Legislative Assembly of Ontario

The House resumed at 8 o’clock, p.m.

Clerk of the House: The sixth order, resuming the adjourned debate on the motion for second reading of Bill 25, An Act to impose a Tax on Speculative Profits resulting from the Disposition of Land.

LAND SPECULATION TAX ACT (CONCLUDED)

Mr. Speaker: The member for Ottawa Centre has the floor.

Mr. M. Cassidy (Ottawa Centre): Thank you, Mr. Speaker. The minister and I have just been having a pleasant chat about the pleasures of boating in and around Toronto Island. It’s a pity I now have to shift gears, so to speak, and tell him that we may agree about boating and Toronto Island, but we do rather severely disagree about this particular bill and the way in which it has been put forward.

An hon. member: Get things back on the rails.

Mr. Cassidy: That’s right. The Speaker may recall before the break I was suggesting that the inconsistencies of the Liberal Party on this particular bill, as on so many other issues, are deplorable.

Mr. R. F. Ruston (Essex-Kent): The “New Capitalistic Party.” I heard some of the members talking about it the other day.

Mr. Cassidy: No, as a matter of fact, some of the members may not remember that during the course of the Throne debate, Mr. Speaker, on behalf of the NDP, I suggested to the minister very strongly and to the government as a whole that an effective tax on speculative gains ought to be introduced. We suggested that --

Mr. Ruston: Why doesn’t the member say he wants the government to own all the land?

Mr. Speaker: Order, please.

Mr. Cassidy: Well, let’s talk about that. I will come to that in a minute. I am damn sure that the Liberal Party isn’t going to say that. I am damn sure that they are not because they have strayed so far to the right of even this government.

Mr. Speaker: Order, please. I suggest the language is somewhat unparliamentary.

Mr. Cassidy: What’s that?

Mr. Speaker: I suggest the language is somewhat unparliamentary. We have young people present.

Mr. Cassidy: Were the Liberals being unparliamentary?

Hon. A. K. Meen (Minister of Revenue): No, the member for Ottawa Centre was.

Mr. Cassidy: Oh, I beg the hon. member’s pardon. All right, Mr. Speaker, if I can return to the government itself --

Mr. P. D. Lawlor (Lakeshore): In Fowler’s English, proper English, familiar quotations, the term is used all the time now.

Mr. Cassidy: That’s right.

Mr. Lawlor: It has become accepted.

Mr. Cassidy: I will come to the question of public land development Mr. Speaker, because that is one of the only ways by which an effective answer can be found to the problems we have had of escalating land prices around our major cities right now.

Interjections by hon. members.

Mr. Cassidy: But I wanted to suggest to the government, through the Ministry of Government Services and the Chairman of Management Board (Mr. Winkler) that the government is clearly abandoning the blueprint that was given to it by Mr. Comay in his report which was handed down last September or last August. Maybe that’s one of the reasons that Mr. Comay has deserted the ship, because whatever wisdom he had to bring has now been rejected and the government has moved into what looks like a series of ad hoc policies.

Ministers are saying that if this particular tax doesn’t work, they will try something tougher. The government is sort of backing into an interference with the private land market, not knowing exactly what it’s going to do, not having any confidence that it ought to be doing it, not having any knowledge about the universe into which it’s venturing, and anxious, it seems to me, to do the least possible to interfere with its land-developing friends.

It’s sort of a typical product of the Conservatives, a tax which is flashy but a tax which is an ineffective measure because, quite frankly, the Tories don’t believe in this particular measure. It’s hard to see how the measure can be effective if it only touches two or three or five per cent of the land transactions which are taking place in the province during the course of a particular year. It’s hard to see how the tax can be effective when it has so many loopholes that are built into it, as a number of members of my party have already indicated. It’s hard to see how the tax can be effective when there are enormous powers of exemption which have been built in and given to the minister.

It’s hard to see how you can curb a situation, how you can come to grips with a situation -- we have seen property doubling in value every three or four years under the Conservative government -- by taking one date and saying that as of this date, any gains over and above the ludicrous level that prevailed on April 9 may be taxed at a rate of 50 per cent or greater if they fit into certain narrowly defined categories.

There were surely enough people with legal training in the government to have told the Minister of Revenue and the Treasurer that it is customary for people in this particular game to use good tax advice in order to quite legally avoid the intentions of the ministry. And there were people, in fact, who had experience practising that, as I’m sure there were people in the Liberal caucus who have had experience in advising clients about the legal ways in which they can avoid taxes and order their affairs in a way that will incur the least possible tax.

When you cast your net with so many holes, you will get very few fish. And that is what has happened in this particular case.

Now, it seems to me that on top of all the other loopholes which have been described, there are a couple that ought to be homed in on. One is the 10 per cent rule. This rule says that you can add to your basic cost in computing the speculative gain on land, your net cost of maintenance up to 10 per cent a year. Now, I assume that the costs of financing are included in the net cost of maintenance. Is that correct?

Hon. Mr. Meen: Yes.

Mr. Cassidy: That is correct, all right. That means, in other words, that a speculator can buy property, and the cost of holding it -- the 10 per cent cost of the mortgage on that property -- will be allowable to that speculator over the period of time that he has it, provided that he borrows the money in order to buy the property. Now, if he happens to have a property with some income attached to it, the income will probably cover the cost of taxes, maintenance, repairs, fuel and that kind of thing. The mortgage on his speculative investment will be allowable as far as the ministry is concerned. And when he gets around to turn around and sell it --

Hon. Mr. Meen: It’s all part of that expense.

Mr. Cassidy: It’s all part of that expense?

Hon. Mr. Meen: He has income to start.

Mr. Cassidy: He has income, all right. I’ll put those figures in very specifically. His casts amount to 15 per cent of the capital value of the property. His revenues amount to five per cent and the remainder is 10 per cent. Putting it another way, the mortgage interest is equal to about 10 per cent and his costs of about five per cent are covered off by his revenues. Would the minister agree with that?

Hon. Mr. Meen: Well, that’s a hypothetical case. There may well be variations one way or the other.

Mr. Cassidy: Oh sure, it’s hypothetical. The point that I’m making, though, is that whether the net cost to the speculator of hanging on to the property is two per cent or 10 per cent a year, it will be covered.

Now, let’s take the example of a speculator who wants to invest all cash in a particular property, and who, therefore, is financing himself rather than borrowing the money. As I understand it, his net maintenance cost will tend to be lower because he cannot credit to himself the cost of borrowing the money. Therefore, he will be liable to a higher tax rate unless he turns around and mortgages the property. There will therefore be an incentive to maximize their expenses, with people who are speculative investors if they feel they are eventually going to be liable to the tax. And they will do so by borrowing the money. Therefore, speculators will tend to attract more money into that particular end of the market, rather than putting it out on their own account.

Now, that is hypothetical as well, as the minister will undoubtedly point out. But it’s clear that so long as the costs of financing speculative investments are allowable and deductible before this 50 per cent tax is levied, then the tax is not going to have a heck of a lot of impact. It means that anybody who buys a speculative property is, at the very least, in a no-loss situation. They really can’t lose because they are allowed to build that 10 per cent a year, holding their maintenance costs into the price of the property. The government is accepting that the price of property is going to escalate by 10 per cent a year.

Now let’s take this on a bit. We’ve had a property for two or three years, the costs are going up a bit, and the speculator decides that he’d better get rid of it, but he wants to keep control of it for an eventual gain. He makes a non-arm’s-length sale after three years to somebody with whom he is in a buddy-buddy relationship, and the price at which he sells that property is, for the sake of argument, 130 per cent of the acquisition cost. His net maintenance costs are 10 per cent a year. There is no tax to be paid and the new owner then holds the property for another year or two.

In the case of the new owner, the acquisition cost was 130 per cent of the value at April 9, 1974. The allowable net maintenance cost for the new holder is therefore 13 per cent per annum of a value at April 9, 1974.

This kind of trading back and forth in a non-arm’s-length kind of fashion can continue. As far as these fellows are concerned, if they are given good tax advice they probably can avoid any tax at all and ultimately can sell and make a significant profit. Maybe it is a bit less than before but it hasn’t deterred them.

It certainly hasn’t had the effect, which the budget statement has indicated, that this would be one of three important measures to stabilize land prices. What kind of stability is it when land prices under this Act are going to be permitted to go up by 10 per cent a year without being touched by the particular tax, even in those limited categories which are subject to the tax?

What kind of stabilization of prices is involved, Mr. Speaker, when a farmer who sells his farm to speculators or for development is allowed 10 per cent per year as long as the family holds on to the farm, and not against maintenance cost or anything like that but just simply because the land is being held in farm land? If you have land in the area around Toronto which is now valued at $3,000 or $5,000 an acre, that 10 per cent is a very substantial sum. Moreover, the net maintenance cost of that farm is quite likely to be substantial too.

Therefore, you could easily see the value of that farm going up by 12 or 15 per cent a year and not attracting a nickel of tax. If the purchaser ultimately develops the land and sells it in the form of homes rather than in this form of lots or raw land, then he too is able to escape the tax. It is simply a matter of stick-handling.

What this comes to then is this, that as far as the Tory government is concerned it has drawn up a set of rules which permits big developers, big farmers, people who have access to good tax advice and all of its friends to avoid, quite legally, the land speculation tax. The speculation tax then ultimately comes out only hitting the small fish. There have been some poignant pleas here about the small builder and about the widow with the fourplex and so on. I must say that I find it difficult to join myself to those particular pleas too fervently, because I think that the whole way which the tax is conceived is misbegotten. I think that either you have a tax which is universal or virtually universal or you act in other ways.

The fact that this tax is the only significant measure that we’ve seen from the government over the last six or eight months directed at solving housing problems in the province indicates to me that the government simply lacks credibility on the question of housing as a whole. The fact that the tax is being introduced as a solo measure rather than as one of a package of measures, including an effective programme of bringing public land to development in order to bring down the price of housing also tells me that the government lacks credibility as far as the questions of housing are really concerned.

Mr. Speaker, let me give you one other way in which the government is going to distort land development in the province in such a way as it will affect negatively our housing crisis, in other words, make the housing crisis worse rather than better. Some people have talked about the fact that the small builder may get shoved out of the market. I don’t know whether the minister is going to do something about that or not. If he does, given the construction of the tax as it stands, he is going to have to put yet another exemption into the tax. That is the way he is going to have to act, and it will make it even less effective than it is at present.

There is also a complete exemption on commercial and industrial property. Any land which is used for commercial or industrial purposes or any land which presumably is intended for commercial and industrial purposes is exempt from the tax. If I can set a hypothetical example again, I want to indicate to the minister that this will have the effect of shifting some land from residential uses into commercial and industrial uses.

I will take the example of land which was worth $50,000 an acre on April 9 and for which, for the sake of argument, the owner wishes to get $75,000 on April 9, 1975.

With the tax, if he can’t wriggle out of it one way or another -- and the loopholes are tremendous -- one assumes he will put it on the market at $100,000 an acre; he will pay the tax and arrive at a net return of $75,000. If, on the other hand, there is a market around town for commercial property and commercial interests are willing to pay $80,000 an acre for that land, clearly he will say, “I’ll sell it for commercial uses rather than for residential uses. My profit will be $30,000 because I am not taxed, rather than the $25,000 I would get after tax if the land was developed for residential purposes.”

The effect will be that commercial and industrial land will be relatively cheap compared with residential land. Therefore, the law of economics being what it is, there will be some shift of property from the residential market into the commercial and industrial market.

Eventually an equilibrium will be reached. I don’t want to give the minister a lecture in Economics 201 but the equilibrium position will be that more land will go into commercial and industrial purposes. The amount of land required for industrial purposes is relatively limited and we shouldn’t be creating new industrial jobs at the rate we have been in the major urbanized areas where the housing crisis has been the worst. The demand for commercial uses, for shopping centres and that kind of thing is, I suppose, pretty tremendous. As far as I can see the construction of new shopping centres, of enormous new office buildings, of that kind of construction at a time of a raging housing crisis across the province -- when there are tremendous shortages of building materials -- is criminal.

Far from encouraging that kind of construction the government should be discouraging these less useful uses of capital, labour and materials in order to encourage residential construction.

Hon. Mr. Meen: Is the member not prepared to admit there can be a reasonable balance in certain communities between small industrial and commercial centres and residential communities in the planned community sense as we know it today? Therefore should there not be some incentive maybe to justify some commercial and industrial development along that line?

Mr. Cassidy: I don’t think we need a particular incentive. It will follow the growth of population; in fact, it often leads the growth of population.

Hon. Mr. Meen: I think the member is suggesting there shouldn’t be any and it should all be residential.

Mr. Cassidy: I am suggesting that what the minister’s legislation is doing is to encourage commercial and industrial development at a time when, frankly, we don’t need more new office buildings. The vacancy rate for offices in downtown Toronto is five or six or seven times the vacancy rate for apartments in Metro Toronto. What kind of values does that reflect? What kind of social priorities does that reflect?

If one wants an office one can march into an office anywhere in downtown Toronto for a competitive rent. But if one wants to get an apartment, on the other hand, one has a heck of a time because there are simply not enough apartments coming on to the market. Yet the bill, because of the exemptions built in for commercial and industrial property, has the effect of shifting some land from residential to commercial uses.

Mr. Speaker, the bill has also to be set against what the Conservative government has been doing in the field of housing policy. We have seen the record over the last year. There was a lot of talk at the creation of the Ministry of Housing, which was welcome. The discovery is now that the Ministry of Housing needs some powers; that is welcome, too, but the government should have found out about that before. At the same time there is a decline in starts in the major urban areas; a decline in OHC activity; a rise in prices and a decline in activity as far as the HOME plan is concerned; promises of more activity to the level of 6,000 HOME lots this year are so little and so late and so small in relation to the entire housing market in the province as to be nugatory, to use the word of the member for Lakeshore.

There is a complete failure in the programme of integrated housing which was announced so proudly by the then Minister of Revenue (Mr. Grossman), who was also Minister of Housing, just over a year ago.

Now we are beginning to see the gradual abandonment of the Comay committee report in favour of a series of ad hoc policies. The rumours coming out of the department and the evident delays indicate quite clearly that the housing action programme is, to put it mildly, on rocky ground and is not working effectively up until now.

Mr. Speaker, I want to suggest to the minister a number of things that could have been done in the area specifically of taxation if the government wanted to make a difference. We suggest, in the first place, that it become part of a major thrust in the housing field.

Secondly, if there is going to be a speculation tax on housing it has got to apply to all the increases in land values -- and the exemptions have either got to be nil, or they have to be very strictly defined. Some of my colleagues and myself had some dispute about the limit of the exemption on the principal residence. If there is to be any exemption at all from the speculative gains tax on land, that is the only exemption that should be allowed. I personally question quite seriously whether that exemption should apply to $200,000 homes up on the Old Post Rd or in Rockcliffe Park, or in the other so-called better residential areas. I don’t see the need for any kind of exemption on that particular point.

On the other hand, if it is a worker, if it is a modest family home in the $20,000 or $30,000 range, and the government wishes to exempt those profits because of the fact that people who they sell those homes are normally moving to another, we would have no particular objection.

However, if one takes the exemptions the government has brought in and takes in the declared intention not to make a lot of money, but the declared intention to wipe out speculative gains, then it seems to me that the government has got to take away the exemption on the principal vacation property. It has got to look very seriously at the 10 acres surrounding the principal residence which is permitted as an exemption right now. It has got to tax every piece of land coming into development, whether it is by a big developer or a little developer or the builder around the corner.

It has got to get away from this business of permitting white painters and people in the renovation and rejuvenation market from being exempt if they do certain things and conform to the rules in certain ways. I find that a disastrous kind of proposal right there. It has got to do away with the exemption for commercial, industrial purposes; and it has got to come to grips with the question of exemptions.

I seriously question whether the exemption for financing costs ought to be permissible against this particular tax. In other words, if the government is going to have the tax, it has got to hurt so badly that people will want to put their land on the market because it will not be profitable or comfortable for them to continue to hold it unless they have a reasonable use other than speculation for continuing to hang on to that particular land.

If the government wants to make the tax work it has got to take out the series of exemptions which are in the back of the Act, which allow the minister to exempt almost any class, group or individual, or to rebate any tax if that idea crosses his mind. And then it might consider whether the 50 per cent rate is really adequate.

Now the minister is going to get up and say: “But you are going to bring the pace of development to a halt.” And I suggest to the minister right away, because that is the kind of answer he is going to come up with, that that is nonsense.

Right now, according to the minister’s figures, big developers who have a lot of land in and around the Toronto area, and who will be exempt from this new tax, should nevertheless be paying tax rates of around 60 per cent when it is computed right through the chain down to their shareholders. The minister knows as well as I do, that they pay far less than that and in many cases they pay no tax at all; but he can’t have it both ways.

Either they pay a lot of tax right now and they are not deterred from developing the land, or they don’t pay a lot of tax right now; in which case the kinds of figures that have been put into the budget are fraudulent and the claim that developers will have to pay 50 per cent tax on speculative gains is equally fraudulent, because loopholes will be found around that tax in the same way as loopholes have been found around the capital gains tax and the tax on the sales of land as a business, which exists in the federal and provincial codes at the present moment.

At any rate, if these big corporations, currently paying around 60 per cent, according to the government, in profits taxes on sales of land, are developing the land at that tax rate, then to push them up to 70 or 75 per cent isn’t going to make a hang of a lot of difference.

I would point out to the minister that companies like Markborough, McLaughlin, Canadian Equity, Bramalea, Monarch and Caledon Mountain, among others, have got tremendous holdings of land in and around Toronto right now and that these holdings will be entirely exempt from the tax that is proposed here.

If there is the difference in treatment between other builders and themselves, then they will simply start to ration these large landbanks for their own uses and bring them into development at a pace that suits the pace at which they can develop and build houses on their own hook, and not any faster. In a private enterprise system, no amount of controlling by the Minister of Housing (Mr. Handleman) is going to encourage them to do it any faster than they darn well please.

In that sense, the tax and the unequal treatment between the small builder and these big fellows is going to have the effect of discouraging rather than encouraging land to come to market. As the minister knows, if the big developers, like Markborough and so on -- all the companies where there are Tory directors -- if those big companies develop the land themselves, they don’t pay the tax. I am suggesting that the equitable way to handle it is to ensure that everybody pays the tax. Then at that point you use your supply --

Hon. Mr. Meen: That’s where we part company.

Mr. Cassidy: -- techniques and your public ownership techniques in order to ensure that you are bringing enough land on to the market.

Mr. Speaker, I want to talk specifically about what we think ought to be done as well with a lot of this speculative land. There will be an incentive to some speculators to hold land until it can come into development in order to avoid this tax. The only way to get it out of their hands, and this is also within the discretion of the Minister of Revenue, is to ensure that they are paying a fair or even a punitive rate of property tax.

The deferment of the assessment on speculative land until 1976 or later by the ministry means that a lot of people are hanging on to land on which they pay very low rates of tax. There is no reason why that land couldn’t be assessed at current market value, at which point the assessments would rise by five, 10, sometimes even 20 or 30 times. Then the cost of holding it would be such that you would see a freeing up of the land market and the land would come out into development rather than sitting in private hands. But right now we are effectively subsidizing people to hang on to land as a speculative investment, rather than ensuring the land is used for a productive purpose until it’s time for a change in use.

I want to suggest to the minister as well --

Hon. Mr. Meen: Mr. Speaker, could I just ask, on a point of clarification, is the hon. member talking about serviced land that is ready for development -- let’s say, on which construction of a building could take place -- or is he talking about raw land?

Mr. Cassidy: I’m talking about both. I’m talking about raw land which may be valued at five or 10 times its agricultural value but which is currently not assessed as such. I’m talking about serviced land which may also be assessed at a very high rate. If it’s on the verge of coming to development, you may catch it in your assessment system; but up until that point, on the other hand, it may sit there with a very high speculative value and increase in value for several years and not be touched by property tax assessment. The deferment of the market value assessment programme has the effect of simply allowing speculators to sit with these privately-owned landbanks and continue to pay very low property taxes on them.

Hon. Mr. Meen: Well with respect, if I may be permitted to interject, to the hon. member for Ottawa Centre, Mr. Speaker, the deferment --

Mr. Speaker: Does the member for Ottawa Centre yield the floor?

Hon. Mr. Meen: -- until 1976 was scarcely a matter related to speculative gain or anything of that sort or deferment of tax. It’s simply related to other mechanical matters in getting the market value assessment completed. If the hon. member is talking about serviced lots, he may well be talking about a subject that is appropriate in the circumstances of this debate. But if he is talking about raw land for which there are so many speculative -- if I can use that term in another context -- factors involved between getting it from the raw land state to the serviced and buildable state, really he is suggesting that some authority, be it municipal or provincial, should interpose itself and impose a punitive tax, possibly in the interest of getting that land on the market for building purposes, when perhaps there may be all kinds of discretion intervening such as municipal planning boards and the like over which the owner could have no control.

Consequently that kind of tax might well be punitive where in other circumstances it might well be appropriate if the land is serviced and ready to go for building purposes. That is why I asked the hon. member if he was talking about serviced lots ready to go for building or about raw land. I think I can sympathize with his argument if he is talking about finished lots ready to go; but I think if he is talking about raw land he is really out in left field.

Mr. Cassidy: I really find this extraordinary, Mr. Speaker. I think it should go on the record -- the solicitude that the minister has shown toward people who speculate in raw land. Even the Liberal Party seems to agree that the one group that they can identify as villains are the people who go and speculate in raw land which is not close to development, and drive the price up from $200 an acre to $1,000 or $2,000 to $5,000 an acre.

Yet, the minister is saying, “Oh, but look at the risk, look at the kinds of problems they bear. They should not be taxed at anything more than the original value.” Is it seven years ago -- 1967 -- when there was last an attempt to provide a fix on the values of this land? The values of this raw land, in particular where the speculation has been the most intense, have gone up at a rate of two, three, five or 10 times the rate of growth of values in the property market generally. In other words, since 1967, if you want to take that particular year, the value of houses in Metro Toronto has perhaps grown by 1 1/2 times; but the value of raw land in and around Metro Toronto has gone up by possibly 10 or 15 times. Yet the assessment will still reflect a value for that raw land that was proportionate to the value of houses at that particular time.

I am suggesting that speculators are getting a free ride. I am glad the minister feels the question of property taxation on serviced land about to come into development is worthy of attention by his assessors, but I cannot see him exempting speculators when there are several avenues by which you can get them.

After all, the purpose, I had understood, of this taxation was to get land out of the hands of speculators; to stop the speculation; to get land into development; to try to increase the flow into the pipeline rather than to decrease it; and to try to decrease the inordinate profits which had been made.

I want to suggest to both the Liberal Party which asked and to the government that they won’t solve this problem about the allocation of our land in and around major cities by a speculation tax alone. The only way this is going to be solved is if the government starts to attack on the supply side to ensure that there is land for housing coming into development that provides housing at prices that people can afford. As the minister is aware, there were 10,000 or more people who sought houses in the Malvern development because they were reasonably priced.

If there is publicly owned land coming into production, with the economies of public land development and with the priorities of what the people of Metro Toronto or Ottawa or the other parts of the province need in terms of housing rather than what developers think they can get away with, then you are going to see a very substantial drop in the kind of inflationary fever we have seen in the housing market over the last few years.

If there was a good $22,000 house that was available in quantity in and around Toronto and Hamilton, then you would stop finding the numbers of people having to pay $40,000 and $50,000 and $60,000 for bungalows. You would find a very definite shift and you would find that the kind of fever that has hit the market would decrease. But this tax with all its loopholes is simply not going to have that effect.

In the NDP we have been saying for several years now that land in and around our major cities should be developed publicly; that it should be developed by leasehold; that the leasehold should give to people who acquire the leases and acquire the homes on the leased land the right to hold it in perpetuity as long as they and their descendants want to hold it but that it should not give to them the right to speculate in land.

When they wish to transfer ownership out of the family, it should be transferred back through the government housing agency, and it should be done at a price which does not permit a speculation, but merely reflects any changes in building cost in the intervening years.

We have called our scheme the ‘Crown Hold Scheme,’ Mr. Speaker. And for the housing it would make available in large quantities, it would do away with the kind of speculative fever which has affected even people in their principal residences. This kind of public competition would have a very definite impact on the land market. It would mean that the speculative gains tax on land development could possibly even be done away with, or if it did exist, it would exist only to catch certain exceptional situations where the market got temporarily out of whack.

But I am suggesting that unless there is a fundamental reform like that in the land market, you might as well not try at all; that the government would be better advised within this measure to forget the pretence of doing anything, and continue in its rather sputtering fashion to bring up land supply policies. If the government were to increase the supply of land effectively in a major way and direct that far more housing was to be built for people on low and moderate incomes, such a policy would have a lot more impact on the supply and cost of housing than this particular tax. But this tax is so ineffective, and so loophole ridden, that we just say that it is better to do nothing than to go ahead with this kind of half-baked measure, and we will not accept it.

Mr. Speaker: The member for Lakeshore.

Order please. In order to keep the rotation a little more even, does the member for Huron-Bruce intend to speak?

Mr. M. Gaunt (Huron-Bruce): Yes. I have a few comments, if my friend for Lakeshore --

Mr. Lawlor: Nothing would give me greater pleasure than to listen to the hon. member for Huron-Bruce.

Mr. Gaunt: Thank you. My comments are going to be brief, and really I am going to address myself to one part of the bill which has been referred to on occasion. My colleague from Huron (Mr. Riddell) referred to it this afternoon. Other speakers have referred to it. But I want to address myself to the matter and indicate to the minister several points of concern with respect to farmers and how they are being treated under the terms of this bill.

First of all, the bill in relation to farmers and farmland worries me somewhat. I think that the exemption provided when a farm is sold from father to son, or within the family, should be extended to include any sale of a farm where that farm is going to remain in food production. Any sale at arm’s length that takes place to anyone should be exempt from this tax. As I understand it, if a neighbour not related to the vendor purchased the farm, the tax would apply, and in the case of a circumstance where there was some difficulty in determining the amount of the tax, then there would, in effect, be a cloud on that title.

Let’s take the example of a farmer applying to get a farm credit corporation mortgage. The cloud remains on the farm because of the fact that the amount of the tax has not been determined. We all know that these things can get rather complicated. Let’s presume that the matter remains unresolved for a period of year. This would mean that the purchaser of that farm, not being a member of the family, would be held up in obtaining funds from the farm credit corporation for a year, possibly less or possibly more, depending on how quickly the matter was dealt with. The farm credit corporation would not process a loan until the cloud on that title was lifted, and the cloud on the title could not be lifted until the tax was paid. So there could be --

Hon. Mr. Meen: Or security given.

Mr. Gaunt: Or security given. But the fact is that in most cases where a farmer is purchasing, he does not have enough security to avoid taking in the new land purchased and using it as security. So in most cases, I say to the minister, the farm that was purchased would have to be used as security -- and it could not be used as security until this tax was paid and the matter cleared. That’s the way I read the terms of the bill.

I think that the whole matter of obtaining mortgages under the Farm Credit Corp. programme would be thrown into chaos. Dear only knows, we have enough trouble now getting these loans processed. Often it takes up to a year to get them processed in the normal course. And when I say in the normal course, if there are any out of the way problems at all, then the loan application gets bogged down in the legalese. It’s thrown back and forth between the Farm Credit lawyer, the lawyer for the vendor and the lawyer for the purchaser, and the first thing you know, 12 months have gone by.

I say to the minister that with this provision, it would possibly throw the whole matter into a two-year period, and I would say that in that circumstance, it would just be impossible. All right. Let me move to my other argument. Before I do, I want to say to the minister that he should consider that, because that is a practical problem.

I want to move now to the philosophical base for my argument. I have been one of those people who have said time and again that I believe that good farmland, good class 1 and 2 farmland, should be preserved for agricultural production. I believe that one of the ways to do that is through a system of taxation. I say one of the ways. I think it is just one of the tools. I think it is one of several tools that can be used in order to do that. I suggest to the minister that this bill will not even do that.

I think that where farmland is being sold under any circumstance to anyone, and where it’s to remain in agricultural production, it should be exempt from this particular tax, and I am going to propose or one of my colleagues is going to propose an amendment to that effect.

There can be an argument made also for the fact that farmers over the past number of years have been the forgotten lot in our society and have been living on very low incomes. We have all talked about it. At least the farm members have talked about it in this House on many occasions. It’s true. The fact is that this last year has seen a shift in that position and the farmers have had better times in the last 12 months.

An hon. member: Since Whelan became Minister of Agriculture.

Mr. R. F. Nixon (Leader of the Opposition): Whelan did it, yes. Best Agriculture Minister we have ever had.

Mr. Gaunt: That’s true. There is no question about it.

Mr. R. F. Nixon: Mr. Whelan, in the whole of southwestern Ontario, right across Canada --

Mr. Gaunt: He is very popular and he will be the cabinet minister in most demand when we go into a federal election this week.

Mr. R. F. Nixon: Tomorrow.

Mr. Gaunt: But in any case, an argument can be made that the only pension fund a farmer was able to accumulate during those years of very low income was the pension related to the appreciation of his land. That’s true; there’s no question about it. Many farmers in this province, and indeed in this country, have stayed on the farm in the thought that when they sell their land, they will be able to get a relatively good chunk of money out of it, and that in effect would be their pension for farming all of those years on a very low income.

This tax is going to remove that option from them. They are not going to be able to do that under the terms of this bill.

Mr. Lawlor: And therefore the Liberals are going to vote against it. Is that what the hon. member is saying.

Interjections by hon. members.

Mr. R. F. Nixon: The NDP are the people who are in favour of the profiteers and speculators. We are against them.

Mr. Cassidy: Every word the Liberals have said has been against the tax and yet they are going to vote for it.

Mr. R. F. Nixon: That’s not true.

Mr. Cassidy: We’ve said to make an effective tax but not this nonsense.

Mr. R. F. Nixon: The NDP is in favour of buying out the land in the public interest. The member is a socialist. That’s what he should be in favour of. That’s the only reason he’s here. Sometimes it is hard to differentiate that.

An hon. member: The speculators will be glad to hear about that.

Mr. Speaker: Order. Meanwhile, back to the bill.

Mr. R. F. Nixon: Yes, that’s the stuff, Mr. Speaker. Meanwhile back to the bill.

Mr. Gaunt: The fact is I think the minister should also consider this. I’m drawn to that argument that a farmer who has farmed more than 10 years is in no way a speculator, no matter for what purpose he sells his land in the end --

Mr. Cassidy: Even if he sells out for $1 million?

Mr. Gaunt: You tell me a farmer that sold out for $1 million. Name me one -- name me a farmer in this province who has sold out for $1 million in the last year -- I’d like to hear about it.

An hon. member: Put up or shut up.

An hon. member: Come on, you socialist farmers.

Mr. Gaunt: I must say, Mr. Speaker, that I am drawn to the argument that if a farmer has been farming for 10 years --

An hon. member: Most have.

Mr. Gaunt: -- and he happens to reside close to a rapidly developing area and his land is required for residential or commercial or industrial purposes and it is obvious that it cannot be saved for food production -- I’m of the view that when that farmer sells his land for that purpose, having farmed it for 40 years, he shouldn’t be subject to the tax.

Mr. Cassidy: And the member supports the principles of the tax.

Mr. Gaunt: Mr. Speaker, I would urge the minister to consider those points because I think --

An hon. member: He’s already done that.

Mr. Gaunt: -- they are important from the point of view of farmers and they are important from the point of view of food production and society generally. I would hope the minister --

Mr. Cassidy: What does this do about food production?

Mr. Gaunt: The member hasn’t been listening.

Mr. Cassidy: I certainly have.

Mr. Gaunt: The problem is that he likes to talk more than he likes to listen.

Hon. Mr. Meen: Keeping farmers on the land, that’s what he’s talking about.

Mr. Cassidy: The member would put a high enough price on the land so that food won’t be produced on the land.

Mr. Gaunt: There were two points that I made. The member for Ottawa Centre obviously doesn’t farm much out on Toronto Island, because he doesn’t understand these things.

An hon. member: Just fishing.

An hon. member: He’s got a rice paddy out there.

An hon. member: He fishes a little.

Mr. Gaunt: So I urge the minister to consider those two points I have raised. I hope he can bring forward amendments. If he doesn’t we are prepared --

Mr. R. F. Nixon: If he does we will support them too.

Mr. Cassidy: From his position in bed with the Liberals.

Mr. Speaker: The member for Lakeshore.

Mr. Lawlor: Mr. Speaker, I am very glad to be back in the House after my prolonged absence.

An hon. member: We are glad to have the member.

Mr. Lawlor: It seems to me almost a lifetime now I’ve existed in the nether regions of this building. I was growing pale with the pure lack of sunlight but now that I’m exposed fully to the lamplight in the chamber my spirits are beginning to be restored.

Hon. Mr. Meen: We thought he had lost his voice.

Mr. R. F. Nixon: It’s a long time since we had a fully exposed NDP.

Mr. Lawlor: The minister knows, I think -- I got at least a slight intimation of the effect of his tax upon the legal profession to start with, and upon the building and mortgage interests in the province, insurance companies, trust companies and what not. As far as the legal boys are concerned they are in a state of high tension. Never have I seen so schizophrenic a mood. They are like dancing on coals down there. If you could remove yourself from your office for just a few moments on any occasion of the day or night, as long as that registry office is open you will see lineups in every direction, particularly going into see Tommy Blacklock and a number of other people who have been deputized.

Nobody ever sees any of the minister’s minions whom he was supposed to send down there to relieve the pressure and who, in his blurb to the profession, he said would be in ready abundance. Nobody sees these people. But the regular staff are using extremely dark, black pencils on the affidavits for some kind of approval; I couldn’t read it the other day after being in three lineups and being frustrated every time. The affidavits were all ready, section 4 and the exempting provision within that section set forth. They were all around me, probably the most notable Conservatives one ever imagined, cursing the minister and his statute right down to the ground. They found the thing was so badly handled and so muddled at the present time as to bring to a standstill pretty well the whole network of property transactions in the province.

I think maybe a little of the repercussions have been visited upon his head. He must consider himself fortunate to sit in this chamber, isolated from the crowds of berating lawyers outside. They sound like harridans when one gets close enough to listen to them. The condition is created completely unnecessarily and without sufficient previsioning of the chaos that legislation, unless it’s well set out and well done, visits upon the head of everyone.

The minister was in here this afternoon for a few moments, having flown back into the fray and found himself like Daniel in the heat of the furnace. He gallantly retired with the first bitter words uttered; he is no longer the formidable bastion of Conservatism, always biting back, but is more vulnerable now, gentler, as is the Treasurer (Mr. White) and unable to take the slings and arrows of this chamber; and so he withdrew. But the man, it seems to me, has a positive genius for mischief. I think there’s a great deal of truth in that this is hastily devised; this legislation is taken out of thin air and, as the Scotsman said, out of the whole cloth. It’s permeable legislation.

Let’s take a few examples of the difficulties inherent in a bill of this kind without going into the intricacies which will be reserved for another occasion. By the way, the central principle that I personally find to be employed or operative within this legislation tonight -- I think the principle of the bill is that it’s so badly drafted. I think it’s an aesthetic principle, in other words. As I read it, the thing is such a muddle that no one could possibly vote for it because one could never disinter exactly what it was seeking to do. Nor has the government over there, as the various ministers have expressed it, been able to do that. They’ve been at cross-purposes in their expressions as to what this thing means.

Take wording like “net maintenance cost.” I think it’s defined in (b) of 1 and there’s a further definition of it in (j), also section 1. I think it has to be conceded it is extremely vague. No one would know whether the section covers such costs as interest or realty taxes and whether these can be deemed to be maintaining the property. The vacuity of the thing is astonishing on that one head alone.

In the area, secondly, of the deductible fee: Is this tax, if it’s levied, deductible from the corporation or the individual income tax or not? Nobody seems to know conclusively. Hints, gestures and surmises arising out of the budget statement by the Treasurer would perhaps indicate that it was but there is nothing in the legislation that so indicates, nor has the position emerged from the debate as it has thus far gone.

Take the area of farm classification. My good friend Clay Paterson, who is in the gallery this evening, was kind enough to supply me with certain documentation, which will be brought in to committee of the whole House to show that the definition with respect to farming is far from adequate. It doesn’t even meet the nostrums of certain reports which came to the government and which might very well have been used as the foundation for the definition.

Take the business of the tourist establishment. What an incredible piece of work is that section. How is it possible, when directing one’s attention to residential multi-family dwellings, to start off with something wholly different, namely tourist establishments?

What kind of tourist establishment is not established; no one has a clue. The budget statement seemed to think that pretty well across the board they were acceptable but, no, the legislation indicates the regulation is going to have to define this. But starting at a section with respect to tourist establishments it goes on to read, “Or for commercial or industrial purposes;” these are exemption sections. Getting into commercial and industrial, and saying they are going to be exempt, it suddenly switches in the middle of the sentence and says, “other than rental of apartment suites.” Could the minister in his drafting not have gone to the length at least of placing these separate heads under separate heads? These things are quite distinct and distinguishable. They are important enough, God knows, in the economy for each to be taken out and segregated but, no, a great molten lump is created inside that section (d).

It goes on, “Other than the rental of apartment suites or residential accommodation for use as the principal residence of the lessee and if the designated land so disposed of” -- I didn’t know when I first read the section what the “and” referred to; whether it was the apartment units that had to have a 40 per cent valuation or ratio between land and building; or whether it was the tourist establishment; or whether it was the commercial one; or whether it was the industrial; or what the devil it really was.

That’s really wretched drafting and there is no necessity for it. The minister could have taken out that residential accommodation and defined it with greater precision than he has done at present. I am sure he doesn’t mean that the little woman who, as has been indicated here before, invests whatever moneys came out of the will in a house in which she lives herself, is going to be hung up and subject to this tax.

What he is talking about are greater units, etc., on which there has been vast speculation largely proceeding from European interests -- Swiss interests; Japanese interests to some extent; German interests. They are in not only the plazas and the malls but apartment buildings. I think the minister has some intent to put a brake on that but he has, as I say, buried it under the heading of a completely different subject matter, an index of the hurried and precipitate way in which this legislation was devised and thrown together. I use the word advisedly.

I had a chance at the dinner hour tonight to take a look at what my colleague from Riverdale had to say on this and he is surely right. On the business of the 60-40 ratio as to improvements, when one resells 40 per cent of the value at least must be in terms of the structure of the building. My Lord, the minister is going to have to have phalanxes of administrators to determine that, isn’t he? Suppose a fellow comes up and the ministry people, who have some expertise in this through succession duties, say, “We think the building is worth $39.3.” The fellow who has just completed the sale says: “Well, if that is the case I have got to take $53,000 worth of tax. Can’t you jack it up by 0.8, let’s say, and save me $50,000?”

What nonsense will go on here; what play back and forth. And the same thing with this 20 per cent. Where is there expertise in this world that is so scientific, or so exact, or so determined -- in this ministry or anywhere for that matter -- that it can come to any definite conclusion? Isn’t the minister building into his legislation an infinity of care of unnecessary scruples and nice atomization that will only bring all kinds of fret into the community and very little money into the coffers of the province on that particular basis?

Take the situation with respect to testators, wills, trustees and the like. What on earth is the minister doing with this legislation? The first mention of the testator situation is when one throws into adjusted value the fair market value of property passing under a will or an intestacy, someone dying after April 9.

And that looks as though it is coming into the adjusted value, into an estate, etc. But then the minister proceeds as subclause (iv) of (d) under terms of disposition to define disposition as:

“Any change in the entitlement to, or any accretion to, the beneficial interest in designated land as a result of the death of any person.” Then lo and behold, having achieved that particular objective -- no, I’m not finished yet -- one comes to section 3 and here is an amazing section with three subsections to it, detailing at some great length: “An administrator, executor, trustee or person acting in fiduciary capacity for the transferor of designated land that is disposed of is not, as such, personally liable for the tax.”

There are six things that rise out of this; six muddleheaded, stupid things at least arise out of this. Because in the next section, having exculpated personal responsibility, the minister snaps him right back in again and says he’s responsible for 150 per cent of the tax. And what is the person responsible for in any event, because in another section, back here, the minister says that in that particular contingency, under a will or an intestacy, there is no tax; there is no tax at all? The minister doesn’t impose a tax; he deliberately excludes the tax.

While I am fumbling around here and trying to find that particular section -- it is the most disenchanting thing in the world to learn that the minister has gone to all that trouble of embodying it on at least three occasions, and then turning around and saying: “After all, gentlemen, and the world at large, we are not imposing a tax on this contingency.”

What goes on? What kind of a deal is that? What kind of drafting of legislation? What the minister should have done, what he is really after, what he is trying to do, he is talking about trustees inter vivos by way of trust documents of the living. This is basically what he is after and not the trusts involved, in wills and testatory instruments of all kinds.

If that is what the minister is after, then why doesn’t he say so? Why does he go to all the flim-flam and the legerdemain of importing all the executors, trustees, administrators, into a particular section of the statute?

It means the minister is woolly-headed and when he was drafting the thing he worked -- I suspect it must have been done close to 5:30 on some very rainy morning; because no light was getting into the windows at that particular time; and the brain was clouded over when he imposed these particular sections under the legislation.

I am bringing these forward, Mr. Speaker, to show the total state of absurdity and muddleheadedness in which this legislation finds itself. A person with an ounce of precision or logic, like myself, couldn’t possibly accept this thing on principle, as it is presented to us under these auspices, and drafted in such a meretricious way. That seems, to me, beyond redemption.

The minister goes to the trouble weeks ahead of time to draft a budget statement sent to the printers, where it sets out in black and white on page 6:

“The government does not wish to discourage development or construction of industrial, commercial or residential building, accordingly exemptions will be provided in the following instances:”

No. 1, I won’t read. No. 2:

“Sale of property, where the vendor has complied with the subdivision agreement and constructed residential or commercial premises, will be exempt.”

That’s two things, by the way, before these wretched amendments begin to flow in on us. The minister has complied and constructed something. He hasn’t just done one of those things, he has done two, and that’s important in order to keep any kind of hold on this speculation business so far as the legislation is concerned.

But what does the minister do? Having set that forth in black and white days before the legislation came before us, the minister doesn’t embody it. There is nothing in this bill that makes any reference to that. The minister has the effrontery then to stand up in this House and say -- with that sanctimonious rectitude for which Conservatives are so famous, and which quite takes the breath out of any living socialist I have ever seen, including myself -- what does the minister do? He gives a list of three things that he thinks he has been deficient in, and that he is going to try to patch up somehow, as we go into the committee of the whole House.

Mr. Cassidy: He is going to rewrite the bill.

Mr. Lawlor: It will simply have to be re-written. How can he explain that hiatus, the total absence of that particular concept in terms of his legislation, if it weren’t a case of precipitate draftsmanship and precipitate dealing with the legislation as a whole.

There are a good many other matters. I would put it to the minister and be very intrigued to learn that he and I go back to our law school days together, hand in hand this evening --

Hon. Mr. Meen: So to speak.

Mr. Lawlor: Tell me, what does he mean by beneficial ownership? He uses it with such cavalier aplomb in the course of the legislation. Everything is beneficial ownership. Is that legal ownership? Is that equitable ownership? Does beneficial ownership refer to a trustee situation? Just what ambit has that intriguing phrase got upon which a great deal of this legislation turns? I spent a good deal of time last evening trying to pick up what on earth the Conservative government, and the minister in particular, could possibly admit in this particular context. So I bring it to his attention. It is not just in the way of bantering; I am serious.

Mention has been made, and I shall not flagellate it, of the multiple sections of this bill which are penal in character. I, of course, refer to the search and seize sections. The minister has taken probably the most coercive, autocratic sections out of his Succession Duties Act, which have been under fire for a long time and which Mr. McRuer found repulsive and incapable of swallowing, added to them, placed an extra turn to the screw and embodied the whole works into this legislation.

Has the minister got some kind of totalitarian complex? Does he feed upon the punitive? Does it somehow titillate his ego to feel that now he is in the seats of the mighty, by George, the little ones down below will know that Meen is here and he will make his velvet glove, his clenched fist, felt in the population as a whole? He knows it is there, and he knows the impact of it and he knows how aggravating that type of legislation is. In the name of every minister of the Crown, no one else has ever dared to bring before the House legislation of such acerbity and such coerciveness as this particular legislation under that very head.

Well, Mr. Speaker, I have pretty well taken to task these various things. There are a number of other points; we will let them pass for this evening. We are anticipating very shortly a whole series of amendments to this legislation which will probably on one side of the fence eviscerate it. The chicken was pretty thin to begin with but, by George, after they take the intestines out there won’t be much left. This is the state in which this is. We have banged over to this side of the House to see those amendments in advance so that we, at least, can be prepared, because this is intricate stuff.

I think the minister himself will agree it’s complex reading to try to work out the way in which the tax is calculated and the various concepts that go into the aggregate values involved here. Some of these things are going to be altered. Some of the major concepts are going to be under fire. The minister is going to argue that they are not changing the principle or the very meat of the bill. We’re going to argue that they are, and he is going to bring forward more amendments in order to exculpate himself and not have to walk down University Ave. in sackcloth and ashes too early in his ministerial career.

The Treasurer of Ontario, with his brainwaves, has visited upon this minister a blight, and the minister grows grey in the process. As a matter of fact, I see a little whiteness over there already toward the rear of his head. With that in mind I have a certain amount of condolence for him in the wretched situation in which he finds himself, and we’ll watch the adroitness with which he twists and squirms, a little like Uriah Heep, in the process of trying to get out of this particular legislation.

Mr. Speaker: The hon. member for St. George.

Mrs. M. Campbell (St. George): Thank you, Mr. Speaker. I am not going to speak at length on this matter, but I feel that it is incumbent upon me to express my own position as it pertains to the principle of this bill.

Mr. Cassidy: Is the member for it?

Mrs. Campbell: So far as I am concerned, my caucus, my party has, in principle, agreed that there ought to be a tax on speculative profits to discourage the speculator who has been abroad in this province for some time, who very often engages in paper transactions in order to inflate the price of land artificially. This, of course, was what I addressed myself to in reading this bill.

Mr. Cassidy: The Liberals never talked about speculation before this bill came in. Not a word.

Mrs. Campbell: That is totally untrue.

Mr. H. Worton (Wellington South): Just forget about him. He’s just like a trickle of water.

Mrs. Campbell: But may I put this to the minister. I know that he has been asked to bring in his amendment and has consistently refused to do so. I know that he has been given one example after the other of what this particular bill will do. It strikes me that what this government has tried to do is to come to grips with the very situation which I describe, and then has created an apparatus, an awning, an umbrella, or whatever you want to call it, which hits all sorts of people who should never at all be considered speculators.

I have, for example, two problems which have been raised in my own riding. One is the case of a man and wife who bought a family home some years ago. The husband died. The wife is in a senior citizen accommodation and the house is being rented. Now, surely, by all that is holy and reasonable, that woman is not a speculator.

Then there is a further problem, the case where people have been sent out of the country by their businesses. They have rented their home for a period of time. Then finding that the five-year plan, or whatever plan it is, is not going to take effect, return to the province and want to sell. Again, surely, that is not a speculator. What happens with this bill and what concerns me even more than those two examples is that the effect of it, as I see it, is to create a monopoly of the large developers in this province to the exclusion of the smaller building, so that we may see the day when there are three or four large developers, plus the province, in control of the development of all the land in the Province of Ontario. I wonder if the reason why this government has not undertaken a definition of the speculator is that its own role is in precise terms the role of those that we are trying to discourage?

I am asking the minister now -- I am not going to say please bring in the amendments -- but if he has at all understood the concern of those who support a principle in that they cannot go too far in condemning everybody else in trying to support that same principle, would he not at least indicate to this chamber the philosophy of the amendments which he hopes to bring in? Is he going to put up a smaller umbrella? Is he going to try to protect those who in no way by any definition are speculators? If he would answer me that question, then it would help me materially in coming to grips with this particular bill.

Mr. P. G. Givens (York-Forest Hill): Will the minister tell her what kind of an umbrella he is going to put up?

Mrs. Campbell: Surely there’s a difference between the line-by-line amendment and giving to this House something of the minister’s own concerns. The minister, I am sure, is far too capable a person not to have himself grave misgivings about the effects of this legislation in this province today. I do not want to be in the position where someone can say I changed my mind. My mind is exactly where it was when our leader proposed exactly the same idea, the same philosophy, but without these horrible repercussions.

Mr. Cassidy: When was that?

Mrs. Campbell: Please look it up. I haven’t the time to enlighten the NDP today.

Mr. Cassidy: How many weeks ago?

Mrs. Campbell: Can the minister understand the problem with those of us who are in support of the philosophy in the way in which this bill really damages a lot of people? Could we expect some sort of definition that would clarify the philosophy, because if he could assure me of that, then I would be prepared to await the precise terms of the proposed amendments? Surely that isn’t too much. Thank you, Mr. Speaker.

Mr. Speaker: Does any other member wish to participate in this debate? The hon. member for Kitchener.

Mr. J. R. Breithaupt (Kitchener): Mr. Speaker, I think it’s fair to say that in this particular debate, most of the matters which should be drawn to the minister’s attention have been drawn by members on all sides of the House. It has been interesting in following this debate and having a dozen speakers from each of the opposition parties, and three as well from the government side, that all speakers have called into question particular items and have particular concerns in this debate.

The member for High Park (Mr. Shulman) had referred initially to a letter which all of us had received from the Metropolitan Hamilton Real Estate Board. It was my intention earlier on to review the particular points in that letter, not that I necessarily agree with all of them, but I think that it is incumbent upon the minister at least to be able to answer all of the particular concerns that that group have.

Mr. Lawlor: The member for High Park did all that.

Mr. Breithaupt: They are only one, of course, of many other groups that have shown interest in this particular legislation.

Mr. Cassidy: Does the member agree with the principle of the bill?

Mr. Breithaupt: The points that have been brought up are points, I think, that must be clearly defined in order that the legislation, if it is finally approved by this House, may attempt to meet the needs which the minister has said it was to meet.

One area of concern in which I was particularly interested was the matter of the exemptions of transaction which this bill allows the minister to make. We are told, particularly in section 20, that the Lieutenant Governor in Council may make certain regulations and those regulations will have the effect of giving exemptions in various areas to those situations that the minister may particularly wish to have exempted.

I have felt, as I have listened to the debate on this bill, Mr. Speaker, that it really should be dealt with parallel to the bill that the member for High Park introduced, Bill 32, which stands on the order paper, because I think there is a section in that bill which is particularly important to us as we debate this bill -- that is section 7. In section 7 of that bill, we read, “The penalty for each offence shall be elastic but immense.”

I think that this legislation could have been perhaps boiled down to that one sentence, because within many areas of our community there is a feeling that the elasticity of the penalty which the minister is able to impose by regulation or otherwise is bound to be immense and have an effect on many areas of our society, some of which I think it is really not the minister’s intention to include in this kind of legislation.

Mr. Cassidy: It is matched only by the elasticity of their principles over in the Liberal Party.

Mr. Breithaupt: Mr. Speaker, it has been commented upon earlier, at least in the view of the Provincial Secretary for Resources Development (Mr. Grossman), that the main function of this bill, even though it is a taxing statute, is eventually to provide housing for the people of this province. It is certainly clear in the comments which have been made by my leader and by members on all sides of the House that the most important need, and in my view at least, the real requirement within this province is for the provision of serviced land for housing. I believe, unless that is attended to, unless there is flood of land placed on the market through the involvement of the province in the servicing of land, and the provision of sewer and water resources, just as Hydro resources are provided, that that is the only effective way we will come to the root problem of the cost of housing within Ontario. There are various other things that have been referred to.

Mr. Speaker, I have no doubt you will recall almost verbatim my comments on the budget speech, which I gave in leading off for the opposition, that referred initially to the need for serviced land and the requirement for this government to remove the sales tax on building materials. That is only one of a number of things which goes to ameliorate the situation, but the root of the situation still remains in the matter of serviced land.

I fear that many of the complaints raised with respect to this bill will not have the effect that the minister is seeking. This is more particularly so when the various matters of exemption are left almost to the peculiar concern, the whim perhaps, of the minister acting through the regulations which can be made by the Lieutenant Governor in Council, which, of course, is the cabinet, that will have an effect on the kinds of control that are going to be developed as these lands, hopefully, are finally brought into the housing market.

There are many other points, Mr. Speaker, that I think can be referred to. Some of them have been covered, but one that I think is worthy of further review is the opportunity that this bill may give to deal in the transfer of principal residences as they are defined in the bill. It may be that the result of this legislation in exempting principal residences will give us persons who are changing those residences rather frequently.

A person may be able to move from one principal residence to another and avoid this taxation. This, of course, is not the intention of the legislation but I would suggest some of the amendments which the minister should be bringing forward will deal with this particular problem. I think that kind of movement between principal residences should be discouraged because it is obviously an abuse of the detail of the bill which the minister is attempting to bring into law.

Another point has been made with respect to the matter of investment going elsewhere. We have seen already in the public press advertisements which suggest that investors within the community and from outside Ontario might be better off to put their investment moneys in other provinces or indeed in other states of the United States. I draw that to the minister’s attention because I feel that the kind of investment development we should have, even within our own province and from our own citizens, may not be the result the minister hopes for by the implementation of this legislation.

Many of the speakers so far, Mr. Speaker, have referred to the matter of building lots which we believe may no longer be available to the builder who puts up five or 10 or 20 homes within a year. The member for Waterloo North (Mr. Good) has commented upon the fact of ownership of land within the regional municipality of Waterloo. In our ridings of Waterloo North and Kitchener we have seen that four or five large organizations have an effective monopoly over the ownership of land which could be developed.

We feel it is not so much only a matter of the lack of services to land, to which I have already referred, but the fact that the average builder who is putting up a smaller number of houses may simply no longer find those lots available to him. The Treasurer, in making comments earlier -- at least in the public press -- has said that if this kind of statute is not sufficient, he is prepared to bring in the kind of legislation which will require sales to smaller building companies and individual contractors in order to avoid the problem to which many of the speakers have referred.

I would make a brief reference to an article which appeared in the Globe and Mail on April 11 last, which was written by Mr. James Purdie. He made the following comments:

“Ontario’s new 50 per cent tax on speculative gains from land sales will force hundreds of small builders out of business unless amendments are introduced to exempt the lots they buy from developers, industry leaders have warned. Small builders are responsible for 50 to 75 per cent of houses built annually in the province. Each builds from five to 100 houses a year on lots purchased from major developers and these lots are subject to the new tax as the proposed legislation stands.”

I won’t go further into that article, Mr. Speaker, other than to comment that we, of course, have expected various amendments to be brought forward by the minister to deal particularly with this point.

As the members are all aware, the amendments have not been made available to us as yet and we are hopeful that, in reviewing this bill when it goes to the committee stage, the minister will bring in the kind of practical exemption which will ensure that many of the builders, who are employing a number of sub-tradesmen and tradesmen within their own building companies or partnerships or whatever it may be, are still going to have the opportunity to acquire the lots from the developers in the situation which has gone on heretofore.

Mr. Cassidy: And if he doesn’t the Liberals will flip-flop and withdraw their support.

Mr. Breithaupt: I think it is important for us to remember that if the construction of houses within the province receives the priority members of the government have said it should, this is one of the most particular points which has to be resolved in this bill.

There are many small builders who will be in a very serious position. I am certain that those of us who, because of our other activities, happen to have some involvement in or knowledge of the kinds of persons who are involved in these trades, have a great fear that the lands will not be available to them. As a result they will no longer build homes which are so badly needed within our province.

Points have been made as well, Mr. Speaker, with respect to the matter which has been raised concerning this tax being imposed, effectively, as a tax on inflation. Many of the members have made comments with respect to the investor who may own a fourplex or the person who has decided to sell a farm after having farmed for a number of years. If these two items were to have been hedges against inflation, then we find that this government, by its proposed tax at least to date, is going to be recovering those costs of inflation and in fact cutting into the savings of the people who have made these investments. So this too is a matter of great concern to us and a matter we feel the minister should make clear statements about.

If this is actually to be an inflation tax, then I suggest there are certain things that can be done. The member for Huron-Bruce has referred to a proposal whereby a person who had owned a farm for a 10-year term, for example, would be exempt from this kind of taxation. This could be done, of course, by using a depreciating scale of taxation which might well have a 50 per cent rate in the first year but would have a five per cent differential removed from the taxation for each year of ownership. This is the sort of thing which I think should also be available to the person who may own a commercial building, a sixplex or an extra home, which he or she has purchased and maintained and has hoped to use as a matter of savings.

There are, indeed, many persons who have not chosen to involve themselves in the security markets. Many persons have decided that the kinds of investments they might best like are those investments which they can see; and those investments frequently -- indeed, within our province, more than just frequently -- show themselves to be in land or in bricks and mortar.

If there was a time element built into this tax, and if the tax could have a depreciating rate of five per cent per year, then I think that many of the complaints which have been raised against this tax might well be resolved.

I believe it is quite satisfactory for us to attempt, at least in principle, to cover the recovery of these tax revenues from those who are simply speculating in raw land. The matters of improvement of those lands and of the length of time of holding those lands are surely things we should be considering.

A further point that has been raised, of course, dealt with the matter of allowances for taxation from the federal authorities. The member for Downsview and the member for York-Forest Hill have referred particularly to the fact, as set out in the earlier press releases, that this kind of taxation could result in burdens of 104 per cent or 112 per cent of the total profit of any project, especially if there was not an allowance made by the federal authorities for the tax provision under this Act.

The minister no doubt will be advising us when he winds up this debate as to how this matter is to be resolved. We certainly have been given no assurance, at least so far, that this is the kind of resolution that is going to fall into place in the way the minister sees it, as compared with the way that the federal authorities may in fact decide. Presumably before we finish the debate on this bill, we will know whether or not these allowances are going to be granted and are going to be deductible.

One other point about which I would like to speak is the matter set out in section 4, which deals with the various areas of designated land. I have referred to the matter of principal residence, but I think there should also be reference made with respect to the contiguous lands, which cannot exceed 10 acres. I think it would be worthwhile for the minister to consider, at least in the regulations that are made under this Act, that the various areas of parcels that should be exempt are those for which the townships have been giving the minimum severance. In other words, if the smallest parcel of land that one could have severed and upon which one could build a home is 25 acres or 20 acres, then that should form the base upon which this tax may be levied. Certainly if the parcel is of a size which cannot allow further subdivision in accordance with local bylaws and regulations, then obviously we won’t be able to deal with the difference in land between the 10 acres that are referred to in the bill and the minimum size of 20 acres or 25 acres upon which the building permit has been granted.

As I have said, Mr. Speaker, there’s a great number of particular items to which various members of the House have referred. I am not at all ashamed of the fact that we are prepared to accept the fact of support of this bill in principle, because I believe that the basic principle of attempting to acquire control over speculation in raw land is one that is worthy of support.

Mr. Cassidy: That’s a very recent conversion. They’ve just come to that.

Mr. Breithaupt: As I have said, not only earlier but now -- and I am not at all bothered by the views of our friends to the left -- we are prepared to support this bill in principle. We believe that there are substantial amendments, and we look forward to seeing the amendments which the minister is going to bring to us.

Mr. Cassidy: The hon. member’s party wants even more loopholes in the bill, in other words.

Mr. Breithaupt: These amendments, of course, are going to deal in many particular areas. As the minister attempts to launch into this area of land speculation, there are of course questions raised on every hand. I had referred earlier in my remarks to the matters brought forward by the Metropolitan Hamilton Real Estate Board. And they raise a large number of points, as I’m sure many other groups have sent on to the interest of the minister.

It is my hope that the minister, in his response and in the detailed information he is going to give us, will at least resolve the various points that have been raised. I am not saying that he is likely to agree with all of them. I am not saying that in many instances the comments made, perhaps by certain groups or individuals, can be seen as self-serving. Indeed, it would be curious if they weren’t. Obviously the people who are interested in these various areas want to have the law as clear as possible.

If definitions are made, if principles are raised, then these are the pegs upon which future decisions can be made in the business world as well as in this Legislature. Whether the minister is able to bring out in detail and regulation the answers to these various questions has yet to be seen.

We hope, on this side of the House, that he will be able to resolve the problems. We do not think that some of them are going to be easily resolved, and it will be a matter of seeing how strong the government is in its commitment to this principle, as we look to the years to come, as to whether or not this bill will have proven to have been effective.

What we do say here and now, Mr. Speaker, is that the principle, as it has been defined by the minister, is worthy of support within the Province of Ontario. We disagree on many of the details and we will be bringing forward amendments that have been alluded to by various of my colleagues, which we hope not only will improve the bill but also will satisfy the comments that have been raised on all sides, not only in the House but also in all sides of interest and concern throughout the province.

On that basis we wish the minister well in attempting to resolve the problems. If he doesn’t resolve them, we’ll have a lot more to say in the future.

Mr. Speaker: Does any other member wish to participate? If not, the hon. minister.

Hon. Mr. Meen: Mr. Speaker, to begin with, may I just observe that I think that this is the most comprehensive debate in which I’ve ever had the pleasure to participate. I’ve read a lot of articles in the daily press and I have heard from an enormous number of individuals pressing, as the hon. member for Kitchener has suggested, their own private interests. I’ve received delegations from various interest groups, and particularly those who represent the subdividers, the developers, builders, home owners, apartment owners and so on. And I think all members here will have noticed that I have listened carefully to this entire debate.

Throughout all of this, I suppose it’s fair to say that nowhere have the goals and objectives and perhaps, for that matter, the inherent problems been better delineated than in an article I came across just last weekend in the Financial Post, April 20 edition. It’s entitled, “Land Speculation Tax May Swing a Big Clout,” and it’s by Beatrice Riddell of the Financial Post.

Ms. Riddell, in my humble opinion, has done an excellent job of covering this extremely complicated issue. I don’t know where, in two pages, I was able to find more of the problems -- not necessarily all of the answers, Mr. Speaker, but a whale of a lot of the problems are outlined there. She touched on the problems of the small builders, of the apartment owners, of the potential escalation in rent and all of those matters.

I would highly commend that article to hon. members as a fast distillation of the problems which we have been endeavouring to cope with here on this side of the House. May I touch briefly -- and I’m going to go through this as speedily as I can in the limited time available -- on some of our goals and objectives in attempting to bring forward productive legislation in this House.

Mr. V. M. Singer (Downsview): Take as much time as you want.

Hon. Mr. Meen: Yes, I think I will take as much as I feel is necessary to cover these points, Mr. Speaker.

We have definitely homed in on an anti-inflation thrust. We know that Canada can invoke tariff protection around its boundaries when it tackles the problem of inflation with matters such as price and wage controls. But, we know that here in the province, our capacity to tackle this sort of thing is somewhat more limited. But we also recognize that Ontario is a quite substantial part of Canada and we therefore recognize that perhaps in no small way and by our own measures, we just might be able to help reduce the rate and spiral of inflation.

As a secondary objective we do have the goal of more serviced lots and housing accommodation to get on the market at a sufficient rate that possibly supply can catch up with demand after all these years when it hasn’t. My colleague, the Minister of Housing, is going to have more on this subject to say to hon. members in the weeks ahead. But enhancement of that programme will doubtless help our attack on inflation. By pricking the speculation boom, the speculation pressure on the price of land should help reduce the cost of land, or at least reduce the rate of increase in the cost of land, and thereby improve the housing picture. So one goal seems to be inextricably involved with the other.

Our approach to these goals, therefore, is multi-faceted. We talked, last week and the week before that, on the Land Transfer Tax Act and the 20 per cent tax on non-residents. That’s a disincentive, as I hold the House at that time, to the foreign investment dollars entering the field of land speculation and land investment generally. We think that this will help reduce the investment pressure. I mentioned the housing action programme. We think that the Land Speculation Tax Act which is now before the House will help to get more houses on the market and will help in many respects to cut back on the spiral of inflation.

I emphasize to the members, particularly in the NDP, so many members have criticized this bill for not doing just that all by itself. I want to emphasize, particularly since I see the member for Scarborough West is here, that the members opposite can’t criticize us for tackling a job which needs to be done. It’s one thrust in several, so how can they criticize us in taking this action simply because they recognize, just as we recognize, that it alone won’t do the job? We have other courses of action as well.

Mr. S. Lewis (Scarborough West): We have been waiting for that. We see no evidence of it.

Hon. Mr. Meen: One has to have myopic vision to suggest that this bill could be the only course of action we’re suggesting. We’ve already seen the non-resident aspect of our Land Transfer Tax.

Mr. Lewis: It is the only one we have seen.

Hon. Mr. Meen: Any suggestion in the course of the debate on this bill is really not germane to this subject. What we’re talking about is a Land Speculation Tax Act.

Mr. Cassidy: The minister had better try better than that. He plays that trick every time.

Hon. Mr. Meen: The member for Riverdale (Mr. Renwick) was loud in his criticism of this Land Speculation Tax Act too, because he said it wouldn’t resolve the housing problem. He also suggested it wouldn’t reduce prices. I’m not suggesting it’s going to reduce prices either. Nobody is.

Mr. Lewis: The minister is not?

Hon. Mr. Meen: If we can reduce the rate of increase in prices just by that --

Mr. Lewis: Oh come on!

Hon. Mr. Meen: -- just by that factor alone, we will have accomplished a great deal.

Mr. Lewis: If that is an accomplishment, that is the --

Hon. Mr. Meen: Let us just outline, for the benefit of the hon. members, the seven or eight different areas on which I would like to touch this evening.

Mr. Lewis: Some bill.

Hon. Mr. Meen: I want to talk about the problem of builder-buyers, let’s say, from developers.

Mr. Lewis: That sounded nice --

Hon. Mr. Meen: I want to touch on the speculation tax, vis-à-vis the Income Tax Act of Canada; I want to touch on the scope of the regulatory powers referred to in the Act; I want to speak about the problem of the genuine investor; I want to talk about the renovations and general improvement sections in this bill; I want to speak about exemptions from designated lands, as raised by the hon. member for Riverdale; the question of precision and accuracy in tax law, and also, if time permits, a few general comments on the matters raised by the hon. members, not necessarily in those particular categories.

First of all, with respect to this Act as it applies to builders. I note that the hon. member for St. George is not in her seat; she was the last to direct my attention, I think, to this particular matter.

Mr. Cassidy: She is in the estimates committee, because of the way this House is ordered.

Hon. Mr. Meen: As we developed this bill, we started out looking at raw land turnovers, and we saw some -- limited, mind you -- but some limited statistics on turnovers at $100,000, the sale of $200,000, of $300,000, of $600,000, of $1 million, and so on. Our first attack was to look at the transactions in raw land without any significant improvement. But then we started looking at the degree to which improvements might be accomplished. If you rezone a piece of property, is that an improvement? If you rezone it and you put on a plan of subdivision is that really an improvement? Or if you rezone it and you put in services, paving, water and sewer mains, street lights and so on, is that an improvement? It may be.

As a matter of fact, to come back to that point, you get more money for it if you simply rezone it. You would get more money for it if you put a plan of subdivision on it without doing anything more for it. But that is not necessarily an improvement in the physical sense.

But, what we were anxious to accomplish was to get more houses into the housing market. And so the Act, as hon. members have seen it, provides that in that case the developer will make a profit out of the development of the properties, free of speculation tax only if he puts houses on the property.

Mr. Lewis: He gets 60 per cent for the land, higher than he is now getting.

Hon. Mr. Meen: It became apparent that many small builders -- as the hon. member for Downsview so clearly expressed it, as many members in both your opposition parties expressed it to me and indeed as I had it submitted to me by many people who came to see me -- that many small builders would be out of business. Some developers don’t build any houses at all in their subdivisions. Others build only on some of their lots. Very, very few build on all of them. In my opinion, and my colleagues agreed with me, if we left the Act this way, it would slow up housing and it would be counter-productive. We were anxious to speed it up.

Interjections by hon. members.

Hon. Mr. Meen: We were afraid that it would hamper all subdivision completion within a reasonable period of time, and frankly, also, there would be less variety and style of homes within various residential subdivisions. So entirely apart from all of this, we noted that it would put many small builders out of business. And, as one of the hon. members observed tonight, it would put them inevitably at a competitive disadvantage.

Therefore, I will be introducing an amendment, when we go into committee, to permit tax-free sales to purchasers covenanting to build within a limited period of time -- nine months as I figure it.

Mr. Givens: How long? A year?

Hon. Mr. Meen: Nine months to build on one-half of the lots they take over, and within 18 months on the balance of the lots which they purchase.

Mr. Lewis: The bill’s a joke.

Hon. Mr. Meen: HUDAC submitted to us a proposal very much like this. They suggested one year for the first half, and two years for the second. We are inclined to favour a somewhat shorter period of time than that. We think that nine months --

Mr. Lewis: Surprised he didn’t give them 60 days.

Mr. Givens: Big hearted.

Hon. Mr. Meen: -- the nine months would be sufficient -- not to complete -- to begin construction within the stipulated period of nine months on the first half and on the remaining half within the other nine months.

Then, I want to come to the matter of speculation tax. This is related to the federal Income Tax Act and I see the member for Downsview nodding his head because I know that he was one of the first to raise this point.

I will simply reiterate what I have said earlier on this. Our approach is within the present operating pattern of the income tax department with respect to costs of doing business. Our tax is not a tax on income and what we have assumed all along in this matter is that the federal Department of National Revenue would not change the rules of the ball game. The rules presently provide that a cost relating to a transaction is expensible with respect to that transaction and is deductible before you compute your income tax for the taxation year.

Our tax does not relate to a taxation year; it is related to the transaction and is utterly unrelated to the taxpayer’s other taxable income. He may be in a non-taxable position or he may be in a very high tax position. He may have a tax loss because of other factors available. He may have a tax shelter. There may be competent cost allowances or whatever that may be available to him under the Income Tax Act but that is not the point. What we are talking about here is a tax on a particular transaction. We think we are on legally firm ground. We also think, and this is in answer to a question raised by the member for Riverdale, that because it is related to the transaction and to the corporate tax picture of the taxpayer, it will be a real disincentive.

It is fine to talk about a minimal increase from 60- to 80-odd per cent. But the fact is, on that transaction over which he has control at the time when he makes it, the tax is 50 per cent on the gain. We think it will be a disincentive to hold on to and to speculate in land.

Mr. Singer: And, in the event that you’re wrong?

Hon. Mr. Meen: In the event that we are wrong, and I might just finish on this point, the --

Mr. Cassidy: Remember, the member for Downsview supports the principle of the bill.

Hon. Mr. Meen: Of course, and may I congratulate him and his party for their intellectual integrity. In the event that we are wrong, in the sense that if your friends, the Liberal Party in Ottawa, change the rules of the ball game --

Mr. Singer: You mean the government of Canada.

Hon. Mr. Meen: Yes, I mean the government of Canada. If they were to change the rules of the ball game, we might very well have to rethink this, because we are not out to confiscate at 112 per cent any transaction. That would mean nobody would put his property on the market at all and that would be very counter-productive. So, we would have to look at it then. I think any taxpayer, and that means any province as well, is entitled to assume that another authority is not going to change the rules of the ball game. If they do we will come back at it. I think we are quite entitled to assume that your friends up in Ottawa are not going to cut the ground out from under us on such a bona fide attack in a serious area like land speculation.

Mr. Singer: Aw, stop being so holy.

Hon. Mr. Meen: Anyway, let me go on to the next point.

Mr. Lewis: Have you discussed it with them since you introduced the bill?

Hon. Mr. Meen: As a matter of fact, there is no point in discussing it with them until the bill is law. Then I think they will be quite prepared from what I am advised to discuss this matter then. But our general assessment of the attitude of the federal government is not one that causes me any grave doubt at this time.

I noted that the Minister of Finance, when asked a question in the House a week ago Tuesday, indicated that he was not prepared to make a firm statement on this until he had seen the bill in its final form.

Mr. Lewis: Not prepared to make a firm statement, but the minister feels --

Mr. Speaker: Order, order, the minister gave every member of this House an opportunity to speak, now give him an opportunity.

Hon. Mr. Meen: Some members, Mr. Speaker, have questioned the scope of the regulatory powers provided in the Act. I’m the first to say, ‘Yes, they are very broad.’

Mr. Cassidy: Yes, they are.

Hon. Mr. Meen: I’d prefer just as much as possible of all of this to be in legislation, and frankly I’d prefer to put as little in the regulations as I could. But at this point I really have no idea what is around the next bend, but we are building into this Act just as much as we possibly can by way of precision. Perhaps after a while, after the Act has been in effect for some months --

Mr. Lewis: Precision.

Hon. Mr. Meen: -- we will be able to build more into the Act. As I say, I would like to see more in the Act than has to be sometimes in regulations.

Mr. Cassidy: There has to be more --

Hon. Mr. Meen: I’ve been asked just what kind of things might go into the regulations. I’ve jotted down a few thoughts that occurred to me in this regard.

Mr. Lewis: What’s occurred to him?

Hon. Mr. Meen: We may have to define specific kinds of transactions. We may have to develop particulars of allowable expenditures on improvements. We may have to alter the forms of the affidavits.

Mr. Cassidy: We have to work this legislation out.

Hon. Mr. Meen: The question was raised tonight of what constitutes a principal residence. The hon. member for Kitchener raised the question. That’s one that may well have to be subject to definition by regulation for the very points that the hon. member for Kitchener raises. We may have to set down guidelines as to evidence of bona fides on prior agreements. We have to develop rules for application of tax with respect to liens, their release both in whole or in part, the postponement in favour of other claims, and so on.

As I mentioned a moment ago, after this Act has been in place for a few months and we have an opportunity to assess it, it is going to be a lot better and a lot easier to determine what should be in regulation and what should be in the Act.

Mr. Cassidy: The minister should have thought of that before and not after the fact.

Hon. Mr. Meen: Now what about the matter of “genuine investor”? He is just as hard to define, I venture to say, as the speculator.

Mr. Cassidy: There is still time for an abortion you know.

Hon. Mr. Meen: The genuine investor is the good guy and the speculator is the bad guy.

I think we have taken care of and adequately protected the genuine farmer, despite what the hon. member for Downsview had to say on the point. But somehow, I think, when we were doing all this, we lost sight of the genuine investor who buys rental property and rents out housing accommodation. I’ve listened to comments by so many of the hon. members from both parties on this subject in trying to catch the speculator who turns over rental accommodation by a routine with which we are all familiar. He buys a duplex or a fourplex, ups the rent, and immediately the sale value goes up -- he may do nothing to it whatever -- turns the property over at a handsome profit and goes on and does the same thing again.

We were trying to catch this sort of situation just as much as we were trying to catch the speculator in raw land.

Interjection by an hon. member.

Hon. Mr. Meen: So I think what happened was that we wound up catching bona fide good long-term investors in the course of trying to catch the bad guy.

Mr. Lawlor: The minister is going to say he’d hold it for five years?

Mr. Cassidy: They are all speculators.

Hon. Mr. Meen: If we were simply to leave the Act as it stands, then the owner of a rental accommodation could anticipate no real protection against the future, so he’d make no repairs unless they were required under our new Landlord and Tenant Act, which the member for Lakeshore and I had a little bit to do with a few years ago.

Mr. Lawlor: We drafted that together and it was well done.

Hon. Mr. Meen: I think, perhaps, along with that, or perhaps as an alternative to that, he might immediately raise the rent substantially to recoup what he lost on unrealizable capital appreciation, or he might do both in some form or other. There would be no more starts in construction of new rental accommodation.

I mentioned Beatrice Riddell earlier. She quoted in the article one person to whom she spoke as saying no one in his right mind is going to build apartments. I think that’s quite right; that is just exactly what would have happened.

So I will be introducing an amendment to provide for abatement or tax where rental property is held over a period of years.

Mr. Cassidy: How many?

Hon. Mr. Meen: The degree of abatement will relate to the length of the term the property is held. I think this will tax the quick in-and-out artist and will protect the genuine investor. I might mention for the benefit of the member for Downsview that I don’t propose to do that by regulation. I think we can do that in the Act.

Let’s say the first two or three years of the period would be subject to no particular abatement so that you then nail down the genuine rental accommodation investor from the quick turnover artist.

Mr. Singer: Is the minister going to make a provision for death?

Hon. Mr. Meen: Then you have a scaled period of years for abatement of the tax.

Mr. Lawlor: Would he settle for 40?

Hon. Mr. Meen: I think we can accommodate that kind of thing, as raised by the question of the member for Downsview. I think we can accommodate that kind of thing in other provisions, such as the regulations.

Mr. Cassidy: You can double your money in five years, is that right?

Hon. Mr. Meen: I have a final observation in this general area of the speculator in response to the member for Riverdale. I am sorry he is not here this evening.

Mr. J. E. Stokes (Thunder Bay): He is down in committee with the Solicitor General’s estimates.

Mr. Meen: I didn’t check Hansard on this point. If I may, I will paraphrase from my notes what he said. He observed that ownership of property, its development from raw land to developed state and its sale in the market place are inexplicably intertwined with the holding of land for investment purposes to derive rental income. I say to him I couldn’t agree with him more. I suppose that has been our greatest task in trying to put this Act together, to distinguish for tax purpose the investor for income purposes from the investor for the purpose of speculative gain. I believe the amendments I have just outlined with respect to builders and owners of rental housing will resolve these difficulties.

Mr. Cassidy: The minister condones long-term robbery, but he disputes short-term robbery.

Hon. Mr. Meen: Now as to renovations and general improvements, there are two general categories with respect to the 20 per cent acquisition cost re renovations. I am told by people here in areas like Metro Toronto that this may be too low. This is a case where the land related to a house in the core of Toronto may have such a high related value that it is not too hard to put 20 per cent of the total cost of that property into the house for any significant improvement in it.

On the other hand, the member for Sandwich-Riverside (Mr. Burr) has observed to us here in the House, and he gave us two good illustrations in the course of his participation in the debate, that that 20 per cent may well be high, once you get out of Metro, where you get a completely different picture of the value or whatever -- the cost -- of raw land or of serviced land, of vacant land, to the value of the building situate on it. When you get away from Metro you get a different kind of picture. So the 20 per cent may turn out to be low in Metro, but it may well turn out to be high elsewhere.

My staff and I are presently looking at other ways to help overcome this type of problem as outlined by the member for Sandwich-Riverside. For example, and whether we can make this work or not, I don’t know, but it is a rather sophisticated approach which will take quite a number of little bits of detail in it.

We might provide that profit on resale could be allowed to be equal to demonstrable improvement expenses if, for example, that’s less than the 20 per cent figure referred to in the Act; with only the excess, if there is any, over the 20 per cent being subject to tax at the speculative rate. It’s complicated and as I indicated we are going to see if we can resolve that difficulty.

Members asked why do we have broad powers in the regulations. I say to the member for Sandwich-Riverside that’s one of the reasons we have a fair amount of discretion and flexibility built into the regulations.

Interjections by hon. members.

Hon. Mr. Meen: As to general improvements on vacant land there is no tax if the value exceeds 40 per cent of the total resale price. We originally thought in terms of a 50-50 balance between land and buildings even though in some areas of the province, as indicated by some members, the value of land may be quite a bit less in terms of percentage than the value of the building located on it. Taking Ontario as a whole we were inclined to look at a ratio of 50-50 and, in order to reach our figure of 40 per cent -- or in reaching it -- we simply picked a figure that was not too harsh.

We didn’t want to be too harsh but on the other hand we wanted to make sure that someone -- the speculator type -- couldn’t erect a shack on a parcel of land and thereby qualify for having improved it. We wanted to make sure he would have a very substantial improvement on that property before he went ahead and sold.

Here in Toronto, if 40 per cent of the sale price is reflected by the value of the improvements one has placed on the otherwise unbuilt-upon lot, in our opinion, one has made a pretty substantial contribution. From a practical and pragmatic approach, even here in Metro, our bet is that one would put on it a building worth more than the purchase price of the lot. That’s probably not an unrealistic figure at 40 per cent.

Some members have questioned the exemptions from designated land. The member for Riverdale said, in effect, it’s just resort property which is exempted and he asked why did we make that exemption? Frankly, it’s quite simple; all members have to do is look at our objectives. We are trying to put a lid on land speculation and we’re trying to get more housing on the market. I don’t want members to think I am being facetious but frankly there is no evidence that people speculating in resort property are thereby driving up the price of housing. There is no relationship between the two and so we exempted that area from the definition of designated land.

Mr. Lawlor: Besides, the government is not stepping on the toes of its oil friends, the sheiks of Araby. It leaves them free to manipulate whatever they please.

Hon. Mr. Meen: There’s also the question of precision and accuracy in our tax laws. I think that was raised by the member for Downsview. I agree that, basically, in a taxing legislation the application has to be clear and precise and it has to be accurate. It is also imperative, particularly in pioneering legislation like this, that there be discretion to relieve against unexpected and unintended adverse effects.

In this regard I might observe that there is nothing unique about this. We’ve got the same thing in the Retail Sales Tax Act, the Succession Duty Act and the Corporations Tax Act; there is nothing new at all. It is particularly important that we have it in this Act.

The federal Income Tax Act, in section 246, has an interesting section that shows the extent to which it thinks it should be able to go and that’s not even in relieving against tax. I might just read to the members section 246 of the federal Act. It talks about tax avoidance. It says:

“Where the Treasury Board has decided that one of the main purposes for a transaction or transactions effected before or after the coming into force of this Act, was improper avoidance or reduction of taxes that might otherwise have become payable under this Act, the Income Tax Act or the Excess Profit Tax Act, 1940, the Treasury Board may give such directions as it considers appropriate to counteract the avoidance or reduction.”

If that isn’t a high-handed provision -- and that’s been in federal taxing legislation since the 1940s.

As members can see there’s nothing unusual and that’s an actual application of a tax when what we’re talking about here is some discretion to relieve against the tax.

Interjections by hon. members.

Mr. Lawlor: That’s an old chestnut.

Hon. Mr. Meen: Perhaps I can make some general comments on points raised by some of the members. Some have asked about the staff requirements. Our staff in our succession duty office and in the assessment office will be able to provide valuers who can serve as the core or nucleus of this programme.

We might, had it not been for this programme, have expected some shrinkage as our assessment programme across the province winds down a little bit where we accomplish all of the assessment and we need fewer staff for that. We will be able to accommodate this load of work as the other workload tapers off somewhat. So I don’t expect a great bulge in employment in --

Mr. Cassidy: The minister deferred that by a couple of years.

Hon. Mr. Meen: -- the ministry, possibly a couple of dozen at the most; but something of that sort. Most will be provided from within the expertise of the succession duty office, the real estate evaluers, and the assessment office.

Mr. Lawlor: The minister is fooling himself.

Mr. Cassidy: It is not the Act that’s the problem. It is the loopholes.

Hon. Mr. Meen: One of the members touched on the tax rate shown in the Treasurer’s budget statement. They assume the top rate and it’s not quite appropriate to talk about them, otherwise than to recognize that they are the top rate. I’ve already mentioned that, in some cases, the corporations and individuals may have a loss picture which, therefore, gives a rather different atmosphere.

Mr. Cassidy: Many of them make huge profits and don’t pay a dime in tax.

Hon. Mr. Meen: The member for Downsview quarrelled with the provision for communication of information to other municipalities -- excuse me, other ministries; I couldn’t read my own notes -- and other provinces and, for that matter, to the federal government. Well, we have this same provision in the gift tax legislation which went through a year or so ago and I don’t recall any particular objection being raised by hon. members at that time about this communication of information. The federal Income Tax Act has a section like this. I read section 241(4) of the federal Income Tax Act:

“An official or authorized person may, under prescribed conditions, communicate, or allow to be communicated, information obtained under this Act to allow inspection of, or access to any written statement furnished under this Act to the government of any province in respect of which information and written statement obtained by the government of the province for the purpose of a law of the province that imposes a tax similar to the tax imposed under this Act, is communicated or furnished on a reciprocal basis to the minister.”

We’ve got, as I say, similar provisions in the common gift tax legislation across the various provinces. It is done on a reciprocity basis rather like the principle of the reciprocal Enforcement of Judgements Act, with which I’m sure the lawyers in the House will be familiar. This is where one jurisdiction has enacted provisions for enforcement of an execution from another province, then we will recognize that execution from another province as one of our own.

So, we’re not really in any different position in this Act, and in this regard, than we are with all our other legislation.

The member for Downsview also said that we’re picking needlessly on the farmers. He said, and I quote page 1478 of Hansard:

“I am not one who has been the strongest advocate of more benefits for farmers [He can say that again, I suppose.] and some of my colleagues can tell the House that, but I think in this statute the government is picking needlessly on the farmers. He is saying to a farmer who has had a farm in his family for several generations that only if he sells it to his sons or to somebody who is going to continue the farming use is he not going to get caught up in this taxation.

“Why? Here’s a farmer who has carried on a farming business for several generations and the minister says whether it’s a good farm or a bad farm, whether the farmer and his family are able to sell it to somebody else for farming uses, we are going to pounce on them too. And like the widow I was just telling members about, his incidence of tax can go the 112 per cent route, too. Is that fair? Of course it is not fair.”

Of course it isn’t fair.

I agree with him.

Of course it isn’t fair. We don’t expect it to go to 112 per cent for one thing, but on the other hand, the member for Downsview is completely misunderstanding the 10 per cent cumulative allowance per annum that we have built into this Act to protect the genuine farming interest and provided that farm is kept in farming, and in the family, the 10 per cent per annum is cumulative. Within seven years at 10 per cent per annum, that farm could double in value and there would be no speculative tax payable whatever.

Mr. W. Hodgson (York North): It has to be kept in the family though.

Mr. Singer: If it is going to be kept in the family, the minister will never realize it.

Hon. Mr. Meen: When he sells it at that point in time, he is able to take that as his base price, together with all other costs he has accumulated over the period of time before any tax is payable.

Mr. Singer: Speak to the member for York North.

Hon. Mr. Meen: That’s an extremely generous allowance to the farm community.

Mr. Cassidy: That’s right.

Mr. F. Young (Yorkview): Mr. Speaker, could I ask the minister a question here? Does this particular thing apply to tree farming?

Mr. Ruston: Tree farming?

Hon. Mr. Meen: Tree farming is not defined in the section in the Act, Mr. Speaker.

Mr. Singer: The minister is wrong on that one too.

Hon. Mr. Meen: Unless it comes within the definition of -- and I don’t have the section in front of me. I wish I could turn that up quickly. We have not spelled it out, but we think that it might well be interpreted as falling within other general words, if the members can help me find the section.

We can get to it in committee. I can have more to say to the hon. member on that point.

Mr. Lawlor: How about wood lots?

Hon. Mr. Meen: It is not spelled out specifically. There is a committee dealing with this and I am awaiting further word from them as to whether it would be necessary to describe, for example, Christmas tree farming specifically or otherwise in order to be included.

Mr. Lawlor: We are thinking of wood lots.

Mr. Gaunt: Is that 10 per cent only applicable to sales within the family?

Hon. Mr. Meen: Well, so many of the other members have simply commented on matters which I have already touched upon, Mr. Speaker. I don’t want to miss anything of consequence.

The member for Lakeshore --

Mr. W. Ferrier (Cochrane South): Great fellow. Wonderful man.

Hon. Mr. Meen: -- described the alleged chaos. I don’t know whether he used that term, but he suggested that there was some measure of chaos perhaps in the registry offices these days.

Mr. Lawlor: I more than suggested, I even intimated.

Hon. Mr. Meen: Well, I am sorry to hear that frankly. I had hoped that my letter to the legal profession and to the real estate people would explain our course of action --

Mr. Lawlor: The minister is too insulated.

Hon. Mr. Meen: -- and that our staff directly from this ministry, or the staff of the Attorney General’s office, through the registrar, would be able to provide adequate explanation, plus the fact that the telephone lines have been available to assist in clarifying any of these points.

Mr. Singer: The bar association is running a $50 course to explain the minister’s bill.

Hon. Mr. Meen: But we do have staff in the registry offices and I hope that as the lawyers and their conveyancers become more accustomed to this new law -- and this is part of the problem, of course, it is a new law -- they will have less difficulty in dealing with it.

Mr. Lawlor: They said there are more affidavits than deeds.

Hon. Mr. Meen: The member for Lakeshore also raised the question of defining land passing under a will as a disposition and then later exempting it. Well, I think if the hon. member will wait until we get into committee I will have an opportunity to show him the way in which the section covers it so that where there is such a disposition they can fix a date from which evaluation can run. In that sense he’ll understand why, in drafting this, we have it included in a disposition and then later on specifically exempt the passage under a will as free of tax. One couldn’t simply exempt it or you didn’t have the precise period of time we were trying to grasp, for computation of the next turnover of taxable period. It’s very complicated.

Mr. Lawlor: I knew there was something convoluted about it.

Hon. Mr. Meen: And I think we can only do it when I can point him to the precise section.

Mr. Lawlor: We’ll go hand in hand through the tulips.

Hon. Mr. Meen: Now the member for St. George still hasn’t returned and I don’t know whether I have touched all the points she has raised or not.

Mr. R. F. Nixon: She is down in the committee working.

Mr. Lewis: Trapped in the committee because of the absurd way this House is run.

Mr. Cassidy: And so is the member for Riverdale.

Hon. Mr. Meen: I think I have touched on the major ones of builders and developers and so, Mr. Speaker, I think quite honestly both parties opposite, particularly the NDP, are having difficulty in justifying their opposition of this bill and I think, basically, both parties really do support the principle of this bill. At least, Mr. Speaker, the Liberals opposite have had the intellectual integrity to come forward and say: “Yes, we do support the bill.”

Mr. Cassidy: That is no integrity -- the minister knows that.

Mr. Lawlor: The hon. member for York East’s (Mr. Meen’s) liver is in the right place, but his brain is all wrong. Come on.

Mr. R. F. Nixon: Write that down somewhere: “intellectual integrity.”

Hon. Mr. Meen: I don’t fault them for saying: “Look, we want to see what amendments you are going to bring in. We may have some of our own.” But if they recognize that the principle is sound, then I give them full marks for their integrity.

The only question the NDP have been able to raise seems to be the charge -- and it is false, utterly false -- that this bill won’t set out to do what it is intended to do.

I pointed out that it is part of a package -- a multi-pronged attack on the whole question of housing and the spiral of inflation. We think that it can do a lot in this regard.

I’ll tell you this much. It’s a whale of a lot better than doing nothing. And that is what those people over there would do, just plain nothing. At least the Liberals recognize that this is a great deal better than doing nothing.

If we were to sit back and do nothing, and six months from now prices were to spiral on some more, they would be the very first ones, Mr. Speaker, to be complaining that we hadn’t done something.

Interjections by hon. members.

Mr. Speaker: Order!

Mr. Cassidy: Government members are experts at that. In 2 1/2 years the price of houses has gone up 50 per cent -- since the Premier (Mr. Davis) came to power.

Hon. Mr. Meen: I throw out a challenge to the NDP to smarten up, to recognize when there is a good bill in the House and to support it just the same way as the Liberals have seen the light and are supporting the bill.

Mr. Speaker: The motion is for second reading of Bill 25.

The House divided on the motion for second reading of Bill 25, which was approved on the following vote:

Ayes

Nays

Allan Beckett Bernier Braithwaite Breithaupt Brunelle Campbell Deacon Downer Eaton Edighoffer Evans Gaunt Gilbertson Givens Guindon Haggerty Havrot Hodgson (Victoria-Haliburton) Hodgson (York North) Irvine Kennedy Kerr Lane Leluk MacBeth Maeck McIlveen McKeough McNeil McNie Meen Morrow Newman (Windsor-Walkerville) Newman (Ontario South) Nixon (Brant) Nuttall Parrott Paterson Reid Riddell Root Rowe Ruston Scrivener Singer Smith (Simcoe East) Smith (Hamilton Mountain) Snow Stewart Taylor Timbrell Turner Villeneuve Walker Wardle Winkler Wiseman Worton Yakabuski-60.

Bounsall Burr Cassidy Dukszta Ferrier Lawlor Lewis Renwick Stokes Young-10.

Clerk of the House: Mr. Speaker, the “ayes” are 60, the “nays” are 10.

Mr. Speaker: I declare the motion carried.

Motion agreed to; second reading of the bill.

Mr. Lewis: Now that’s a moral victory. Virtue is its own reward, Mr. Speaker.

Mr. Speaker: Shall the bill be ordered for third reading?

Some hon. members: No, no.

Mr. Speaker: Committee of the whole House?

Agreed.

Hon. E. A. Winkler (Chairman, Management Board of Cabinet): Mr. Speaker, before I move the adjournment of the House, tomorrow we will return to item 6 on today’s order paper. Bill 25, in committee of the whole House.

Hon. Mr. Winkler moves the adjournment of the House.

Motion agreed to.

The House adjourned at 10:55 o’clock, p.m.