in terms of just exactly what this is doing to us, as we have indicated, those kinds of programs take a long time. We saw that in the whole battle in this province on health and safety and the rest of it, over how many years. It is difficult to win the battle in terms of education. People look for quick fixes, and if you come up with a quick fix, it is going to have to be pretty simple or you are probably going to have some problems with it.

Mr Turnbull: Most of the things Mr Bisson said I agree with completely. That does not often happen.

There is no doubt that it is a complex problem. There is no one single fix to it. An education program needs to be mounted, because to a great extent the savings are overblown. There are certain items which there are significant savings on. Some of that we could address and others are probably impossible to address.

I was struck by the minister's opening remarks. You said the three items which in your mind contributed to these problems were the high interest rate policy of the federal government, GST and the increase in value of the Canadian dollar. Then later on you went on to blame free trade to some extent.

I would just like some very quick answers on things. Would you not agree that some very prominent economists have suggested that the deficit budget your government has brought in exacerbates the problems of the federal government and the Bank of Canada in bringing interest rates down? You cannot untangle one from the other. When you are drawing that amount of money in to support a debt, you have to have a certain interest rate which supports it. To the extent that in Canada we now do not have as high a per capita savings rate as we traditionally used to have, to the extent that we borrow overseas to make up for government debts at any level, surely there is a pressure first of all on interest rates, which in turn has a circular effect of forcing up the value of the Canadian dollar.

Hon Mr Mackenzie: I think there are a couple of responses to the question you have asked. You and I may or may not agree on them, but in terms of my concern about free trade, the high dollar, interest rates and the GST, these helped to fuel or produced, with the downturn, the recession we have had in the province, and that means people with less money to spend and more likelihood to be tempted if they think there is a real saving in crossing over at a border community.

In terms of the budget we have brought down, I guess the quickest answer to the question you asked is that in my own mind most of the things I outlined are federal responsibilities, as I said very clearly. The debt we are paying off in Ontario, as I think you probably know, is 11 cents on the dollar. The debt they are paying off federally is 30-some cents on the dollar. That makes a heck of a difference in terms of where the pressure is coming from on the economy.

Mr Turnbull: Let's be realistic. That federal debt did not appear overnight. It did not just sort of suddenly go poof and one day it was there. When the federal Tories took over -- and I am not supporting them; I am just saying they took over a huge debt -- instead of being paid down during good times -- I am not bashing your government for running some deficit during a recession. I totally disagree with the extent of your deficit, but I am saying that it seems reasonable, if you subscribe to Keynesian economics, and I do not happen to, you are going to run some debt.

In fairness to John Maynard Keynes, he advocated at least paying off that debt in the good years, and you have taken over the problems from the Liberals. Successive governments did not pay it down. I am going back to when the Tories were in power and they did the same thing. We have every government at every level blaming the other and we have to stop this if we are going to move forward in this country.

The comments that are made about free trade are rather silly when you consider that last year, for the very first time in history, Ontario actually ran a positive surplus vis-à-vis trade with the US. In other words, we exported more to the US than we imported in dollars from the US for the first time. That is since free trade, so this argument about free trade is absolutely flawed.

Hon Mr Mackenzie: One of the privileges, and it is not always a pleasure, if you can call it that, but one of the interesting things in sitting down with the business community in the Ministry of Labour -- and you sit down with the community quite often, let me tell you, because it has an immediate concern over issues we may be taking a look at --

Mr Turnbull: They are not very happy with you at the moment, are they?

Mr Bisson: They are not very happy with the federal government right now.

Mr Turnbull: Excuse me. Mr Chairman, if we are going to have heckling in here, please give a ruling and I will join in the heckling. But if you do not rule that they keep their statements to themselves until they have time, I will not participate.

The Acting Chair: I would ask all members to be as cordial and as parliamentary as possible.

Mr Bisson: I apologize.

The Acting Chair: Mr Mammoliti on a point of order.

Mr Mammoliti: On that note, I would ask that Mr Turnbull not interrupt the minister in the middle of his response to one of his questions, then.

The Acting Chair: I think we will proceed and we will try to act in as parliamentary a fashion as we can. Please proceed, Mr Minister.

Hon Mr Mackenzie: What I was going to say to my colleague Mr Turnbull is that one of the things that struck me with some strength at a recent meeting with the key people in the auto parts industry, Woodbridge Group and a number of others, one of the comments made by all of them at that session in my boardroom when we discussed the effect of free trade, among other things, as well as the effect, as they saw it, of any labour legislative changes we might make in the province of Ontario, was that had they realized that both the interest rate and the Canadian dollar were going to stay as high as they were, they might have taken a different position on the free trade argument. I found it a little bit difficult to accept, simply because we had made those points in the course of the hearings on free trade.

The final point I will make in terms of our budget is that there is about $1.6 billion or $1.7 billion in new money in that budget. Most of it is statutory requirements in the social services field, the welfare field or the lack of transfer payments that have come through. There is no question that there has been an effect on that budget in this province.

Mr Turnbull: They could have easily cut back government expenditures.

Mr Abel: We would like hear the answer.

The Acting Chair: It is Mr Turnbull's time and I am going to allow him his time. There is give and take on this, so if you would proceed.

Mr Turnbull: I want to point out to the members across there that we have heard ministers or other people interrupting at times and saying -- this minister, in fact, indicated --

The Acting Chair: Mr Turnbull, I will rule on what is acceptable and what is not.

Mr Turnbull: Thank you. Good.

Minister, will you confirm to me that last year for the first time in history Ontario had a positive surplus in trade with the United States?

Hon Mr Mackenzie: I am not sure whether that is a fact. I do not dispute it if you say it; I just do not know offhand.

Mr Thomson: I am in the same position as my minister, Mr Turnbull.

Mr Turnbull: It is a fact that we had a positive trade balance for the first year after we had free trade.

Hon Mr Mackenzie: I am not sure what point that really makes, though.

Mr Turnbull: Please check it out. I mean, you cannot bash free trade and suddenly say that we have a positive balance. The problems we are having now are complex, as you have indicated, and they involve interest rate policy and the value of the Canadian dollar and also taxes. Surely we have to look at them in unison. Your government is driving interest rates higher simply because of the pressures of borrowing, and leading economists are saying this.

Hon Mr Mackenzie: Once again, how do you explain the 11 cents compared to 34 cents on the dollar in carrying debt? It seems to me we have done a relatively good job.

Mr Turnbull: As I was about to say before, the difference in borrowing is that it does not occur overnight, to the extent that governments have not paid off in good years the amount of money they have. In my estimation, the federal government made the fatal mistake of not cutting back on government services tremendously and paying down the debt. But it was the debt they inherited from the Liberals when they took over, because they have been running a balanced budget, revenues relative to expenditures. The increase in the federal debt has occurred because of servicing the debt, and I am cautioning you, Minister, that your government should not make the same mistake in building up the debt, because if it is 11 cents now, then simple mathematics would say that if you double the debt as you are proposing, then it is going to be 22 cents. If you are saying it is wrong for the federal government, why would you imitate what they have inherited?

1120

Hon Mr Mackenzie: Once again, I think some of your questions are probably more properly directed to the Treasurer, but as a member of the team, I can simply tell you that it is not our intent not to deal with the deficit. We were dealing this year in the budget with a specific problem. As the Treasurer has made it very clear, were we fighting the deficit or were we fighting the recession? Without some of the things we did, as you know, we would have had another 70,000 or 80,000 people out of work in this province.

The Acting Chair: I am sorry, I am going to have to cut it off at this point. We have run out of time, gentlemen. Thank you for appearing and thank you for keeping to the tight time limits and co-operating with me.

We will move on to our next set of presenters. Mr Mammoliti wanted a question, but we ran out of time. We will get to the next set of presenters and back to you for questioning.

MINISTRY OF INDUSTRY, TRADE AND TECHNOLOGY

The Acting Chair: Can I call on the Honourable Allan Pilkey, the Minister of Industry, Trade and Technology; Tim Armstrong, his deputy minister; Peter Friedman, director of small business at the ministry and anyone else they would like to introduce who is also present. Please come forward, gentlemen. We do have to keep to a tight time schedule here. Welcome to the committee meeting, and I would ask that you allow some time for members to ask questions after your presentation. We have approximately 45 minutes. Please proceed.

Hon Mr Pilkey: Thank you very much, Mr Chairman. I am joined today by Tim Armstrong on my immediate left, who is the Deputy Minister of Industry, Trade and Technology; on my right, Peter Friedman, director of small business for the same ministry. Peter is also chair of an interministerial task force we have commissioned to study and to bring forward recommendations with respect to the cross-border shopping issue.

Mr Chairman, cross-border shopping has become a problem for Ontario as a result of circumstances mainly under federal control, but there is required to be a response from all levels of government, hopefully working co-operatively to find a solution to this difficulty.

We have a rather complex problem, with a variety of interest groups. There does not seem to be any single solution to this problem. Perhaps one of the greatest difficulties is that this exodus seems to be based on consumer choice, based on either the real or perceived benefits they might achieve across the border.

I could continue at this point, but I wish to offer one possible suggestion, if the committee feels it would be helpful. As I indicated in the introduction, Mr Friedman has chaired the interministerial group. He does have about three to five minutes of comments to update you on the workings of that committee and some of the findings and issues. If it would be helpful prior to my continuance and offering myself for questions to the committee, would the committee find it helpful to hear the findings of that particular group for that brief time?

The Acting Chair: By all means, if that is the way in which you wish to proceed, please feel free to do so.

Hon Mr Pilkey: Thank you. As I said, Peter Friedman is the chairman of the committee and he will take you through a very brief overview. I think it will be very helpful to the committee.

Mr Friedman: As an opening, I just want to mention that the committee has met with a number of groups on this issue. The federal government also has an interdepartment committee on this issue, and we met with them. We met with the mayors' committee, which is chaired by the mayor of Windsor, Mayor Millson. We met with all the labour unions, or most of the labour unions led by the Ontario Federation of Labour and the Canadian Labour Congress. We met and have been working with a number of border community task force groups made up of business people and everyone in the eight border communities affected by this issue. Also, we attended and talked with the retail council and a number of other business trade associations in the period we have had the committee working.

As the minister started saying, this is a highly complex problem with various interest groups coming at it from different directions. We believe no one solution will in fact have a significant effect.

Consumers are basing their purchases on either real or perceived differences in prices, which I will talk about in a minute. One important element you should be aware of is that there are important differences in our wholesale and retail sector between Canada and the United States, which a preliminary study by Ernst and Young indicated are causing some significant differences in pricing and significant differences in modes of operation.

The border communities are taking the brunt of this problem at the moment, and the problem is growing extremely rapidly. In this quarter, the volume of shoppers has gone up 22%. Another unfortunate situation is that, in effect, most of Ontario is a border community, 80% of our citizens live within two hours of some border of the United States, so we are in a very precarious position as far as this particular issue is concerned.

The closing of businesses in the various border communities is causing, I think, quite serious hardship in those communities above and beyond the economics. I think it is causing some of the communities to have an effect on their structures and in their situation, because many of the people who are closing were also the people who were involved in the funding of junior baseball leagues and many other of these situations. So it is having detrimental effects on those communities.

It is also threatening the consumers' contribution to the economic recovery, which we hope will be coming soon, because of the significant downplay.

The border communities are looking to the provincial government for leadership, and they certainly need all the border officials. And the retailers in the community are looking for some assistance and leadership from anywhere they can get it to come out of this particular problem, which is hurting them terribly.

The next page I will very quickly summarize. The situation last year was that there were 20 million same-day shoppers returning, a 20% increase from the year before, which was a 20% increase from the year before that. With that sort of volume coming across our eight or nine border points, the basic excise system is being totally clogged up.

We did some research on all the border communities and it indicated an approximately $1-billion loss in retail sales projected for 1991. We broke those out in the various border communities, and they break out something like that. In addition, we did research in four of what one would consider non-border communities, such as Hamilton, London, Ottawa and Kitchener-Waterloo. Based on that research, we found there would be an additional $1.2 billion of retail sales lost within the two-hour drive element.

These estimates are based on goods only. Services would add to that.

There are a number of causes to this. The one you hear most about is the lower prices, some of which are real and some of which are perceived, most of which is being promoted by the media, our media and the American advertisers.

In discussions with consumers, there definitely seems to be some tie-in with the concept of the free trade agreement and the feeling that the border in fact has now disappeared and they can go more freely back and forth.

The GST is another thing they certainly talk about. They use the slogan in the Buffalo area of, "Go Shop Tops" which, as many of you know, is a department store in the Buffalo area.

1130

The administration of customs and excise has become a serious problem mainly because of the volume. The people there have mostly become traffic officers trying to move the people through the system because of the huge lineups at certain times at the border points, with very little time or effort to deal with the concept of duties and tax collection.

The Americans have woken up to the opportunities. They now have large shopping malls across every border point. They are also advertising heavily in Ontario and are doing a lot of their marketing based on the Canadian consumer.

I believe consumer attitudes have changed. What we have heard is that there seems to have been an unwritten kind of an agreement between the people and Canada, that they were prepared to pay slightly higher prices for goods because of the social and health networks that we have in Canada. That seems to be disappearing now. They are taking advantage of those opportunities, going to spend their bucks across the border.

Taxation and regulation by all levels of government is certainly one of the causes that appears to come forward.

That is a quick summary of what our task force has found.

Hon Mr Pilkey: I hope that in some way capsulizes and sets out many of the difficulties, real and perceived, that surround this issue. Perhaps we might proceed to a question and answer period if that would be helpful, or if there are any elaborations on any of those circumstances we would be pleased to respond to those.

Mr Mammoliti: My question revolves around what we can do as a team. This morning all we have heard is what we can do here in Canada, what we can do here in Ontario, what we can do together with the federal government. I am curious about what we can do as a team to try to influence the United States against hurting us. What I mean, and you touched on it in your report somewhat, is that they are doing a lot: They are setting up malls and they are advertising and attracting Canadians, and they are advertising around Canadian wants and Canadian needs.

To be more specific and just to give you an example, when we were in Windsor, I was talking with some of the residents in Windsor and they were saying there are bars and stores across the border that accept our money at face value. That attracts Canadians cross-border.

What can we do as a team -- I am talking about the federal government as well as municipal and the rest of the residents in Ontario, and Canada, for that matter -- to create some sort of strategy? Is there a strategy we can come up with, away from the free trade agreement now? Is there anything we can do to try to stop the Americans from doing the damage they are doing?

Hon Mr Pilkey: To be objective, I really do not know what you could say to an American business person who is simply trying to market his product line. I think they are going to do what businessmen do, and I am not sure how one might approach that. I think you really would be left with: How could you promote your own side of the border? Are there incentives? Are there promotional programs that merchants in those border communities can offer to entice their customers to stay at home or, for that matter, to entice US citizens to come over to our side of the border?

We have met and have been meeting, I believe for a considerable length of time, with those border communities and have assisted in some framework studies that would assist them in that particular direction. Of course, we will be meeting in a joint fashion with the federal government and the mayors' committee within the next week or two to see whether these various stakeholders can bring to the table any particular suggestions or solutions to the problem.

Mr Mammoliti: So the provincial government is quite prepared to sit down with the federal government and think of ways of combating this particular problem?

Hon Mr Pilkey: Absolutely. One of my cabinet colleagues, Shelley Wark-Martyn, recently met, I believe, with Mr Jelinek with respect to the issue of collection of provincial sales tax, which would take away some of the advantage of cross-border shopping. My discussions with her have indicated that she was not particularly well received and the suggestion that the federal government might assist us in this way did not meet with a great deal of favour. Regrettably, I am not convinced that there will be a united focus with respect to the federal and provincial governments, notwithstanding our desire to do so.

Mr Kwinter: I have a question and I do not particularly care who answers it. I am sure you know that we have another committee that is addressing the cross-border shopping issue, and I just came from that committee. We have been meeting for some time.

In your causes, you list the free trade agreement. I am sure you know that prior to the free trade agreement, 80% of all of the trade in goods and services between Canada and the US was duty-free. For the remaining 20% that was in place, the average tariff was between 7% and 10%. That was the average. Those tariffs are coming down over a period of 10 years. Some have come down immediately, some are coming down over five, and some are coming down over 10.

What I would like to ask any one of you is, can you identify one consumer item that has been affected by free trade?

Interjection.

Hon Mr Pilkey: We will press for both, though. Go ahead. We will give him all kinds of information.

Mr Friedman: I think the important part, and what I was trying to say, is that much of this phenomenon is a mindset of people. It is not really based solely on the price difference. I think people are doing this in some way -- the notion that the free trade agreement gave people in the consumer world is that in fact there would be a difference. Whether there was an actual difference or not I do not believe really matters to these people. I think that it is the concept, and in fact the border is disappearing. In many ways they have caused the border to disappear by the numbers that are going over.

When you have 20 million people going back and forth, it is like a mob with the police. You cannot in fact be diligent in the customs and excise function. By their actions they have caused the border in essence to disappear.

The federal government tells us that they have to get people through that thing in 45 seconds. That is what they are doing it in now. Their aim is to get it down to 15 seconds just to keep the system moving. In that mode, duties and taxes become kind of irrelevant, because they can only deal with 5% of the people in terms of collecting.

Hon Mr Pilkey: I believe the question is well put and technically correct, but if I can just add to that, I think it is really a question, Monte, of perception, and almost a feeling now that it is okay to go over that border and shop. I think with the free trade agreement, by the very nature of the words "free trade," the border now becomes irrelevant, invisible, and I think that kind of sanctioning, if you will, has started to set in.

In addition to the sanctioning that people now feel, I think there is also a feeling of bitterness and resentment by many consumers -- and it certainly was expressed in media interviews -- from many people with respect to the GST. I do not mean to be partisan in this comment either, but I think a lot of people finally just said --

1140

Interjections.

Hon Mr Pilkey: No, I am not trying to be. Seriously, I am not trying to be. But I think they finally used that, as well as their frustration, to say: "The heck with it. It is cheaper over there. I am going. I am upset with our own national government's tax policies." It is another straw, I think, coupled with the first point I made, the sort of low enforcement -- and I am sorry to be repetitive of Peter's comments. I can recall, many years ago that some Ontarians, when they crossed that border, could not remember how much you could bring back after 24 hours and how much after 48. You had to be there seven days, I believe it was, before you could bring back $300. There was enforcement and it was a concern of people.

I think because of the lack of enforcement, or the low enforcement, and because of the FTA and the GST, people now feel quite at ease at making that sojourn over there to reap what they perceive to be an immediate cash benefit in their hand or in their front pocket. So while I do not disagree with the member in terms of his technical explanation -- I am sure it is quite accurate -- I think it is these attitudinal problems that we fight.

Mr Kwinter: The reason I raised the point was because, again in our other committee -- and this committee is going to have to do the same thing -- we are looking for solutions, and you cannot get the solution until you know what the problem is. If you are going to just stand up and say, "Well, there's an attitudinal problem," that may be what we have to address. But I think you do everybody a disservice when you stand up and say that because of free trade -- and God knows, when free trade came, I was our government's spokesman against free trade. I thought it was a terrible deal.

But having said all that, what I am saying is that when you say it is the free trade agreement, it gives the impression that because of free trade, there is a competitive advantage. I am saying to you that I have not found one single consumer product that has changed in price because of it. There may be some, but no one has identified them to me. All you are saying is: "Well, it's got nothing to do with that. It has to do with an attitude that because of free trade you can go across and shop at will without any duty or anything else."

If that is the problem, then that is a relatively easy thing to address. It is a matter of education. You spend some money and you tell people, "Free trade does not allow you to go across the border and shop at will." But the impression, and I hear this all the time -- and again, my credentials are known; I was opposing the free trade agreement. I see member after member stand up and complain about job losses because of free trade or competitive disadvantage because of free trade.

When you consider, as I said earlier, that 80% of all of our trade in goods and services was there before free trade, the most significant thing that has happened is the change in the value of the dollar, because the 20% that was still in place was only between 7% and 10%. When we started negotiating the free trade agreement, the dollar was at 72 cents. It is now at 87. That 15 cents has wiped out any possible advantage that anyone would get from the free trade agreement.

What we have to do, if you think that is a cause for the cross-border shopping phenomenon, is relatively simple. You just take out full-page ads and say: "Free trade doesn't give you the right to go across to the United States and shop at will. You still have to pay duty when you come back. You still have limitations. You still have all of these things. Don't think that free trade will do that."

The reason I bring this up is that I think this committee and the other committees that are looking at it have to come forward with recommendations on how to address the problem. We are not going to address the problem if all you are going to be doing is making fuzzy statements about, "Well, there are perceptions and there is this and there is that, and what are we going to do about it?" I think we have to take a look at things.

If I could just add one more comment, we have found that the areas that have triggered the most trips to the United States, certainly in border communities -- and then, of course, you have to define what is a border community, and I suggest that even Toronto is now a border community -- are milk, gasoline, beer, cigarettes. Those are the things that are the trigger. Once people go over there, they buy lots of other things, but those are the trigger.

I would respectfully submit that in virtually every one of those areas, we as a provincial government can affect it. We can affect it because our taxes impact on all of those and exacerbate the problem. Those are some of the areas that we should be looking at.

The Acting Chair: If you could respond briefly, I would appreciate it.

Hon Mr Pilkey: I can respond briefly. The member can well appreciate, understanding the business that he and I and others around this table are in, that the question of perception and the question of commonly held beliefs are in fact very powerful tools. I think there needs to be found, as was suggested, a remedy to that circumstance.

I think in any number of things, anywhere from taxation policy to one's car insurance policy to whatever, there are not many Ontarians walking around with the book. They know what they perceive they know, the information that they have. It is not always technical, and most shoppers are not technologists.

When you have a low level of enforcement, almost a wave-through, I think that reinforces people's belief that it is somehow free and it is okay, that there is nobody checking and they do not care anyway. It is in that context that I think we were trying to make the point about attitude and perceptions. In fairness, that is not to argue against the technical points that are made, because that is true.

I notice the Treasurer is coming in following this presentation. The question of taxation on particular product levels or Ontario's subsidy of particular product levels in the four that the member mentioned might be something that he may well like to entertain.

The Acting Chair: That is great, because we are winding down here and I would like to move on to Mr Turnbull and allow him an opportunity to ask a question.

Mr Turnbull: Minister, I was struck by what Mr Kwinter was asking. The question was put: What single item has been decreased as a result of free trade in the United States? We did not get a response to that, so it is quite obvious you cannot think of anything to hand.

You have said that essentially it is a perception problem. This free trade is a perception thing. But when we are dealing with something as vexatious as free trade and the implications for the Ontario economy and in fact the Canadian economy and the support of our social safety network that we have built up and we are all so proud of, surely it would behoove your government to stop dumping on free trade.

Every time we talk about cross-border shopping in the House, the answer comes from your benches that it is because of free trade, and you yourself have admitted that this is not the problem.

Mr Sutherland: That's not true.

Mr Turnbull: Excuse me, Mr Chairman. Will you once again direct the other side to keep their comments until they have their time.

The Acting Chair: Mr Turnbull has a point. Please do not interject; he has the floor. Please continue, Mr Turnbull.

Mr Turnbull: Could you first respond to that, Minister?

Hon Mr Pilkey: I do not want to be repetitive. I tried to and I believe I did respond as accurately as I could --

Mr Turnbull: Would it not be more appropriate for you to stop dumping on free trade as the reason for it, since free trade has not made it more attractive to shop?

Hon Mr Pilkey: We identified seven or eight causes.

Mr Turnbull: I will go point by point. First of all, on this question of free trade, since you have implicitly admitted that free trade is not the cause of people going across the border, that it is a perception problem, surely you stoke the perception problem by giving this fallacious answer in the House and at all kinds of press conferences? Could you just respond to that specific question?

1150

Hon Mr Pilkey: I do not know who made the direct statements or what the context on a given issue or question was. I was simply responding that I believe that in the minds of Ontarians and everybody else, the free trade agreement sets up a mindset for people and they believe that to be the case.

Mr Turnbull: But it is not the case.

Hon Mr Pilkey: But also, when you see a federal minister -- and I hope I am attributing correctly to Mr Jelinek -- I think he came out with some kind of remark that it was a social problem or something. I am not sure of the words he coined. This was not really anything he could do anything about specifically; this was people's mindset and --

Mr Turnbull: But your government also seems to think there is nothing it can do about it. You have just increased the taxes on gasoline and a whole host of items. In fact, the federal gasoline tax is less than the US federal gasoline tax. The reason gasoline is so expensive in Ontario is because of the provincial tax, and that is one of the main items people are going across the border for.

Hon Mr Pilkey: Yes, but taxation and regulation and public policy in this province and in this country, in my view, do have an impact with respect to the price differential between the two nations. That will lead us into some very tough water and some questions of structure and approach which will be difficult indeed. I think that is where a lot of this problem lies. That is why people like you and me and any number of other people around the table are still at the margins on this argument, not being able to find the single obvious key to answer the door to the problem of cross-border shopping.

Mr Turnbull: I was attempting to go step by step, because I agree it is a complex problem and there are many factors.

The first one I mentioned was free trade, which, you would agree, was a perception problem. I feel your government stokes that perception problem by blaming free trade. We have agreed it is not free trade that has caused the reduction. Gasoline tax is another item which is recognized as one of the causes of fuelling people to go across the border, if you will excuse the pun. It is very problematic.

Your government has increased taxes at such a rate that we have become very uncompetitive, yet Canadian federal gasoline tax is less than US federal gasoline tax. So the problem clearly is at the provincial level. Surely we should be addressing these items, and I am not suggesting in isolation that that is the only thing.

Clearly we recognize that when we look at alcohol and the level of taxation we have on alcohol in Ontario, that is as a result of government policy where it has decided to put relatively heavy penalties on alcohol for social reasons and, as well as that, to fund other important social projects.

Hon Mr Pilkey: Let's not excuse Ontario from its responsibilities. I think often when you hear members rise in the House, they do not give you a bare FTA comment. It is usually surrounded by high dollar, high interest rates, FTA, and a host of other things which try to speak to some of the cumulative causes that are causing a recession in the country.

Mr Turnbull: That is correct, Minister, but high interest rates, of course, are caused by deficits because you have to go out and borrow the money. As you add to your deficit, you exacerbate exactly the problem that you blame the federal government for, yet you are doing the same thing.

Hon Mr Pilkey: Before we trail off into that, what I was trying to point out is that these areas are within federal control, and I think many of these comments are directed towards the federal government and some of its public policies and fiscal policies, because it has been having, in the minds of many, a negative impact on any number of circumstances and well beyond our -- -

Mr Turnbull: My comments are directed towards your government, because we can certainly bring forward a report where we make recommendations as to what the federal government does, but we are specifically talking to you as a provincial minister. We have talked about the gas tax, which is too high.

Hon Mr Pilkey: Let me answer you -- -

Mr Turnbull: We have talked about the perception problem with the free trade, and you have agreed it is just a perception problem --

The Acting Chair: Excuse me, I am going to have to cut it off at this point, Mr Turnbull, because you have run out of time. I apologize, but I am going to move on because we have a long list of speakers. We have approximately 10 minutes left. Mr Bisson is next on the list, and then I will rotate the questioning.

Mrs Y. O'Neill: Mr Chairman, on a point of order: We are going to go and vote, which I understand you said we were. We do not have 10 minutes without a break.

The Acting Chair: It is a five-minute bell, so I am assuming we will have enough time. I will continue, and hopefully we will have enough time. It is a bit of a gamble.

Mrs Y. O'Neill: Yes, it is.

The Acting Chair: Unless everyone wants to come back for a few minutes afterwards.

Hon Mr Pilkey: Let's gamble.

Mrs Y. O'Neill: This is the lead ministry on this issue and I do not think we have had 45 minutes with Mr Pilkey. I really do feel it is important.

The Acting Chair: We started at 11:23 by my time, and 45 minutes will take us to 12:08 approximately. We are almost at 12 now. Unless we waste more time, we are going to finish at 12:08. I have Mr Bisson on the list. You have approximately five minutes, and then whatever time remains we will allocate among the three parties.

Mr Bisson: I think it is an interesting exchange that we have been into up to this point because we were speaking before with the previous witness, who was Mr Mackenzie, the Minister of Labour, as we talked about the whole question of what the ramifications are of me, as a consumer, deciding to go to shop on the other side of the border.

There are a couple of things that I want to get to. We can sit here all we want, quite frankly, as politicians, the Liberals, the Tories and New Democrats, and point fingers at each other until we are blue in the face. But the reality is that neither one of us, as either of these political parties, is perfect when it comes to this question. The feds in the last budget raised the taxes on gas and on cigarettes, and all of a sudden we do the same in Ontario because there are services that need to be rendered and all of a sudden we are the bad people.

The Liberal government was no shining example of perfection when it came to taxation in its five-year tenure as government. I think --

The Acting Chair: Could you stick to the subject matter, Mr Bisson?

Mr Bisson: Just one second. The point I am trying to make is --

The Acting Chair: Ask the question, please.

Mr Bisson: -- a very important point. We, as politicians in this Legislature in Ontario, have a responsibility to be able to try to work out some of the social problems that we have in this province, which are also economic. I perfectly agree with the member of the opposition from the Tory Party, who says at times we tend to jump all over each other and try to blame each other for our problems.

The reality is we have a problem with Sunday shopping that can be addressed to a certain extent, but not only by government. What I am saying here is that the problem I have is that we turn around in this nation and we say every time that we have a problem it is strictly the government that is going to be able to give the solution. I think there has to be a common ground found, and also a partnership built between both the private sector and the government, to be able to sit down and to strategize how we can curb this.

You talked about perception. I think you hit the nail on the head. A big part of the problem we are having with Sunday shopping is, yes, it is cheaper in some instances to cross-border shop on certain items. People can say, "Well, let's rip all the taxes, both federally and provincially, off our gas, cigarettes, booze and the rest of it, and we're going to take away those loss-leaders on the other side of the border."

The reality is that we determined in this country years ago that we wanted to have a lifestyle and we wanted to have social programs to make sure that when my dear old mother has to go into the hospital to get a heart transplant or whatever it might be, it does not come out of my pocket. That costs bucks. So we have to raise the revenue somewhere.

The Acting Chair: Mr Bisson, if I could interrupt, we are --

Mr Bisson: The point I am trying to get to is simply this: What can be done with regard to some sort of working between both the provincial and federal government, as well as the municipalities, as well as the business sector and labour, to put together some fairly aggressive marketing campaigns by which we start explaining to people what we are doing as Canadians to ourselves when we go out and cross-border shop, and that in the end, we as consumers have a very big responsibility to play in this issue?

Is there anything going on in that particular direction and is that something that you would contemplate as something that we can very aggressively get in? The Americans are aggressively trying to take our consumers and get them to shop in the United States. What are we going to do to be able to say, "This is what the end result is," and market the whole idea of what Canada is all about?

Hon Mr Pilkey: Mr Friedman indicated at the top of his presentation that there has been a very broad consultation with any number of groups. The meeting will take place -- I am not sure of the date; it is going to be either 25 June or 2 July, I believe -- on the task force where finally all the players will come together at one particular place. Quite frankly, I think they have had sufficient time to review many of the aspects that need to be tested with respect to the issue. I am hopeful, coming out of that meeting with the federal government, the provincial government and the mayors, we will in fact come up with some solutions that will be effective.

The question of an awareness program I think is a very valid one. It is one that has been talked about. I think it enjoys the support of business, labour, government and all of the stakeholders involved in this, and more particularly the merchants in those border communities. I think your idea is a very good one. It is one that I think is likely to find favour, and we hope it would be effective.

1200

The Acting Chair: Can I just interrupt? I am sorry, Mr Bisson. I will ask for a recess as soon as there are division bells that we hear, and then at that point we can continue for approximately three or four more minutes and allow members to go up to the House to vote, if that is the wish of the committee. Is a vote taking place? I just want to clarify this.

Mrs Sullivan: They just voted on Mr Jackson's bill.

The Acting Chair: There is the division bell. There will be a vote. We do not have to go yet. If members wish, we can come back.

Mr Turnbull: I do have to go.

The Acting Chair: In that case we will recess and ask the witnesses to come back for a further five minutes of questioning. I am informed by the clerk as well that the Treasurer only has until 12:30, which further complicates our work here.

Mrs Y. O'Neill: Mr Chair, a question if I may: I just wanted to ask you, you mentioned this --

The Acting Chair: Any further direction at this point about what we are going to do from the committee? I am sorry to interrupt you.

Hon Mr Pilkey: I can try to respond with a brief answer to a brief question, if that will help.

The Acting Chair: Okay, brief question, brief answer.

Mrs Y. O'Neill: Then we will come back as soon as the vote comes through? All right.

You have this document and you have given moneys to three communities that have been named. Could you tell me the status of where you are at with this document, and have you done any interim reports with Cornwall, Sault Ste Marie and Niagara on the document? Where are we with this document?

Hon Mr Pilkey: Yes, I believe they have. Peter, do you want to detail on it?

Mr Friedman: Yes, we are meeting regularly with the three communities. Very shortly we are going to assist Windsor as well to do something similar. The communities are all working on slightly different methods of using the documents. It is not just the three communities; all seven are using aspects of the document.

Mrs Y. O'Neill: When do you expect your final report?

Mr Friedman: I do not think there will be a final report. I think it is a continual --

Mrs Y. O'Neill: You are not asking for updates on how they are doing this?

Mr Friedman: Oh yes. We meet regularly. We meet with them once a month.

Mrs Y. O'Neill: Would it be possible for you to summarize for this committee what the results of this have been, since you are the lead ministry?

Mr Friedman: Sault Ste Marie, for example --

Mrs Y. O'Neill: We do not have time for a long answer. Could you present something in writing to this committee about the results of these?

Mr Friedman: Sure.

The Acting Chair: To members of the committee, shall we come back for further questioning, since the Treasurer only has until 12:30? We are going to be hard-pressed for time. Can we recess and allow our witnesses at this point to leave for the day? All agreement? Great. We are recessed until after the vote has been taken. We will be rejoining you here.

The committee recessed at 1203.

1213

MINISTRY OF TREASURY AND ECONOMICS

The Acting Chair: I call the meeting back to order. We have before us the Treasurer of Ontario, the Honourable Floyd Laughren.

Hon Mr Laughren: This is Tom Sweeting, who is the director of our taxation policy branch.

The Acting Chair: If you would like to proceed, we have approximately half an hour. If you would allow some time for questions, that would be appreciated.

Hon Mr Laughren: Did you wish me to start off with some remarks?

The Acting Chair: If you wish.

Hon Mr Laughren: I thought I was coming primarily to answer any questions that the members might have but I think that, first of all, I could indicate my pleasure at coming before yet another committee dealing with cross-border shopping. I think you are aware that the standing committee on finance and economic affairs is dealing with this issue and is indeed going to be presenting a report very shortly, I believe, on the whole question of cross-border shopping.

It is one of those issues that bedevils us. It is not just an Ontario problem; I think we all understand that. The last time I checked -- I do not imagine it has changed very much -- there were 14 border communities in Ontario, as we define border communities. It is not just any one community and it is not just in Ontario. We have all heard of the problems, I think, in New Brunswick, Quebec, British Columbia, and perhaps others too, where cross-border shopping is seen to be a problem.

The causes are varied. We know, for example, that in some cases taxes play a role. I do not think there is any question about that. If you look at the taxes on gasoline and on cigarettes in all Canadian jurisdictions compared to the United States, there is an enormous difference. I would be the last person, whether in government or opposition, to apologize for those taxes. I think if you are looking at gasoline and cigarettes, which are the two most often used as examples, there are very good reasons for both those taxes. I regret they are as low as they are across the border, but I cannot do anything about that and neither can you.

I am very much aware too that the value of the Canadian dollar has a role to play in this. If the value of the Canadian dollar was somewhat different, that would help as well.

The Ministry of Industry, Trade and Technology has headed up a task force, if you will, of various ministries to look at this. The Minister of Revenue, Shelley Wark-Martyn, has had meetings with the federal Minister of National Revenue to talk about working together on the issue. We think there is an opportunity to do some marketing in the border communities, to talk to people in those communities about the importance of shopping at home.

I know it is tempting to cross the border to shop, and I do understand that, but the taxes pay for services that the very same people who are doing the shopping attach a great deal of importance to, such as our medicare system, our education system, our highway system, our social services system and others. I regret very much that people shop across the border they way they do.

Also, there is the question of jobs. I look at Windsor and Sault Ste Marie, two communities that I am more familiar with than others. I see the impact on the retail sector in those communities and it is substantial. That in turn affects employment in those communities and the taxes that accrue to those communities. It is unfortunate.

When the budget was being prepared we were looking at the whole question of taxes, because we were going to raise and did raise the tax on gasoline. I was fretting about the cross-border communities. When we did the numbers -- Mr Sweeting will correct me if I am wrong here, I am sure -- we showed that we could take every single penny of Ontario taxes off gasoline and gasoline would still be five cents a litre more than across the border. Even taking all our Ontario taxes off would not resolve the problem. There is a different set of federal taxes and there are different pricing structures, not just on those products but on other products as well.

Not to get sidetracked on the issue of free trade, but I think when free trade was brought in, there came to be a growing perception that you could now shop across the border more readily. I know that is not a particularly logical kind of conclusion to come from it, but I think there was that perception in the public's mind, that now with free trade cross-border shopping was the thing to do and it would be easier to do.

With those opening remarks, I would like to leave an opportunity for some questions. I thought I would be here from 12 to 12:30, so I have a bit of pressure on time for another meeting which was scheduled for 12:30. I do not mind being a few minutes late, but I would appreciate not staying too much beyond that. I realize it was not this committee's fault, but I would appreciate that. I would be quite happy to try to answer any questions you might have.

Mr Bradley: I will try to state my questions as succinctly as possible. When you were considering the tax measures that you eventually put in, the increase on alcohol, the increase on cigarettes and the increase on gasoline, the ones I call the loss-leaders that draw people across the border from a far greater distance than used to be the case -- it used to be the member for Niagara Falls and I would have seen it from our communities; now we see it from Oakville, Kitchener and areas like that -- when you were developing your budget, did you take into consideration the potential impact on the border communities when you decided to raise those particular taxes to produce revenue?

Hon Mr Laughren: Yes.

Mr Bradley: Why did you raise them despite the fact you saw this?

Mrs Y. O'Neill: A straight answer, anyway.

Mr Bradley: The member for Niagara Falls is going to have to explain this on CJRN next time she is on.

1220

Hon Mr Laughren: I was trying to make my answer as succinct as your question. It is a serious question and it deserves a serious answer.

My own feeling was that 1.7 cents, or 3.4, if you want to take the two-staged increase, would not stop people. The difference was so great that this amount would not stop people from crossing the border to fill up their tanks.

The other problem was, where is the line on a border community? If, for example, we were to say, "Let's not increase the tax on border communities," I do not know where a border community begins and ends any more, because people are so mobile and will drive considerable distances to shop. I guess there is a limit on how far you would drive to fill up your tank. There must be a line where it would not make any sense at all.

We did think about it, but we decided not to do it.

Mr Sweeting has just given me a note that the Quebec minister came to the same conclusion apparently, because they do have different prices, I think, in the border communities in Quebec on gasoline.

Mr Sweeting: They have a varying rate schedule. Mostly the focus is in the Hull area between Ontario and Quebec, and then in the major outlying remote areas of Quebec it focuses.

Hon Mr Laughren: And they increased their gasoline in two stages of 2 cents each in their recent budget.

The other thing -- let's not tiptoe around the issue -- is that given the size of the deficit, we were very concerned about revenues as well. There is no question that the tax increases and the cigarette increases -- there are other reasons for those increases, as you know: conservation, environmental. I know that your ears prick up every time I talk about environmental reasons, Mr Bradley. That was a factor as well. We did not really want to start undermining our revenue base by making exceptions, because there are people who argue that Toronto is one of those communities that now shops across the border and that you had better include Toronto as a border community. At what point do you undermine your tax base totally?

Mr Bradley: I guess my question was more related to the application of the tax across the province. When I said, "Did you take into consideration border areas?" I meant it in the context of applying, "Add new tax, period." I know what you are talking about when you say how difficult it is to treat individual communities in a certain way. I may like that, but I know the difficulty of administering that. But I was thinking of the whole province.

The second thing you mentioned was free trade. I think your observation is accurate, as far as I can see, that people had concluded that free trade meant they could go across the border. But since your leader said he was going to thwart free trade at every turn, I know we will not have that free trade agreement in this province for long.

Hon Mr Laughren: He was picking up where the previous Premier left off.

Mr Bradley: You mean the one you criticize so heavily.

The other question I would have, because you are the Deputy Premier and the Treasurer and you sit in the major committees of cabinet, is, when you look at any new legislation that you have coming in, or new regulations or new policies coming in, you have to look at a lot of implications. Are you taking into account the impact of those on cross-border shopping? Do you take everything you do that can increase costs on this side of the border into consideration, or is that a major factor, I suppose I am asking, when you are doing that? I recognize not everybody lives near a border, even though we are subject to it. Do you give that serious consideration?

Hon Mr Laughren: I think it is something that is being forced upon us to consider. I am the first to confess that when I took over this job, that was not uppermost in my mind. I really was not aware of how big an issue it was. That is perhaps a confession one should not make, but I really was not aware of how important this issue would become, and indeed has become.

We do in Treasury try and keep a very close eye on the impact of any changes on the private sector, because we know we are in a time when the buzzword out there, and appropriately so, is competitiveness. We are very concerned about not only the reality but the perception of competitiveness. It is almost like the cross-border shopping issue. Once it becomes a mindset, it becomes reality. We are very concerned about that and trying to keep an eye on the impact of any government changes, regardless of the ministry involved, on competitiveness.

Just to conclude that comment, it is not just taxes -- and my friend from the Conservative caucus might raise his eyebrows at this -- it is things like environmental regulations and labour legislation as well that we want to make sure we keep a close eye and consult with the private sector on, because if there is one thing that they tell us, it is, "For heaven's sake, don't consult after the fact, consult before the fact so that you can get some input from us."

Mr Bradley: There is a coalition that has asked the government for some funding to promote shopping on our side of the border. I saw an article in a newspaper a couple of months ago now, I must say, where they did not receive funding. Your government decided they would not receive certain funding. I realize this is not as straightforward as simply my saying, "You should do it," and your saying, "Well, we can't." It is difficult, because you have to chose where you are putting it. Are you contemplating providing some assistance, or will the government itself decide to embark upon some kind of campaign showing some advantages of shopping on our side of the border?

Hon Mr Laughren: Was that the OSSTF, the teachers' federation, you were referring to?

Mr Bradley: They were involved in one of those.

Hon Mr Laughren: Anyway, one of the teachers' federations.

Mr Bradley: Down in the area of the member for Niagara Falls, the Niagara Peninsula, there was a group there, I think, of retailers and others --

Hon Mr Laughren: I see.

Mrs Y. O'Neill: Shop Ontario.

Mr Bradley: Shop Ontario. They were looking for some funding to promote shopping in Ontario. Are you contemplating providing funds there?

Hon Mr Laughren: Could I hedge my answer on that one a bit, for two reasons? One is the report from the other standing committee that is going to make some recommendations to us. I have not seen that report. I do not know what is going to be in it. The other was the efforts of our Minister of Revenue with the Minister of National Revenue. My own view is that it should be a joint effort on marketing in the border communities. That is why there is a bit of a hedge in my answer on that. I would like to see that happen.

Mr Bradley: My last quick question, because I know you have others who want in on this, is the new Sunday shopping legislation you brought in. Have you people done any studies or have you seen studies which show the impact? A lot of people will say it has one effect or does not have an effect. Do you actually have any studies under way or have you done studies or had access to studies to show what effect that has on cross-border shopping?

Hon Mr Laughren: I do not know of any, because I think the consensus of opinion seemed to be that cross-border shopping was not a Sunday shopping problem, but a seven-day-a-week problem, in that the rules applied to Sunday shopping would not -- I am not saying would have zero impact, but would not be the major problem.

Ms Harrington: I would like to give you my personal point of view and then ask you a couple of questions that I need a little help with.

First of all, it has taken quite a while with my own family -- in fact my own husband, who is a very good New Democrat -- to get them to break the habit of getting gas across the border. I would like to say that gasoline is a trigger. We have heard a lot about the triggers that bring people across, and the difference between saving $10 on a tank of gas and saving $5 on a tank of gas does make a difference, I believe, to that habit of going across. I personally think that, if given half a chance, Canadians do want to support and do want to shop in Canada. There has to be some way to break that habit.

I think what we have learned this morning and in our other committee as well is that people shopping across the border are buying into the US system. We are beginning to realize this. This is the bottom line, and as you said, whether it is the environmental regulations there or whether it is the labour regulations there, whether it is their discrimination or their slums, that is what we are buying into when we cross that border. How do we get that message across?

Sunday is the 50th anniversary of the bridge commission and the Rainbow Bridge in Niagara Falls. I have been asked to speak across the border and then have those officials come across to our side. I am dreading the thought of going across the border on Sunday. Shall I bring a picket sign, or what would be appropriate?

1230

Hon Mr Laughren: We must maintain good relations with our friendly neighbours.

First of all, on the question of a tankful of gas, if you take the two-staged increase of 1.7 cents now and 1.7 cents on 1 January, that is 3.4 cents a litre on a tank of gas. That is roughly $1.50 in very round numbers. I do not think people will drive a long way because of that difference of $1.50 on a full tank of gas.

I am not sure how we educate people. I had the very distinct pleasure a couple of months ago of driving across the border at Buffalo with an opposition member of the Legislature, and his tank was empty as we crossed the border into Buffalo. I did not want to say anything, but I was just waiting. That member, being the great Canadian that he is, did not fill up on the other side of the border. I would never drop the name of that member. It was a good hockey game too. I did not go across to buy anything, other than to see a good hockey game.

I really do believe it is important to get the message out there that you mentioned. I do not belabour this because I know it sounds terribly self-serving, but when I was in New York and Washington just in the last couple of weeks, I really was struck by the differences in our major cities. This is not meant to heap abuse on American cities, but you cannot have our quality of life without paying for it.

When the United Nations brought in its report saying that we were the second-best country in the world in which to live because of our quality of life, there is a reason we are right up there. One of the reasons -- obviously not the only one, though -- is the relatively high taxes here in many areas, in many ways, compared to there. I do not think we should pretend that this is not the case. I think we should acknowledge that and talk about what it delivers.

I know some people think that is good in theory but it is terribly idealistic and we cannot compete if we do that. I could spend the next hour talking about how we would like to compete in the 1990s, and it is not on low-wage, beggar-my-neighbour, lowest-common-denominator kind of competition. I think it is going to be a high-value-added kind of economy that we head into. Look at countries like Japan and Germany. They are not competing at the low end of the scale. I do not think we can either. We have too much going for us to rely on that.

I hope I have answered your question.

Ms Harrington: Is there any way that we can educate and promote? That is what we have to do. We have to get the message there.

Hon Mr Laughren: I would like to see some of it done in the school system. One cannot be coercive about it either. I think that would backfire. But I think there does need to be a lot of education done, and I think that has to be done with the right attitude going into it, that this is a positive thing to shop at home, not to heap guilt on people who do shop across the border but to show the positive aspects of shopping in Ontario.

That is why I really believe this. This is not meant to be passing the buck to the federal government, because I think we have to play a role in it, but it would be really nice to develop a very good system in which the federal government had a major role, because it is a Canadian problem, not just an Ontario problem. It would be really nice to have them play a major role, even in educational materials, whether they are videos or written material for the schools and paid advertising in the communities. I would suspect that in a lot of the communities you could draw upon the goodwill of the media as well to help out, because they have a stake in it as well.

Mr Turnbull: As one of the very few people in the Legislature who immigrated to Canada as an adult --

Hon Mr Laughren: And we are pleased you did, Mr Turnbull.

Mr Turnbull: Absolutely, and so you should be.

Hon Mr Laughren: Despite your twisted ideology.

Mr Turnbull: I too feel that we have to protect the institutions of Canada which we hold so dear, medicare and the welfare system, albeit I think your government happens to be going about it in the wrong direction. You have mentioned the fact that you think you should have a co-operative approach with the federal government. One of the things mentioned by one of the ministers to speak to us earlier was the whole question of harmonization and how the federal government had said, "Look, we will collect taxes at the border but only if you harmonize with the GST." I asked this question and she said it would be more appropriate to direct it to you at the time.

In opposition you always ran on the platform that some businesses were not paying their fair share of taxes. That is a fair comment. One of the great problems with the tax system we have has been the fact of policing those people who are getting away with it.

Hon Mr Laughren: I am sorry, I missed your last comment.

Mr Turnbull: When the federal sales tax was brought in, the manufacturers' sales tax, early in this century, it was a very broadly based tax. About 80% of our gross national product was attributable to the manufacturing sector, and it slowly diminished to about one third of our GNP today. Therefore, the manufacturers' sales tax was moved progressively on to one small portion of our economy. In one significant way, the GST allows the government to more adequately track those companies or sole proprietorships that were getting away with cash transactions. It becomes easier to police. It could be stated that it should be easier in the future to identify those people who are not paying their fair taxes.

Given that, why would you have a philosophical disagreement with the idea of harmonization, with all that implies? You would move some taxes on to the service sector which does not currently have them; in other words, a reshuffling of taxes so that we have a more rational system both federally and provincially. Hopefully we could reduce other taxes and in this way address this very real problem of cross-border shopping.

Hon Mr Laughren: I think the best way I can answer that is to say our sense was that it was not the way to impose taxes, that the GST was not a good alternative to the manufacturers' sales tax. We developed a set of alternative proposals that we think would not have done any damage to anyone, but would have made the manufacturers' sales tax fairer and more appropriate, if I can use those words, and changed some other taxes. It would have collected at least as many taxes, if not more, for the federal government but would not have put it in the form of a GST which is applied to the purchaser. So I guess it is a philosophical disagreement on the way you raise taxes.

Mr Turnbull: Are you suggesting, then, that the whole of the common market is wrong in having a GST type of tax?

Hon Mr Laughren: No. They have decided to go that way. That is fine, I am not quarrelling with them. I guess it is a case of what kind of tax regime you want to have.

Mr Turnbull: So you find it appropriate that a small portion of our GNP be subject to federal taxes as opposed to spreading it more evenly across the spectrum. The GST makes it easier to police the distribution of the burden.

Hon Mr Laughren: That is probably true. I am not sure of that, not being an expert on federal tax collection. Let's face it, we tried to raise the issue during the debate at the federal level on the GST, the inadequacy of the low-income tax credits and the unfairness on social agencies that have to pay the GST. We would have been opposed to it anyway, but it would have been a little more palatable if there had been a more substantial set of low-income credits for people; that plus the housing. The whole impact on housing I think is substantial as well.

Did you want to add anything to that, Tom? That is a good point. I am glad the words are here. We have asked the Fair Tax Commission a couple of questions --

1240

Mr Bradley: Is that like the NDP tax commission?

Hon Mr Laughren: No, no. This is the Fair Tax Commission. I do not even think half the members of that commission are that familiar with the NDP, and certainly are not members of it, which is a very fair distribution --

Mr Bradley: I cannot believe that.

Interjection: I am having a little difficulty too.

The Acting Chair: I am glad we clarified that.

Hon Mr Laughren: They appeared before the committee. That was the evidence from the committee. I was surprised at that myself.

These are the questions we have asked the Fair Tax Commission: What changes should be made to Ontario's retail sales tax now that the federal government has implemented the goods and services tax? Maybe they will say none, maybe they will say harmonization. I do not know what they will say.

The second question was, are there any changes that should be made for administration or policy reasons as the result of having both Ontario's retail sales tax and the federal GST collected at the retail level? There has been some pressure -- a lot of people would prefer it if we harmonized with the GST because it would make it so much easier administratively. So we will await their response. You could appreciate the fact that if we had come into office and as one of our first acts, tax changes, harmonized with the GST, there would have been raised eyebrows, to say the least.

Mr Turnbull: Yes. Given the platform you have occupied in the past, I agree.

Hon Mr Laughren: No, that is exactly the point.

Mr Turnbull: In terms of fairness and good sense I would have applauded you, but it would have certainly raised eyebrows relative to the position your party had taken.

Hon Mr Laughren: It is good to talk to a fellow politician who understands these things. So before we do anything, really even consider it seriously, we are waiting until we see what the Fair Tax Commission has to say about it.

The Acting Chair: Mr Turnbull, I do have to move on. I have a few more questioners. I would like to ask Mr Duignan to be next after Mrs O'Neill. There are three minutes left. Mrs O'Neill is first. Would you please try and divide that evenly?

Mrs Y. O'Neill: I have a very brief question. Thank you very much, Treasurer, for coming this morning. I was told by your colleagues in the Ministry of Revenue that you are really the person I should ask questions of if I want to know about creativity or taxation policy.

Hon Mr Laughren: Quite a lot of people use that argument --

Mrs Y. O'Neill: That she only administers, but you actually create the policies. You have just given us an idea of the direction you have given within the tax commission, and I am very pleased you have brought us up to date on the questions you have placed before this group. Are there any impact studies, policy studies taking place right now in Treasury that have to do with changes in policy measures that would deal with this very important issue?

Hon Mr Laughren: I will ask Mr Sweeting to help me out here but I think, before the GST was being applied, when it was being introduced by the federal government, there were studies done by Treasury on the impact of that in Ontario. There is some of that kind of work around that has already been done. But following that, when the Fair Tax Commission was -- I would assume that Treasury backed off a bit when we asked the Fair Tax Commission that question. But I would ask Mr Sweeting to comment on that.

Mrs Y. O'Neill: Are you members of the MITT interministerial?

Mr Sweeting: Yes. You were referring to the cross-border issue in general in terms of --

Mrs Y. O'Neill: Exactly, that is what we are meeting on.

Mr Sweeting: -- studies and that sort of thing. We are participating to the extent that we are supporting the efforts of the MITT committee in terms of different options for dealing with the issues. The Treasurer said it is a very difficult issue. We have been trying to see if there is some possibility that taxes could be considered as part of the solution, but there is no apparent easy answer, no easy way. You know the Treasurer has been quite direct in dealing with the difficulties around the gas tax and the possibilities on that particular front. We are trying to see if there are some things that would be helpful.

Mrs Y. O'Neill: Are there any studies under way at the present moment?

Mr Sweeting: Studies probably would not be an appropriate characterization. We are looking at certain kinds of tax issues as we look at a broad variety of issues on the taxation front that have to do with the potential changes with respect to the cross-border issue.

Hon Mr Laughren: I am sorry, I thought you were asking about the GST. I did not realize --

The Acting Chair: I have to move on to Mr Duignan for the last question. We have run out of time, so we are going over.

Mr Duignan: Briefly -- it is a big subject. I am talking about enticing tourists to come not only to Ontario but to Canada. Have you looked at the situation in the common market where they have an aggressive campaign to encourage tourists to apply for the rebate on their particular VAT? For example, go into any major store in England or Ireland and you can get a docket filled out in that particular store, put in it an envelope which you either mail back or deposit at your port of entry. In some cases they have an office set up where you actually get the tax rebate when you leave the country. I was wondering whether you are looking at something like that in conjunction with the federal government. Have you given any sort of consideration to that type of scheme?

Hon Mr Laughren: I do not know if we are but I would ask Mr Sweeting. If we are, I am not aware of that.

Mr Sweeting: We have a rebate program now for retail sales tax for people who are visitors to the province called "Ontario -- Incredible!". I think that is the official name. It has been around for a number of years, in which goods that are removed from the province are -- the tax can be claimed from the Ministry of Revenue. There is also treatment of accommodation, taxes paid on the service of accommodation that also can be claimed back. You know the federal government has a program as well as part of their new GST. I believe there are some discussions going on between the federal and provincial officials at the official level as to whether both levels of government should offer programs aimed at recognizing the return of taxes paid by tourists. But I am not specifically familiar with what those discussions are doing.

Hon Mr Laughren: Could I add something to what Mr Sweeting said? There is a meeting next Monday in Charlottetown of the federal and provincial finance ministers, Mr Mazankowski and all the provincial finance ministers, and this is actually on the agenda. Cross-border shopping is one of the items on the agenda, so it will be an interesting discussion, I think.

Mr Duignan: Very briefly on that point --

The Acting Chair: Very, very briefly.

Mr Duignan: In the European countries they greatly encourage the visitors to apply, which does not happen here.

Hon Mr Laughren: I know what you are saying. We do not have a real promotion on it, though. I suspect all provinces have a similar program, would they not, Tom, in terms of getting a rebate?

Mr Sweeting: Some do.

Mrs Y. O'Neill: Mr Chairman, I would like to make a request that if something comes out of this meeting next Monday or if there is a policy within our province that it be presented in writing to this committee, because it is an issue that is very closely related. If you find an update we would certainly appreciate having it tabled here.

Hon Mr Laughren: Okay, we could commit to do that.

The Acting Chair: We are adjourned. Thank you very much, members of the committee and the Treasurer, for your patience.

The committee adjourned at 1249.