The House resumed at 8 p.m.
CENTRAL ALGOMA BOARD OF EDUCATION AND TEACHERS DISPUTE ACT (CONCLUDED)
Mr. Speaker: When the House rose at 6 o’clock, the hon. member for Port Arthur was speaking.
Mr. Foulds: I want to resume my remarks by reading a few excerpts, which I think are important and fundamental to this debate, from the decision of the Education Relations Commission with regard to the dispute between the Central Algoma Board of Education and the branch affiliate of the OSSTF. Because the ERG in its decision very clearly understood the difficulty that the minister and this Legislature were getting in by continually abrogating the rights -- the full and free collective bargaining rights -- of teachers and boards under Bill 100. I just want to read a few excerpts from that decision by the Education Relations Commission.
“During the course of the hearing held by the commission on April 6, 1976, the branch affiliate offered to terminate the strike and submit the dispute to arbitration or final offer selection in accordance with the School Boards and Teachers Collective Negotiations Act, 1975. The board declined to accept this offer and insisted that it wished the dispute to be terminated by special legislation.”
Could it be any clearer that the board wished to get off the hook for its legislated responsibility?
Further, the commission said in that judgement:
“In our view, the interest of the community and the future health of the collective bargaining relationship would best be served by the acceptance of the existing legislated procedures for resolving an impasse rather than specially legislated resolution.”
Reluctantly, in the next paragraph they said this:
“Despite the praiseworthy offer by the branch affiliate, we have determined that an impasse has been reached.”
However, they concluded their judgement with the following statement; it is couched in very careful terms but nevertheless it is a warning, I hope, to the government, to this Legislature and to other parties in collective bargaining, because the commission went on to say this:
“We do stress, however, that a party which deliberately creates an impasse should not necessarily expect that our declaration concerning the jeopardy of the students will be automatically forthcoming. We intend to exercise our jurisdiction so as to promote responsible settlement as compensated by the legislation.”
They are, of course, referring to the general legislation, Bill 100. It seems to me that this is a warning, carefully couched in civil service terms, by the members of the Education Relations Commission to the minister, to this Legislature, and to the bargaining parties throughout this province. It is, as I read it, a plea for the integrity of Bill 100.
In brief, the reason we oppose this special legislation -- if I may say it without sounding too holier than thou -- is because of our sense of justice. There are three kinds of justice, it seems to me. There is the rough justice so loved by conservatives such as Trudeau, Stanfield and McKeough when they talk about the Anti-Inflation Board regulations; the equation really is that rough justice in that case means injustice.
Then we have the kind of justice that is expressed in this particular piece of legislation, interestingly brought forward by a Conservative cabinet minister who may be the only surviving 20th-century Liberal in Ontario, the Minister of Education (Mr. Wells). It’s a kind of heavy-handed justice which he equates with equality of justice because it is heavy-handed against a board in this case. His stance is that as long as you are equally heavy-handed occasionally against boards and occasionally against teachers, then that’s all right. I would submit that that’s a kind of heavy-handed justice.
I think the reason we would not agree to the minister’s suggestion yesterday that we rush the bill through in 20 minutes, that all the arguments had been put, is that we subscribe to Milton’s view of justice as being even-handed.
Finally, I want to conclude with a few remarks about the collective bargaining process in the educational system in the Province of Ontario as a whole. One of the principles that this bill brings before the Legislature is the removal of fair and free collective bargaining rights for a group to whom we had previously granted them.
I want to reiterate that for my money, the teacher-board collective negotiations bill, commonly referred to as Bill 100, is a very fine piece of legislation. We in the New Democratic Party are often accused of being wild-eyed, naive idealists; but, my goodness, we are rank amateurs in comparison to teachers and boards.
Hon. Mr. Timbrell: That’s another subject altogether.
Mr. Speaker: Order, please.
Mr. Foulds: It seems to me that the complaints we have heard from teachers and boards and the Tory back-benchers about Bill 100 are because Bill 100 is not perfect. I think that what we have to understand about Bill 100 and what we have to understand about the Education Relations Commission is that they will never be perfect. No human legislation and no human agency will ever be perfect.
That does not destroy the valid principles of collective bargaining nor does it destroy the validity of the principles and assumptions underlying Bill 100. No one expected collective bargaining between teachers and boards to be easy nor did anyone expect it to work perfectly.
It is my contention that the general legislation works better than most people expected and it is my contention that the bill’s basic principles are sound. If that is so, why have we faced crisis situations in Metro Toronto and Kirkland Lake and why are we now facing those crises in Windsor, central Algoma and Sault Ste. Marie?
Let me be blunt. I believe that both boards and teachers have a lot to learn about the collective bargaining process and, I say it with some care, they had better learn it fast if they want their respective organizations to survive. If we want local school boards and local autonomy to survive in education in Ontario collective bargaining in the school system must work. If the federations are to survive, situations such as we have seen in the past, the Metro teachers’ strike, must be solved through negotiations rather than through legislation. Do I need to add that I think it essential that local school boards and the federations survive for the good of education in Ontario?
I believe that both boards and teachers must learn that although collective bargaining is an adversary process compromise is at the heart of that process. Both boards and teachers must learn that collective bargaining does not take place in the press nor through the media. Both boards and teachers must learn not to paint themselves publicly into corners out of which they cannot retreat. Even more importantly, they have to stop slandering each other’s negotiators in personal terms.
Teachers and trustees are even more talented than politicians when it comes to rhetorical invective and it doesn’t really help the collective bargaining process when one side calls the key personnel on the other side a lying SOB, when that lying S.O.B. is the guy who has to sign the contract. No matter what one thought of his position or tactics in negotiations, for example, Metro Toronto board chairman Bill Ross took verbal and personal abuse that should not be visited on any public figure trying to serve his community.
Collective bargaining takes place at the bargaining table. It can be tough, bitter and forceful but it is simply self-destructive for both sides if each becomes vindictive and childish. I must say that some collective bargaining I have seen around the province between trustees and teachers has been both of these things.
Above all, the aim of collective bargaining is to arrive at a mutually agreeable contractor a mutually disagreeable one for that matter. Anything which interferes with that is irrelevant and that is the lesson the boards and trustees have yet to learn if we take Windsor, Kirkland Lake, Sault Ste. Marie, central Algoma and Metro Toronto as our examples. These disputes are symptomatic of what is wrong with the attitudes of both parties to collective bargaining not what is wrong with collective bargaining itself.
To be fair, they are to some extent the result of inexperience with the collective bargaining process. But they are also the result of a refusal to grow up on the part of this board and the teacher negotiating team. It sometimes seems to me that boards long for the days of Mr. Chips, which will never return. It also seems to me at times to betray an arrogant assumption on the part of teachers that they are the only ones who have a stake or an interest in the education of young people.
The important thing is that these disputes are the exceptions; the overwhelmingly vast majority of contracts have been settled without strikes or lockout action. However, the strike or lockout weapon must remain for each party, if indeed one of them should encounter absolute intransigence on the other side. It is much healthier to have a legitimate and legal strike or lockout than it is to have the madness and mess of, say, New York where the strike is illegal and there are far more strikes, work stoppages and disruptions than in any other single jurisdiction in North America.
To get back to some specifics, it is my view that the Metro teachers’ strike did not take place for collective bargaining reasons. It took place largely for psychological reasons. That may be a good reason to have an analysis but it’s a lousy reason for a strike. It took place not to obtain a collective bargaining agreement but from some primordial necessity on the part of teachers to show they were deeply frustrated with the Ontario school system. It took place because of the same necessity on the part of a board to show it was still in charge of the school system. Both sides misused and mistook the purpose of the collective bargaining process to carry out some ritual dance to display their own credentials to the Ministry of Education, to this government and to the public.
These are great and important questions that affect our school system. But they are not issues that can be settled entirely through collective bargaining; nor should we expect the collective bargaining process to solve all of our educational problems, just as we should not expect collective bargaining in the industrial sector to solve all of our technological problems. In short, the Metro teachers strike, for example, especially after Trudeau’s Thanksgiving speech, did not take place as a tool to obtain a contract, and that is all that a strike or lockout should be, the final and the most powerful tool to obtain a contract.
In Kirkland Lake, and certainly at one point in the central Algoma dispute, especially when my colleague from that riding, the member for Algoma (Mr. Wildman), was involved, the sides were so close to a settlement I cannot believe if both parties were primarily interested in obtaining a contract one could not have been achieved.
If there is any fault with Bill 100 it is, as my colleague the member for Windsor-Sandwich (Mr. Bounsall) outlined, that perhaps some care should be taken in dealing with the good-faith bargaining section. Perhaps both sides have to learn not only to bargain in good faith but how to use that section. Perhaps the ministry has to toughen up that section. I think it is fair to say that the personnel involved in terms of the processes of Bill 100, particularly as they take place in the early stages of negotiations, the fact-finding stage, must be more fully trained in the educational and collective bargaining sectors than they are now.
One of the little realized facts about Bill 100 is that in a very definite way it strengthens the position of both trustees and teachers in relationship to the provincial government and to the Ministry of Education. Bill 100 enshrines the importance of boards of education and local affiliates in a way that had never occurred before in Ontario’s history. Because negotiations must take place according to the bill at the local level, that has given local boards and local affiliates a legitimacy and importance that had been rapidly eroding because of centralized provincial power. The bill makes certain that key decisions over the scope and nature of education are local decisions.
Even though the trustees’ council will rail against the scope of clauses 3 and 9 of the School Boards and Teachers Collective Negotiations Act, these clauses in fact put enormous power back into the hands of the local board as opposed to the provincial Ministry of Education. The destruction of Bill 100 would remove this very real local power. Every time the provincial Legislature is called upon, as we are being called upon at this time, to settle a local dispute through legislation, that action diminishes local power.
If there are too many Windsors, Metropolitan Torontos, Kirkland Lakes and central Algomas to be legislated back to work through individual bills, abrogating the general legislation, then Bill 100 will be destroyed; and if Bill 100 is destroyed that could mean the destruction of one of the few safeguards to local decision-making. The fact that the board must to some extent share that decision-making power with its teachers through collective bargaining does not take away from its essentially local character.
Let me remind the House that if the right to strike and the right to lock out is removed from Bill 100, that too reduces local authority and local responsibility, and that is what we are doing with this particular individual bill.
The federal anti-inflation legislation severely damaged collective bargaining rights right across Canada. It had a particularly damaging effect on teacher/board negotiations in Ontario because the process was so new and the legislation hardly in place. Nevertheless, that is no reason for either boards or teachers to give up on the School Boards and Teachers Collective Negotiations Act, 1975; that is no reason why we should give up on the Act -- and every time we introduce a bill like this one that we are presently dealing with we are giving up on Bill 100 -- and that is no reason why each side in the dispute should avoid making every conceivable, and at times even some superhuman, effort to reach collective agreement.
More than collective bargaining is at stake. The future direction of Ontario’s school system and the integrity of local autonomy are also at stake. For these reasons we are opposing the legislation and offering our reasoned amendment.
Mr. Laughren: Long live the Minister of Education.
Mr. Speaker: Does any other hon. member wish to take part in the debate on second reading? The hon. minister.
Hon. Mr. Wells: Mr. Speaker, first of all, let me begin by thanking my friend from Port Arthur again for that part of his speech in which he was laudatory towards Bill 100. I, of course, have some kind of personal feeling toward Bill 100 myself, and couldn’t agree more with the things that he said in support of it.
I have to tell him that we are not going to give up on Bill 100. Bill 100 is going to stay and it will be around here for quite a while. I think the procedures that it has laid down -- with perhaps some technical refinements that we will all work on some six months or so from now When we have a chance after this round of negotiations is completed -- I think that within those technical adjustments the bill will stay and will be even more effective than it has been, because it certainly has been effective insofar as bargaining is concerned in this province. All we have to do is look at other jurisdictions, particularly in the United States, and see what’s happening there; and even look a few years back here and see what’s happening.
Mr. Foulds: No argument.
Hon. Mr. Wells: There are at this time three elementary disputes in this province and two secondary disputes, apart from Sault Ste. Marie, which we have a bill on, and Windsor. That is all that is left out at the minute, and they are all the areas where there are no contracts in effect in this province. And that, as I have said many times, is something like 203 contracts that have been negotiated and signed since last Sept. 1 just after Bill 100 came into effect. A lot of those contracts were in the works before this bill came along. There is no question that what my friend has said about attitudes towards bargaining is right on.
The attitudes, the techniques, the approach to bargaining by both teachers and school boards in this province is still in its embryonic stage. There are a lot of refinements and there are a lot of improvements needed. Both sides are going to have to learn to really collectively bargain and not confront each other in positions and posturing that doesn’t lead to effective bargaining. I think it can be rightly said that both sides stand in need of improvement in this particular area, and that given that improvement by both teachers and school boards -- with the techniques and procedures laid down in Bill 100 -- we will see even better collective bargaining in the educational field in the years to come.
Let me just go on -- and I might just say that I appreciated the remarks --
Mr. Foulds: The government will have to pay for Bill 100.
Hon. Mr. Wells: I might just say that I appreciated the remarks that my friend, the member for Kitchener-Wilmot (Mr. Sweeney), made about final offer selection. He was one of the few who had anything good to say about it. I think that it is something that in certain instances can be tried. I think it is an innovative approach. That’s why we put it in Bill 100. This is a particular dispute that lends itself to this particular method of final settlement, because there are just a very few things left in dispute, and final offer selection, I think, is worthy of trying. Indeed, that’s why we have put it in this legislation.
He also made some remarks -- and, of course, there are different stances between the official opposition and the Liberal Party.
Mr. Foulds: I should hope so.
Hon. Mr. Wells: There are in some things. He made some remarks about shortening the time that the Education Relations Commission and that we, perhaps, take some particular action on these matters.
Mr. Reid: Wait until we talk about Sault Ste. Marie tomorrow.
Hon. Mr. Wells: And in Sault Ste. Marie we have indeed shortened the time.
Mr. Reid: Did the Education Relations Commission report on that one to you?
Hon. Mr. Wells: Yes, they reported and they said, “Don’t do anything.” Now, would you like me to not do anything, or do you think I should have done something?
Mr. Reid: I just wondered if you had a report.
Hon. Mr. Wells: I had a report. Certainly, it was made public last week here and they recommended that we not do anything. But we decided that in that particular case we should do something.
What I guess I really want to say about this legislation and about our position on this is, as I have said already, Bill 100 stands. Bill 100 is a good piece of legislation. The procedures that are there will remain. But I guess the difference between what I have to say and what we on this side have to think about this, and what my friends can say, is that I’ll be in a minority position.
The people of Ontario put us over here in a position of a government prepared to present to this House and to lead on certain matters -- and it is all very well. In my philosophic moments, thinking about collective bargaining, I can sometimes agree with the kind of stance that the member puts forward. But really, the best thing is not to interfere in the process. Once you’ve got the ground rules laid down, let everybody just hope that they can negotiate.
We all agree a negotiated settlement is the best; let’s hope they can negotiate. If they can’t negotiate, let all the procedures take place. Don’t have any third party or outside interference. That’s the way collective bargaining should work, and it does work that way in a lot of areas.
But the member knows as well as I do that in the public sector there is another dimension and no matter how idealistically we would like it to work, in the pure collective bargaining sense, the third party -- the parents and the students affected in this kind of a strike -- are not packages of soap or cars on an assembly line. They are good people who this day and at this time in the Province of Ontario will accept the right to strike for teachers. They will accept the right to strike for teachers, but at a certain point when that strike goes on they say: “If you are the government, and we voted you in there, we want you to do something.” That’s exactly what we said when we brought this bill in.
Mr. Laughren: Tell us about the pulp and paper strike.
Hon. Mr. Wells: Now, if I was to carry to its logical conclusion the things that the member has said -- if the NDP was the government of this province -- the high school students in Metro Toronto would probably still be out of school. That’s exactly what the members opposite have said. They would still be out of school.
Mr. Laughren: Tell us about the pulp and paper strike.
Mr. Roy: They would do it like they did in BC.
Hon. Mr. Wells: And the high school students in Kirkland Lake would still be out of school.
Mr. Speaker: Order, please.
Hon. Mr. Wells: We supported the opening of the schools.
Mr. Speaker: Order, please. The hon. minister has the floor.
Hon. Mr. Wells: Wait a minute, I see -- my friend says no, they wouldn’t still be out of school. What we would have done is suspend their right to strike, something like Mr. Bourassa is doing. We would have suspended their right to strike.
Hon. Mr. Wells: We would have suspended their right to strike and told them to go back in and negotiate.
Hon. Mr. Wells: That is exactly what the amendment said. It said, “You’ll go back to school. Your right to strike and lockout is taken away but we are not going to solve the matter. You are going to continue to negotiate.”
Mr. MacDonald: That’s right.
Hon. Mr. Wells: “You are going to continue to negotiate.”
Mr. Roy: You would have done like they did in BC.
Hon. Mr. Wells: “You are going to negotiate and negotiate but your right to strike has been taken away from you.”
Mr. Roy: The NDP in British Columbia forced the workers back to work.
Hon. Mr. Wells: And you have no resolution.
I just have to echo again what the Premier (Mr. Davis) said on the Metro Toronto bill. What they really want to do is have it both ways over there.
Hon. Mr. Wells: On the Metropolitan Toronto bill the opposition wanted to be in favour of getting the schools open but they didn’t want to be in favour of getting a resolution to the problem --
Mr. Bain: Right.
Hon. Mr. Wells: -- knowing that a non-resolution leaves a lingering aura of bad feeling --
Mr. Speaker: Order, please.
Hon. Mr. Wells: -- worse than the kind of resolution that comes from imposed arbitration. I have to submit that.
Hon. Mr. Wells: In this particular case, we’ve got a completely different bill, one which I submit the opposition members could support and support completely. They can support it completely because of what we’ve done here.
What my friend has said is absolutely right -- when the Education Relations Commission held its hearing in central Algoma the teachers appeared at that hearing and said the pupils’ programmes were in jeopardy. They said, “We’ll go back to school tomorrow if you will go to final offer selection. We’ll go back to school tomorrow if you’ll go to voluntary arbitration. We’ll go back to school if we can get some kind of negotiations going.” I’m not sure if that was exactly the way they put it.
Mr. MacDonald: That sounds like our position.
Hon. Mr. Wells: No, that’s what the teachers said.
Mr. MacDonald: That sounds intelligent.
Hon. Mr. Wells: The board said to each of those, “No, no, no.”
Mr. MacDonald: That sounds intransigent.
Hon. Mr. Wells: All right, I can agree with you on that. They said no.
Mr. MacDonald: Right.
Hon. Mr. Wells: The Education Relations Commission reported to us and said there was an impasse. My friend read the report. I am not going to read it again.
Mr. Wildman: They knew you were going to order them back.
Hon. Mr. Wells: They put down exactly the same kind of sentiments that I have, the point being, however, that those schools opened last Friday. They opened at that time because we had given our assurance that we would bring legislation in to put the matter to final offer selection.
Hon. Mr. Wells: They opened because we had given them that assurance.
Hon. Mr. Wells: Now, I have to think that there is no other responsible position --
Mr. MacDonald: You are right.
Hon. Mr. Wells: -- for a government to take -- maybe not for an opposition, because it can fly with things a little easier than a government can.
Mr. MacDonald: We can be consistent. You can have aberrations, and do on occasion.
Hon. Mr. Wells: There is no other responsible position, given the fact that those teachers indicated to us that if we were prepared, through legislation, to implement a final resolution to the problem they would return to school. Indeed, they indicated they would return at practically the same time as we were introducing the legislation here. Hence we have a piece of legislation and all it does is put that particular area, the teachers and board in central Algoma, into a position of final offer selection under Bill 100. That’s all this bill does. It’s a simple bill.
It is a necessary bill. It’s a bill which should be passed at this particular time and it is a bill which should be supported in this House. All I can say to my friends across -- here -- I hear they don’t want to have a division on this bill -- is if they really sincerely believe all the things they said, let them stand up and have a division on this bill.
Mr. MacDonald: We will have it if you want it.
Mr. Roy: The NDP in British Columbia forced the workers back to work.
Hon. Mr. Wells: I just get the idea they like to have it both ways all the time.
Mr. Speaker: Order, please.
Hon. Mr. Wells: If they believe they are opposed to what we are doing on this bill, let them stand up and vote against it. If they have any real concern about the process in this province -- I think I have proved that I have a real concern about it --
Mr. Roy: The NDP in British Columbia forced the workers back to work.
Hon. Mr. Wells: -- I believe at this time this is the thing which should be done, particularly in the interests of the students in central Algoma. If those members vote against this bill, they are voting against the students in central Algoma.
Mr. Speaker: Hon. Mr. Wells has moved that the bill now be read a second time.
Mr. Wildman has moved a reasoned amendment that Bill 51 be not now read a second time, but be read a second time one hour hence and that it now be referred back to have incorporated therein the following amendments: Does the House take cognizance of the amendments as printed?
All those in favour of the bill being now read a second time will please say “aye.”
All those opposed will please say “nay.”
In my opinion the “ayes” have it.
Motion agreed to; second reading of the bill.
Mr. Speaker: Shall this bill be referred for third reading?
An hon. member: Committee of the whole.
Mr. Speaker: To committee then.
Mr. Roy: You are gutless, you are all talk.
Mr. Breaugh: You were almost leader, but not quite.
Mr. Roy: It is all sound and fury.
Mr. MacDonald: We are doing what you would not understand; being consistent.
Mr. Roy: You are consistent, yes.
Mr. Reid: Ask Ian Deans about EMO.
Mr. Roy: Read your old speeches.
Clerk of the House: The second order, House in committee of the whole.
CENTRAL ALGOMA BOARD OF EDUCATION AND TEACHERS DISPUTE ACT
House in committee on Bill 51, An Act respecting the Central Algoma Board of Education and Teachers Dispute.
Mr. Chairman: Are there any comments, questions or amendments to any section of the bill; and if so to which section?
Hon. Mr. Wells: I have amendments, Mr. Chairman.
Mr. Chairman: Hon. Mr. Wells moves that the preamble to the bill be struck out and the following be substituted therefor:
Whereas the Central Algoma Board of Education and its secondary school teachers have been negotiating terms and conditions of employment; and whereas the strike by the secondary school teachers against the board of education began on Feb. 16, 1976, and was terminated by the teachers on April 12, 1976; and whereas the board of education and its secondary school teachers have been unable to make an agreement as to terms and conditions of employment; and whereas the public interest requires that means be found for the settlement of the matters in dispute between the board of education and its secondary school teachers:
Motion agreed to:
Mr. Foulds: On section 1, Mr. Chairman.
On section 1:
Mr. Chairman: The hon. member for Port Arthur has an amendment. Mr. Foulds moves that section 1(1) be struck from the bill.
Mr. Foulds: Very briefly, this is the first place in which the compulsory arbitration aspect comes up in the bill, even though it’s in the definition of “selector.” A selector in this bill is simply a person who makes a decision by compulsory arbitration, and we oppose it. We made the arguments on second reading.
Mr. Ferris: Could I ask whether the NDP is prepared to make all the motions that were inherent in the reasoned amendment as amendments to the bill at this time?
Mr. Foulds: We were just going to do --
Mr. Ferris: If so, perhaps we could do them all at one time and dispose of them all at the same time.
Mr. Renwick: What you mean is you are supporting the government.
Mr. Chairman: Any other discussion on Mr. Fould’s amendment?
Hon. Mr. Wells: Mr. Chairman, this amendment is not acceptable.
Mr. Chairman: All those in favour of Mr. Fould’s amendment will please say “aye.”
All those opposed will please say “nay.”
In my opinion, the “nays” have it.
I declare the amendment lost.
Section 1 agreed to.
On section 2:
Mr. Chairman: Hon. Mr. Wells moves that subsections 1, 2 and 4 of section 2 of the bill he struck out and that subsection 3 be renumbered as section 2 of the bill.
Hon. Mr. Wells: Mr. Chairman, this takes out the sections which are known in colloquial terms as the back-to-work sections of the bill. Since they are not now necessary, I am suggesting that they be removed from the bill.
Mr. Foulds: Mr. Chairman, we support the amendment.
Mr. Ferris: Mr. Chairman, we would also support the amendment --
Mr. MacDonald: We are always prepared to acknowledge reality and that is a reality.
Mr. Chairman: Order, please.
Mr. Ferris: Would the minister, as I asked in my comments on second reading and in opposing the reasoned amendment, give any assurance that in fact the professional development days will be used as professional development days and that we will not be exposed to the situation in Toronto at this time where they are not instruction days?
Hon. Mr. Wells: Mr. Chairman, I have full confidence that the board will make every effort, along with the teachers and the students in central Algoma, to adjust the programme so that the students can catch up the time that has been lost.
Mr. Shore: Tom, you know that isn’t right.
Hon. Mr. Wells: I’m sure they will handle the professional development days in that manner. I’m sure that will be done.
Mr. Wildman: Mr. Chairman, in relation to that point, over the weekend both sides, the chairman of the board and the chairman of the teacher negotiating committee, assured the students and the parents of the area that they would do everything possible to help the students complete their credits, and both made statements to the effect that teachers and students would have to work very diligently in order to do that. That would indicate that both sides are interested in doing everything possible to ensure that all days that possibly can be used will be used.
Hon. Mr. Wells: I think it is very good that the member for the area has indicated this. I was sure that would have been the situation, and I’m pleased to hear that.
I might also say that some mention was made of the situation in Metropolitan Toronto. There have been certain news stories about how the directors of education handled this matter; I’ve looked into them. I am fully confident that the teachers, the students and the boards in Metropolitan Toronto have made great efforts and indeed are to be commended for the way that they have organized things to help students and to allow them to make up for that lost time. I can find no criticism from myself about the way they are handling the PD days.
Motion agreed to.
Section 2, as amended, agreed to.
On section 3:
Mr. Chairman: Mr. Foulds moves that subsections 1, 2 and 3 of section 3 be deleted and the following substituted therefor:
(1) The terms and conditions last offered by the board to the teachers shall be implemented on an interim basis.
(2) The parties involved are instructed to resume forthwith negotiations in good faith in order to resolve all matters remaining in dispute.
(3) The parties shall each give written notice to the Minister of Education within seven days after the day this Act comes into force setting out all of the matters the parties have agreed upon for inclusion in an agreement and the matters remaining in dispute between the parties, and the notice shall be deemed to be notice to the commission and thereafter, except as provided in section 57 of the School Boards and Teachers Collective Negotiations Act, 1975, a party shall not withdraw from the negotiations hereinafter provided for.
Any comments on Mr. Foulds’ amendment?
Mr. Foulds: I think they are self-explanatory. We have made the arguments in second reading and we don’t need to repeat them here in committee.
Mr. Ferris: I will make a brief comment that we will oppose this amendment consistent to what we have done on the other bills. I believe there is no use of enforcing interim procedures or settlements. Let’s get on with the job. I compliment the Minister of Education in including that clause that says they may reduce the time at their discretion, and I would hope that it would come to a very early settlement of the arbitration.
Hon. Mr. Wells: I think what my friend has said is right. We have discussed this. This really goes right to the root of the principle of the bill. Section 3 is the section of the bill which provides for putting the parties into final offer selection. My friend from London South has indicated that the section gives the commission with the consent of the parties an opportunity to condense the time. I think that’s important and it needs to be in there.
If they follow Bill 100, it will take 62 days to go through the process for final offer selection. I would hope that both sides would see fit to condense that time working with the commission. I think that is possible. I am sure they can do it and that’s why we have got that section. But as far as the amendments are concerned I would have to oppose them.
Mr. Chairman: All those in favour of Mr. Foulds’ amendment will please say “aye.”
All those opposed will please say “nay.”
In my opinion, the “nays” have it.
I declare the amendment lost.
Section 3 agreed to.
Sections 4 to 7, inclusive, agreed to.
Bill 51, as amended, reported.
Hon. Mr. Wells moved that the committee rise and report.
Motion agreed to.
The House resumed, Mr. Speaker in the chair.
Mr. Chairman: Mr. Speaker, the committee of the whole House begs to report one bill with a certain amendment and asks for leave to sit again.
Report agreed to,
Hon. Mr. Wells moved third reading of Bill 51, an Act respecting the Central Algoma Board of Education and Teachers Dispute.
Mr. Speaker: All those in favour will please say “aye.”
All those opposed will please say “nay.”
In my opinion, the “ayes” have it.
Motion agreed to; third reading of the bill.
Hon. Mr. Meen: Mr. Speaker, before calling the next order, I would ask that the House entertain a resolution that motions now be entertained.
Mr. Speaker: I am sorry.
Hon. Mr. Meen: Perhaps I should express it another way. Will the House give its --
Mr. Speaker: Order, please. We have to hear this. Order, please.
Hon. Mr. Meen: -- unanimous consent to revert to motions?
Mr. Speaker: May we revert to motions, please?
Hon. Mr. Meen: Mr. Speaker, I believe I have consent on this.
Hon. Mr. Meen moved that the House sit tomorrow at 11 a.m., rising for a luncheon interval at 1 p.m., with routine proceedings to take place at 2 p.m.
Motion agreed to.
TOBACCO TAX AMENDMENT ACT
Hon. Mr. Meen moved second reading of Bill 48, An Act to amend the Tobacco Tax Act.
Mr. Renwick: Mr. Speaker, we don’t oppose the passage of this bill; we are just curious as to what the profit will be to the tobacco companies on the sale of cigarettes after they have added in the tax and rounded off the cents. What will the element of profit be which will accrue to the tobacco companies as a result of the imposition of this tax?
Mr. Edighoffer: Mr. Speaker, this party will support the Act to amend the Tobacco Tax Act. This increases the tax to the extent of a quarter of a cent per cigarette. Of course, we support particularly the part of the bill which offers remuneration to those who collect the sales tax. This is in keeping with the policy that came about last year for those who collect the retail sales tax.
In regard to the regulation section, there is a new regulation in there which allows the Lieutenant Governor in Council, I believe, to make remuneration to those who take inventories. I think this is most reasonable for the extra work that is encountered by those who are selling this product. So we support the legislation.
Mr. Cassidy: I want to make two or three comments about this bill, Mr. Speaker. We are supporting the bill, but I think the problem with it, frankly, is that it doesn’t go far enough. I know the minister end other members of the government have heard that before from this party, but in this case it means I think that the nickel-per-pack increase on cigarette taxes is, in fact, inadequate. I say that for revenue reasons, and I say that also for social and for health reasons. I have to declare a certain interest because I am a former smoker and somebody who has shown a good deal of concern for the health aspects of smokers.
Mr. Roy: Yes, but you used to roll your cigarettes.
Mr. Cassidy: I used to roll them, that’s right. I would say to the cigar smokers and pipe smokers of the Legislature that this should apply to them --
Mr. Shore: Have you still got your Imperial Oil shares, Mike?
Mr. Ferrier: How many does the member for London North have?
Mr. Cassidy: No, I don’t, as a matter of fact.
Mr. Speaker, the nickel a pack increase on cigarette taxation at the provincial level is going to yield about $50 million according to the estimates that were tabled by the Treasurer (Mr. McKeough) the other day. I want the Legislature to consider just what could have happened if the increase on cigarettes had been from 75 cents to 90 cents a pack, rather than from 15 to 80 cents a pack.
It’s safe to assume that in the short run for the next year there would have been not too much of an effect on consumption; it’s more of a long-term impact. Therefore, the increase in revenue from cigarette taxation would have be more like $150 million rather than $50 million. If cigars and pipe tobacco and roll-your-own tobacco had been included, I’m sure that an extra $100 million could have been received.
There are two or three effects that one could attain over the short run. We learned from reading the budget that after one got through the Treasurer’s fancy and rather misleading figures, approximately $114 million of the OHIP premium increase was going to come out of the pockets of individual employees and about the same amount out of the pockets or corporations.
If the government had chosen to raise the premiums paid by employers by $5 a head a month in order to ensure that unorganized workers as well as organized workers had that extra sum paid by the employer, and if they had also increased the taxation on tobacco, there would have been no need at all for any increase in the premiums paid by individuals. The shortfall would have been all of $14 million, a sum which I would have suspected could have been absorbed in the government’s deficit, raised by other means, or could have been perhaps accommodated by an extra half a per cent increase on the insurance premium tax. In other words, I’m suggesting that on revenue grounds alone an increase in the tobacco tax could have been enough to have prevented any need to raise the individual OHIP premium at all.
On health grounds, I had an answer the other year from the Treasurer or the Minister of Health (Mr. F. S. Miller) suggesting that the costs in medical treatment for tobacco-related diseases was at least $100 million a year. That was probably a very conservative estimate, if I can use the word, because the cost of health treatment and hospital treatment have gone up substantially since that estimate was prepared. The estimate was made on the basis of, I think, approximations developed as part of the Hall report on health, which you, Mr. Speaker, will remember came down in the early 1960s and was the basis of the extension of Medicare throughout Canada.
If we could stop the bulk of the population of the Province of Ontario from smoking we could save more than we receive right now from the tobacco tax. The figures that have been given to the Legislature at my request indicate that the tobacco tax back in 1974, I think it was, yielded something approaching $100 million, but that the cost of tobacco-related disease treatment under OHIP and the hospital insurance plan was at least $100 million, if not more.
In other words, we spend as much or more than we get; and there is absolutely no benefit to the general non-smoking taxpayer from this tax on something that one assumed was a luxury. If we’re lucky it pays for itself and nothing more.
I would like to suggest to the Minister of Revenue (Mr. Meen), and through him to the Treasurer, who as we know makes tax policy, and also through him to the Minister of Health, who is concerned about OHIP costs, that over the next three or four years it might be worthwhile for this province to launch on a deliberate and phased attempt to raise the taxes on tobacco to quite a high level. That has been done in a number of European countries. It’s something that people grudgingly accept. But most people, smokers included I think, accept that smoking is harmful to health, smoking creates an awful lot of costs, smoking doesn’t contribute a hell of a lot to this society, and it’s a very expensive and dangerous kind of luxury.
The people who don’t accept that are in the ministry. The ministry comes along and says: “If you work in an environmentally dangerous factory or milling plant or refining plan, then we urge you not to smoke, because that would add to the health hazards of being in a place where the occupational hazards are very severe.” That’s as far as they are willing to go.
Ontario, at most recent report, spent something like $25,000 or $30,000 a year on its entire programme of health education and its entire programme of clinics to help people quit smoking; and that’s clearly a paltry effort and one that should be improved.
I know that despite the political complexion of the ridings that contain the tobacco farms of this province, the government is concerned about the future of the tobacco-growing industry, and that’s a legitimate concern. That’s one of the reasons I do not suggest that the tobacco tax should be raised to such a level that, say, the price of cigarettes would be doubled tomorrow. This could be done over the period of three or four years to give people a chance every six months to look at their conscience and to decide whether or not the time had arrived to quit; and to ensure that fewer and fewer young people embarked on the practice of smoking, which is so dangerous to their health.
If the consumption of tobacco started to drop it would lead to a drop in agricultural revenues down in the tobacco belt around Simcoe and Delhi and the other parts of southwestern Ontario. But I suggest to the minister, and through him to the rest of his cabinet, that we are in what amounts to a crisis in terms of the reduction of agricultural land. Most of that tobacco land is good for other purposes as well -- radishes or wheat or oats or cattle. It’s good for food in general, even if it’s particularly suited to tobacco. It seems to me the Ontario government could offset some of the losses of farmland that has been going into urban uses by converting tobacco land on a systematic and fairly rapid basis into foodland that would be used for purposes that are helpful to health rather than purposes which are injurious to health.
That is a series of suggestions. They come from me personally rather than from my party, which has not adopted a specific position on that; but I think a number of my colleagues are sympathetic to the view that the Ontario government can lean quite heavily on tobacco as a source of taxation for revenue purposes in the short run, for health purposes in the long run, and in order to provide a source of farmland in the longer run to offset the very grave losses of farmland that have been created because of irresponsible practices and policies of the ministry.
It may seem unusual and almost balm to the ears of the minister to hear me say this, but if the minister decided to bring in an amendment to further increase the increase in taxation on tobacco products we would welcome it, particularly if it was accompanied by a reduction in the regressive and very undesirable increase in OHIP premiums.
Mr. B. Newman: Mr. Speaker, I wanted to raise an issue with the minister concerning his announcement on the night that the tax was to become effective. The minister made mention that this would be effective as of midnight on April 6, and many of the retail merchants assumed that would have been levied at the wholesale level, and as a result sold their stock on April 6 at the regular price. Had the minister in his announcement made mention that an inventory would be required from each of the retailers, and that the tax was effective on their inventory at that time, the problems that did arise would not have arisen.
It’s good that the minister’s officials, in my discussing this issue with them, made mention that they would sort of indirectly overlook the fact that some of the merchants did not receive their letter concerning their inventory until April 8, and as a result in all conscience could not make the declaration that their inventory was such and such as of midnight April 6. I think an announcement or a pronouncement such as the minister did make on budget day should have specified that the tax would be effective at the retail level on April 6 and that the inventory would be required of the retail merchant.
Mr. Speaker: Does any other hon. member wish to speak to this? Yes, the member for Haldimand-Norfolk.
Mr. G. I. Miller: Mr. Speaker, I would like to rise and speak on the bill to amend the Tobacco Tax Act, with specific reference to clause 1. As I represent the riding of a tobacco growing area, I think it is only fitting that I should give you some facts in this regard.
I would like to point out that before tobacco came in Norfolk county and the area where the tobacco is grown was nothing but blowing sand, contributing very little to making a living. But since tobacco has come in, the area has begun to prosper. I think it started back in the mid-1920s and from that point on it has moved ahead year by year. It has provided a good living and good homes; I don’t think you will find any finer area in Ontario.
So for those reasons I think it is important I should speak on it. I realize smoking is maybe a bit of a sin, but I don’t know. I think we all have something along that line. Some like to drink a little, some like to smoke marijuana. I think you have a choice. Even if you eat too much food, it can be detrimental.
We import the coffee we drink, and I don’t know if it contributes anything to our health; it may keep us awake at nights. Therefore, I would just like to bring out some facts.
In regard to this tax increase, I think it is perhaps excessive. We raised it from 0.46 for cigarettes to 0.71, that’s an increase of 53 per cent.
I would like to point out that last year, I think there was something in the neighbourhood of $104 million contributed by the tax on cigarettes and tobacco. I think the increase is going to add another $50 million. If you total that up it comes to approximately $154 million that it is going to put into the coffers of Ontario.
I think last year’s crop was approximately 200 million pounds, and I think that was at an average price perhaps of 89 to 90 cents a pound. They are striving for 94 cents -- and hopefully they will get it -- which will bring in a return of $185 million. Put $154 million against $185 and you can see what it is contributing to Ontario to offset the taxes that would have to come from some other source.
I think we should take all these things into consideration. I realize my party is supporting the tax increase at this time, but the working man smokes, the average Joe on the street. I think if you raise the cost, he’s going to fork over a little more money so he can continue to do it.
Mr. Haggerty: Like the Premier (Mr. Davis) smokes.
Mr. G. I. Miller: Perhaps not. The Premier does smoke the odd cigar and the Treasurer smokes his pipe. I enjoy a pipe too.
Mr. Haggerty: No taxes there.
Mr. G. I. Miller: There is no tax on it. However, I still think we have to be realistic. I think we have to protect this industry which is contributing to our economy. I think they are in tough enough straits now. I believe they are bargaining for their contract this year, and I see they have cut back to 175 million pounds. There is competition from imports and smoking has dropped off. I think something like 47 per cent of the population are smoking at the present time and I think the growers are in a bit of trouble.
I still think that we have to take into consideration what they are contributing to our economy. I think if the NDP had their way, that they would take all the tax from tobacco and eventually would wipe out tobacco all together. Maybe that is their policy. I don’t think that we would want to do that in the Liberal Party. I know as the member for the riding of Haldimand-Norfolk I couldn’t support that.
I also think there is a research factor. I believe there was an extensive study done back in 1968 or in the early 1970s at the federal level, although I don’t know if it was ever proven that tobacco really was the exact cause of many things they said it caused as far as health is concerned. Again, I think anything done in moderation can be acceptable. I think you do get pleasure. For these reasons, it is my privilege to speak on behalf of the tobacco farmers of my riding.
Mr. Spence: I would like to say a word or two in this debate on Bill 48, An Act to amend the Tobacco Tax Act of the Province of Ontario.
It seems to me that each time the tax is raised in the Province of Ontario, the tobacco taxes are increased. However, I must say that I am speaking on this bill because I represent a riding that is made up of two counties, the county of Elgin and the county of Kent; and, of course, those two counties produce a considerable amount of tobacco.
Tobacco results in a very healthy economy for the tobacco industry. It is a tremendously dear crop to grow. It brings a lot of work to labour in different parts of the province; we even have labour coming in from Barbados and Jamaica. Also, it gives a lot of work to female workers in the Province of Ontario. Not only does it help the economy of the area in which the tobacco is grown but it stimulates industries in that area, because it requires fine, dear machinery to grow and harvest the tobacco.
Tobacco also strengthens the economy in many other ways. The insurance companies benefit, because all tobacco is insured; and the banks derive a considerable amount of money from the tobacco industry because the ordinary grower cannot afford to finance a tobacco crop.
Another thing, as my hon. colleague from Haldimand-Norfolk has said, is that we produce about 175 million lb of tobacco, which is processed and then marketed in Great Britain. It brings in a lot of money from Great Britain and stimulates the whole economy of the Province of Ontario. Because the tax will bring in about $150 million or $154 million, as my colleague has said, it means a lot to this province. I must say, as my colleague has also said, that with $154 million in income from taxes, there should be some research done on flue-cured tobacco and air-cured tobacco, because a good many people are never going to stop smoking. A large number have quit smoking -- I, for one, smoked as many as three packages of cigarettes a day, and I conquered that -- but I know others who have not stopped or never will stop.
If we don’t keep the tobacco industry going we are going to be importing tobacco from other countries in the world. I would say that the tobacco industry is one that has stimulated the economy in different counties and different areas of the Province of Ontario. It has meant a lot; it has brought a healthy economy.
Mr. Speaker, I would suggest to this government there should be more research. I know there have been studies carried out in regard to tobacco; and the reports haven’t been very favourable. But I would suggest there should be some money put into research so we can take out those impurities that are injurious to the human body.
I’m not opposing the tax but I just wanted to say that the tobacco industry has stimulated our economy in so many parts of southwestern Ontario.
Hon. Mr. Meen: Taking the comments in the order in which the hon. members have advanced them to me, the member for Riverdale (Mr. Renwick) asked about tobacco company profits. The ministry does not fix the retail sale price. This is determined in the free market and I’m not in a position to say whether there would be any increase. I would doubt if there would. With an increase in the tax, it would probably not be a propitious time for the merchants to increase the retail prices of the product.
The increase of five cents a pack of 20 or one quarter cent for each cigarette in a pack of 20 will yield about another $50 million in round figures. As to what that will do to the market price, if anything it’s conceivable that some merchants might not pass on the entire five cent increase. I would suppose, if they felt competition was intense or that people might smoke somewhat less, they’d be inclined to reduce the price to ameliorate the impact of the increase in the tax. I think we’ll just have to wait and see. The fact of the matter is economists estimate an approximate revenue of $150 or $155 million in the coming year, as opposed to $106 million for the fiscal year 1975-1976 just ended.
I must ask the member for Perth (Mr. Edighoffer) if he could clarify his question for me. I was interrupted momentarily in listening to him. Was the member for Perth asking about the amount of tax on inventory in the hands of the merchants at the time of the introduction of the budget?
Mr. Edighoffer: Yes.
Hon. Mr. Meen: The amount of the inventory as we estimate it, and we won’t know until the returns are in some time in May, is such that it will with an additional five cents a pack generate a further $2.5 million. As I’ve already indicated to some, there’s provision in the bill for compensation to the merchants, for taking this inventory and remitting the proceeds of the sales to us when they complete their sales in the next couple of weeks following the budget, a commission of five per cent of the amount of that additional tax. That’s a sort of one-shot compensation to the retail merchant and the same compensation exists for the 170 or so wholesale merchants who will likewise be taking inventory and remitting the proceeds along to us as they move the product out to the retailers.
I was interested in the comments by the member for Ottawa Centre (Mr. Cassidy) who suggested a 25-cent-a-pack increase and that his colleagues would probably support that too. Being a non-smoker myself, I think I’d be inclined to endorse that. The member for Lake Nipigon (Mr. Stokes) is waving a cigar at me, but of course that’s not subject to any tax increase. I would warn him, though, that the next time it comes around not to expect such luck.
Mr. Stokes: Do you mean you slipped up this time?
Hon. Mr. Meen: This time round, with the increase in the tax on cigarettes we’re bringing the level of taxation roughly in line on an ad valorem basis with the tax that is applicable on cigars and pipe tobacco. So next time perhaps if there is an increase it will be right across the board.
Coming back to the observations by the member for Ottawa Centre, one of the problems that would arise if we were to increase the rates so dramatically by, say, another 25 cents, rather than another five cents, is that there would be a significant amount of smuggling between provinces where there is a different tax rate. At this rate we’re already pretty close to the maximum beyond which one might expect to see some kind of smuggling on a significant basis.
I might just point out that in Alberta the tax is only 7.2 cents for a pack of 20; in New Brunswick it’s eight cents; in Quebec it’s eight cents; in British Columbia it’s 9.6 cents; in Nova Scotia it’s 10 cents; in Saskatchewan it’s 12 cents; with this addition of five cents on a pack of 20, ours is 14.2 cents; Manitoba is 15 cents so if there’s any smuggling, it’ll go in the other direction from Manitoba; Prince Edward Island is 16 cents; and Newfoundland is 20 cents. We’re pressing upward and if we get any higher than the present proposed 14.2 cents, effective with this current budget, I think we could expect to see or at any rate encounter a significant amount of smuggling.
I think the member for Ottawa Centre also talked about increasing the tax rate gradually to discourage smoking. I’m advised the experience in other jurisdictions such as the United Kingdom where they tried doing this has sort of proved the opposite. It proved that the tax was an inelastic kind of tax and the degree of smoking simply rose along with the tax. There wouldn’t be anything accomplished, in terms of reduction of consumption, by a slow increase in the rate. Indeed, it might be that the addition of five cents a pack might be the straw that breaks the camel’s back with some of those who are trying to kick the habit. They might decide once and for all to knock it off and not to smoke any more.
Anyhow, the experience in the United Kingdom is contrary to the suggestion by the hon. member for Ottawa Centre. I might say that, as I indicated earlier, I would not be averse to an increase in the interests of a reduction of smoking if that were possible.
In reply to the member for Windsor-Walkerville (Mr. B. Newman) I had heard that some merchants didn’t get their notifications and the details of the tax increase in time for Monday morning. I really don’t know -- we wouldn’t want to be that rigid and inflexible. We would expect them to be honest with their inventory reporting. We’ll be doing some audits but we would expect them to report honestly on their inventories and to remit the tax less the five per cent agent’s commission.
Mr. Speaker, I must say that I thank the hon. members opposite for their indication of support of this bill.
Motion agreed to; second reading of the bill.
Mr. Speaker: Shall this bill be ordered for third reading?
The following bill was given third reading upon motion:
Bill 48, An Act to amend the Tobacco Tax Act.
Clerk of the House: The second order, House in committee of the whole.
ARBITRATIONS AMENDMENT ACT
House in committee on Bill 1, An Act to amend the Arbitrations Act.
Hon. Mr. McMurtry moved that the bill be amended by renumbering the present sections 2 and 3 as 3 and 4 and by adding thereto the following section:
2. Subsection 2 of section 3(1) of the said Act as enacted by the statutes of Ontario, 1973, chapter 28, section 4, is amended by adding at the end thereof “in default of agreement.”
Hon. Mr. McMurtry: I might say, Mr. Chairman, this is a matter which was raised by the hon. member for Riverdale (Mr. Renwick) and as a result of his submissions I am proposing this amendment because I think it does certainly clarify the Act and prevent what might be perceived, at least by some, as a conflict between certain sections. I am very much obliged for the assistance of the hon. member in that regard.
Amendment agreed to.
Mr. Chairman: Shall the bill be reported? Bill 1, as amended, reported.
BLIND PERSONS’ RIGHTS ACT
House in committee on Bill 13, An Act to provide for Certain Rights for Blind Persons.
Mr. Chairman: The hon. minister has an amendment to section 1 of the bill.
Hon. Mr. McMurtry: Yes, Mr. Chairman, I have several amendments.
On section 1:
Mr. Chairman: Hon. Mr. McMurtry moves that section 1 of the bill be amended by adding thereto the following subsection: “3. This Act binds the Crown.”
Mr. Roy: Just so I understand the purpose. I didn’t get a copy of the amendment or the purpose of it, Mr. Chairman, and I took it for granted from reading the legislation that this legislation would bind the Crown in a sense that everyone operating under the Act, including the Crown, would be involved and would be subject to this legislation. I just don’t understand the purpose of the amendment I missed out on second reading, so maybe the minister could give me some explanation for this.
Hon, Mr. McMurtry: I can respond now, Mr. Chairman.
Mr. Chairman: Any further comments? If not, the minister can respond.
Hon. Mr. McMurtry: As a matter of fact Mr. Chairman, I was asked on second reading of this bill whether this bill would, in fact, bind the Crown. My immediate response was yes. On further reflection, it is fairly fundamental that the Crown is not bound by any such legislation except if the Crown is specifically named therein.
Although any Crown corporations or any facilities operated by the Crown in the right of the province would obviously abide by such legislation, looking at it from a technical but at the same time a legal sense, it is my considered opinion, after a little reflection, and as I indicated to that on second reading, that the Crown should be specifically named if the Crown is going to be bound. That is the purpose of that amendment.
Mr. Roy: You know, as a matter of interest, of countless pieces of legislation, and in fact legislation presently on the books where the Crown is not named specifically, and I am sure there is certainly case law. For instance, I will just give an example, the Highway Traffic Act. Officers of the Crown and operators of Crown vehicles are all subject to this law. I don’t quite understand. To follow consistently with what you are saying here, I would think that we should start looking at every piece of legislation or many pieces of legislation that we have passed through this House and, in fact, make them specifically applicable to the Crown.
Somehow I get the feeling that it is not going to change this legislation very much if we make it applicable to the Crown. Certainly we approve of the fact that this legislation is applicable to the Crown, but it seems to us that it is somewhat redundant. If we were to follow the minister’s reasoning and the consistency of that reasoning, I would think that with many pieces of legislation we would have to go back and say, “This legislation is applicable to the Crown.”
Hon. Mr. McMurtry: My understanding with relation to legislation generally is that the Crown is often not named but always considers itself bound. In this particular case, the point was specifically raised by the hon. member for Sudbury (Mr. Germa) and it seemed to me appropriate therefore that it was a case in which we should not just adopt a position that the Crown would consider itself bound to reassure the member that the Crown would be in fact bound in law.
The member was particularly concerned with respect to accommodation operated or owned and maintained by the Ontario Housing Corp. I indicated to him, to assure him that it could never be raised, that we would amend the legislation in the manner that I have proposed. There is no question but that where the legislation is introduced it does affect the Crown and the Crown does consider itself bound. But from a narrow legal sense the Crown is not bound unless specifically named in the legislation I can’t be any more specific than that. If they don’t want to support the amendment, that is a matter for the hon. members opposite.
Mr. Roy: It is not a question of making a big issue of this. All I am saying is that, reading the legislation as in many other pieces of legislation, the way the legislation is breached is not though the Crown as an impersonal person but by certain people here. A person acting on behalf of private enterprise or acting on behalf of the Crown, I would say, is not only bound by a matter of discretion or good taste or whatever the Attorney General might call it but is bound in fact by law. I would think that, if a person as named in this section or in this Act were to deny accommodation or entrance, he is in breach of the Act whether he is acting on behalf of the Crown or anyone else.
I am just basing this on other legislation that we have passed in this House and other legislation which is applicable in the Revised Statutes of Ontario now. I am saying that I appreciate the member who posed the question wanted to make sure the Crown was in fact bound by this, but I respectfully differ with the chief law officer for the Crown this evening and say to him I don’t think it’s necessary.
Mr. Germa: I am very pleased to see that the minister chose to respond to my doubts as raised at second reading. Despite all the legalities and the technicalities as they pertain to other statutes in the statutes of Ontario, I think it removes any doubt whatsoever from this piece of legislation at least as to the fact the Crown is bound by the bill. If there are some doubts in other legislation, presumably we will have to take steps to ensure, if it is necessary for the Crown to commit itself to being bound, that every bill that has that potential in it is therefore corrected. But I feel as a layman very much more secure with the legislation as amended than it was as originally presented.
Mr. Renwick: And as a lawyer I share that.
Hon. Mr. McMurtry: If I might be permitted a further response in order to clarify this matter once and for all, I would refer my friend, the hon. member for Ottawa East, to the Interpretation Act as contained in the Revised Statutes of Ontario of 1970, chapter 225, section 11, which states as follows:
“No Act affects the rights of Her Majesty, her heirs or successors unless it is expressly stated therein that Her Majesty is bound thereby.”
I would trust that as a result you have learned something tonight from the senior law officer of the Crown in that respect.
Mr. Roy: Don’t be too smug. I suspect you learned something as well, because you didn’t have it in the original legislation.
Motion agreed to.
Section 1, as amended, agreed to.
Sections 2 and 3 agreed to.
On section 4:
Mr. Chairman: Hon. Mr. McMurtry moves that subsection 1 of section 4 of the bill be amended by striking out “Canadian National Institute for the Blind” in the first line, and inserting in lieu thereof, “Attorney General or an officer of his ministry designated by him in writing”; and further moves that subsection 3 of the said section 4 be amended by striking out “Canadian National Institute for the Blind” in the second and third lines, and inserting in lieu thereof, “Attorney General or an officer of his ministry designated by him in writing.”
We’ll take both of these together, since they’re related, obviously.
Motion agreed to.
Section 4, as amended, agreed to. Sections 5 to 7, inclusive, agreed to.
On section 8:
Mr. Chairman: Hon. Mr. McMurtry moves that section 8 of the bill be amended by striking out the word “January” and substituting therefor the words “July 1976.”
Hon. Mr. McMurtry: I’m sorry; it would appear to have been just a mistake in the printing in relation to January as opposed to July, because obviously there will have to be some blind persons will have to have an opportunity to apply to the ministry and to receive their identification cards prior to the Act coming into force.
Motion agreed to.
Section 5, as amended, agreed to.
Section 9 agreed to.
Bill 13, as amended, reported.
COUNTY JUDGES AMENDMENT ACT
House in committee on Bill 14, An Act to amend the County Judges Act.
Hon. Mr. McKeough: Can we do this without the member for Wilson Heights (Mr. Singer) being here?
Mr. Roy: It’s going to be tough. Maybe the chief officer for the Crown might advise us. I understand what the purpose of the legislation is, but I just would like to know as a matter of interest what supernumerary judges are paid at the county court level. I don’t have the federal legislation here. Can you help me there?
Hon. Mr. McMurtry: I can give that to you in a moment. The supernumerary judges would continue on at full pay. They would have a choice: Either go on pension -- which I guess would amount to approximately half their normal salary -- or if they continue as a supernumerary judge they do continue at their regular pay. To put it in a colloquial sense, the supernumerary judges will tell you they are working for half pay but in effect the pensions that they could receive without working would amount to approximately 50 per cent. They do carry on at their regular salary.
Mr. Breithaupt: Mr. Chairman, the amendment the Attorney General is proposing is one with which I have some familiarity. It certainly appears to me this is a very useful way to allow certain judges to continue in service if they so wish to do. I have been apprised of some situations in which judges who are approaching retirement age will therefore be able to be of continuing use as they see themselves and as the Attorney General sees them as being in a position to render further service. I think the amendment is a most worthwhile one and I think that it will, hopefully --
Mr. Chairman: May I remind the hon. member this is committee? Do you have an amendment to any particular section?
Mr. Breithaupt: No, I am just talking with respect to this section 3.
Mr. Chairman: Which section?
Mr. Breithaupt: Section 3, Mr. Chairman, which allows this matter of the supernumerary judge to be brought before the House. I think it’s a most worthwhile amendment and is going to be quite useful, particularly in dealing with some of the backlogs in certain courts.
Mr. Chairman: Are there any other comments on any other section of the bill? Shall the bill be reported?
Bill 14 reported.
Mr. Ferrier: You have an agreeable House tonight.
MEMBERS OF COMMODITY BOARDS ACT
House in committee on Bill 5, An Act respecting Members of Commodity Boards.
Mr. Chairman: Any comments or amendments to any section of Bill 5?
Mr. Renwick: On Bill 5, I had raised a question on second reading in relation to section 4 and a question on section 5. The minister had been kind enough to discuss the matters with me earlier and I wondered what his intentions are with respect to the proposed amendments I had suggested.
Hon. W. Newman: Mr. Chairman, I have an amendment to section 4.
Sections 1 to 3, inclusive, agreed to.
On section 4:
Mr. Chairman: Hon. W. Newman moves that subsection 1 of section 4 of the bill be amended by striking out “within six weeks after the fact” in the second line and inserting in lieu thereof “where it”, so that the subsection reads as follows:
“Subject to subsections 3 and 4, a producer or the commodity board may, where it comes to his or its knowledge that a member of a commodity board may have contravened subsection 1 or 2 of section 2, apply to the proper tribunal by notice in writing for a determination of the question of whether or not the member has contravened subsection 1 or 2 of section 2.”
Mr. Riddell: Just for clarification, is that intended to remove any limitation problems? What is the purpose of removing the six-week portion of that clause? In other words, if, after a year’s time, a producer decides he wants to expose a member of the board for some contravention of the rules and regulations, he can so do. Is my understanding of this correct?
Hon. W. Newman: This removes the time frame within the bill which we set out. We felt that if he knew about an infraction he should move within six weeks. He only had six weeks to make up his mind. There are times when a member of a board may have been on a board with other board members, and of course when he is reappointed or re-elected to a board would still give him the opportunity, it’s really taking out the time frame.
Mr. Gaunt: Just on a matter of clarification, Mr. Chairman, in the minister’s best judgement, does he consider that there should be no time limit at all? One could logically pose the question, when does the finality set in in this procedure?
Mr. Renwick: When he ceases to be a member of the board.
Mr. Gaunt: When he ceases to be a member of the board?
Hon. W. Newman: Yes, when he ceases to be a member of the board he would automatically come out of this situation, but as long as he is a member of the board the time frame is taken off.
Mr. Gaunt: I see, okay.
Mr. Chairman: Any further comments? Shall the minister’s amendment carry?
Mr. Chairman: Any other amendments or comments to any other section of the bill?
Mr. Renwick: Mr. Chairman, I raised a further question on section 5 and perhaps the minister has an amendment. If not, he might care to comment about it.
Hon. W. Newman: Yes, Mr. Chairman, under subsection 3 of section 5 of the bill, I am going to be taking out the word “shall” in the sixth line and inserting the word “may” in lieu thereof. What I am saying, in effect, is that the board may, if it so desires depending on the circumstances of the case, return the deposit that is made.
Hon. W. Newman moved that subsection 3 of section 5 of the bill be amended by striking out “shall” in the sixth line and inserting in lieu thereof the word “may.”
Mr. Chairman: Does the amendment carry?
Mr. Chairman: Any other comment on any other section of the bill? Shall the bill be reported?
Bill 5 as amended reported.
DRAINAGE AMENDMENT ACT
House in committee on Bill 6, An Act to amend the Drainage Act, 1975.
Mr. Chairman: Any comments on any section of Bill 6?
Mr. Renwick: Mr. Chairman, I had raised a point on subsection 2 of section 2 of the bill, and my friend from Kitchener had concurred in it. Perhaps the minister is going to propose an amendment.
Hon. W. Newman: No, Mr. Speaker, I don’t propose an amendment at this particular point in time. That’s section 2, subsection 5: “No referee or acting referee shall practice as a solicitor or barrister in any matter arising under this Act or act as legal agent or adviser in any such matter.” I don’t propose to change that amendment at this point in time.
Mr. Renwick: I am content. I was batting .666. That’s pretty good.
Mr. Chairman: Any further comment? Shall the bill be reported?
Bill 6 reported.
SUCCESSION DUTY AMENDMENT ACT
House in committee on Bill 26, An Act to amend the Succession Duty Act.
Mr. Chairman: Any comment or amendment to any section of this bill? If so, what section?
Mr. Good: Section 8.
Mr. Chairman: Anything prior to section 8?
Mr. Renwick: Yes, Mr. Chairman. I want to have a very brief discussion with the minister on the question raised by the change in his definition of the word “transmission” in the Act, and particularly to draw to his attention the provisions in the report of the Ontario Advisory Committee on Succession Duties, which recommended that we depart from the concept of a transmission and substitute for it the concept of succession.
Mr. Chairman: May I ask what section the hon. member is dealing with?
Mr. Renwick: I am speaking, I believe, to section 2, subsection 2, Mr. Chairman.
Mr. Chairman: Thank you.
On section 1:
Mr. Renwick: I don’t intend to prolong it, but I would like to read a brief synopsis of the recommendation made by the advisory committee.
“The committee recommended that the present transmissions basis of taxation be replaced by an accessions basis. It must be noted that the accessions basis of taxation recommended by the committee and, in fact, adopted recently in the model Succession Duty Acts of several provinces of Canada, can be a very effective weapon against avoidance of duty by wealthy individuals who have left or plan to leave Canada and establish domicile and residence in tax haven jurisdictions such as the Bahamas or Bermuda.
“The adoption of the accessions basis would mean that even if such an individual transferred all his Canadian property to a holding company incorporated in a tax haven jurisdiction, so that his own property then consisted of securities of this company which are not regarded as properties situate in Canada, if his beneficiaries were resident in a province where an accessions basis of taxing for succession duty was in force, they would still be subject to succession duty on the death of the non-resident devisee. In the report of the Ontario commission on taxation in 1967 it was accepted that there appears to be no legal reason why Ontario could not tax anyone in Ontario with respect to property he receives from any source and situation and anyone, no matter where he lived, with respect to property in Ontario and the committee has accepted this proposition.”
The recommendation to implement an accessions basis of taxation is clearly an improvement over the past but is certainly not an unexpected move. It would bring Ontario into line. I wonder if the minister would care to comment, regarding his enlargement of the definition of transmission to cover the two situations Which the proposed amendment does cover, but in particular the first one to include in it foreign real estate passing from a person domiciled in Ontario to another person domiciled in Ontario, why he didn’t go the whole road and adopt the accessions basis in the statute and so protect the Ontario economy so far as the disappearance of considerable wealth from the province is concerned. I realize, of course, that there is now a departure tax under the Income Tax Act of Canada.
Hon. Mr. Meen: The hon. member, when he talks of a departure tax, is speaking of money moving out of the country.
In the case of the recommendation for the accessions basis rather than a succession duty applied on a transmission, I am advised that only two provinces in Canada now have the accessions basis for the purpose of taxing the transmission of wealth. We here in Ontario -- I mentioned this during the debate on second reading -- are still looking at this, and I am hoping that in the next six months or so we will have a pretty substantial reworking of the Succession Duty Act. I must say that particularly with respect to the application of rates and the complex rate structure as it exists; I would hope we can replace that with something a lot simpler.
In the course of doing this, we are also looking at the recommendation of the committee as to accessions. But it doesn’t strike me that it is necessarily likely to be any more successful than what we presently have with our application of duty on a successor, the beneficiary here in Ontario, and now, under this amendment, bringing in a transmission of real estate as well as a transmission of personalty, as presently exists in the Act. Bringing in “foreign” realty as a taxable transmission in the hands of a successor who is here in Ontario, where we have already the right to tax realty per se here in Ontario -- we have the right to tax individuals as beneficiaries or successors in Ontario -- is how we approach the realty side of things by way of defining realty now to come under the definition of a transmission.
I am not sure whether the accessions route would be successful in a province or a state in which they didn’t have a similar kind of taxing provision. Perhaps the member for Riverdale could enlighten me as to how that would work. Maybe it would. But what does one do, for example, with the Province of Alberta, as one illustration, where there is no succession duty or anything equivalent to our Succession Duty Act unless one has provisions of this sort.
It may be -- and my advisors can clarify for me sometime -- that going by the accessions route one could successfully tax without a mutuality of application of that kind of tax in another jurisdiction, I don’t know.
All I know is that under our Succession Duty Act, as it stands, we have been losing potential succession duty by the loophole, if I can call it that. I think it is, in the colloquial, one of those large ones though which people could drive a Mack truck.
A potential testator could dispose of assets here in Ontario, assets otherwise dutiable, and use those assets to purchase real estate in another jurisdiction in which, let us say there is no succession duty -- or there is a rate of duty substantially less than here in Ontario, thereby masking it attractive to do that -- and then set up or leave the real estate to his intended beneficiary, particularly those outside the jurisdiction.
In the case of those in the jurisdiction, he could set up a company -- and that’s the second subsection (ii), under the new definition of transmission -- in which his intended beneficiaries are shareholders. Now if the company is a shell of a company, then the gift of those shares to his intended beneficiaries would be a non-taxable gift; they would be virtually valueless shares.
As I understand the technique, then he would leave the real estate to the company that he’d set up and on his death the company would then be the beneficiary. But being a non-resident company, as it would be established, then there would be no duty attracted by that bequest of the realty to a corporation outside the jurisdiction. Then the company would be wound up and the proceeds of winding up would then be distributed to the shareholders here in Ontario and they would receive the money completely free of succession duties; unless we have this kind of definition under the Act.
This is what we’re proposing at this stage. If it should turn out that in the further and more extensive reworking of the Succession Duty Act we determined that the recommendations of the committee by way of accession were perhaps more appropriate and easier to work into an Act, certainly I’d be the first to adopt it. We are endeavouring where possible to simplify the entire legislative picture here on succession duties, which I would be the first to confess is an extremely complicated picture at the present time.
Mr. Renwick: Mr. Chairman, I only want to make two comments. One is that in the effluxion of time what was a hallowed principle of taxing law, that one didn’t tax foreign real estate, now becomes a loophole big enough to drive a Mack truck through. I suppose it was true that both for jurisdictional purposes and for taxing purposes, there was no more hallowed principle of succession duty law, you didn’t tax foreign real estate. But are we now going to tax foreign real estate?
Hon. Mr. Meen: No, with respect Mr. Chairman, that’s not what I was saying. I was saying we were taxing the transmission of an interest in foreign real estate, but we are really applying the tax to the successor here in Ontario.
Mr. Renwick: I understand.
Mr. Reid: Yes, you are taxing foreign real estate.
Hon. Mr. Meen: No we’re not.
Mr. Renwick: Mr. Chairman, all I’m saying is that you overruled the principle in Penn vs. Lord Baltimore.
Hon. Mr. Meen: No, that is the next point.
Mr. Renwick: That was decided in 1750. But I do want to make this point --
Mr. Reid: I remember that case well, as I am sure the minister does.
Mr. Renwick: There are the three points of contact: That is, a person domiciled in Ontario, where his property passes on death to a person domiciled in the Province of Ontario, of property in Ontario, no problem; right?
Then we go to the transmission situation where you have a person domiciled in Ontario leaving property passing on his death to a person domiciled in Ontario. When there’s personal property outside Ontario we tax him under the technical definition of transmission.
We have now extended the technical definition of transmission to provide that a person domiciled in Ontario, leaving property passing on his death to a person domiciled in Ontario of personal property and real estate not in Ontario, will be subject to the tax.
All I’m saying is why don’t you drop the second of the three spokes and provide that any property, anywhere, regardless of the domicile of the person who is dying, passing on his death to a person domiciled in Ontario, should not be taxed to the person domiciled in Ontario on the very same theory as you’ve made this extension?
I’m not going to elaborate on it. I think the minister and I have had the exchange I wanted to have and I’m satisfied as long as he’s thinking about it.
Hon. Mr. Meen: I just wanted to say that having covered realty and having covered personalty, one would think that one could then generalize and talk about all property.
Mr. Renwick: And regardless of the domicile of the devisee.
Hon. Mr. Meen: However, that would probably require quite a number of other things. I thought the hon. member was talking about the devisee still being here in Ontario.
Mr. Renwick: The devisor, sorry.
Hon. Mr. Meen: In any event, if we’re talking in that terminology it would probably require a fairly extensive rewrite of the Act and we’re not trying that in this set of amendments. This is what I hope will come about in the not too distant future.
Mr. Chairman: The hon. member for Waterloo North (Mr. Good) indicated he had something on section 8. Anything previous to section 8?
Section 1 agreed to.
On section 2:
Mr. Renwick: On section 2, I just wanted to make the comment that rather than allow the deduction for succession duty purposes of all solicitors’ fees, you could remove the $100 fee as the deduction in the Act for the administration of the estate.
Mr. Good: Raise it and make it realistic.
Mr. Renwick: I don’t know why you didn’t choose the other route.
Hon. Mr. Meen: As a matter of fact, there was the suggestion that we could perhaps go the other way and allow the entire amount, but in order to make that determinable at the time when the return is prepared and filed, it seemed more sensible to us, since the $100 has tended to cause more confusion as between client and solicitor than it has ever worked as a benefit to clients, that we should simply remove it at this time.
Hon. Mr. McKeough: They won’t even open the door for $100.
Mr. Renwick: We would take a telephone call.
Mr. Chairman: Section 8. The hon. member for Waterloo North.
Mr. Good: Thank you, Mr. Chairman. I’d like to discuss briefly the revisions here.
Sections 2 to 6, inclusive, agreed to.
On section 7:
Mr. Renwick: Mr. Chairman, if I may, with my friend’s consent, could I just ask an explanation on section 7 from the minister?
Mr. Chairman: Section 7. Do you have a question?
Mr. Renwick: Yes. I would like the minister to explain the meaning of the addition of subsection 3 to section 25 of the Act.
Hon. Mr. Meen: Perhaps the best way to explain this would be to give an illustration to the hon. member, if I could.
Mr. Renwick: Please.
Hon. Mr. Meen: In short, before I give you the explanation, perhaps I would point out that sometimes foreign real estate forms part of an estate and sometimes there are foreign beneficiaries. The testator may or may not have made specific allocation of assets within his will. If he did not make such specific allocation, then one must treat the distribution of the residue as a general package, and only if the testator has specifically allocated a foreign asset to a foreign beneficiary would that then be appropriate to designate to the foreign beneficiary where a different bud of tax rate -- perhaps nothing at all -- would apply.
The illustration that I could give the hon. members would be, let us say, an estate of $1 million, with an asset mix of, say, foreign realty of $200,000, of foreign personalty of $100000 and of Ontario property forming the balance of $700,000, making in all a total of $1 million.
Let’s assume that the beneficiaries are four children and all four children taking equally. Let’s assume that one of them is a non-resident and let’s assume that the other three are residents in Ontario. As the Act presently stands, the executor could allocate most of the foreign property to the foreign beneficiary with no tax being paid on it by that foreign beneficiary. For example, the non-resident child in this case could receive the whole of the foreign realty of $200,000 and a half of the foreign personalty of $50,000, thereby receiving his one-quarter interest in the estate of $250,000 allocated by the executor completely free of tax.
The three resident children would receive, according to the will, three-quarters of the residue -- three-quarters of the estate at $750,000 -- and they would pay 17.5 per cent on that particular size of estate, making it a duty of $131,250 -- and that would be the total duty that would be recoverable.
Under this amendment, we would preclude the executor from allocating the foreign property and all four children would share equally in the estate assets, just as exactly he says in the will that they shall do.
So, we would then have the one non-resident child receiving a quarter of the foreign property -- and a quarter of $250,000 is $62,500 -- and there would be no tax on that, remember. But he would receive a quarter of the Ontario property -- also $175,000 at 17.5 per cent, or a tax of $30,625 to make up his total, one-quarter interest on $250,000. The three resident children, they would receive three-quarters of the foreign property -- that works out at $225,000 at 17.5 per cent, or $39,375; and three-quarters of the Ontario property, $525,000 at the same mite of 17.5 per cent for another $91,875. You add those together and they then pay $131,250 as before. So they haven’t paid any more, but what the Succession Duty Act has then recovered for the people of Ontario is a total $161,875, or an improvement of $30,625.
On the Act, as it presently stands, that apportionment would be shown to us -- that is, the original apportionment would be shown to us -- for the purpose of duty. And then, presumably, the beneficiaries would all share and share alike in the net proceeds -- having defeated the Act to the extent of $30,625. That’s what this amendment is intended to remove.
Mr. Renwick: I just want to try to clarify two points in what the minister has said. We are assuming that we are talking about the wills or testamentary instruments of relatively wealthy people who can afford the luxury of advice as to what they should do.
I take it that if testator makes his will and makes a specific bequest of particular property to a particular person, that this does not in any way affect that kind of specific bequest, whether it is of real estate or personal property?
Hon. Mr. Meen: That is correct.
Mr. Renwick: All right. I then take it that the kind of situation that the minister is talking about -- well, let me put the other situation. If there is a shall-call-and-convert-into-money obligation and the executor shall call in and convert into money the whole of the estate and then divide it among the beneficiaries of the estate, being more than one -- again no problem.
Hon. Mr. Meen: Mr. Chairman, I would think that would be the kind of situation in which, without a specific bequest of a specific legacy -- by way of, say a foreign asset to a foreign resident -- that, where one has the more or less common provision that “my executor shall call in and convert into money any assets of my estate not consisting of money” and so on, that then he has realized by way of instructions under the will all the assets. He is then not in a position to allocate a foreign asset in specie, or otherwise. If he realized on the foreign asset certain foreign moneys he could not use those foreign moneys to pay a foreign beneficiary and say, “That’s the way we are doing it, and so we will treat it for succession duty in that way.” This section rules out that kind of apportionment or distribution of the money.
Mr. Renwick: I think we were for a moment talking in the same language, and then I think we diverted. If there is a strict instruction that the executor shall call in and convert into money all of the assets, the executor does so and he converts it all into Canadian dollars. His obligation then is to divide it among five beneficiaries in equal shares; he so divides it in dollars and he pays cash to each of them. No problem. Am I correct in that?
Hon. Mr. Meen: Yes. I agree. I thought the hon. member was suggesting that having got the money into a common pot he would then make a distribution but for tax purposes would show a different kind of distribution. As long as he shows the distribution on that basis there would be no problem as I would see it.
Mr. Renwick: The only purpose of this section then is in the third situation. That is when there is no obligation to sell, call in and convert into money and distribute the money in equal shares but there’s an obligation to transfer equal shares of the estate to five beneficiaries. He chooses to value the various types of assets and comes to an agreement with the beneficiaries as to who is to accept what asset in lieu of his interest in the estate. If he does it then in such a way that the Treasury or the Ministry of Revenue of Ontario is not satisfied that it is getting the proper amount of tax to Ontario, the minister can say, “Regardless of what you have done, we are going to establish what the allocation was in order that we will get the proper amount of Ontario tax.”
Hon. Mr. Meen: I think I find myself in agreement with what the hon. member is saying. May I put it another way? Provided the will provides for the allocation of, let us say, foreign assets to a foreign beneficiary this section does not apply to rewrite the terms of the will. What it does do is to provide that in default -- I think I am correct in this -- of some specific provisions as to allocations which are of such a nature as to reduce the tax.
Mr. Renwick: Let’s try the third one just once more and then if not, we can talk about it privately at some other time.
The third situation I am thinking about, which appears to me to be the one this amendment is directed toward, is a situation in which there are no specific bequests of specific property; there is no obligation on the executor to sell, call in and convert into cash, which is the second situation. The third situation is where there are divers assets situated in divers jurisdictions which the executor is called upon to value and then, in his decision, to direct an equal share in accordance with the valuation of particular assets to the five beneficiaries. He selects the real estate in Florida to go to daughter X living in Hawaii and some other asset to go to somebody else in some other jurisdiction and the minister feels that the person in Ontario is not paying the proper share of tax on that estate. That is the purpose for which this clause, this proposed amendment, is before us.
Hon. Mr. Meen: That’s exactly the situation to which I would envisage this section applying. When the testator has not specifically directed a particular asset or the proceeds of the sale of particular foreign assets to go to a particular foreign-domiciled beneficiary the executor cannot then use his discretion subsequently for the purpose of reduction of duty.
Mr. Good: I am concerned, Mr. Chairman, over the manner in which the problem which was spoken of by the minister the other day has been handled under this amendment.
We are talking about the valuation of bequests of income to a surviving spouse who would have, I presume, a life interest in an estate and how that valuation is calculated in reducing the estate for tax purposes. I think it is very important. As the minister indicated the other day, the value is computed on the basis of the life expectancy of the surviving spouse, either under the terms of the will which says she or he should get a certain percentage or, if there is no percentage of that income mentioned in the terms of the will, then their practice had been to make the computation at four per cent income per year. Well, we do know that it’s not hard to realize more than four per cent, but there’s an important point here. Estate planners tell me, in talking to them about this, that very often where there are reciprocal wills between spouses leaving a life interest, it is the intention to have one estate in a manner that it would just fall below the taxation level. Unless the person is able to ascertain how you are going to compute that valuation of that income it’s going to be very difficult to effectively plan so that one estate is just non-taxable while the other one could be either non-taxable or taxable.
I think one has to bear in mind, first of all, that that income going to the surviving spouse will be taxed in the hands of the spouse as income tax. It will be taxed on the death of the surviving spouse if that surviving spouse then has a taxable income. In effect, if you don’t get it then you’re going to get it later. That’s about the size of it.
I believe that your method of handling this, where you simply say that you may make regulations, not saying what they’re going to be, or how you’re going to compute the valuation of that life interest, is just not good enough when it comes to estate planning in this particular category where you would be dealing with an estate that could in fact be taxable.
The estate itself may be made of quite a bit of non-revenue-producing assets, which could have a bearing on the actual life interest of the surviving spouse. But I believe it’s going to be most difficult for those engaged in the estate planning field to adequately figure out how your valuation is going to be done when you my you’re going to give the guidelines by regulations in those instances where a certain percentage of the estate is designated as income interest to the surviving spouse.
Now, what do you plan to do about it? Do you plan to make public in the very near future what the new rules will be, or how will this be dealt with? Do you expect people to just grope in the dark? When you get into estates which are potentially taxable you’re talking about a lot of money, because the primary rate will apply to the whole estate, even if it’s just a few thousand dollars over the $250,000 exemption.
I would be pleased to have an answer and to suggest that your method of treating this apparent problem that you had designated the other day is not very satisfactory when it comes to estate planning.
Hon. Mr. Meen: Mr. Chairman, the present table and the present provision are turning out to be unsatisfactory in today’s economy, where good, secure, first-rate investments can be made at 10 per cent plus, whereas the present tables, which combine life expectancy -- the table used for the purpose of computing the value of an income annuity, I’m talking about -- assume the life expectancy of the beneficiary and work into that a figure of assumed interest at four per cent, as the hon. member has stated and as I’ve stated in the debate on second reading.
In the illustration I gave yesterday, when we were dealing with this on second reading, the 57-year-old female surviving spouse would have a life expectancy of 19.6 years. That wouldn’t be the figure that would be presently used. The figure under the tables would be, as I recall, 12.2 multiplied by the rate of return designated under the will of eight per cent on $1 million, or $80,000, which comes out to something like $960,000 or so.
This is the kind of problem we’re facing where the present provisions in the Act develop a present value for the income so close to the capital value, and in some cases exceeding it -- and remember the surviving spouse is succession-duty-free by our recent amendment -- so only the difference that then exists between that present value of the annuity and the capital value of the estate is then subject to tax in the hands of the remaindermen. This is turning out to be a very convenient way to almost completely wipe out succession duty, otherwise payable in the hands of, say, collaterals or descendants who would pay some level of tax.
What we are proposing to do here is to seek the assistance and advice of actuaries who, we think in a day or so perhaps, can give us a set of calculations that can be used. I am not an actuary. I really have no idea how they would be likely to recommend to us that we approach this problem. But we are anxious to have the authority to bring in a regulation that would reflect more accurately the present value of an annuity of that sort -- say, $80,000 on a $1 million estate, and that’s not hard to achieve; that’s a pretty realistic kind of income over the life expectancy of that widow.
Her life expectancy, according to our tables -- and they are not even updated tables; we would like to update those life expectancy tables -- her life expectancy is 19.6 years. If you put that into your pocket computer at present interest rates of, say, 10 per cent, and 19.6 payments of $80,000 at 10 per cent, the present worth of that kind of annuity, as I worked it out, is $676,464, showing the disparity -- and that amount, remember, would not be subject to duty; that part would be free -- but the excess between there and $1 million would be subject to tax.
That’s the kind of area we are talking about, and the regulations that I would expect we can work out would reflect that kind of figure, when the actuaries are able to give us updated life expectancy tables and current interest rates, or a method of use of current interest rates.
That’s what we are proposing, and I will be asking actuaries to get into this immediately the bill is passed.
Mr. Good: On section 2, Mr. Chairman: First of all, if the terms of the will did not designate a percentage of the estate to be transferred as income to the person with the life interest, would you then continue on with your present formula using the five per cent interest?
Hon. Mr. Meen: Five per cent. Yes, we presently assume five per cent.
Mr. Good: Five per cent. What formula is presently used for the computation of the valuation of the power to encroach by the surviving spouse, because the amendment says whether this income is paid out of capital or income or periodic payments? How do you calculate, for this purpose of estate reduction, the value of power to encroach at, say, the discretion of an executor who is not the surviving spouse?
Hon. Mr. Meen: Mr. Chairman, I have no idea, to tell you the truth. I don’t think, since it is discretionary, that we could take that into account, but I really don’t know, if it is completely discretionary and it normally is; otherwise the power to encroach is meaningless, with the discretionary power in the hands of the executor. In other words, if you are trying to isolate it from the life tenant as an asset of the life tenant for succession duty purposes, you can’t give the life tenant the unfettered right to encroach. So I really don’t know; I would imagine that it would be calculated on the assumption that there were no encroachment.
Mr. Good: Are you saying you don’t put any valuation on that?
Hon. Mr. Meen: I don’t believe so, but that’s really not part of this section. I must confess I am not fully knowledgeable.
Mr. Good: Well, it certainly is, because the amendment says “whether this entitlement is paid out of income or capital.”
Hon. Mr. Meen: No, no, that’s not the point. There is a specified rate of return on the capital. All that means, to follow along on the point the hon. member for Waterloo North was making, some of the assets may not be income-producing. Therefore, they may be saying: “Well, okay, if you’re only making $40,000 out of income, I still want my widow to receive $80,000 or a net effect of eight per cent on the capital.” A portion of that obviously, in that case 50 per cent of the amount being paid out, is out of capital.
Mr. Renwick: Why is the regulatory power made effective as of a date not earlier than March 17, 1976?
Hon. Mr. Meen: Having signalled our intention by the introduction of the bill on that date, I did not feel it appropriate it should go back farther than that date.
Mr. Renwick: I see.
Mr. Chairman: Shall the bill be reported?
Bill 26 reported.
Hon. Mr. Meen moved that the committee rise and report.
Motion agreed to.
The house resumed; Mr. Speaker in the chair.
Mr. Chairman: Mr. Speaker, the committee of the whole House begs to report three bills with amendments, three bills without amendments and asks for leave to sit again.
The following bills were given third reading upon motion:
Bill 1, An Act to amend the Arbitrations Act.
Bill 5, An Act respecting Members of Commodity Boards.
Bill 6, An Act to amend the Drainage Act, 1975.
Bill 13, An Act to provide for Certain Rights for Blind Persons.
Bill 14, An Act to amend the County Judges Act.
Bill 26, An Act to amend the Succession Duty Act.
Hon. Mr. Meen: Mr. Speaker, tomorrow we will have legislation regarding the Sault Ste. Marie teachers, beginning at 11 o’clock. Then I understand that we’ll receive the Liberal contribution to the budget debate after the routine proceedings and then we’ll resume the teacher legislation if required. Following that, we’ll continue with legislation.
Mr. Renwick: Mr. Speaker, I take it the routine proceedings will be at 2 o’clock?
Hon. Mr. Meen: Yes, that is correct.
Mr. B. Newman: Will we rise at 6 o’clock?
Hon. Mr. Meen: Yes, that is the intention.
Hon. Mr. Meen moved the adjournment of the House.
Motion agreed to.
Report agreed to.
The House adjourned at 10:30 p.m.