Editorial

Tory Budget:
broken promises

_ The April 27th Federal Budget
is an attempt by the Mulroney
government to test the post elec-
tion political waters. Prior to last
fall’s election, we were promised
tax fairness and increased social
spending. Now the Mulroney gov-
ernment has released a budget
which fulfills neither promise.

In the aftermath of the U.S.-
Canada free trade agreement, the
Tories are reducing social pro-
grams, increasing taxes, and main-
taining a pre-recessionary policy
of high interest rates. It appears
as if this government is attempt-
ing to clobber ordinary Canadian
taxpayers while breaking election
promises one after another.

The budget includes a total of
$5 billion in spending cuts and tax
increases. Cuts will affect such
programs as Unemployment In-
surance, old age security, family
allowance, child care, and transfer
payments to the provinces for
health and education.

Meanwhile the Bank of Canada
has jacked up interest rates to
eliminate any savings that spend-
ing cuts and tax increase may
bring. A two percentage point rise
in interest rates has added more
than $6 billion in payments on the
national debt.

Despite the election promise of
a national child care program
worth $6.4 billion to the provinces
over seven years, the Tories are
providing only $2 billion in tax
credits and cutting the promised
portion of funding to create new

spaces for children.

The Conservatives have axed
$2.6 billion in federal contributions
from the Unemployment Insur-
ance program, to deny thousands
of Canadians jobless benefits.
Money from the cuts will then go
into the pockets of corporate Can-
ada for short term subsidies that
are considered as “job training”.
This has been done in spite of
Mulroney’s pre-election commit-
ment to maintain and enhance
social programs and retrain work-
ers displaced because of the trade
deal with the U.S.

Despite campaign promises that
“As long as I am Prime Minister of
Canada, social benefits, especially
for the elderly, will be improved,
not diminished by our govern-
ment,” Mulroney has driven a
wedge into the sacred Canadian
notion of universality in social
payments.

Through the ’89 budget many
medium and higher income Cana-
dians will repay old age security
and family allowance payments
normally provided. The principle
of universality is being eroded and
there arises future risks that quali-
fying for social benefits will be-
come increasingly difficult in
future years.

Add to all this the fact that
corporate taxes are being reduced
as a total percentage of the federal
tax bite. In 1989 corporate Canada
will pay only about 17% of the
Federal tax bill.

Deferred corporate income taxes
are now approaching $35 billion as
tax specialists work diligently to
search for loopholes to avoid
payments.

Meanwhile the average family
in Canada will pay more than $500
in increased taxes. In addition, an
increased national surtax will not
be eliminated when a new national
sales tax takes effect in 1991.

Michael Wilson’s budget, re-
leased in a torrent of controversy,
and allegations of budget leak
coverups is a characteristic of an
arrogant, deceitful government.
Swept into power as part of a
corporate right wing agenda and
the media that have long been
bought out, the Tories are on their
way to another dishonest term in
office.

As New Democratic Member of
Parliament Dave Barrett (Es-
quimalt-Juan De Fuca) said in the
fall of 1988, during the debate of
the trade deal, this Tory regime
will go down as the most hated
government in Canadian history.

With the introduction of the
1989 Federal Budget, it looks like
the Tories are well on their way to
earning that reputation.

VOLUME 54, No. 2

JACK MUNRO
GERRY STONEY .
NEIL MENARD .
FERNIE VIALA.
BILL POINTON ..
ROGER STANYER

LUITIBERWORKER

Official publication of IWA-CANADA
NORMAN GARCIA, Editor
5th Floor, 1285 West Pender Street
Vancouver, B,C. V6E 4B2

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MISRPNISMETE. ..-... 00.1... 00.20: ote ee Secretary-Treasurer

MAGAZINE

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DAYCARE IS

ARIGHT OF
(CANADIAN,

New log export tax:
an analysis

By Phillip Legg, Assistant Research Director — IWA-Canada

On March 20, 1989 the provincial
government in British Columbia
announced an increase in the tax on
log exports. Referred to as a fee in-lieu-
of-manufacture, the new tax is 100%
of the difference between the export
market value of a log and the domes-
tic value of that same log.

The new fee will not affect the cur-
rent system of applying for an export
permit, it simply eliminates the finan-
cial incentive. Prospective log export-
ers must still advertise their logs on
the provincial government's bi-weekly
list which is circulated to over 200
mills and log brokers. If no offers are
received for logs advertised in this
way, the logs are considered “surplus”
and, therefore, eligible for export.

Once the logs are sold to an over-
seas buyer, the provincial government
collects its new tax using the export-
er’s invoice to determine the export
value and Ministry of Forest data to
derive the domestic selling price of
those same logs. Under these condi-
tions, prospective exporters of sur-
plus provincial logs will not profit
from selling these logs to the export
market.

The 100% tax does not apply to all
grades of logs exported from BC.
Lower grade pulp logs (statutory
grades “X”, “Y” and “Z”) will be
taxed at a rate of 40%. And to avoid
possible abuse in this area, the gov-
ernment announced that statutory
grades will be redefined to reflect
more accurately the true pulp status
of a log. Because current grade rules
focus more on characteristics such as
length, diameter and sweep of a log, it
is possible to buck a sawlog in such a
way that it yields statutory grade
pulp logs and, thereby, avoids the full
effect of the new fee.

Logging companies who do not own
manufacturing plants, commonly
referred to as market loggers, have
been given some reprieve from the
impact of the new fee. For this group,
the higher fee does not take effect
until December 31, 1989. The same
holds true for Small Business Sales
acquired before March 20, 1989. The
reprieve is designed to provide smaller

companies with an easier transition
to the higher fee schedule.

The current area exemption for mar-
ket loggers in the Mid-Coast, North
Coast and Queen Charlotte Islands
remains in force and the export tax on
these logs remains at 15%. This
exemption allows market loggers in
these areas to export 40% of their
annual harvest to a maximum of
10,000 cubic meters. When this area
exemption was first proposed in 1986,
the IWA voiced its’ opposition by
noting that sustainable development
of harvest activity in these regions
would only occur if the granting of
harvest rights was linked to the devel-
opment of manufacturing facilities.
Allowing area exemptions for log
exports does little to promote sus-
tainable development.

The new provincial fee applies only
to those logs harvested from lands
under provincial jurisdiction. Private
lands and other lands under federal
jurisdiction are not subject to this
new fee. From the IWA’s perspective
this could be a real problem because
unless all opportunities for export are
restricted simultaneously, the prob-
lem of log exports will not be ade-
quately resolved.

Last year “federal wood” (i.e., logs
from lands under federal jurisdiction)
accounted for approximately 15% of
the total volume exported from B.C.
That may not sound like a large num-
ber, but keep in mind that most of it
was harvested from lands on South-
ern Vancouver Island, an area which
is close to most of the major timber
processing facilities on the BC. Coast.
Exporting these logs forces mills to
source replacement logs from further
out and adversely affects viability.

The IWA-CANADA has asked the
federal government to re-assess the
administration of log exports to
ensure that the current testing of
surplus more accurately reflects the
needs of local manufacturing facili-
ties. Until we have such an assurance,
the possibility for log exports contin-
uing from federal lands remains a
problem.

LUMBERWORKER/JUNE, 1989/5