Assemblée législative de l'Ontario

STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS

WEDNESDAY 2 FEBRUARY 1994

DRAFT REPORT UNDERGROUND ECONOMY

DRAFT REPORT PRE-BUDGET CONSULTATIONS

CONTENTS

Wednesday 2 February 1994

Draft report, Underground economy

Draft report, Pre-budget consultations

STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS

*Chair / Président: Johnson, Paul R. (Prince Edward-Lennox-South Hastings/

Prince Edward-Lennox-Hastings-Sud ND)

*Vice-Chair / Vice-Président: Wiseman, Jim (Durham West/-Ouest ND)

Caplan, Elinor (Oriole L)

*Carr, Gary (Oakville South/-Sud PC)

*Cousens, W. Donald (Markham PC)

Haslam, Karen (Perth ND)

*Jamison, Norm (Norfolk ND)

Kwinter, Monte (Wilson Heights L)

*Lessard, Wayne (Windsor-Walkerville ND)

*Mathyssen, Irene (Middlesex ND)

*Phillips, Gerry (Scarborough-Agincourt L)

*Sutherland, Kimble (Oxford ND)

*In attendance / présents

Substitutions present/ Membres remplaçants présents:

Crozier, Bruce (Essex South/-Sud L) for Mrs Caplan

Haeck, Christel (St Catharines-Brock ND) for Mrs Haslam

Ramsay, David (Timiskaming L) for Mr Kwinter

Sterling, Norman W. (Carleton PC) for Mr Cousens

Clerk pro tem / Greffière par intérim: Bryce, Donna

Staff / Personnel: Campbell, Elaine, research officer, Legislative Research Service

STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS

WEDNESDAY 2 FEBRUARY 1994

The committee met at 1012 in the St Clair/Thames/Erie Rooms, Macdonald Block, Toronto.

DRAFT REPORT UNDERGROUND ECONOMY

The Chair (Mr Paul R. Johnson): The standing committee on finance and economic affairs will come to order. Our first order of business this morning is to finalize the draft report on the underground economy. I believe all the members have had an opportunity at this time to peruse the draft report as it was written by our research officer, Elaine Campbell.

At this point in time, the Chair is soliciting responses or direction.

Mr Gerry Phillips (Scarborough-Agincourt): I guess we'll just go around the table. I think it's a good piece of work. I assume this is all public meetings and this is all in public.

The Chair: Unless you choose it not to be.

Mr Phillips: No, I think there's virtually no occasion when I want to be in private.

Interjections.

Mr Phillips: I shouldn't say there's no --

Laughter.

Mr Phillips: When I'm doing the public's business.

The Chair: Does Hansard show laughter or loud laughter?

Interjection.

Mr Phillips: Yes, "We'll make that decision," they said.

As I say, I think it's good and I think where we have to focus our attention is on the recommendations side, which is clearly the toughest for the staff to do.

Before we get to that, the one thing I think might be useful is for me -- I'm not sure it comes through as clearly as I think it might, about the size of the problem. I don't know whether other members share my view, but I think without much doubt we're looking at it being 7% to 10% of the economy and I think we're looking at $3 billion to $4 billion of lost revenue. I base that on, firstly, 7% to 10% of the economy would represent that sort of lost revenue for the province. Then, if you just look at the government's estimates on lost tax revenue, liquor revenue, retail sales tax revenue in the last few years, plus I think the Ministry of Finance said the biggest loss is actually in the area of income tax, so that we don't have any income tax estimates on lost revenue.

So my thought would be on page 3, on the size of the underground economy, at the bottom there, or at least somewhere in this section, to try and highlight that it is very large. I think we heard it is growing quite quickly right now. Maybe I can just go through them.

The Chair: Sure, that would be a good start.

Mr Phillips: Tobacco has tended to become almost what I call the metaphor for the underground economy. I think that one's quite serious. I might highlight it a little more on page 10. Then, on page 14, I think the public safety is maybe highlighted enough here, but over the life of this committee that one became almost even more significant in my own mind.

Then we get to recommendations. I would once again on recommendations restate that this is a major problem for the province of Ontario. The solution is going to be a multifaceted solution. Again, I say I think we have to be realistic with ourselves. This committee, with the limited time we put into it, isn't going to find all the solutions. So I'm not embarrassed to say we've taken it this far, but now it needs more effort by the government.

Then I would personally orient the recommendations, if we can find a way, under sort of broad headings. I think they're not bad here now, but to me the broad headings are compliance, public education, tax levels -- did I say enforcement? -- enforcement and government accountability. But I don't feel strongly about those headings, and if the rest of the group doesn't feel strongly, I don't mind staying with the current ones.

Candidly, on the one of lowering tobacco taxes, my own instincts are to be with the Minister of Finance on that and saying that kind of is the last resort. I'm not sure we've done enough on all the other things before we look at every reduction of the taxes on tobacco.

So I would tend to acknowledge this is a major problem and growing. I think what's happening in Quebec is extremely serious and could begin to move itself here. But I would be more inclined to say that the committee is not convinced that we've done everything we can in the areas other than reducing taxes, before we reduce taxes. So, as I say, I think this is a good piece of work by the research staff and in the end will be a good piece of work by our committee.

The Chair: Further indications?

Mr Bruce Crozier (Essex South): Not withstanding the fact that I wasn't here for most of these, it doesn't prevent me from saying something on them. But these are rather minor --

Mr Kimble Sutherland (Oxford): He learns quickly.

Mr Crozier: I found that the rest are that way, so why shouldn't I?

Page 3, the first paragraph, where, although it's not an exhaustive list, we say, "Services such as car repairs," it seemed to me the discussion included general construction or home renovation as being major. So I thought if we were going to point out anywhere where it was a problem at all, that should be included.

On page 15, if I can get to that, I just wondered about maybe some others' comments, because I hadn't heard them. But where we say, "`Sin' taxes were seen by many...as a health as opposed to a revenue measure," is that correct? Is that really why those taxes were put on so many years ago and increased so many times, because of the health aspect?

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The Chair: Deterrents, yes.

Mr Crozier: Is that right?

Mr Norm Jamison (Norfolk): That's what they said.

Mr Crozier: Gee, I hate to be sceptical, but okay.

Mr Sutherland: Maybe you should call Bob Nixon and find out.

Mr Crozier: Yes. Well, whoever. Page 17, under "Unemployment," here again it may be something that would be seen in the editing, but where it's in italics, "Every time a plant lays off 1,000 workers, there are 1,000 new home renovators and home builders." What? Laid off? I don't think that sentence, that thought, is quite complete. It leaves me in the middle of nowhere if it just says that.

The Chair: No, that's a statement. It says, "Every time a plant lays off 1,000 workers, there are 1,000 new home renovators and home builders." It creates; maybe "creates" should be there, but that's a quote.

Mr Crozier: Oh, okay. So it's the opposite to what I was thinking. All right.

Mr Sutherland: It's a direct quote.

Mr Crozier: It's a direct quote. So we can't change a direct quote.

The Chair: Those people that get laid off go into business.

Mr Crozier: I see. It's left for me to interpret whether it's 1,000 fewer or 1,000 more, eh? Okay, I'm just about finished.

Page 23, the paragraph that begins "Doob and Brooks," we go on to say in about the fourth line, "These included whether respondents felt they paid too much tax, whether the system of deductions was seen as fair," and then we go on to give an example about the respondents. I just wondered what the percentage was of respondents who gave a comment as to whether the system of deductions was seen as fair. Oh, excuse me, they said it was unfair. Thank you. I answered my own question.

Mr Gary Carr (Oakville South): I'm not going to spend a lot of time on this report, because we will be submitting a minority report, and I'll tell you why. Right off the bat, what we've called for, same as last time, is that there should be a freeze to deal with the whole problem. The problem we have with the underground economy is not one of enforcement; it's the fact that taxes are too high.

We heard yesterday from the Ministry of Finance people that they are looking at non-tax revenue, as they call it, so I don't suspect the NDP is going to support a call for a freeze of taxes and fees, because in fact we heard very clearly from the deputy minister that they are looking at it and you'll probably see it. So I don't expect us to get consensus, because I don't expect you to agree to something and then have the budget come out and have the opposite.

We're going to put a clear statement in there where again we disagree with the government, not necessarily with the members sitting here but certainly with the Minister of Finance. The problem we are facing is not a revenue problem; it is a spending problem. I don't think you can deal with one without the other. So we'll be calling for some comprehensive plans to deal with spending, which I don't think you will be able to agree with.

So quite frankly, in terms of writing it, as happens with all these reports, I'm not going to get into too much detail, because I think there are fundamental differences certainly between us and the government, maybe not so much, surprisingly enough, between us and the Liberals. I don't know. But I don't think there's going to be consensus on it, so I don't want to spend a whole lot of time going through this, because we will be submitting a minority report on what we think needs to be done to deal with it, unless of course the members agree with a couple of things I've said and are willing to support it in a broad sense. Then I'm prepared to work and go through the detail to get a consensus. Forgive me for being so cynical now, but I just don't see it happening.

Mr Sutherland: Let me say that I think the additional information that's been provided by the researcher is very good and completes the report. I don't really have any concerns or comments regarding that. I don't have a great deal of problems with the comments that have been made by Mr Phillips, including how to categorize the recommendations. I think generally that's fine.

I guess the one point that I would like to make is, and I don't know how we normally do this with reports, but I think there is one new development that you should be made aware of regarding the tobacco issue, and that is the fact that we now have a manufacturing facility on a native reserve. I think we all need to be aware -- not to say that it definitely will -- the potential implications of one manufacturing facility on a native reserve are not significant, but the fact that one is there means that there could be others. The potential impact from that is significant to the whole issue of tobacco policy, taxation, taxation policy.

If no one has any objections, I think that would be important to put into the report under the comments regarding tobacco just to make aware -- maybe it can go after the copycat section or just under the general comments. That has implications for the underground economy, particularly regarding tobacco.

There's a lot there. I'm not sure if that's clear enough to allow, but hopefully --

The Chair: Ms Campbell will have enough time to write that down?

Mr Sutherland: I'm sure she'll make it more concise than I've presented it.

The Chair: Do you want to ask further questions or clarification with regard to that, or anything that we've said so far?

Ms Elaine Campbell: Well -- are there further comments?

The Chair: Mr Phillips, did you have further comments to make?

Mr Phillips: I'm interested in Mr Carr's comments. I think one of the messages in the report is that people are concerned about taxes. I think we should be making a comment on holding the taxes and reducing them long term. I wouldn't mind a debate around the language that they would like to see in there because, as I mentioned, I have some comments on taxes and compliance and enforcement that I'd like to get into. Maybe we can find a way that at least we understand the language you'd like in there. I'd like to make sure we give the government an opportunity to say, "Listen, we can agree to that language" or "We can't agreed to it." It would be useful to see that.

The Chair: Whatever we might direct the government to do is another thing, but I think there's a real consensus among people and politicians that taxes have reached the limit. I don't think that's a question. It's maybe the advice we want to send to the provincial government with regard to that.

Mr Carr: My problem comes out of yesterday. I think everybody agrees about the taxes but, as you know, what we heard yesterday is we're talking about -- and the terms mean the same -- non-revenue sources. To me, we need a clear statement that there should be no increase in taxes, fees, non-revenue, bottom line, whatever you want to say. I think that's where we're going to run into the problem.

The other members can say no increase in taxes. The Minister of Finance has already said no net increase in taxes, so I think they can buy into that. What I'm saying is that it would include every fee and no new non-revenue tax generation, whatever that is. That's where I don't see the government agreeing, because you already heard the deputy minister saying: "We're looking at it. We're telling ministries, `You can keep 30% of it and you're going to see it in the next budget.'"

Forgive me; if this committee wants to put that report together in strong language, I think it would be terrific. Being through this, I don't think we're going to see the standing committee do something it knows the government won't do in the budget. I think -- and I may be wrong -- I heard very clearly the deputy saying that we are looking at all non-tax revenue. They may decide three weeks from now they won't do that. This report needs to be done and if we can have clear language -- but I don't want to just focus on taxes; it has to be fees and no increase in whatever we call that non-tax revenue. How we word it, I don't know. If we can get a clear statement then maybe we can get a consensus, but I don't think government members will agree to that.

Mr Sutherland: It seems like members of the committee want to have a discussion on that. There are still a few questions that I believe the researcher has left in the hands of the committee. Maybe we should go through those issues first and then if we want to come back to this discussion, do that --

Mr Carr: That's a good idea.

Mr Sutherland: -- but to get the other issues out of the way first.

The Chair: That sounds like good advice. However, a couple of additional members of the committee would like to make some comments.

Mr Norman W. Sterling (Carleton): Because I wasn't involved with the hearings, please just shut me off if I'm -- one of the problems I think we face in the language of tax evasion and tax avoidance is another popular term which particularly was used, I must say, by the governing party when they were in opposition, and continued to be used in Ottawa and in the press, and that is the whole concept of what a tax loophole is.

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I think the public have it in their minds that tax relief is a tax loophole. Many of these so-called loopholes were created intentionally by governments in order to drive a certain kind of philosophy or economic program that they might have wanted; for instance, capital depreciation. I remember a few years ago on films, I think you were allowed to write down the cost of a film over a two-year period, and that was done intentionally by our governments to encourage the film industry in Canada.

I wonder whether or not the committee might want to put in the whole concept of the loophole and this misconception, in my view, that is out there in the public that these things were created unintentionally by government.

Some tax relief has been created unintentionally by government, but if you read any people who deal with taxation, there is no logic or reason behind a lot of the rulings that occur with taxation on the basis of intent. In other words, someone rules in the taxation area on a particular thing, it's just on the wording. In a lot of cases people are taxed with no fairness and in a lot of cases people are let off tax without fairness. So these loopholes, so-called -- I don't know, I just think you might want to put something in there.

Can I say another thing in terms of this, having only briefly looked through the report? I see where you have provided some comparative information on tobacco and beverage alcohol taxes on page 19. What does the dark lining mean? Does that mean added or out?

Ms Campbell: Those were additions to the previous edition of the report. It's new information.

Mr Sterling: We have comparative tax rates in the United States on both alcohol and tobacco, do we?

Ms Campbell: There's nothing in there in any great detail.

Mr Sterling: I really think that would be helpful, for me anyway, in terms of pointing out the difference perhaps in tax per carton of cigarettes, or the difference in cost of some quantity, a litre or a bottle of alcohol or a case of beer, and maybe even a gallon of gasoline or a litre of gasoline. With those kinds of comparisons, people start to understand the attractiveness of the smuggling.

The other part that I would like to see written somewhere is that a lot of the smuggling, particularly in eastern Ontario, is related to the Akwesasne group in Cornwall. I think it would be very informative for us to know exactly what tax laws and limitations are placed on Indians in Ontario. In other words, what are they allowed to do? Are they allowed to buy cigarettes without tax for their own consumption? Are there limitations on this? That kind of thing. Is that included in your report?

Ms Campbell: Excuse me, I'm trying to find it here. I'm having difficulty finding that.

The Chair: While you're looking, I would just like to speak to the point you brought up about loopholes. We did have quite extensive conversations about evasion and avoidance. In fact, Mr Kwinter was the one who initiated that debate, I think, and he quite aptly explained the difference between and the two.

I think we all agreed that avoidance was taking advantage of what you have indicated would be loopholes and evasion is something that you would do that would be totally illegal. I think we agreed that was a pretty basic but good definition of the difference between the two. We didn't actually use the term "loopholes." I know people still use that term, but you're right, we haven't used it in our report.

Ms Campbell: Getting back to Mr Sterling's point, if you look at the bottom of page 11, the final paragraph, it makes reference to the presentations from the Ontario Provincial Police and the Ontario Flue-Cured Tobacco Growers' Marketing Board. The OPP did discuss the issue of first nations people and tax-free status. The third line says: "First nations people are allowed to purchase unlimited quantities of tax-free tobacco products in the United States. According to the OPP, these purchases are to remain on reserves and are for personal use only."

Mr Sterling: Can they not buy them for their own personal use from Canada as well?

Ms Campbell: You were thinking in the Canadian context, what the status here in Canada is.

Mr Sterling: Yes, as well.

Mr Jamison: There's a quota system on tobacco.

Mr Sterling: But I think the ministry of revenue also has some pretty accurate figures here on how much is in fact being purchased on these reserves. Would it not be prudent for us to ask for that?

The Chair: In legal channels they do, but when you go outside the legal parameters of legal channels --

Mr Sterling: But even legal channels, as I understand it, it breaks down to every person on the reserves smoking something like two or three cartons a day.

The Chair: That's right, it does. However, once you go beyond the legal aspect and the documentation that would be made by the Ministry of Finance with regard to how much tobacco is being used by the native community, then there's the other side of that, the underground economy aspect of it, and they can use all they want, according to what we heard.

Mr Sterling: We're really faced with a problem here in terms of enforcing the law on the reserve. Should we not really face that? Should we not really get to the bottom of this problem? If that is a problem, then let's --

The Chair: I guess it depends on how extensively we want to report on different aspects of the underground economy. We're trying to get a report together here that's basically informative yet concise and we've been through much of what you're raising again.

However, I do have quite an extensive list here. I want to go to Mr Lessard next.

Mr Wayne Lessard (Windsor-Walkerville): I think we're talking about finalizing a report that Mr Carr has indicated the Tories aren't going to be signing at this point.

Mr Carr: If you agree with what I want, you can have it. Tell me if you agree, yes or no.

Mr Lessard: There are some parts of the things that you said that I agree with --

Mr Carr: Yes or no?

Mr Lessard: -- and I'll indicate to them that I don't think that you'll find much disagreement to recommend to the Treasurer that there will be no net increase in taxation. But we spent millions of dollars on a Fair Tax Commission to investigate ways to make the system more fair, and to make a recommendation to the Treasurer that would make it difficult for him to make adjustments to the tax system would really seem incongruous.

Now as far as government fees and licences and registrations and payments for services rendered by the government are concerned, I wasn't here for all of the hearings, but I don't know if anybody came and said these sorts of fees are directly encouraging people to become involved in the underground economy and if you freeze those or reduce them or eliminate them, it would cause people to operate above ground instead of underground.

The Tories, if anybody, I would think would be indicating that fees for government services or for licences and registrations should really reflect the cost of providing that service. If we are going to review those types of services provided by government and find that the costs that we're charging don't cover the services we're providing, I think Mr Carr would be asking us to adjust those fees upward to cover those services. To make a recommendation that we shouldn't have any adjustments in those types of fees just wouldn't make any sense.

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Mr Carr: There's no sense arguing this. Obviously, we disagree on that. You heard the presentation saying even if it's WCB, people realize it's the bottom line of what they're paying. I know the line, the way it's being sold by the bureaucrats and everybody else, is that user fees pay. Nothing else gets reduced. You know we're not going to agree to that. You know you can't agree to that. Let's save the debate for the Legislature.

The other point I want to make and the thing that we want to put very clearly in there somewhere, which I don't think you'll agree on -- I don't know if Elaine would tell us whether it would be in the definitions or whatever -- is that I would like a very clear statement that the underground economy is nothing but a tax revolt, so that people know very clearly what it is. I don't want to get into the debate that was on yesterday with Mr Manning, whether we're encouraging one or not. The fact of the matter is that on the underground economy I think we need to have a very clear statement in there, under "Definitions" or whatever, that the reason for the underground economy is people are revolting because of the high levels of taxation.

I would even go so far as to say -- not to be political with it; we can accuse governments at all levels and all political stripes of doing it, because that is the reality -- the fact of the matter is there needs to be a clear statement, if the report is going to mean anything to the average public out there, that the reason for the underground economy is it is a tax revolt and people are fed up and they'll do anything to avoid paying taxes, whether it's smuggling cigarettes -- out in the open last night you could see people flaunting it, walking down the streets waving them in the air in front of the cameras. We have a tax revolt because of the high taxes in this province and there needs to be a clear statement.

If you want to put that in there, terrific, but -- I've been through these committees before -- let's save the debate for the Legislature. If you can agree on this stuff, if you know a couple of ideas, great. I'm not going to convince you; you're not going to convince me. Let's just get on with it and we'll do our minority report, which ironically probably nobody will listen to anyway because they didn't in our last one in the pre-budget last year, so I'm under no illusions that we're going to change you. We just want to be very clear on where we stand. If we can get an agreement on those issues as I outlined them, terrific; if not, let's move on and we'll go through the report and try to get the part that we can agree on to be fairly general. I just want you to know where we're coming from, the areas of concern, and I don't see you changing.

The Chair: The underground economy, of course, is not a new phenomenon. I think that was one thing that we certainly were made aware of.

Mr Sutherland: I just wanted to pick up in terms of Mr Sterling's comments, and you mentioned about how we had defined it. We may want to put in the comment about fair taxation -- I think the debate about loopholes is, do those tax relief measures still serve the purpose they were intended to? Maybe some reference to a debate about that in terms of people understanding the tax system and what is a fair tax system may be relevant. He's quite right that some of them are for economic programs, some of them were to create jobs. I'm not sure the evaluation of all those so-called tax relief measures or loopholes has been done to justify which ones need to be there and which ones don't.

Just regarding the native issue too, there is one recommendation in the list of recommendations encouraging the government to negotiate with first nation reserves on the question of compliance, enforcement and -- I'm not sure if we used the word -- collection, but on those issues. So we have made some reference that this issue needs to be put forward, but I think your point about what the situation here is in Ontario and Canada regarding natives and their tax responsibilities or tax exemptions is probably good information to have in the report for people to understand.

Mr Phillips: I think we should try to put something in on the tax area. I'd like to try something on the group to see if we can get a consensus on it. I would have it, in the recommendations, called "tax level" as opposed to "fair taxation," and I would say: "It is clear that a major part of the problem is the reaction to taxes. One of the solutions will be to assure the public that the direct and indirect taxes will in the short term be at least not increased and over the long term that the tax and near-tax burden will be reduced."

Mr Sutherland: What do you mean by "indirect taxes"?

Mr Carr: Non-tax revenue -- fees, licences.

Mr Phillips: You see, if by fees what you mean is another way of taxing, then I think we do have a problem. If by fees you're saying, "Listen, this is another way of taxing and so we're going to charge people directly for things they used to get paid for elsewhere," then we are increasing the tax or near-tax burden on people. If they used to get something free and now they pay for it, and they have to have it, that's not a fee; that's a tax.

Mr Sutherland: Okay. But the question on some of those things is whether they have to have it. I understand the comment that was made about some of the fees on licences. They hadn't gone up in 20 years in some cases, and in other cases they were extremely low. So they go from $10 to $15 and the sense is, yes, it does generate more revenue for the government. But I'm not quite convinced that type of increase is leading to the underground economy. I would suggest that certainly the discussion around taxation in general is an issue, but I'm not convinced that non-tax revenue that's increasing for some of the registrations, licences, are the reasons people are going into the underground economy.

Mr Phillips: I think we just have a fundamental difference of opinion. I think governments now think they can pull the wool over the public's eyes by saying, "We're not increasing taxes; we're increasing fees." I think toll roads are a tax. They're a neat tax, but they're a tax.

Mr Sutherland: I would disagree with you about pulling the wool over the eyes. When people have got to pay it, they understand that they're paying it, so I don't see how you're pulling the wool over the eyes. In many cases, those fees and licences are optional things. There are a few that are mandatory, I will acknowledge that, but I would say a lot more of them are optional types of things and people may make the decision as to whether, if they're upset about the cost, they can engage in a different type of activity.

Mr Phillips: I move that, by the way, those words, just so we're debating something.

The Chair: Could you just repeat that again for the committee members?

Mr Phillips: "Tax levels: It is clear that a major part of the problem is the reaction to taxes. One of the solutions will be to assure the public that the direct and indirect taxes will, in the short-term be at least not increased and over the long term, the tax and near-tax burden will be reduced."

The Chair: Isn't one of the concerns that people have as well the value they're getting for the tax money they're paying? Isn't that part of the problem?

Mr Phillips: Sure, but isn't that government accountability? Don't we have recommendations in other areas on that?

Mr Sutherland: But I think the question that's being raised is, can you look at them totally separately or is there some linkage? I would say there is some linkage. I mean, you've been here as long as I have; you know the different groups come in and say the public would support more increased taxes if they were going to pay more for x, whether that be health care or education types of things. The groups come in with the surveys. I think the sense, the reflection of those surveys, depending on what the methodology is, is that people, if they get a sense that they're going to get more service or there's going to be more accessibility to that service, are willing to pay more taxes. So then the question is, how much can you separate the taxation from what they feel they're getting in the value for these public services?

Mr Phillips: If you want my reaction -- I mean, maybe it's easier in opposition to make these motions than it is in the government, and I accept that -- I actually think that we're at the end of the road when people believe us when we say we're going to do something with increased taxes. I think virtually every single individual or business has been living with very little increase in revenue, if any, and that we get our revenue from taxes and fees. Business gets its revenue from selling goods, and they've gone through several years where they couldn't take their price up and so they've had to find a way to kind of cut their cloth. As I say, if we don't understand the mood, what I heard on the underground economy was indeed a tax revolt -- not by everybody but by a significant number and a growing number.

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I think they have difficulty in believing governments are going to, in the short term, reduce taxes. But they want a statement that governments understand we're at the wall and that in the short term we're going to cut our cloth to handle it with no increase in the tax. I know we can say here that fees aren't a tax, but if you're running a business and you previously weren't paying whatever it is and now you're paying it, that's a tax on you.

It's like yesterday we heard that the clean water organization's going to spend a bundle of money. No taxes are involved but people's water rates are going to go up three times. They're going to go from $250 a house to $700 a house. If we don't think people will interpret that as a tax and they'll see it as a fee, if we think they'll think it's a nice fee to pay for services, we're kidding ourselves. Logically, you can say: Listen, pay for water. That all makes sense in an environmental sense. But if you're a home owner and you have lived in a community that has funded its sewer and water in a way and it's suddenly changed, you'll say, "That's a $500 tax increase on my property tax."

Mr Lessard: You can't buy water in the underground economy.

The Chair: I'd just like to pose this question, if I may. Isn't one of the problems the fact that people have been receiving services at a rate that is less than probably what they should have paid in the past? Isn't there some merit --

Mr Phillips: But this is not the underground economy. I think what people are responding to and what I heard from a lot of them was: "I am so sick of taxes. I will do whatever I can to avoid them/evade them." Not everybody, but a significant number.

The Chair: I'd just like to pose this too. Isn't it human nature to purchase your commodities at the lowest possible price? Irrespective of taxes or anything else, you just want --

Mr Sterling: That's the first NDP guy I've ever heard say that.

Mr Carr: He's cheap.

Mr Sterling: I'm amazed. You must come from eastern Ontario.

The Chair: I must, Norm. I must.

Mr Jamison: A simplistic point of view is one that's been put forward by the third party. It doesn't take into account some of the -- it is very simplistic.

If I might reference to questions, the numbers of questions that evolve around government spending in the House, it seems that every second question is, "Why are you cutting back here and why are you cutting back there?" Let's not play this for what it's worth.

Mr Carr: Not from us.

Mr Sterling: Not from us.

Mr Jamison: Pardon me, Mr Carr? It's what? What did you say it was?

Anyway, that seems to be rather the case. Rather than look at the simplistic point of view, it also deals with the recessional period that we've gone through and the anxiety of people going through a lengthy recession, one that has been called the worst in 50 years. People's mindset during a period of time like that changes somewhat. We've heard and read very clearly about the lack of security that people feel within their employment. That in itself adds to that.

When you take a simplistic point of view, you certainly don't add in the human mix and the human factors that really contribute to the human mindset that given all of that uncertainty, as an average person, I'm going to find the ways and the means to spend less. That has a direct effect, therefore, on the underground economy and the size of the underground economy.

I simply don't buy into the simplistic point of view that it's taxes. Taxes are very important. The message, and I think there's a consensus, is that, again in people's minds, whether taxes have hit the wall or not, that is the perception. Taxes are at a level where people are saying "major problem."

But to simply say, as the third party would here, that that is the end-all and be-all to the problem, I believe there are other factors that weigh into that. I just thought I should put that clearly out there to the committee, that that very simplistic point of view is not one that's well rounded whatsoever.

Mr Sutherland: If we want to make some reference to the fact that there's concern about taxation levels and that governments need to keep that in mind in terms of how they establish tax rates and tax policies, as a general comment I think most of us would agree with that. My sense is, and I would concur with Mr Jamison, that we can make that as a statement, but in terms of looking at what the background is, I would agree with Mr Jamison. I wouldn't accept the analysis put forward by the third party that if you simply reduce taxes, automatically this whole problem's going to be solved. We know, as other members have stated, the underground economy has been around for a long, long time. If we want to make a statement to that effect, I don't think many of us would have a problem.

Mr Sterling: I think that's not true. When you compare the level of the underground economy now with what it was even five years ago, to say it's been around a long time is misleading, actually. I think there has been an underground economy, but it might have been -- I'm just using figures out of the air -- 2% before and now I suspect it's 25%. To say it's been around for a long time -- I think it's a recent phenomenon.

Mr Sutherland: The committee has heard it has certainly increased, and we've all accepted that. That's certainly noted in the report, that the growth is there. But it has clearly been there.

The Chair: Before we go to Ms Campbell to review what we've said so far, I just want to remind everybody that should we complete this report today, and it would appear that we may not, any dissenting opinions should be delivered to the clerk tomorrow.

Mr Sterling: No way.

The Chair: If this report cannot be finalized, then we will deal with it in subcommittee on February 17, and dissenting reports should be in before that time.

Mr Carr: I thought there was a little bit more time. When we had discussions, I thought it was by the subcommittee meeting we had the minority reports ready, didn't we? Because I think we talked and I think it was Gerry who said we need a little bit more time.

The Chair: Yes. That's if we don't finish it today.

Mr Sutherland: Sorry. I thought that was for the pre-budget report, that in terms of what we had --

The Chair: Yes, we're dealing with two reports here so it does get a little confusing. The underground economy is what we're dealing with right now.

Mr Carr: But we would need a little more time than by tomorrow for a minority report.

The Chair: On the underground economy.

Mr Carr: Yes.

Mr Sterling: We didn't know whether we were going to agree with it today or not. I thought Kimble was going to agree.

Interjections.

Mr Sutherland: Would by Monday be acceptable?

Mr Carr: You know our points. It's easy enough to do. If you want to agree, we could --

Ms Campbell: That's fine.

The Chair: Okay. Monday would be acceptable.

Mr Sutherland: So by Monday morning.

The Chair: Sure.

Mr Carr: The other one just like it, Chair: The pre-budget was the meeting on February 17 or whatever?

The Chair: Yes. By subcommittee on February 17.

Mr Carr: Okay.

The Chair: We should probably review what we've done or what we've recommended so far to the research officer. Ms Campbell, if you would just take us through what we've suggested to you.

Ms Campbell: I've attempted to place the members' comments in some sort of order as it relates to the order found in the paper.

There were some comments made about inserting statements related to the public mood with regard to taxation levels. I was wondering if the committee would be agreeable to inserting a sentence in the second paragraph of the first page under "Introduction," something along the lines of, "As one of the background reasons for entering into the study of the underground economy, the committee had a sense that there was a growing public perception that tax burdens were growing" or "tax levels were growing and increasingly seen as a burden."

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The Chair: There seems to be no opposition to that.

Mr Sutherland: Can I just get the wording? Are you saying, "perception"? Are you going to use the term "perception"? Okay.

Ms Campbell: On page 3, the first paragraph, Mr Crozier asked that the committee perhaps insert a reference to home renovations among the self-performed services that are referred to in the second sentence.

The Chair: It would appear that there's no opposition to that.

Ms Campbell: Thirdly, Mr Phillips was interested in more information on the size of the underground economy in terms of lost revenue. There are some references on page 13, I think it is. There's a paragraph at the bottom of that page, "Since its appearance before the committee in October 1993, the Ministry" -- of Finance -- "has been able to calculate specific revenue impacts." Would the committee be interested in moving that paragraph perhaps to the beginning of the section on the size of the underground economy, taking it out of "Reasons for Concern"?

Mr Sutherland: I would suggest leaving it there, only because obviously we know some of it's attributed to the underground economy and some of it is to the shifting pattern. Since we don't have a way of breaking it down to both I would suggest leaving it where it is.

Mr Phillips: To me, if we're agreed that the underground economy is 7% to 10% of the economy, that we'll never, even under perfect conditions, eliminate the underground economy, but if there were no underground economy the revenues of the province would be $3 billion to $4 billion higher than they are. I think that puts an order of magnitude on it, so at least we know how much energy one should be expending in trying to deal with it.

I would prefer to have a paragraph in there that says that in the end it looks like, taking into account all of the witnesses, that the underground economy is at least in the 7% to 10% range. If that is the case, the revenue loss to the province is in the $3-billion to $4-billion range, and while we understand that the underground economy can never be completely eliminated, this is the order of magnitude of revenue that the province doesn't get as a result of the underground economy.

Mr Sutherland: I'm just looking at page 6 where Professor Vaillancourt puts it "at the lower end, 7.5%, which represented $50 billion to $55 billion in 1992" towards the economy. If we added in a sentence there, what the potential tax impact would be, would that be fine?

Mr Phillips: I suppose it's second best.

Ms Campbell: I think it's important to make clear to the members that the numbers and percentages cited in this section are national GDP as opposed to provincial.

Mr Sutherland: Okay.

Mr Jim Wiseman (Durham West): So you have to take about 45% of your number to really calculate what the impact is on Ontario.

Mr Phillips: No, no. Provincial revenues are running around $40 billion; 7% of $40 billion, to me, is $2.8 billion.

Mr Wiseman: You can't do it that way. That math doesn't add up.

Mr Phillips: Why?

Mr Wiseman: Because if you take GDP then you have to take how much is going to be missing and then you have to take what percentage of that would be paid in taxes, so you can't just take it right off the top of our revenues.

Mr Phillips: You give me a better way of doing it.

Mr Wiseman: Do it the way I just said. It works out to be about $1.4 billion.

Mr Phillips: The government says it's gone up that much just in three taxes in the last few years. It doesn't make sense to me.

Mr Sutherland: What you're asking for, though, is under the discussion on the size of the underground economy, you want some reference made to the impact it has on government revenue. Yes?

Mr Phillips: The government itself says that's the problem.

Mr Sutherland: I don't think there's a problem putting that reference in there. Obviously, it has an impact on government revenue. Then we go on for more detail later on on that.

Mr Carr: Can't we write up what we heard, even if the government wants to be conservative with it, what Mr Brandt said? I'm asking the researcher now whether the numbers could be added up.

Mr Wiseman: I just want to be accurate.

The Chair: We won't be accurate ever in trying to establish what the underground economy is and how it affects taxes.

Mr Carr: But even if we're low and conservative in our estimates, they are estimates.

The Chair: I think clearly if it was indicated that it was an estimate based on what the committee had heard and certainly we could put some percentage figures in there.

Mr Carr: We heard numbers from a variety of groups.

The Chair: We could also put down what we expect the loss in revenues for the province of Ontario might be, so long as we indicate that this is not absolute and it's not accurate but based on information we've received. Wouldn't that be reasonable?

Mr Carr: And attribute it to Andy Brandt or whomever.

The Chair: We would attribute it to all the people that we heard before the committee I think.

Mr Phillips: What we heard, and on page 13, what the government figures show us, was that tobacco revenues are down by roughly $200 million, not necessarily all smuggling, that LCBO, according to Brandt, was badly hit, more than the $90 million provincial sales tax, let's say it's $400 million. Then we were told that the income tax is the biggest loss, due to the underground economy. This is just changes in two years. The underground economy didn't start two years ago, so you have to say there was a base before. Others would say, "Let's imagine the base three years ago and let's imagine it's doubled in the last three years." You can see you can get to $1.5 billion just in terms of the increase in the last two to three years. That's where I get my $3-billion number. If somebody's got a better estimate, great, I'd love to see it.

Mr Sutherland: It's very hard coming up with the exact figure. The decline in PIT and sales tax, I think you can more accurately predict on the tobacco and alcohol where things are at in looking at declining patterns in consumption in those two and then figuring it out.

The PIT and sales tax: It's no doubt that there's a portion attributed to that. The other problem of course we run into is the fact that because of the other factors going in and the economy that, yes, we have growth going on, but the amount of income tax we're even getting from that growth is less because of restructuring going on, that much of the growth has come from productivity gains rather than increases in employment, which obviously has an impact on personal income tax and would have some impact on sales tax.

I have no problem putting a reference in; it's figuring out what you want to do. If you want to take the 7.5% of what that is -- I know it's on a federal scale -- and if you took a proportion of what that may mean on the Ontario scale and make that as an estimate --

Mr Phillips: I much prefer the Ministry of Finance officials give it, but they won't. If you remember the last thing we said to them, "Can you give us an estimate of how much revenue we're losing?" They said, "Yes, we will try and do that," and we got those three numbers from them. So in the absence of the experts giving us some estimates, we're left to our own little devices here.

The Chair: I guess that would just indicate again though how difficult it is to come up with accurate measures of what's lost. I would also like to add that to assume that revenue losses or shortfalls, and let's just talk about beverage alcohol, if it's assumed that all that revenue shortfall has gone to the underground economy, I would believe that to be wrong because often during difficult times people cut back on certain things. Maybe they're just not purchasing as much of that particular commodity. You have to take that into consideration. So to say that shortfall has entirely gone to the underground economy wouldn't necessarily be accurate. Wouldn't you agree?

Mr Phillips: Well, I'm trying to be helpful here.

The Chair: The committee recognizes that, as does the Chair.

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Mr Phillips: What I heard from the ministry officials was that this is a big problem and growing: "The biggest problem is in income tax. We'll try and give you an estimate." On the tobacco one, the number we've got here, according to some people, may be actually less than what's really happened because -- so, if anybody's got a better number, let's just put it in.

The Chair: As we try to arrive at and establish numbers I guess we certainly have to give a range, because to put one number down would certainly be inaccurate. Even maybe to give a range wouldn't necessarily indicate, in any absolute terms, any accuracy, but it certainly would give an idea or a sense of what the problem is.

Ms Christel Haeck (St Catharines-Brock): I haven't been part of these discussions before and I feel a little bit awkward wading in, but I live in a border community and have some sense of what the cross-border economy is; not to suggest that I have an in-depth knowledge, but obviously people do talk to me about some of these things.

This is like trying to pin jelly to the wall, because obviously you don't have any accurate way of determining this and even your ranges may be totally off. I think one of the concerns I have that is reflected in the economy right now is that patterns of use have changed dramatically.

I know, from just even the social events that I go to, people are not drinking hard alcohol, hard liquor, in the way they used to. Wine and other spirits are definitely taking on a larger role in any social event. So when you say that there's been a drop in sales within the liquor control board, I think you have to take that into account. This is true across all of North America.

So I really find it very odd that we're going to end up trying to put some firm number on something where we don't really have a handle on it. I would totally disavow any credibility in this. Anybody who asked me, "Well, you sat on this committee," I'd say: "Yes, and I totally disagreed with some of the comments made because, hey, who's got a handle on it? The experts don't."

Everybody's making -- sorry, I'll use my name -- everybody assumes they have a crystal ball and has some handle on this. They don't. It's in the mists somewhere. We'd all be making huge sums of money if we could actually nail it down firmly. So I think that to try to say a range or something, I think that's as much a guess as anything else that you're talking about with the underground economy. You don't know.

Mr Phillips: I think we got the answer, so we'll move on.

Ms Campbell: Could I clarify what that answer is, that we're not going to add anything --

Mr Phillips: I don't think there's agreement on putting it in, so we'll do something different.

Ms Campbell: The fourth point was raised by Mr Sutherland concerning the establishment of a cigarette manufacturing facility. I think you were probably referring to the news about the Six Nations?

Mr Sutherland: Yes, the one at Six Nations.

Ms Campbell: Would you like that to be included as a footnote to the text or to have a line inserted?

Mr Sutherland: I think it probably should go right into the text because what it demonstrates is that the whole issue of tobacco smuggling -- I guess I shouldn't say that. But just say that the issue of tobacco and the government being able to collect taxes is changing quickly and dramatically, and I think that's why it needs to go into the text.

I would suggest that the best place it may go is just after we talk about copycat cigarettes. Maybe we should put a line or just a separate section that since the committee held its hearings there has been a cigarette manufacturing facility established on the reserve and it's up and in production; then just some reference that this could further have an impact on tobacco revenues for the government.

Mr Phillips: That's useful. What page is that again?

Mr Sutherland: I would say page 11, just under the new paragraph that we had on the copycat cigarettes.

Ms Campbell: The next point: Mr Phillips, in his opening remarks, asked that there be more said on the tobacco issue in the section that begins on page 10. I was wondering if I could get a bit more in the way of direction.

Mr Phillips: I don't know what the other members' sense is but I think this issue's getting even more serious than it was when we heard the presentations. My own view is that there's going to be quite a concerted effort required quickly to deal with it. I think we should be highlighting how serious it is even more than we have here, and it's going to be a priority to deal with it.

I go back to my own sense, that I think the government should be encouraged to put together a plan quickly. I'm not sure that plan should include tax reductions but I think they're going to have to put together a plan that deals with the problem and then assess it very quickly. Because if there isn't significant progress made on it quickly, I think we're going to have to look for more significant action.

Mr Jamison: Mr Phillips, just a question on that: Is that recognizing the sharing of jurisdiction between the federal government and the provincial government? The various enforcement measures that might be considered would automatically, I think, include a joint effort. I know there's a joint task force on that at this point.

Again, this issue is evolving at such a great speed that it's going to have to be dealt with in various ways.

Mr Phillips: I assume all the players are involved.

Mr Wiseman: I don't see in here, either, the comment made by the small -- I can't remember the name, but they were saying something to the effect that they were concerned that if you're too successful at clamping down on cigarette smuggling the next thing would be that the local stores would become the targets of even more crime, where they would steal the cigarettes because the underground network is so pervasive now that the demand for cheap cigarettes will continue and that the only way to get them at a price where the underground could still make a profit would be to steal them.

Did we want to flag any kind of comments like that one, in this section on the tobacco?

Ms Campbell: This section on tobacco, on pages 10 and 11, is with respect to the size of the underground economy. Then there's a reference further on to the actual taxes. I just wanted to clarify.

Mr Wiseman: That may be the better place for that.

Mr Jamison: If I might just add to that: I believe that when the tobacco board in the pre-budget hearings made its case it indicated, through its own studies, that if things continued on the way they are now, and there are signs that they're going to get worse with the manufacturing situation, I believe their graph indicated that the size of the contraband issue would surpass legal sales by mid-1996.

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Mr Sutherland: Two things. Regarding Mr Wiseman's comments, maybe some reference could be put in under the social concerns. We may want to put it in as, you know, there have been more variety store, convenience store robberies specifically aimed at just cigarettes type of thing there.

Regarding Mr Phillips' comments, and I know we've got to organize here, if we feel the tobacco situation is a significant problem, maybe we should just reorganize the section on key economic sectors and put tobacco first, before the other ones, giving emphasis to the impact, because I know our views have kind of changed. Initially we wanted to say that tobacco is one part of it, and the smuggling, but there are much broader areas of concern in the underground economy. As well as adding on to the initial comments, that may help give that more focus.

Ms Campbell: Could I also make another comment? Since this particular section is dealing with what the committee heard in terms of the size of the underground economy, would it perhaps be more appropriate to expand on developments since the committee held its hearings in the section on recommendations at the end? There do seem to be a number of recommendations that relate to tobacco. Would it perhaps be more appropriate to comment on what I sense is a feeling that there's some urgency involved with the issue of tobacco? Would it perhaps be best to emphasize that in the recommendations section?

Mr Sutherland: I think that might be a good approach. We kind of generalized our recommendations in what we had, but maybe we need a more specific recommendation regarding the tobacco and some of Mr Phillips' comments that we believe the government needs to have a plan to deal with that in cooperation with the other levels of jurisdiction.

Mr Phillips: That's fine. My only hesitation on moving the tobacco one up is that I view the underground economy as a fairly broadly based, significant issue. Then, within it, tobacco has some of the elements of it and then some different elements. I personally would prefer that the report doesn't get seen as a tobacco report but gets seen as trying to deal with a -- if you talk to many people in some of the European countries, they will say: "Listen, the people of that country are rich. The country's poor because the people have very successfully developed a black market." My own view is that we're not there but we are heading that way if we don't all appreciate it. Anyway, that's my reluctance of moving it up, but I think it is that tobacco happens to have percolated to emergency --

Mr Sutherland: Would you agree then with Ms Campbell's recommendation that we put into "Recommendations" a more specific one regarding that?

Mr Phillips: Yes. That's fine.

Ms Campbell: Would it perhaps be appropriate to move Mr Sutherland's comments concerning the manufacturing establishment to the recommendations section as well?

Mr Sutherland: I would suggest we leave it in the main body, because I'm not sure any of us have any recommendations on what to do with that one at this stage. I think it needs to be noted that it is in the area of future concern.

Ms Campbell: Another issue raised by Mr Sterling: He had asked if it might be possible to get more information on the tax status of native people here in Canada with respect to tobacco and alcohol products. Where does the committee see inserting that information, in the section on tobacco under size of the underground economy or in the section on tobacco and beverage alcohol taxes, under contributing factors?

Mr Sutherland: I would suggest that you maybe put it on the top of page 12, just after talking about the American side, make reference to what the status is on the Canadian side.

Mr Sterling: An alternative might be on page 19, where you're talking about tobacco and beverage alcohol taxes.

Mr Sutherland: I guess the only reason I put it back there is because you've already made reference to the issue of the status, certainly from the American side. I may be wrong. I don't believe we make any reference on page 19 regarding the tax status of the natives. If we want to add in a separate section on 19, I suppose you could do that.

The Chair: Is there any clear indication of where that should go?

Mrs Irene Mathyssen (Middlesex): I think Mr Sutherland's right. I think it flows in at the top of page 12 best.

The Chair: Mr Sterling?

Mr Sterling: I don't care, as long as the information's in there.

Ms Campbell: Perhaps it could be added as a footnote, as opposed to a few lines.

Mr Sutherland: Sure.

Mr Sterling: The only reason I said 19 was that it seemed if you have all the information about various tax statuses in one area, then it's not assigning all the blame for smuggling to one group or another group. That's why I said 19 rather than putting it in the other area. But you can argue it either way, I guess.

Ms Campbell: The next point concerned the issue of security. Mr Phillips referred to the section on page 14 under "Social." That would be the fourth paragraph. Mr Wiseman also made reference to the security issue. The opening lines are:

"Public safety was a concern for a number of witnesses. Members heard of growing crime networks and threats of theft and violence. Representatives from the OPP felt that the penalties for smuggling were minor given the potential for financial gain involved."

Does the committee feel there's more that has to be added to that section?

Mr Phillips: I'm probably all right with it. I guess we'll all interpret this in our own way, and I think that is particularly for some areas of the province a big concern. I do think we are seeing that there are networks set up now, business networks to market this stuff that are getting very well established and actually will be pretty disrupted if --

Mr Sutherland: I wouldn't mind if we could just elaborate on the theft standpoint. My sense would be that someone reading this and some of the past references to the Akwesasne area would suggest, "Oh yes, the Cornwall area problem that gained a lot of headlines," but I think when we look at the issue of the thefts, I've certainly heard from my own variety store owners in my own riding and I think most of us would have. Somehow perhaps we can elaborate on that so people get an understanding that that's a province-wide problem. Maybe it's implied, and maybe it's just my interpretation of it, but I think it's important that at least that's understood. Maybe the violence aspect in terms of the shootings is only directly related to Cornwall but the increase in the theft problem I think is a province-wide issue.

Ms Campbell: There are different levels of violence involved here. Perhaps some reference could be made to that.

Mr Sutherland: Sure.

Ms Campbell: This is a point of clarification. Mr Sterling introduced some discussion on the concept of tax loopholes and wanted comparisons of tobacco and alcohol taxes in the United States with those in Ontario in the section on page 19 under tobacco and beverage alcohol taxes. You asked if it might be possible to get something more in the way of detailed comparative information. There is some reference as provided by witnesses to the differences in prices and taxes between Ontario and the United States, but is it the committee's wish to have more detail?

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Mr Sterling: Part of the debate on tobacco taxes is that some people are saying that in order to stop the smuggling we've got to lower tobacco taxes. I think it would be important in terms of having the knowledge for that debate to know how much New York state, for instance, is putting on a carton of cigarettes. How much of the tobacco tax in Ontario is Ontario tax and how much is federal tax? How much of the responsibility lies on this government and how much lies on the federal government in terms of the whole taxation issue?

Ms Campbell: There's a paragraph on page 20, actually two paragraphs, starting in the middle. The Ministry of Finance did provide some comparative information on other provincial tax jurisdictions, and it did provide a breakdown on the tax components on the price of a carton of 200 cigarettes: "The total cost was approximately $47.42. The federal share (GST and excise tax and duty) was 39.5%." So there is some in there.

Mr Sterling: I don't want to belabour it. I'm sorry, and as I say, I'm coming late to the discussion. I quite frankly think that the information on page 20 would be better put in a table of some sort rather than in written form, so that people can quickly look and find out on some comparative basis, whatever basis is best for the members of the committee.

Two figures are important to me. Number one is the cost of a carton of cigarettes, because that is what is compelling the underground economy, if there is a big difference. What effect can the province have on that cost and what effect can the federal government have on the cost of that carton?

The other figure that I guess is as important to me is the revenue side for the government. How much revenue is this providing to the government? I believe it's somewhere around $700 million or $800 million a year. If the government chops the cost by 50%, I assume it's going to lose $350 million or whatever. I think that's important to know as well.

I just think tables are easier for me in terms of comparative information, to read it off, than the narrative form that you have it in.

Ms Campbell: The Ministry of Finance, when it made its presentation to the committee in late October of last year, did include some comparative tables for Ontario with other provinces, as opposed to jurisdictions in the United States.

Mr Sterling: But I think other provinces are irrelevant in this. We're talking about an American problem, are we not?

Ms Campbell: So the committee would like a table showing --

Mr Sterling: I'm just saying what I would like. As I say, I don't know whether the other people want that or not.

Mr Carr: I like that too.

Mr Sutherland: If you want to put the table in that the Ministry of Finance presented, I think that's fine. There are some references to the cost of Canadian exported cigarettes going across, and the sense that we've been presented is that that's the major problem to this date, those cigarettes going across and then coming back are the real issue, not so much American cigarettes and the price of American cigarettes coming in here. I don't think we heard much information regarding them. So if you want to put that in, that's fine. It does make reference to what the export of cigarettes would sell for in New York state.

The Chair: If I may, you do make a good point, Mr Sutherland. In our examination of the underground economy and with regard to tobacco, the comparative prices weren't the comparisons between American cigarettes in the United States and Canadian cigarettes; it was the situation or circumstance of our tobacco and tobacco products going across and coming back into Canada. That was the most important aspect of the whole smuggling aspect of tobacco.

I'm in the hands of the committee, but I think at this point in time to bring in this, which would be indeed new information, before the committee right now as we draft our final report -- I don't know if it would be appropriate. I understand that this would be certainly interesting information for people as a comparative of what tobacco costs were. What would the committee like? Ms Campbell would like to know.

Mr Sterling: I don't see any great drive for it, so I think we should just drop it.

The Chair: Okay.

Ms Campbell: My next series of questions revolves around the recommendations section. I was wondering if the committee could respond to some questions found on page 28. In its earlier discussions of what would go in this report, the members went through the recommendations that had been made by the various witnesses. There were three references that were put aside. They all appear on page 28.

The second one dealt with the identification of smuggling as an enterprise crime under the Criminal Code. The members received a memo two weeks ago that provided a definition of the term "enterprise crime." Another memo was provided to the committee today, which is a follow-up on the definition of "enterprise crime." Smuggling has been considered an enterprise crime since the proclamation of federal Bill C-102 last June, so this recommendation is somewhat redundant.

The next one deals with the issue of markings on cigarette packages. There was considerable discussion in committee about the issue of packaging and marking. Members did have some concerns that this was perhaps a federal issue.

The committee has been provided with a memo dated January 25, "Packaging and marking of tobacco products." Contact was made with Health and Welfare Canada, as well as the provincial Ministry of Heath, and it was learned, as is set out in the memo, that the federal government sets minimum standards for packaging and marking of tobacco products. If a province wishes to add on to those minimum standards, it's quite within its jurisdiction to do that. Does the committee wish to make a recommendation concerning marking and packaging?

Mr Sutherland: I would suggest that we not accept this recommendation, only because, if I remember correctly, when the testimony came forward, they were talking about specific markings or stickers or labels that are to go right on the package that would indicate that they're cigarettes that don't have to have tax paid on them because they're bound for export. I would suggest again that any marking of that nature is a federal jurisdiction.

I certainly accept what you put forward in terms of minimum standards for other things, but I think anything that deals with export clearly comes under federal jurisdiction. If I remember correctly, that was the main intent of trying to do these stamp markings that I believe had been used in one of the European countries.

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Mr Phillips: I don't have any trouble supporting recommendation 1. As tough as that's worded, it probably is helpful. The enterprise crime is a kind of thing I can barely understand and it's not central to my thinking. I don't have a problem with Mr Sutherland's explanation on the third one. I don't have any trouble accepting the first recommendation. It would be part of the tax level proposal wording that I've suggested.

Mr Carr: I'm just going to comment. I agree, the first one is excellent and should be included somewhere.

Mr Lessard: With respect to the enterprise crime, I think it might be helpful if on page 24 or 25 under "Corrective Initiatives in Place" there was some statement that smuggling is now considered an enterprise crime as a result of this legislation, because if the LCBO doesn't know it, then I'm sure many of the other presenters don't know it. It would be helpful to have it in the report.

The Chair: Okay. That's been noted.

Ms Campbell: Is the committee then agreeable to inserting a reworded form of the first recommendation there?

Mr Sutherland: Sure. Have fun.

Ms Campbell: Further to the recommendations, they begin at the bottom of page 25. An attempt was made to come up with something that resembled the comments made by members during their deliberations on the recommendations. Is the wording as it appears in the draft acceptable to the committee? I guess another question that has to be considered is the order in which the recommendations will appear.

Mr Phillips: Just to start the debate, on an opening paragraph I personally think it's useful to summarize the three things I think we've found, which are: This is a major and growing problem; the solutions are multifaceted. Those are the two things I would say.

Mr Sutherland: Maybe you should add the third one which I believe you mentioned earlier, some reference that this shouldn't be considered the comprehensive list of what needs to be done.

Mr Phillips: Yes. I appreciate that. I think we should say: It's a major and growing problem. These are our recommendations based on a limited study by the committee.

Then in terms of recommendations, this is where it gets a little tricky probably for all of us. In terms of order of priority, I happen to think the tax level wording that I had is number one. I think the government accountability is number two. The public education one I put further down just because I think there's a lot of cynicism in the public around, "So they're just going to educate us on why we should pay more taxes, eh?" They will, even though I think there are some --

Ms Haeck: Do we put in the "eh" too?

Mr Phillips: I know. Isn't it awful? I don't want to have to be defending that one, other than it's worth probably having it in.

My other thing is on the tax one. I think this is a two-phase thing. I think we need to say to the government that this is getting serious and it needs a comprehensive plan quickly. The plan could very likely encompass the following suggestions and then we hope the government would review it after a period of time to see whether more action's going to be required or not.

As I said earlier, I'm personally -- as an individual and maybe our caucus as well -- reluctant to propose tax reductions. I'm basing that on the assumption that we can find other things that tackle the problem, but I think the problem has to be tackled quickly and heavily. I would say: Do these things, review it quickly and if it isn't working then we're going to have to find something more significant. I would move the tobacco one up a little bit.

On the regulation one, there may be enough words in here, but I heard an awful lot about -- and I can use these words to expand -- we need a really concerted effort to make it easier for business to do business.

If you want my opinion it's taxes, one; government accountability, two; regulation, three. Then I would move the tobacco one up and then I don't care; interjurisdictional enforcement, compliance, education, unemployment insurance, social assistance, in any order we want.

Mr Carr: That's fine; I can agree with what Gerry said. The only point is, and I think we already debated it and we're not going to get it at this point, this is where I'd like to put in about the recommendation for no new taxes, no increase in fees, no increase in non-tax revenue, whatever we want to call it -- as many definitions.

I think we've already heard that the government side won't agree to that but obviously this is the place to put it. They may have changed their mind in 20 minutes.

Interjections.

The Chair: Order. I would like to ask committee members, if you're going to make comments, if they'd please get up close to the mike so Hansard can hear them.

Mr Sutherland: I think it's probably safe to say that we've got consensus on what's here. I would suggest that we may be struggling to find consensus on the other issues and that if people want to add additional comments, then maybe they should be submitted there.

The only reason I say that is we spent most of the morning finalizing this one. I do think we'll probably need the rest of the time to try and get a handle on our pre-budget report. If any of the three groups want to make additional comments then I think they can submit an additional report on what other advice they want to provide.

Mr Phillips: I don't know whether there was consensus on my wording on the tax thing. I'm trying to gather something that all three of us could support. I don't know how you want to deal with that, Kimble.

Mr Sutherland: If you say, "There's a general perception and concern about taxation," I think we'll all agree on that. My sense is that is not considered adequate enough. I'm not sure if that's considered adequate enough by yourself, Mr Phillips, but I certainly have a strong sense that's not going to be considered adequate enough by the third party.

Mr Carr: You read me right.

Mr Sutherland: If you want to put as part of the consensus report a general comment about concern that everyone needs to recognize the taxation stuff as an issue, we can. I think that recommendation we agreed to go in there kind of -- while I agree with you the wording is difficult -- more or less summarizes that general comment about all governments have to be aware of how far you can go in taxation versus how willing the public will be to comply with the taxation policy.

I'm not sure what else we can put on there that we're going to get consensus, given the fact of how far people want to go on what they want to state.

Mr Phillips: Okay, so you would be in favour of the wording on page 27. Is that right?

Mr Sutherland: On page 27 or 28?

Mr Phillips: Yes, on the fair taxation thing, but not the wording that I've proposed.

Mr Sutherland: Yes, I would think a combination of what's on 27, maybe combined with what the recommendation was from -- I guess that's the accountants' group, is probably what I think we can agree to.

Mr Phillips: Okay. I think we would want to go a step further on that.

Mr Sutherland: Sure. If you want to submit that, I think that's fine.

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Ms Campbell: Just to review the comments that have been made over the last few moments, the committee's consensus is that the recommendation on taxation should be placed first, at the beginning of any list, followed by government accountability and government regulation?

Mr Phillips: That's my proposal.

The Chair: It would appear that no one objected to that.

Ms Campbell: In terms of the recommendation on page 27 under the heading "Fair Taxation," the committee would now like the recommendation, as it appears on that page, combined with the wording that is found on page 28.

Mr Sutherland: Yes. My sense would be that both those comments would go under the general title of "Recommendations on Taxation."

Ms Campbell: "Taxation," as opposed to "Fair Taxation."

Mr Sutherland: I think if we've got a general title of "Taxation," then they can come in as recommendations under that title.

The Chair: I think "fair" is an arbitrary comment.

Mr Phillips: What about "almost fair"?

The Chair: That's almost arbitrary.

Mr Sutherland: Just on the "Government Accountability," my sense on accountability is it is the buzzword and it certainly makes sense, but it seems to me the comment about accountability, regulation, and then even the changes to unemployment insurance and social assistance programs could somehow be all incorporated under one title. Part of the accountability comes back to the effectiveness of programs; it comes back to value for perceived money for the tax dollars. Am I on my own on that sense or feeling that somehow they can be incorporated together? It's the value of the service. It's how government operates.

Ms Campbell: A general heading of "Government Operations"?

Mr Sutherland: I'm just not sure whether that's the right heading, but maybe we can just put it under "Government" in general.

Ms Campbell: "Government Programs and Operations," perhaps?

Mr Sutherland: Sure, something to that effect, and then try to incorporate those recommendations coming under one title.

Mr Phillips: I didn't mind the way it was worded. I thought maybe all three parties might be able to accept it. The tone that I got in the hearings was this "We're mad as hell and we're not going to take it any more" sort of thing. I like the words "consideration given to establishing." I think if people had a sense that their governments were operating within some ground rules about just the financial parameters in which they can operate, they'd feel a lot better. I think the "consideration should be given" gives all three parties the opportunity to then say, "Well, what's the legislative framework we could live with?"

Mr Sutherland: I think back to particularly the consumers' association and its presentation. They highlighted some examples that they didn't think governments, not only our government but past governments, were accountable on or could see the benefits of value for money which many of us might see. One of the examples they cited was giving funds to support Chrysler in its expansion in Windsor. They didn't think that was an appropriate use of taxpayers' money.

I don't know if you were still here for their presentation, but I know Mr Kwinter and myself talked about, for example, my own riding in terms of the previous government giving funds to support the establishment of the CAMI automotive plant, and those types of things.

So while I accept the sense of financial parameters, the sense of some of what we heard goes beyond just what the financial parameters are. It's how the money is spent, how the decision-making is spent. Also, I think we're seeing more results, particularly in the education sector, based on the amounts spent. I take all those into an accountability framework, not just the financial parameters.

Ms Campbell: So is the consensus that things should be left as they are?

Mr Sutherland: If the rest of the committee members are comfortable with that, that's fine. We think it's a little much to put them together, but I would hope that all the government areas could be listed one after the other, anyway.

Ms Campbell: One final question concerning the issue of tobacco. There are a number of recommendations that appear on page 27. Is it my understanding that the committee wishes there be some text inserted before the first recommendation stating that the committee recognizes that there have been a number of recent developments concerning tobacco at the federal and provincial levels?

Mr Phillips: Frankly, I don't know what the solution is on tobacco. My own preference would be to say that it is clear that this area requires significant and quick action and the following are several recommendations that the committee puts forward for consideration by the government as part of its comprehensive plan, and that we would ask the government to move quickly on it and to review its success in the short term.

I would move that first recommendation down to the end, just because again the public sort of says, "Oh, yes, they'll solve the problem; they'll get somebody else to raise the prices," and it looks like we're always pointing the finger at somebody else.

Mr Sutherland: Sure. Okay.

The Chair: Does the research officer have enough information to finalize the draft report we have before us, in your opinion?

Ms Campbell: Yes. I do have one question. When would the committee like to see a revised edition of the report as it appears now?

Mr Carr: Two o'clock this afternoon would be fine.

Mr Sutherland: We're going to be meeting for the pre-budget one. We could probably, if we had it a few days before that, take any last glances at it or last alterations before that. Would that still allow time for it to be printed? I would expect we'd want to have the Chair present it when the House resumes.

The Chair: I think the directions we've been given have been clear. I don't know that we have to have a meeting other than that every member should get a copy of the finalized draft report, unless there's some problem with that.

Mr Sutherland: Well, no. The sense I was getting was that research may just want some final approval given by -- I mean, obviously the committee's not going to meet again, but the subcommittee was going to meet on the pre-budget consultations, and if there were any last comments that needed to be made, they could be made then.

The Chair: So we could give it the stamp of approval at that time.

Mr Sutherland: Yes.

The Chair: Certainly all the members would expect that they would have an opportunity to have a copy of this some time prior to the 17th. So some time prior to the 17th, with a reasonable amount of time to review it, I guess. Does that give you enough leeway, Ms Campbell?

Ms Campbell: Well, there is the issue of the pre-budget report having to be done within a similar time frame, but something can be worked out.

The Chair: We don't want to unduly burden you, that's for sure.

So at this point in time, we have given final direction to the research officer with regard to finalizing the report on the underground economy. I'd just like to also -- Mr Phillips.

Mr Sterling: Watch out.

Mr Phillips: Pulling the strings there like --

The Chair: For some reason I have this strange, great expectation that you're going to move something.

Mr Phillips: Your lips weren't even moving when I heard that voice saying, "Mr Phillips."

I gather I've been designated to move a motion here. I guess we need some motion to deal with this stuff.

(1) I move the committee adopt the final report on the underground economy and that the Chair be authorized to present the report to the House.

Listen carefully to this one: (2) I move that the committee request the government to table a comprehensive response to the report on the underground economy within 120 days of presentation of the report to the House.

(3) I move that the committee authorize the subcommittee on committee business to finalize the report on the underground economy.

I think two things: One is I gather from this motion it doesn't preclude the minority or the --

The Chair: In fact, just before I indicated that you should move that, I wanted to say that any dissenting reports should be filed with the clerk by Monday, 7 February.

Mr Phillips: Monday, 17 February?

The Chair: Okay, it will be the 17th, I'm sorry, and that's not a Monday; that's a Thursday.

Any discussion on the motion?

Mr Sutherland: Could I just ask about the one point about the ministry responding in 120 days? This is new to me so I just wanted to have some sense as to where that came from.

The Chair: It comes from the standing orders.

Mr Phillips: It's not even in my writing.

The Chair: There's an obligation to ask the committee members if they would like to have that recommendation moved and accepted. Anyway, the motions have been moved by Mr Phillips. Any debate?

Mr Sutherland: That's 120 days, so we're looking at four months?

Mr Phillips: Sort of, yes.

Mr Sutherland: I'm just trying to think. I guess that would take us into the summer, so I imagine, in terms of the committee, it would be when the House resumes in the fall then. In terms of the committee --

Mr Phillips: I'm just carrying out my written instructions.

Mr Sutherland: In terms of the committee formally receiving a response though, it probably wouldn't be till September because --

Ms Haeck: You never know. We've sat through July before.

Mr Sutherland: Okay.

The Chair: It would be 120 days from the time that the minister receives the report.

Mr Sutherland: Okay.

The Chair: All those in favour of the motion as moved? Opposed? The motion is carried.

Clerk Pro Tem (Ms Donna Bryce): The three motions.

The Chair: The three motions, as read, are carried.

Just for the record, that vote was unanimous. The committee members agreed unanimously on the three motions as read by Mr Phillips.

We are recessed until 2:00 pm.

The committee recessed from 1202 to 1413.

DRAFT REPORT PRE-BUDGET CONSULTATIONS

The Chair: The standing committee on finance and economic affairs will come to order. The business of the committee this afternoon is to deal with the draft outline of the report on the 1994 pre-budget consultations. As always, the Chair is in the very qualified hands of the members of the committee.

I understand that the report is very new to everyone, at least the draft outline is new to everyone. It would probably be proper to go through the report, initially at least, page by page. Any direction or assistance that we could receive from the research officer of course is always appreciated.

The Chair would like to open the floor to the committee members for any comments or questions with regard to the draft outline we have before us or indeed any direction the committee might take at this time with regard to dealing with the draft outline.

Mr W. Donald Cousens (Markham): Maybe you can guide me a little bit, Mr Chair. Is the plan that we have this afternoon and tomorrow as well to spend in the preparation of this?

The Chair: Yes, that's correct.

Mr Sutherland: Then we have one more week for any dissenting reports to be submitted, correct?

Mr Cousens: As I see it, what we would do between now and tomorrow is declare our intent, at which time Ms Campbell would go ahead and start working on the report.

The Chair: The final report will be given the stamp of approval, if that's the way I should put it, on February 17, when the subcommittee will meet and review the report.

Mr Cousens: So our objective, just to be clear on our objective, between this afternoon and tomorrow is to declare our general plan of action.

The Chair: And to give, I guess, some consensus direction to the research officer, as opposed to dissenting direction.

Mr Cousens: I'm just thinking about taking this as it is now and reading it, and then coming back and working on it tomorrow morning.

The Chair: It may be helpful today, though, to go through it page by page. I don't think that would be out of line.

Mr Cousens: I find that an honourable suggestion.

Mr Sutherland: Even if we haven't had a chance to go through it, I have gone through it and primarily what we have is the list of recommendations from the different presenters. What we could do today is I think it might not be a bad idea if we gave research some sense of our agreement on the outline of how the body of the report will look, as she's presented it through some of the table of contents, and then maybe what we would like done on the taxation issues.

The Chair: It seems like an idea for a good start.

Mr Phillips: Generally, I think we've boxed ourselves in a little bit, just because the hearings ended late yesterday, finally, with the ministry officials. If we had to do all over again, we probably would allow ourselves a one-week break right now to kind of get our thinking together. The problem has been compounded by dealing with the underground economy this morning, because that was also something that took some of our time.

I think Mr Cousens has the germ of an idea. We should maybe discuss this a little bit today, but I for one have had barely a chance to skim through the thing. My comments won't be particularly helpful, even on format. I think we have to get the framework in place, and then say, "All right, here's the framework."

I can see the first framework is going to be the economic environment. That's fairly easy and that's the thing you've got there and that's probably comparatively non-contentious. Then I'm not sure what the next sections are. I would think personally less time rather than more time today, if there's something useful we can accomplish for a little bit of the afternoon. I think we all might benefit from just going away and putting our feet up and actually thinking about it. That's my own feeling.

The Chair: The Chair would like more definitive direction with regard to what we should do. I guess it's true to say that we haven't had much time, if any, to review the draft outline, although it is appreciated that we've received it in such timely fashion.

If we had an opportunity individually to go away and read it through and make some notations, and kind of get a sense of what it was we want to accomplish, tomorrow would probably be more productive than it might otherwise be, but I don't want to preclude any opportunity this afternoon for individuals on the committee to make any comments at this time with regard to the report.

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Mr Sutherland: That seems fine to me. We certainly have confidence that in terms of the summary and forecast issue, the economic things regarding that, that will all be done fine.

I guess my only comment on some of that, and even under the economic and fiscal policies, is if some of the more generalized comments can be reflected in there. I would appreciate something being mentioned in the report on what some of the forecasters have advised us on how the deficit issue should be handled. We had quite a bit of discussion with them as to how quickly a deficit should be reduced. Should you take a very dramatic action such as I believe the Reform Party has proposed federally, or a more gradual approach and its impact on economic recovery?

Obviously, whatever comments could be summarized regarding general comments about job creation would be important.

Regarding the Fair Tax Commission and the advice we received on that, maybe we could try to lump that into some categories and deal with some of the significant recommendations there. There is this question of going from the property tax base for education to an income-tax-based kind. I'm thinking for the body of the report having some summary of the different comments we heard, different issues that might have been raised regarding that particular issue, and maybe even tie some of the questions around the assessment processes into that.

I'm trying to think what the other major topics were that people commented on. I guess there were some general comments made about people's perceptions of what fair taxation is. I must say I was surprised by some of the comments and maybe it's fair to have some discussion about not all of the parties agreeing that progressive taxation is fair taxation. Maybe some of that debate that went on should be highlighted in the body of the report. If we had some of that summary, if possible, I think that would give a better sense for whatever the final report should put in on recommendations. That would be some of my sense of where we could go on how the report is developed.

The Chair: As I listened to the reports made by all those who presented before the committee, it became clear that there are indeed many opinions with regard to what government should do with regard to dealing with their finances. As the Chair, and certainly with every intention of being non-partisan, as I listened, it became clear that there were presenters and people who thought that the direction the government was going in was indeed not that bad, and then there were others at the other extreme who said that what the government was doing was absolutely wrong. Then, of course, there was almost everything in between.

In writing the report, I would just think it should somewhere be reflected that there was that range of viewpoints, whether that could be made in a paragraph or two, or a sentence or two.

Mr Sutherland: We have the economic summary and forecast, and the economic and fiscal policies. Maybe when I mentioned earlier about the deficit, that could be added as a section and maybe a section on what people suggested about spending priorities, just a summary of that.

I think we need to put the big caveat that this wasn't a comprehensive list of presenters. We didn't cover all areas in a detailed way, but maybe some sense of summarizing what we did hear, anyway, on what the spending priorities should be. As to the rest of the groups that have been highlighted, I don't think we'd have too much problem with that fitting into the report.

Ms Campbell: I'd just like to remind the members that the recommendations contained within this outline are not an exhaustive inventory of what was said to the committee. There are certainly gaps. For instance, under "Transfer Recipients," on page 13 there is nothing on hospitals; there's nothing under universities or community colleges on page 11.

Also, with respect to the comments made on the Fair Tax Commission's recommendations, I think members will remember that most people who made presentations to the committee did have comments on the recommendations contained within that report. The items that are included in this outline, again, are not exhaustive. There are still a lot of comments that could be entered in here, and it would take time to group them and assign them to the proper categories and then make some sort of general statement, which might require a bit more time in terms of preparation if it's the committee's desire to have some sort of text included in terms of summarizing comments.

Mr Crozier: For my information, and perhaps it's like a point of information, what's the real objective of the committee when it comes to this pre-budget consultation? Is it merely to report everything that everybody said or is it to try and glean from that recommendations to the government; therefore, you would accept some and not others? I just don't know, so I'm curious.

The Chair: I suggest it should be a summary of all the presentations made before the committee, and as a result of those recommendations, this committee would offer some recommendations supporting --

Mr Crozier: Support some of the recommendations and not support others?

The Chair: Well, it's a little more complex than that.

Mr Sutherland: There are two audiences. One is the formal report, the audience for us, and in terms of the recommendations to the Finance Minister. I think also at times we try and keep in mind that outside people may have an interest in reading this report, either at this time or some time in the future, so we'd like to provide some type of summary and background information so they can make some sense of, "Great, you recommended this, but where did it come up in your hearings?" and pick up on that. So if we have some summary, it's more or less a combination of both, I would say.

The Chair: Any further direction to Ms Campbell with regard to what she might do this evening?

Mr Sutherland: I'm debating whether we need to have a complete summary of all the advice we received on the Fair Tax Commission. I certainly think, in terms of the different organizations' sense of what fair taxation is, a summary of that is very appropriate to go in the report. Then I certainly would like on this property versus income -- that's one of the most significant recommendations and the vast majority of presenters who commented, commented on that.

I don't know how we could somehow summarize the rest of the recommendations in a very concise, limited fashion, whether we thought the easiest way of doing that may be outside of those issues, attaching that as an appendix to the report, "These were the other recommendations on the Fair Tax Commission proposals." That might be the easiest way of doing it without having the researcher having to go back through all the testimony and sift through it and do it section by section.

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The Chair: That sounds like good advice.

Mr Cousens: I'd like to think about that.

The Chair: How much time would you like?

Mr Sutherland: We can come back to this tomorrow.

Mr Cousens: The Fair Tax Commission raises a lot of questions for me and the worry I have, though there are some excellent thoughts to it, is that the danger is that the government can cherry-pick parts of that Fair Tax Commission report. There's enough in it that they could come along and justify just about anything they're going to do in this forthcoming budget by referring to specific sections of the FTC. That has to be a concern I have. That's purely one of the worries of an opposition member who's been watching government.

Mr Sutherland: As I say, I don't have any problem if we come back tomorrow morning and people have given it some thought. I'm just putting out some ideas as to what we could have for the format of the report, and hopefully that would generate people to think about some things this afternoon. Then if they want to recommend other ideas, we can deal with some of that in the morning.

The Chair: Do any other committee members have any input they would like to add to this discussion? I get the sense, if there's no further input today, that it would be probably in the interest of the committee to adjourn today and come back tomorrow at 10 am. Is that the sense I get from committee members? I see a lot of people nodding their heads.

Just to go back to the underground economy report, it would appear that we need to have agreement to forward a copy of the report to the Minister of Finance once the subcommittee has seen the final report.

Mr Wiseman: Do you want somebody to move that?

The Chair: Apparently, we have made some indications previously that the clerk has reminded me of that the committee had indicated it wanted to forward a copy of the report to the Minister of Finance once the subcommittee had seen the final version. Is it my understanding that there needs to be a motion?

The final report is confidential until it's presented to the House. Well, it's supposed to be confidential anyway.

Mr Phillips: Why would the final report --

Mr Wiseman: It was leaked yesterday to the paper, for Pete's sake.

The Chair: That was the draft so that could be far from being accurate.

Mr Phillips: What report?

The Chair: We're talking about the underground economy report. We're back to that for a minute. It's not final so if someone would like to entertain a motion to forward a copy to the Finance minister, subsequent to the subcommittee approving the final version, it would be appreciated.

Mr Wiseman: I'll move that.

The Chair: Mr Wiseman has moved the aforementioned motion. Are all the committee members in agreement? It's carried.

Mr Phillips: All these reports are public, aren't they? We're doing all this in public.

Mr Wiseman: It's all in Hansard.

Mr Phillips: I view this stuff as --

The Chair: All this is certainly accomplished in the public eye, but apparently the final report is actually not for public information until the Finance minister has received it, or it's presented to the Legislature so that the members of the Legislature actually have the document before it becomes a public document.

Mr Phillips: I'm not sure I understand this. In theory we'll all say, "There, we've agreed to that." I don't want to get into hot water with anybody but I have no compunctions about saying that I assume everything we're doing is done in public here. I'm not going to treat this draft as confidential, because it's in public.

Mr Sutherland: I believe, though, if I recall, that some of our report writing we have done in camera in the past.

Mr David Ramsay (Timiskaming): Not today.

Mr Sutherland: No, not today, but in the past, and I don't know whether it was the tradition around here before we were here, that that was done. I imagine that with some committee reports, given the nature of some of the recommendations, that may have been adopted somewhere as a procedure.

Mr Phillips: I don't want to be in a position, if somebody says to me, "I understand you finished a report on the underground economy," of having to say, "I'm sorry, I can't give you that because it's confidential until the House comes back." That is not how I view it.

Mr Wiseman: I would agree with you. I want to make it clear, though, that I would hate to have some of our fellow colleagues turn around and say, "What are you doing, giving that out to the public before it comes back to the Legislature? You have violated my rights as a member by giving this out; shame on you," and all that sort of stuff on the floor of the Legislature come some time in March.

The Chair: It's certainly the decision of the committee as to how this is communicated.

Mr Wiseman: If we have the unanimous decision of the committee, then everybody wears it the same way if somebody's angry.

Mr Sutherland: I have no problem.

Mr Phillips: The way I operate, everything's in the public domain unless there is a personality or someone can benefit economically from it, and then we can move into private session. I would prefer to do virtually nothing in private.

Mr Wiseman: I would agree with you on that.

The Chair: It has been such that this has all been in the public domain, and as the committee has indicated, will continue to be so. I think that message is clear.

Mr Phillips: We can open the door to the media. Come on in now, media.

Mr Wiseman: It's wide open. They're standing in the hall.

Mr Phillips: Maybe we should say we are in private and they'll take some interest in it.

Mr Wiseman: It's that open-door policy that turns them off.

The Chair: Not all of the committee members were here just a few moments ago, and I want to reiterate that we have agreed to adjourn today and meet back here tomorrow at 10 am. That will have allowed us some time to review the draft report. If there's no further comment with regard to what has transpired here this afternoon or what we might anticipate tomorrow, then this committee stands adjourned.

The committee adjourned at 1438.