Reg apiece al Entertainment A Aren't Themen ids Ar . On Halloween 96 with 1 aoa mes 9 tun tor your Witle devil! each individual marshmallow piscuits ee xage of 20 Reg. Price 9 a6-5 99 - No’ , curren oO price iny We have an extra SPECT including Play wmccn more, Lt YO Reg 4 lowe! ur city wool\c? a ag.97-52-97 Q reg. Price 49-9" ow , 9°° price 79-09 wy q D Kootenay Where You Belong KOOTENAY SAVINGS U.S. DOLLAR ACCOUNT industr faces tax increases Editor's note: Following is the fourth in a series on proposed changes to the Canadian tax system. By MADELAINE DROHAN Canadian Press OTTAWA — There's nothing like kicking a guy when he’s down to make him really mad at you. And that’s how the so-called smokestack industries will see it if tax reforms in the works mean they end up shouldering a greater share of the tax burden. For decades, the steel mills, mining companies, heavy manufacturers and oil panies have d from an array of tax breaks that favor investment in plants and equipment But the economic picture has changed. The smoke. stack industries have matured and now it's the service industries — retail stores, restaurants, financial services and real estate agencies — that are generating more new jobs. These businesses want their contribution to the economy recognized by having the tax system changed so that it no longer discriminates against them. Finance Minister Michael Wilson has signalled his intention to do just that. He made a start in his last budget and says he will continue in the next SUFFERING NOW But with many of the smokestack industries getting = low world prices for their products, protectionist moves = inthe United States, the North American economic slow down or a combination of all three, the finance minister's timing may be off Wilson has tried to soften the blow by promising to lower corporate tax rates overall while tax breaks are removed. But with no details, it's impossible to know if the capital-intensive industries will end up better off, the same, or in the hole. Add to that Wilson's recent change of heart on whether the corporate sector as a whole is paying enough tax and the result is a potential confrontation between Wilson and the groups whose interests are affected Business groups can mount a powerful lobby when they feel they've been crossed, as former finance minister Allan MacEachen found out in 1981 when he attempted to do much the same thing as Wilson is trying now The corporate clamor than ensued forced MacEachen to back off, dropping his budget measures one by one in what the opposition labelled the “budget striptease.” AVOID PROBLEMS Wilson wants to avoid staging a similar performance and to that end has promised lower rates and improve ments in the federal manufacturers’ sales tax Business groups have been lobbying for years to have the narrowly based sales tax changed so that it vnEUUonUnennerOGnUEUS4AUTi eanageennaaueaentdD antstit doesn't discriminate between different products. And Canadian manufacturers have long opposed paying a sales tax that is on average one-third higher than that paid by importers of foreign goods. The finance minister's hand is strengthened by the adoption of a tax reform plan in the United States. While the two tax systems don't have to be the same, the degree of cross-border activity necessitates they at least be similar to avoid imbalances, and business groups recognize that Nevertheless, some tax experts say Wilson is facing a tough task in attempting to make the reforms now. “This might not be the best time for tax reform, but I'm not sure it’s advisable to wait for the best time because it may never arrive,” says Gordon Bale, a tax expert at Queen's University. “But there is a problem here. It may be that the industries that will be more adversely affected are the ones that are not faring well now anyway.” POSES PROBLEM William Strain, a member of the tax committee at the Canadian Institute of Chartered Accountants, agrees that reform poses a problem to some industries “A very good argument can be made that to make the shift they seem to be thinking about is going to further hurt our manufa¢turing industries in their inter national market competition,” said Strain “But the other side of the coin is that the Americans Se have just done it and their shift was also benefiting the service sector and penalizing the capital-intensive sector. They moved exactly that way.” John Bulloch of the Canadian Federation of Indepen dent Business said removal of the tax benefits for the smokestack industries is “the dramatic issue in tax reform.” “We don't want to divert resources into the areas which are a declining source of jobs,” says Bulloch, whose membership falls largely on the service-sector side “That's just stupid.” ATTACKS PLAN Not surprisingly, tax specialist Eric Owen of the Canadian Manufacturers’ Association sees things differ ently. Owen said Phase 1 of corporate tax reform, part of Wilson's last budget, was to reduce rates slightly while gradually eliminating the investment tax credit and the inventory allowance “When we start looking now at Phase 2, this is the more important phase because we're starting to look at the incentives which have worked so well for Canada over the years.” Owen said he didn't know whether a neutral tax system, which favored neither capital-intensive indust ries nor labor-intensive service businesses, was a good idea. “I think you have to recognize that manufacturers have generated wealth. You can have all the McDonald's NO BREAKS .. . Federal Finance Minister Michael Wilson is considering tax reforms that could eliminate of the tax 3 for smokestack industries such as Cominco's lead-zinc smelter in Trail on every corner in Canada and you won't create any wealth.” While the different sectors are bickering among themselves on who should be favored by the taxman, there is one reform issue that affects them as a group — whether the corporate sector as a whole should be paying more tax. CHANGED TAXES When Wilson first proposed corporate tax reform in May 1984, he said the changes would be “revenue-neu tral,” in other words the overall corporate tax take by the federal government wouldn't change. But more recently he's stated the percentage of total g Pp! d by corporate tax has been dropping for the last 20 years and he wants to stop that trend and perhaps reverse it. It's difficult to say whether Wilson will follow through and impose a heavier load on corporations. Given his oft-stated claim that the private sector is the engine of economic growth, some tax experts find it strange he would now choose to increase corporate taxes as a percentage of total revenues. “I find it really difficult to believe that this govern ment at this time, going into what looks like an economic slowdown, is really going to increase taxes on the corporate sector,” said Dan O'Hagen of the Canadian Labor Congress. “That just flies against al] our exper ience to date with these people. suv vonennnaunennnn neni MM CE HEATED DISPUTE . . . U.S. trade representative Clayton Yeutter prefers negotiations to contron. a tation with U.S. trade partners, as in the heated dispute with Canada over lumber imports Coston: Photo Top U.S. trade man trapped i By NORMA GREENAWAY WASHINGTON (CP) Clayton Yeutter doesn't have the air of a trapped man. But he's been smack in the middle of a raging battle between Congress and the White House over U.S. trade policy ever since he became the Reagan administration's top trade official 16 months ago. In public, the U.S. trade representative seems immune to the regular verbal pummelling he gets from Capitol Hill politicians fuming over what they see as the administration's refusal to heed congressional demands for a tougher, more aggressive trade policy At committee hearing after committee hearing. Yeutter has calmly and patiently fended off the criticism and repeated the administration's view that protect ionism is no way to solve the problem of the burgeoning U.S. trade deficit with the rest of the world During these hearings leading up to the Senate finance committee's narrow approval of freer-trade talks with Canada, he heard senator after senator blast the administration for treating them as “dirt” and a “rubber stamp” on international trade issues. Through it all, the burly, bespectacled former Nebraska farmer manged to maintain his trademark grin and sound understanding, conciliatory and concerned He agrees there is a problem on the trade front but insists the solutions proposed by Congress, such as restricting imports of foreign goods, will create more problems than they solve PREFERS TALKS He prefers negotiation to confrontation with U.S trading partners, as is the case in the heated dispute with Canada over lumber imports. We're not interested in whether anybody is declared guilty or not guilty.” he said recently, referring to U.S. forest industry allegations that Canadian timber cutting fees are unfairly subsidized n ‘battle’ He defends pursuit of a freer-trade pact with Canada as an historic opportunity to create new jobs on bot sides of the border and show the rest of the world that freer trading system gives everybody a better shot at economic prosperity s the U.S. counterpart to Trade Minister Pat Carney, Yeutter has overall responsibility for the freer trade negotiations although neither he nor Carney are the bargaining table Despite being Congress's whipping boy Yeutter wins high marks from critics for his inte tenacity, resilience and energetic approach which aides say has him at his desk before 7 days The most frequent criticism of Yeutter back slapping character, is his “lack of ¢ White House Trade lawyers, congressional aides say the 55 year old trade representative i main decision-making group, which inc Ronald Reagan, Treasury Secretary James Don Regan, White House chief of staff. He messenger boy” for the administration someone who shapes policy Yeutter had the disadvantage of t as something of an outsider. despite Republic party polities most his lif Although he held senior jobs with the trade repre sentative's office and Agriculture Department in the 1970s, he had been out of the Washington whirl since becoming president of the Chicago Mercantile Exchange in 1978. By contrast, his predecessor Bill Brock enjoyed close relationships with Capitol Hill politicians, many estab lished during his 13 years as an elected member of Congress.