Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697720917893.pdf (Canada)
october 22.

1968 COMMONS DEBATES 1677 Mr. Speaker: Order, please.

I am sure the hon.

member adjourn the debate.

I t is moved by the hon.

member for Moose Jaw, seconded by the hon.

.

( 5 : 5 0 for Moose J a w wishes The Budget-Mr. Benson Accordingly, Mr. Speaker with the house to went u p to the Senate chamber.

member for Yorkton-Melville, that the debate be now adjourned.

1s it the pleasure of the Mr. Speaker informed the house that the house that the debate be now adjourned?
Deputy Governor General had been pleased to give, in Her Majesty's name, the royal assent to the following bill: Some hon.

Members: Agreed.

And being returned: Mr. Macdonald (Rosedale): Mr. Speaker, because of the fact that we are having royal assent and then proceeding with other busi- ness of eight o'clock, I believe there is a general the dispensation-disposition-in house not to proceed with private members' hour this evening.
If Your Honour finds there is general agreement, perhaps this could be done on the understanding that all motions would preserve their place on the order paper and also that this hour would be saved for the house as a further private members' hour.
An act respecting the construction of a line of railway in the province of Alberta by Canadian National Railway Company from the vicinity of Windfall on the Windfall extension to the Sangudo subdivision of the Canadian National Railway in a westerly direction for a distance of approximately 51 miles to the Bigstone property of Pan American Petroleum Corporation and of a connecting spur extending in a northerly direction for a distance of approximately 9 miles to the South Kaybob property of Hudson's Bay Oil & Gas Company Limited and its associates.
At six o'clock the house took recess.

Mr. Knowles (Winnipeg North Centre): Mr. Speaker, I am sure I would rather agree to a general disposition than to a general dispen- sation.

Mr. Speaker: Is this the desire of the house?

Some hon.

Members: Agreed.

Mr. Speaker: I t is so ordered.

PROCEEDINGS ON ADJOURNMENT MOTION SUBJECT MATTER OF QUESTIONS TO BE DEBATED Mr. Speaker: Order, please.
I t is my duty, Pursuant to provisional standing order 39A, to inform the house that the questions to be discussed at the time of adjournment this evening are as follows: The hon.

member fo' Lotbiniere (Mr. Fortin)-National Health and Welfare-inquiry as to possible participation of federal government in a campaign against alcoholism; the hon.

member for St. John's West (Mr. Carter)-Fisheries-inquiry as to deficiency payments; the hon.
member for Gander- willinga ate (Mr. Lundrigad-Man- agement of Canada's Fishing Resources-con- tinental shelf.

THE ROYAL ASSENT A message was delivered by Major C. R. Lamoureux, Gentleman Usher of the Black Rod, as iollows: Mr. Speaker, the Right Honourable the Deputy Governor General desires the immediate attendance Of this honourable house in the chamber of the "Onourable the Senate.

AFTER RECESS The house resumed at 8 p.m.

THE BUDGET ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE Hon.
E. J. Benson (Minister of Finance) moved: That Mr. Speaker do now leave the chair for the house to go into committee of ways and means.

He said: Mr. Speaker, it is a great honour and a serious responsigility to present the first budget to this new twenty-eighth parlia- ment of Canada.

The government and its strong parliamentary majority have come into office with many new ideas and a desire to look a t our problems with a fresh perspective.

We have, however, many major commitments.


These restrict our freedom of innovation and make it necessary for us to work out our new ideas over time.

I have much to report and to propose in this budget and thereiore will not attempt a comprehensive review of our financial affairs and policies tonight.
The budget white paper, tabled last Wednesday, provides material on our public accounts for 1967-68, and on the economic and financial conditions prevailing in Canada and elsewhere as of the time when it was prepared.

I shall refer occasionally to this paper but I shall try not to weary the house with repetition of detail.

In particular I do not propose to comment upon the accounts for 1967-68.

1678 COMMONS DEBATES October 22, 1968 The Budget-Mr. Benson it in Current Economic Setting markets.
Sterling was devalued.

There was a prolonged crisis in gold markets which was The current economic setting for this budget only resolved by the working out of a new two price system for gold as well as by has been set forth in part I of the White Paper.

The Canadian economy continues the stringent measures by the U.S. to safe- ,ore expansion that began in 19G1, that ran to guard and improve its balance of payments excess in 1965 and 1966, that slowed down in position.
adjusting for these excesses in 1967, and that During this period of stress in the interns- has accelerated moderately again this year.

tional financial markets last winter there was We are in a period of widespread prosperity, but is prosperity with problems.
The a short but very sharp run on the Canadian increase this year in production, in national dollar, despite an unusually strong position in income, in exports, in housing investment, Canada's current account balance of payments industrial productivity has been at that time.

We were in danger of being and encouraging.


On the other hand, we are trou- forced into an inappropriate devaluation of bled both by the extent of unemployment and our currency, which would have brought by the rate at which prices are increasing.

higher prices and costs to the Canadian Our balance of trade has been better than economy and the CaIladian ColXXmer.

Our expected, but our capital markets continue to position was strengthened by monetary and fiscal measures taken at that time.
We were be subject to serious strains.

These are re- fortunate in being able to get from interna- flected not only in high interest rates but in tional institutions and from friendly monetary problems for many byrowers and for those authorities and governments the temporary who sell securities.

In the international economic field, we have assistance that we needed to sustain us during this crisis.

We also were able to work out in recent years made great advances in free- ing trade.
We are still engaged in implement- with the United States Treasury arrange- ing agreements by legislative action.
Tonight ments which enabled us to safeguard our vital I shall lay before you some 200 pages of tariff unrestricted access to the U.S. capital market these while not endangering or worsening the U.S. items which implement our part of of payments position' international arrangements, together with a resolution asking approval for a new bill on we have been able to borrow substantial sums Italy, in Gemany, and in the United anti-dumping duty which will follow consid- eration of our white paper on this subject by States to assist Us in restoring our exchange a committee of this house.
These are impor- tant and constructive measures.

Together with related action by others, they should Medium Term Outlook widen the markets and improve the produc- tivity of Canadian industry.

They should also provide to Canadian consumers the benefits of increased competition in domestic markets.
In looking ahead through the prospective life of this Parliament, we can be optimistic regarding both the resources that will be available to sustain vigorous growth in the In monetary matters, the period under Canadian economy and the markets that will review has been one of many difficulties but be available for what we produce.

We have a has ended upon a most constructive note.


For labour force that is growing more rapidly years the Canadian government, with other than that of any other industrial country.
It is western governments, has been working out a also increasingly well educated and trained plan to supplement gold and foreign exchange for work Our natural balances with new forms of international liq- uid reserves that could be expanded in accord resources are the envy of others and the basis We with the needs of world trade and other trans- actions.

After considerable debate this has have a large industrial capacity, much of it now been achieved.
Parliament will be asked now relatively modern and little of it in seri- to approve amendments to the Bretton Woods ous excess.

We have access to a large supply Agreements Act to carry out our part in these of savings within Canada, since we save a high proportion of our income by comparison new and encouraging arrangements.

with others.
with others.

Fortunately we also enjoy a pre- ferred position in securing international capi- tal, both direct investment associated with completed several major crises occurred dur- modern management, and loan capital in large amounts.

At the same time we can look ing the past year in the international financial Before these new arrangements could be industry and in modern reserves.

(8:10 p.m.) much jobs.

Our [Mr. Benson.1 October 22.


1968 COMMONS DEBATES 1679 though Short Term Outlook regarded as satisfactory.
The Budget-Mr. Benson forward to demands for large scale invest- I now expect to see a level of gross national merit by business in new plant and equip- product and gross national expenditures merit, growing needs in housing and urban this calendar year of approximately $67 bil- lion, or about 8 per cent over the $62 billion development, and the continued expansion of including hospitals, achieved in 1967.

Of this increase, a larger useful social capital, schools and universities.
There should be no proportion than was the case last year, say about 4& per cent, should be in real terms, dearth of demand during the next four years.

We do face serious problems, however, in while the average increase in prices reflected organizing our economic advance and ex- in the G.N.P.

may average out around 39 per pansion, in managing it and in financing it.

cent as compared to about 4 per cent last Both in our public and private activities these year.
This is a modest improvement in price tasks are going to require the best brains and performance it clearly cannot be work that Canadians can devote to them.

Great economic advance is open to us but only if we manage our affairs well.

I will not endeavor to put a precise figure to my expectations for 1969 at this very early stage, but in considering the budgetary posi- tion for next year I have had to form some The outlook for the remainder of 1968 and views.
I should say that over-all w e might for next year is discussed in general terms ifi expect a somewhat better price performance the first few pages of the White Paper.

Condi- and about the same increase in volume as this tions in the United States have as usual had a year.

This implies a growth in G.N.P.

from most important influence upon our affairs.

1968 to 1969 of something between 7 and 8 This has been true both in the financial mark- per cent.
I think we shall continue to face a ets, where their high interest rates and short- situation where both the level of unemploy- age of capital have affected us directly, and ment in some areas and the rate of increase in their markets for our ~roducts.

Our e x ~ o r t s .

in prices will continue to give us concern.

assisted by the automoiive agreements, in- creased very rapidly early this year.
Now Current that the United ~ t a t k s has-put into effect its I turn now to review our current fiscal posi- new fiscal policy, approved by Congress in tion.

The last budget was that of November June, we must expect a moderation in their 30th, 1967, in which my colleague, the present Pace of expansion and, we hope, in the rate Secretary of State for External Affairs, was of price increases which a r e associated with confronted, as I have been since, with diffi- it.
cult problems in the financial markets.

He I n our internal affairs we expect to see proposed some tax increases and stated the continued strength in the sustaining forces of government's intentions to limit its expendi- tures this year to $19,300 million, apart from our economy.

Business investment in Canada has begun to increase again after the pause of medicare, and to limit its demands on the 1967 and I look for a significant advance next capital market this fiscal year (apart from Year.
Expenditures on housing in Canada have risen substantially during this year and should exchange continue to expand significantly in 1969, when purchases) to less than $750 million.

Those demand will be strong and when we would proposals would have just about balanced the expect more mortgage funds to be available.

budget this Year.
budget this Year.

Subsequently the proposed Par- The market for consumption goods and serv- revenue measures were not approved liament and had to be changed, which has ices in Canada has also been strong this reduced our prospective revenues.

while we ahead, we can expect to see year.


~ succeeded in imposing a vigorous restraint further gains in consumer expenditure in real terms, though perhaps at a more moderate Upon those expenditure Programs which are rate in money terms if we can succeed in within direct control of the government, we moderating in prices, costs and substantially underestimated the growth in m n e y incomes in accordance with our anti- our expenditures under certain statutory obli- inflationary policy.
The generally bouyant gations and particularly in several large fed- Outlook, however, Problems, particularly those now faced by the .

(8:20 m,) regional eral-provincial Programs.

is marred by requirements the rise finance 'Osition.

~ ~ ~ ~ k i & , Prairie farmers and the relative lack of employment opportunities in Quebec and the Atlantic provinces.

After reviewing the reports from the Trea- sury Board that I have received and taking 1680 COMMONS DEBATES October 22.
1968 The Budget-Mr. Benson into account as best we can the supplemen- tary estimates we must still place before Par- liament, I estimate our total expenditures this year will be $10,780 milliorl, about 48 per cent higher than our original intention.

I now estimate our revenue this year-before taking in the tax changes I am proposing-will turn out to be approximately $10,050 million.

This would leave a substantial deficit of $730 mil- lion.
Thcse figures do not include any write- off of our share of the Expo deficit, which involves no cash expenditure and which will be the subject of legislation later in this ses- sioil.

This deacit of Expo has been financed in earlier years and we are now recovering a part of the cost from Quebec.

Our extra-budgetary accounts this fiscal year have been complicated by the rundown in our exchange reserves late in the last fiscal year and their restoration in recent months.
Early in 1968 the rundown of our exchange reserves produced a tefnporary swelling of our cash balances-a situation which made it possible and desirable to postpone borrowing during the latter part of last fiscal year.
Apart from foreign exchange o p ~ r a t ~ o n s , our loans and investments this year have been a bit less than expected, though in the housing field the slower than expected demand by provincial and local authorities for loans for public and other institutional housing has made it possible to provide a winter program of direct loans for owner-occupied housing.

This program will not only help to meet a real need but will also provide a direct stimu- lus to employment.
Apart from the financing of exchange, our net extra-budgetary requirements for cash during this fiscal year I now forecast at $600 million.

This must be added to the budgetary deficit in assessing our total cash require- ments, including those being met by reducing our cash balances.
I n regard to exchange we have had to uti- lize $490 million Canadian since April 1st up to the end of last month in order to finance our net purchases of foreign exchange in the market which is evidence of the recovery in strength of the Canadian dollar.

This has been added to our reserves.

T h e government has also borrowed the equivalent of $US 234 million outside Canada to be added to our reserves during this period.
P a r t of these new foreign exchange resources has of course been used to pay off in full the short-term interna- tional the exchange crisis.

[Mr. Benson.1 obligations incurred during To meet the large Canadian cash require- ments this year we have been able to draw down the abnormally large balances we had at April 1st-$997 million-mainly arising from the sale of U.S. dollars during the exchange crisis.
In addition we have had to borrow very substantial sums, by issues of marketable bonds a t June 15th, August 1st and October lst, by the sale of the special replacement issue of Canada Savings Bonds in May, mainly to refund in advance the large issue maturing this year but also in part providing cash, and by increasing the volume of sales of Treasury Bills.
The proceeds of these issues, together with our cash balances, have been used: first, to refund maturing issues; secondly, to meet the very large net redemptions of Canada Savings Bonds (amounting to $556 million up to October 16 this to purchase exchange in the market; and, finally, to meet our current budgetary and extra-budgetary requirements.
To October 16 this fiscal year we have borrowed $428 million on balance in the Canadian market after into account refundings and redemptions both of marketable obligations and of Canada Savings Bonds.

fiscal year); thirdly, taking such investment Our objective in the current Canada Sav- ings Bond campaign is a record sale which will raise a large amount of cash during November.

The terms are very attractive in comparison with earlier Series and with other investment possibilities.
This savings bond is an excellent through which Canadians in all walks of life can convenient- ly and profitably put their money to work in furthering their own interests and the nation- al interest through the financing of important constructive programs as housing; nuclear power is another example, and of course farm credit.
To achieve a broad place- ment of the new Series of Canada Savings Bonds, a vigorous effort is underway from coast to coast by a large and experienced payroll savings organization, by the banks and other financial institutions and by invest- ment dealers and stockbrokers.

This effort is backed by a first class advertising cam- paign using all major media.

The attractive terms will prompt many holders to convert earlier Series into the new Series.
To cover these rollovers and to produce a large amount of cash will require a gross sale during the campaign period in excess of the previous record established in 1966.

I believe our sav- ings bond organization is mounting the best Ociober 22.

1968 COMMONS DEBATES 1681 operation of its kind in the western world and I look forward to its success as a major element in our financing program this year.

Mr. Harkness: What is your estimate of the amount of money involved?
Mr. Benson: We will need to borrow in the market again before this fiscal year is over in order to refund maturing debt and possibly to raise some additional cash as well but the financing will such marketable total of depend importantly on the outcome of the Savings Bond campaign.
1969-70 Fiscal Outlook It is difficult to forecast our position in the next fiscal year at such an early date as this, yet I feel I must make some effort to do so in order to develop the tax proposals that I think it is necessary to place before you tonight.

We intend to continue severe restraint upon those direct expenditure programs under the government's control, eliminating what is obsolete and permitting only the degree of growth that is essential.
We shall have to resist requests by members on both sides of the house, and from groups and individuals outside, to spend money for worthy purposes which we cannot afford to do along with the other things we are doing.

I t will also be necessary to maintain a virtual freeze on the size of the public service of Canada.

We shall also seek the vigorous cooperation of the pro- vincial governments in the same kind of re- straint upon the growth of the jointly financed expenditure programs under their control.
Even those programs which we and they agree deserve priority must be carried out with maximum economy, and with a keen eye to what is really essential.

On this basis I am now forecasting budget- ary expenditures in the next fiscal year a t approximately $11,670 million, including medicare expenditures on the assumption that all provinces will take advantage of the Medi- cal Care Act.
This would be an increase of $890 million, of which about $335 million would be for medicare-leaving an increase of less than 54 percent for all other expendi- tures.

Revenues for next year-before the tax changes I am now proposing or those that may arise from our tax reform program next be estimated a t about $10,830 mil- Year-can lion, a growth of approximately 7 2 percent over the current year.

This takes into account a variety of special factors as well as general economic growth.
The Budget-Mr. Benson (8:30 p.m.) We must of course keep in mind the loans and investments to be made next year, as well as our expenditures, in assessing the nature and scale of our fiscal problems.

Our detailed budgets in this field are not yet decided.

By f a r the largest element in this total is housing.
The capital budget for the Central M o ~ g a g e and Housing Corporation next year should reflect the conclusions of the government after it receives the views of the special task force headed by my colleague, the Minister of Transport (Mr. Hellyer).

I t will also include farm credit as a major ele- ment, where we must endeavor to take into account the extent to which demands can be met from the banks and other institutional lenders.
The revision of the Farm Improve- ment Loans Act will help in this regard.

In addition of course we have a wide variety of loans and investments for nuclear and other special power projects, for the Seaway and Air Canada, the Canadian National Railways and other crown agencies.

and for foreign aid and export credits.


I would expect the total to be something of the same general level as this year, and partly offset by receipts of cash from outside the budget (from employee pen- sion funds and other accounts for example).

The net extra-budgetary requirement for cash would appear likely to be of the order of $600 or $700 million, excluding what may be required for foreign exchange purposes.
These extra-budgetary requirements a r e demands that we would normally aim to meet by borrowing.

At the level indicated, how- ever, they alone will pre-empt most or all of what we should expect to borrow next year in competition with other borrowers in the capital and credit markets.

Control of Public Expenditure Our experience this past year, and the pros- pects next year, force us all to recognize the central problem of the control of public expenditures in Canada today.
This is a prob- lem that confronts not only the parliament of Canada but also the legislatures of the prov- inces and the Councils of the municipalities.

The past decade has witnessed a very rapid increase in the scale of public expenditures a t all levels, and particularly by provinces and municipalities.
I will not endeavor to give detailed figures to the house a t this point, but we may note briefly that expenditures by all governments as recorded in our national eco- nomic accounts have risen from $8.7 billion in 1682 COMMONS DEBATES October 22.

1968 The Budget-Mr. Benson 1957 to $21.2 billion in 1967.

Of this increase of $12.5 billion some $8.4 billion has been in provincial and municipal final expenditures.
Federal transfer payments to provinces, of course, have increased very rapidly to help meet this growth.

When these transfers are eliminated, the increase in federal expendi- tures for its own direct programs over this period has been $4 billion.

In 1957 they were 15.1 percent of the G.N.P.

By 1967 they had fallen to 14.3 percent of the G.N.P.

It is well known that several large pro- grams that we finance jointly with provincial governments are those that have been found most difficult to control.
These include nota- bly the program commenced in 1967 whereby we have provided tax abatements, equaliza- tion payments, and direct cash adjustment payments under the Fiscal Arrangements Act to assist the provinces in meeting the costs of university and other post-secondary educa- tion.

Included in these shareable costs are large sums spent for senior matriculation courses in secondary schools, such as grade 13 in Ontario.
Our assistance for such education amounts to one half of the total operating expenditures in the provinces, including those financed by student fees or other sources.

These costs are now increasing a t an annual rate of about 20 percent, and our a'djustment payments must be expected to rise very rap- idly to reflect this phenomenal expansion.
The other most rapidly expanding program is hospital insurance, where the current rate of cost increases exceeds 15 percent despite the fact that the program is now well established and reasonably mature.

Payments for general welfare purposes under the Canada Assist- ance Plan are large, but they are not subject to such rapid built-in cost increases a,nd do not cause as much concern.
Medicare of course will quickly become a large joint program and will involve growing expenditures for us as well as for the provinces for some time.

However, in view of the substantial increases in medical fee schedules in recent years, the new medicare program should not run into cost increases as large as those of hospital insurance, for example.
We should note that new government expenditures for medical care will be mainly replacing payments by individuals for the same purpose or payments made through existing private or public plans.

Only a fraction of the cost will consti- tute an increasing demand upon the econo- my, but the result should be a fairer and more efficient system of assuring health care for all Canadians regardless of income.

[Mr. Benson.1 Mr. Knowles (Winnipeg North Centre): ~t last the government is beginning to realize this.
Mr. Benson: Discussions with the Provinces The effective management of all these major services is a matter for the provinces.

It is in the mutual interest of all the govern- ments and of the people of Canada to ensure that expenditures under these very important in programs are made economically and accordance with sound judgments as to pri- orities and rates of growth, taking into account the burdens they place on the tax- payers as well as the objectives of the pro- grams themselves.
I plan to meet with the treasurers and finance ministers of the prov- inces early in November to discuss these questions.

I expect that in reviewing this health field we will be joined by our col- leagues, the ministers of health who will also be meeting here at the same time.
We will consider whether some intensive work should be put in hand on a broad basis to apply modern systems analysis and operational re- search to improving the efficiency with which health services and facilities are provided to the people of Canada.

In the field of higher education there is the same need for economy and efficiency but one must also take into account major issues of policy.

These, of course, are matters of pro- vincial responsibility.
The universities and other educational institutions face increasing problems of their own, and we are all more conscious of them now than ever before.

Pro- vincial governments are responsible for the evolution of the laws and institutions for higher education.

We have no desire to inter- fere at all in this difficult and delicate respon- sibility, where each of our provinces will wish to see its institutions develop in a way that suits its own conditions.

Our main con- of growth involved.


In 1965-66 our contribu- cern in 1966 and 1967 was to ensure that the provinces had additional financial means at their disposal to help meet the abnormally rapid increase in requirements during the current period for the expansion of universi- ties and other post-secondary educational in- stitutions.
We recognized this priority, although we have been surprised at the extreme rate the support of higher education, tion including the special tax abatement to Que- bec, amounted to about $40 million.

This year the equivalent fiscal transfer and cash Pay- ments to the provinces are estimated at about to ~ c f o b e r 22, 1968 COMMONS DEBATES 1683 The Budget-MT.

Benson t i ~ ~ the twelve times what they $500 million-over were three years ago.
i As the prime ~ labour, improvement of productivity, increasing economic efficiency through more has already indieat- vigorous competition, the freeing of interna- ~ ~ ed, we anticipate that provinces will wish to tional trade, the reduction of regional dispari- the elimination of ~overty-indeed, ties, discuss with us questions related to medicare.

we shall be quite prepared to discuss them.

almost all the economic and social virtues we we hope that all the provinces will take Can think of.
But the real problem in public advantage of that act at the first opportunity.

policy comes in being specific, in reconciling we continue to believe that the provision of conflicting objectives, in making choices medical care services as a publicly financed among competing demands, in deciding how operation is a matter of high priority in the much of each to pursue, and of course in development of proper health and social ser- knowing how to do it all effectively and efficiently.
There are far more good things to vices for Canadians.

be done in Canada, particularly by govern- (8:40 p.m.) This government and this House recognize ments, than there are resources available to the financial problems being faced by all the do them.

provinces-even them, We are doing a great deal, and will do the wealthiest of which is the most outspoken on the subject.

more next Year, in pursuit of all the goals Between 1962 and 1967 we reduced the feder- and objectives I have mentioned.
Not the least of our efforts, I would emphasize, are a1 personal income tax to make way for the provinces to enlarge their use of this revenue the many services and programs to deal effec- tively, constructively and humanely with field from 16 percentage points to 28 percent- age points.

We are now helping all provinces poverty.

But we cannot do everything at once.


with substantial participation in meeting the Rather, we must try to advance on as broad cost of broad services in the fields of health, and balanced a front as possible, and we welfare and higher education, and particular- must be ready a t all times to face up to the ly in rapidly growing programs in fields of most urgent priorities among all of our highest priority.

We are giving major assist- objectives.


ance to the provinces with less than average taxable capacity by our equalization grants.

We are providing hundreds of millions a year In the broad field of economic policy the in housing finance to provincial and local most urgent need now is to check further the agencies under the National Housing Act.

All continuing increase in prices and living costs.
the many hundreds of millions of dollars w e There appears to have been some easing of inflationary pressure in recent months.

But collect in contributions under the Canada Pension Plan, in excess of current pension there is little evidence that the damaging Payments, are loaned immediately the upward spir@ of prices and costs has been Provinces.

Parliament has proven with action effectively bi-oken.
Further, unless our poli- its concern for the financial needs of the cies are firmly set to resist inflation, there is Provinces.

We can legitimately expect recog- great danger in nition by them of Our problems, and of the 1969 will cause pressures that will set in train needs for expenditures on national programs a new round of price and cost increases.

for which we as a parliament are responsible.


that continued prosperity Inflation to Emphasis in Economic Policy Before turning to our immediate fiscal poli- cy and the details of proposed tax measures, it is essential to consider the over-all frame- work of general economic policy for 1969 and to determine its main emphasis.
Needless to say, we shall continue to work toward all the broad goals which are widely accepted in western employ- ment, economic growth, price stability, bal- ance in external payments, and an equitable sharing of rising incomes.

industrial countries-full These general goals comprehend many spe- training and mobility of cific objectives-the 29180-107; I want to emphasize that a rapid rise in the price level, on the scale experienced in recent years, has many serious and damaging effects.
Firstly, it is most unfair to those in our socie- ty, mainly the older people and the poor among us, who do not possess the bargaining power necessary to protect themselves against the increase in the cost of living.

There is no doubt that recent and current inflation is hurting many more than the number who suffer from unemployment.

Secondly, rapid price increases undermine the whole basis of our economic structure and competitive mar- ket system.
A flexible price system cannot to allocate resources for operate properly 1684 C O M M O N S DEBATES October 22.

1968 The Budget-Mr. Benson maximum production and income unless the price level as a whole is reasonably stable.

Thirdly, serious inflation erodes gradually but surely the competitive position of Canadian producers, both in other countries with whom we must trade and in our own markets at home.
And fourthly, it makes people, and the institutions through whom they invest their money, increasingly reluctant to lend money except at high interest rates and in decreas- ing amounts.

Yet the growth and development of our economy requires the large scale investment of savings i n the form of mort- gages and bonds fixed in terms of money.
These securities are the only means open to homeowners, school boards, municipalities and governments to borrow funds needed for housing and for all the public purposes essen- tial in our modern society.

Unlike large cor- porations, none of these borrowers can sell equity shares, but their increasing role in the capital markets means that"even a moderate degree of inflation poses a larger problem than ever before.
We should not delude ourselves into think- ing the choice is between either policies of fiscal ease to counter unemployment or poli- cies of fiscal restraint to fight inflation.

In our present circumstances, unchecked inflation would precipitate the kind of economic dis- ruption in which unemployment would surely increase and we would end up with more of both of these evils.

Achieving greater stability in our price level requires action on many fronts.
Our fiscal policy must avoid excess demand on production and markets, and keep producers constantly aware of the need to compete vigorously and to prevent cost increases.

We need to exercise a wider responsibility to pro- mote competition and minimize restraints on trade.

Management must do all it can to improve efficiency and productivity.

Workers and governments must cooperate to ensure better training and mobility of the labour force.
Business and governments must antici- pate bottlenecks and shortages and plan pro- duction and demands to minimize them in every way possible.

Over the long term the provinces must plan and provide better edu- cation.

Finally, we must, I feel, do all we can to persuade those who enjoy strong market power to exercise it with due restraint, taking the public interest fully into account.
This will require the use of public education, spe- cial inquiries into inflationary situations, and [Mr. Benson.1 the mobilizing of public opinion against prac- tices and actions which endanger the mainte- nance of price stability in our country.

1 expect that my colleague, the Minister Consumer and Corporate Affairs, will have something more to say on plans and measures to combat inflationary cost increases when he participates in the Budget debate.
The list I have already given, Mr. Speaker, makes quite a catalogue.

Nevertheless they are all meas- ures which Canadians, working together ran achieve.

Most of them are desirable in them- selves, but they should now be given particu- lar attention and focused upon Preventing further increases in the cost of living.
Current Fiscal Strategy In deciding on over-all fiscal strategy for 1968 and '69 we must take into account both the financial prospects I have described and the broad economic situation I have outlined.
After doing so we have reached the conclu- sion that we must raise substantially more revenues in order to bring the budget into balance in 1969-70. investment programs By such action we will be contributing to the restoration of price stability, while at the same time giving support to the economy through i n housing, farm credit and other economic fields.

We will be limiting our demands on the capital market to non-inflationary amounts to be used for capital purposes.
The provinces and municipalities on their part will be investing one way or another the large funds we turn over to them from the Canada Pension Plan, and borrowing in the market to finance public works and their other lending and investment programs.
In accordance with the practice of recent years I shall be meeting at the end of the year with the provincial finance ministers to review the current economic situation and prospects, to assess the impact on the econo- my of our over-all public financial position, and to consider what are appropriate fiscal policies in this light.

I believe however that the general strategy I have proposed is the best one for the federal government in the present circumstances.
Tax Recommendations In selecting the tax changes to be made to implement this policy I am mindful of the tax reform program which the government pro- poses to initiate next winter.

I have been over with my officials the conclusions which they have reached from a long and comprehensive review of our income tax laws, the report of October 22.

1968 COMMONS DEBATES 1685 The Budget-Mr. Benson the Royal Commission on Taxation and the and conservation of the wealth of the family.
scores of briefs and hundreds of letters which I t will eliminate a deeply felt grievance.

There would also be a $10,000 exemption in we have received on the subject.
After fur- ther thought I have reached certain decisions respect of the amount left to each child, and which I have asked my officers to set forth in additional exemptions for younger children the form of a draft bill, which I will place depending on age and income, and for chil- before my colleagues for their approval or dren wholly dependent because of disability.

modification.
modification.

It is this draft, suitably revised Finally there would be a general exemption and explained, which will be placed before of $20,000 to eliminate or reduce the tax on they may be the house, provincial ministers, and the pub- small estates lic for detailed study and discussion early in willed.

the new year.
the new year.

I t would then be reconsidered and revised by the government for final con- sideration by the house in the latter part of I propose that the loss of revenue arising from this long awaited reform of the exemp- tion structure be made up by raising the rates I hope we can have a on the rest of the estate.

The schedule of rates is set forth in the table included in the resolution: they range from 15 percent at the ing tonight are not an integral part of next bottom to 50 percent at the top.
The value of year's reform package.

BY that I mean that taxable gifts made after tonight will, on the they stand on their own and should be imple- donor's death, affect the rates in the tax merited, whether or not there is to be any schedule that are applied to the taxable Y~alue further reform.

They do not c ~ m m i t us to of his estate.

I n effect, taxable gifts made after tonight will use up part of the low rate particular changes in other areas.

brackets in the Estate Tax rate schedule.


The tax i-ec~mmendations which I am mak- reformed income tax in effect in 1970. to whomever By that (8:50 p.m.) wife without tax.
Estate Tax and Gift Tax inces have enjoyed three-quarters of I t is difficult to predict accurately the reve- nue effects of changes in estate taxes but I have aimed a t maintaining the same total over-all revenue while permitting the trans- that transfers of mission of property between husband and this matter summed up in the phrase that "a believe that the The first group of recommendations con- cerns the Estate Tax and the Gift ,Tax.
I have come to the conclusion property at death and by gift should not, at I t will be recalled that since 1964 the prov- least for the present, be included in income like other items that have normally been the regarded as income of a recurring nature.

revenue from the estate tax-either by pay- While respecting the intellectual coherence ment from the federal treasury or by abate- and elegance of the case made by the Royal ment in their favour.

I do not propose that this be changed.


We recognize the special Commission on Taxation on interest ofithe provinces in this field of taxa- -crudely buck is a buck is a bucku-I tion but Believe that parliament should keep overwhelming weight of Canadian opinion is a share in i t for its indirect benefits in the against it now, and many Canadian practices enforcing of the Income Tax Act as well as and institutions would be seriously disrupted its direct benefits in revenue.
There are some that cannot be transmissions of property if we embraced this proposal.

Instead, 1 pro- taxed by laws within provincial jurisdiction.

pose that the estate and gift taxes continue to be levied on the transferor and that they be reformed along did erent lines.

the special statutory rules about situs of property in order to bring the federal rules more in line with those used for purposes of provin- after midnight tonight we exempt all amounts cial succession duties.
I intend to discuss with left outright to a widow by her husband, and provincial ministers other means of achieving to a widower by his wife.

Perhaps I should greater uniformity and simplicity in the laws make it absolutely clear that this estate tax concerning death duties and their application.

exemption As for the gift tax, effective tonight the benefits.
Further, if a husband leaves the exemptions and the rates will be changed, entire life interest in a trust to his wife, the and the new rate schedule will apply progres- assets in that trust will be excluded from his s i v e !

~ to the cumulative total of all future estate, but included in hers, and vice versa.

Straightforward gifts between husband and With this reform, we will recognize the con- tribution made by wives to the accumulation wife will be completely exempt.
Gifts to other I am proposing that in respect of deaths includes pension and annuity that we amend certain Of gifts made by the donor.

I 1686 COMMONS DEBATES October 22, 1968 The Budget-Mr. Benson individuals will be exempt up to $2,000 per in mind that we would use, in computing the annum for each recipient.

There will be no reserves against the various classes of poli- exemption for gifts to trusts or corporations.
cies, the same interest assumption that is The present exemption for gifts to registered tables of cash Surrender implicit charities will be continued.

as will the once- values.

.

- - - in-a-lifetime exemption of '$10,000 in respect Policy dividends will be deductible, provid- of a gift of a farm by the farmer to his child.

ed they are paid out of the profits of the The other present exemptions, including that participating fund.

based on income after tax, will be dropped.

the in .

.
the in .

.

The rates of gift tax would range from 12 percent on the cumulative total of taxable gifts until $15,000 is reached, up to a max- imum rate of 75 percent on gifts when the cumulative total exceeds $200,000.

This 75 percent means in effect a tax rate of three- sevenths or about 43 percent, on the total of the gift and the tax on it, the basis on which we nornlally think of income and estate taxes.
It will be evident to the honourable mem- bers that, if the gift tax rate changes were not effective immediately, taxpayers could take advantage of any interim pmiod to make the new abnormally large gifts before cumulative system begins.

I believe that members will also agree that the estate tax changes should be made effective immediately so as to exempt property passing to widows on deaths after midnight tonight.
Life Insurance Companies My second group of proposals concerns the life insurance companies and their policy- holders.

At present, the business incomes of life insurance companies are largely exempt from tax: the companies are taxed only on the amounts appropriated for shareholders during the year.
This is usually only a small fraction of the total business income of the sharehold- er-owned companies, and of course it pro- duces no taxable income at all for the mutual companies, which now I should point out, dominate the industry, or for the fraternal benefit societies.
income I am proposing that we introduce special rules to recognize the problems that arise in measuring insurance in industry, but that, with the exception of these special rules, the general provisions of the Income Tax Act apply to this industry just as they do to all others.

life the One of the special rules will deal with the deductions from income permitted in order to provide the policy reserves needed to meet future liabilities under policies of insurance.
The details of these reserves will be set out in regulations, and the industry will be consulted in the course of preparing these regulations.

However, I have the computation of [Mr. Benson.1 (9:00 P.m.) All of this will apply only to the Canadian operations of the corporations.
The usual rules for determining the profits of a branch of a company will apply except that we will provide by regulation for the computation of the portion of their investment income which is attributable to their Canadian operations.

For Canadian companies, the income pro- ducing assets that will be treated as Canadian will be proportionate to the part of their that relate to over-all actuarial reserves Canadian business.
This will bring a reasona- ble portion of their investment income into Canadian taxable income, and a t the same time, it will not penalize those companies which choose to keep most of their assets in Canada.

that will be For non-resident companies, the income- producing assets treated as Canadian as of January 1, 1969 will be those required to be kept in Canada in accordance with the rules of the Superintendent of In- surance.
The income from other Canadian assets of these companies will continue to be subject only to withholding taxes.

I want to emphasize that these recommendations to cause these companies to withdraw funds from Canada, nor is there anything to deter them from investing more in Canada.
is nothing there in For the future, the income-producing assets of these companies will be increased by the amounts derived from the Canadian opera- tions, and reduced by the value of the assets which they choose to transfer to withholding- tax status.

We will apply our 15 percent branch tax only to these transfers.
I t is essential as well, I believe, in terms of equity between those who save in the form of insurance policies and those who save in other forms, to levy some tax on the invest- ment receive income which policyholders through the insurance companies, either in the form of policy dividends or otherwise.

The Royal Commission proposed valuing investment income each these elements of or not received directly by the year-whether to policyholder-and them directly taxing C O M M O N S DEBATES 1687 him.
We have worked out a much simpler and more practical method which should achieve substantially similar equity.

In order to tax those elements of invest- ment income actually received by the policy- holder before he dies, either through cashing in his policy or selling it, we propose to include in his taxable income the proceeds of the policy less the net amount he has paid for it.

In most cases his cost would be premiums less dividends.
For policies already in exis- tence the taxpayer could use as his cost to date the cash surrender value on the next anniversary date of the policy.

This will ensure that this tax applies only to invest- ment income earned after today.

The regulations which define the taxable element of annuity payments will be amended so that they are consistent with this treatment of insurance policies.

Again, the change will not affect the treatment of interest earned before today.
the This will bring to tax the amounts with- drawn by policyholders.

There is no compara- ble simple and practical method of taxing in investment the policyholders' hands income which benefits them by way of reduced premiums or increased policy divi- dends.

Consequently I am proposing that we levy a 15 percent tax on part of the invest- ment income of insurance companies.

This will take the place of a tax on the individual policyholders.
I will not attempt to give all of the details of taxable investment income: they are set out in the resolution.

However, I would like to mention that there are several deductions from total investment taxable investment income, including deductions to recognize that some policies are in respect of registered pension plans, and a deduction to recognize the special situation with respect to outstanding non-participating policies.
the computation of to arrive a t income Since this tax will reduce the investment income available to the companies, it will be a deduction i n arriving a t taxable income.

The Budget-Mr. Benson be paid in future on many outstanding par- ticipating policies.

industry insurance On balance however the gain in revenue to us and to the provinces and the gain in equity in treating different channels of savings more fairly would outweigh the disadvantages.
The life in Canada, both foreign and domestic and those who invest in it will be taxed fairly by comparison with other industries and financial institutions.

I t will be taxed more logically I believe than that industry is taxed in other countries, including the United States.
The industry is already having to adjust to changing condi- tions and market preferences, and I believe should remove this new tax regime-which the uncertainty about taxes which has been hanging over the industry for years-will speed that process.

It could lead to new com- binations of basic insurance protection and savings i n various forms, perhaps making more effective use of for registered retirement savings plans.
the provisions Estimating the revenue yield from these taxes on life insurance companies and with- drawals is somewhat hazardous but I believe that for the next fiscal year the total revenue yield would be about $95 million, of which about $40 million would come from the indirect tax on investment income.

About $10 million would be provincial revenue.


I also propose that non-resident companies carrying on a general insurance business in Canada (that is other than life insurance) will include in Canadian taxable income the in- vestment income attributable to their Cana- dian operations.

This will be the income flow- ing from the assets.


*related to the Canadian branch computed in the same manner as for non-resident life companies; other Cana- dian investment income or such companies would continue to be subject only to with- holding tax.

This will correct a discrimination against Canadian companies carrying on such business here, but will not impede the invest- ment in Canada of reserves against insurance risks elsewhere.
I hnve tried to assess the effects of these Reserves of Financial Institutions taxes on the Canadian life insurance industry.

I have reviewed the reserves allowed to Clearly they will reduce its annual accumula- financial institutions f o r tax purposes in the tion of income in general contingency re- light of the Report of the Royal Commission serves-which is as it ought to be, for these on Taxation.

As a result, I propose now to are business profits not now being taxed.
The reduce the limits both for mortgage lenders tax on investment incolne may cause a mod- and for banks and those cases where the erate increase in the premium rates in the reserves a r e not determined by a detailed future, or a t least in the net cost after policy appraisal of individual accounts but on the dividends, of new policies and it may cause a basis of a general percentage applied to large moderate reduction in the policy dividends to categories, which is the normal practice.
i ~ ~ 1688 COMMONS DEBATES October 22.

1968 The Budget-Mr. Benson In view of the loss experience of mortage Other Measures ~ ~ ~ change in the law to In quite another field I am lenders over the past twenty years, 1 am a proposing to reduce the limit in section 85G exclude from the Of the Income Tax Act from percent Of the excmpticn provided for provincial crown tor- Of non-NHA mortgages t' porations those cases where persons or corpo- 18 percent.
I am prepared to entertain alter- rations other than Her Majesty or a munici- to differentiate pality have options to buy shares held by Her native practical proposals between mortgages of different Or quai- Majesty or a mqJnicipality.
It is still possible ity as the Carter Commission proposed, but I that corporations in respect of which this is have not that t r ~ ~ e may be held taxable under the present seemed better than a single percentage when the arrangements law, since in question account is taken of the problems of reporting appear to be facades.

However, I think we and assessment.

should put the matter beyond doubt.


yet found a For banks, I am also proposing a limit of the that on T ~ transitional by the ~~~~l ~ limit set by and gas ~ - The existing reserves of some of these obtain much greater benefits 14 percent applied to the total of the assets * (9:10 p.m.) that are now eligible to be included in com- At this time I wish to announce a change puting reserves.
This will represent a cut- back of approximately one half from the that will be made in the regulations relating for the Operators of present level of reserves.

I am not persuaded and mines.

The existing that more elaborate formulas, of the types scheme contemplates that depletion will be ~ ~ i ~ tion, are necessary; but I am prepazed to calculated as a percentage of production prof- i t ~ after deducting exploration and develop- consider alternatives as long as they lead to ment expenses.
Unfortunately, as the regula- comparable aggregate results.

tions now read, groups of companies can than were intended by arranging to have their explora- financial institutions, built up over many tion and development activities carried on in years, are substantially larger than this new formula would provide.

This mainly applies one company and their producton activities to the banks.

The Royal Commission recom- carried on in another.


The regulations are mended arrangements being changed to provide that all exploration extending up to ten years would be appropri- and development expenses of the group must ate for the gradual adjustment of the reserves be deducted from production profits before to the new limits.

I propose that such a tran- I should also like to announce that my col- sition be authorized.
As long as the reserves the 1i percent exceed league the Minister of National Revenue formula they would not be increased.

The intends to enforce more thoroughly and in finer detail the collection of tax on receipts of interest.
It has been fairly widely believed in limit on the reserves for each institution would be reduced Year by Year on a curnula- noted by the Royal Corn- recent years-and tive basis in such a way as to reduce the mission on axa at ion-that there appears to authorized excess over the 16 percent ratio have been a large volume of interest payments by an amount each year equal to one tenth of to individuals that have not been reported the excess for that institution at the end of its or assessed for income tax.
I t is now feasible current taxation year.

I n most cases a large information by to match UP much more part of this reduction and in some cases all of means of computers with tax individual it would be brought about by the growth in returns than was previously the case, and we intend to secure more such information, par- percent ratio the assets to which the ticularly in regard to interest and dividends.
I applies, but insofar as this Was not sufficient believe that such action will produce a nota- a portion of the excess ~ o u l d have to be ble increase in our revenues and that it will brought back into taxable income to accom- increase the over-all equity of our tax system.

introduction of medical care plish authorized ratio.
plans in a number of provinces, taxpayers I estimate that this change in permitted will no longer have to pay certain medical reserves will bring in $45 million of budget- costs which formerly were classified as medi- ary revenue during 1969-70, as well as some cal expenses for tax purposes.

I propose that revenue to the old age security account, and we follow the pattern set in 1959 when hospi- tal insurance was introduced and amend the some increase in provincial revenues.
the new With the gradual transition the to is [Mr. Benson.1 ocfober 22.
1968 C O M M O N S DEBATES 1689 The Budget-Mr. Benson the royalties authority of that medical suggested by section 22 of further measure The third, and by far the largest of these Income Tax Act to provide expenses, as defined in the Act, shall not sets of resolutions, were those tabled on include amounts which are paid on a taxpay- November 6, 1967, implementing Canada's ers' behalf, or for which he is reimbursed, commitments, other than those on chemicals under a provincial medical care insurance and plastics, under the Kennedy Round agre- plan which meets the criteria set forth in the ements.
The rates set out in these resolutions came into effect on a provisional basis on Medical Care Act.

The Income Tax Act will be amended to January 1 of this year.

The resolutions were referred standing committee on finance, trade and economic affairs.

After a the committee range of payments.


~h~ recommended them to the house for favoura- provide that the present non-resident with- holding tax on royalties paid by a resident of canada to a nonmresident shall apply to a Series of public hearings somewhat wider proposed amendment will be based on t h e ble However, parliament was dissolved before definition of t h e O.E.C.D.
fiscal committee and used as a model they could be enacted and an order in council by Canada in several of its international tax was therefore passed on April 25 under the the Financial agreements.

to help Administration Act, continuing in effect the is intended reducticns in duty.

I announced a t farmers who have need of more grain storage ~ r o ~ o s e d capacity on their farms.
I am thinking in the time that collections of the increases in particular of the farmers in Western Canada ~1:StomS duties proposed on a few imported who will have to store increased amounts of products were being suspended, br1.t that it grain this winter and of the corn growers in intention to ask the Ontario.
I t is proposed that amounts spent to next parliament to enact legislation imple- acquire grain storage facilities may be menting both the reductions and increases, deducted for tax purposes over a short peri- effective from the dates originally proposed in the resol~tions.

The resolutions 1 am tabling od.

This will be done by a n amendment to t h e income tax regulations and will provide that tonight will, if enacted into law, have this the capital cost of new buildings, structures effect.
and bins designed for the purpose of storing grain on a farm, acquired i n the period Chemicals and Plastics August 1, 1968 to December 31, 1969, may be written-off for tax purposes over a four year period.

The new resolution which I a m introducing this evening flows from the Tariff Board report on chemicals under reference 120.

The 1 should note at this point that these vari- first volume of the board's report was tabled in June 1966.
The revised in ous changes in the Income Tax Act, other than those on life insurance companies a n d schedule proposed by this the board financial institutions which I have already volume formed @e broad basis for our Ken- reported, should increase budgetary revenues nedy Round negotiations on chemicals and by about $10 million in 1969-70.

Because .of plastics.

I n these negotiations the rates of their nature they will not affect the current duty on chemicals were "bound" at not more than 15 percent.
The plastics rates were, in fiscal year substantially.

general, bound a t the highest recommended rate within any group of products.

Customs Tariff Resolutions the government's the house in In the Kennedy Round, Canada undertook I turn now to the Customs Tariff.

I am to introduce the concessions offered on chem- reintroducing three sets of resolutions which icals and plastics not later than J ~ i l y 1.

I t was were tabled by my predecessor in the last the session of parliament.
The first set formed not, Part of the budget speech which was present- proposed new chemical and plastics schedule ed to the house on J u n e 1, 1967.

In the budget by that date.

Accordingly, it was agreed with of November 30, 1967, the rates of excise duty our trading partners that Canada could delay on domestic spirits and beer were increased.

putting these concessions into effect to not later than January 1 next.
As a result of our The second set of resolutions provided for an increase of the same amount in the customs negotiations with the United States, which is duties on imported spirits and beer.

The reso- Canada's major supplier of chemicals and lutions of June 1 and November 30 were con- plastics, reductions in the rates of duty on a sidered by the committee of ways and means number of chemicals and plastics in terms of the present tariff nomenclature were made by last December.
in fact, possible implement to 1690 COMMONS DEBATES October 22, 1968 The Budget-Mr. Benson that named.

for those order in council for the period July 1 to would be similar to that set out in the cus- December 31. in headings which are The schedule proposed b y the board is very these rules and cent to 10 percent or even lower rates.

toms Act to reduce or remove duties on arti- As to the tariff structure proposed by the c l e ~ used in Canadian manufactures.
Thus I Board, the industry proposed and the Board am presenting for the consideration of the recommended the adoption of the so-called house a much shorter schedule than that Brussels Nomenclature for most of its new proposed by the board.

At the same time I tariff schedule.


This nomenclature is used by should make clear that, by appropriate orders in C O U C ~ ~ , We will ensure that British goods the major trading countries, with the excep- tion of the United States; it is a system for will face no increases in rates of duty other classifying goods than those fully consistent with the principles grouped into chapters and sections.

~t also underlying the board's proposals.


Moreover, contains rules and notes defining the scope for many products imported from Britain and priority of the various headings.

The there will be reductions in rates from 15 per- board recommended notes be adapted for Canadian use and that A somewhat similar situation exists with the Customs Tariff provide that the governor regard to plastics.

For these products the i n council may prescribe such rules and notes.
board recommended a progression of rates, to the more fabricated fol'nls.

It part this is due to the use of this named those which it felt should be dutiable long.

nomenclature and in part because the Board because they were made in Canada Or were was directed not to make any general changes competitive with Canadian made plastics, and in the margins of preference, i.e.
in the differ- proposed residual items free of duty, in most ence between the British preferential and Representations were received to the effect most-favoured-nation rates of duty.

General- that the Board's proposals provided no assur- ly, the present rates are 15 percent B.P.

and 20 percent M.F.N.

on chemicals of a kind ance of protection when new products are produced in Canada, and Free B.P.

and 15 made in Canada.

It appears to me that there is validity in this view.
On the other hand, it percent M.F.N.

for those not produced in is important to have a procedure for free Canada.

As these chemicals are ruled by the Department of National Revenue to be made entry when c i ~ ~ m s t a n c e s warrant, so as to or not made in Canada, they automatically avoid imposing unnecessary costs on Cana- move, by this administrative action, from one dian users.

Accordingly, I Propose that rates of duty higher than those proposed by the set of rates to the other.
Accordingly the board, in general, recorn- board be established for the residual items, and that the governor in council be given au- mended a very long list of chemicals pro- thority to waive, reduce or restore these duced in Canada, identified by name, with duties.

This procedure will permit a shorten- rates of 10 percent under the B.P.

tariff and ing of the list of statutory tariff items in the 15 percent under the M.F.N.

tariff, and rates plastics schedule.

of Free B.P.

and 15 percent M.F.N.


on the residual tariff items providing for chemicals (9:20 p.m.) I am also recommending a few other depar- in Canada.

The structure not produced tures from the board's proposed schedule, the board, particularly with proposed by regard to the preferential tariff, would be less based for some products on new information, on new production in Canada or to meet cer- flexible than the present tariff.

tain problems not foreseen by the board.


All the changes I am proposing are consistent with our international commitments.

The board,s proposals have given rise to many representations urging a less rigid sys- tem.

I found considerable merit in these It goes without saying that I have received representations.
I t seems to me that both the a large number of representations for changes from the board,s proposals, many for higher present flexibility and the results intended by the Board could be brought about in another duties which are not being met in the resolu- manner.

tions I am tabling.

One I would like to men- the board's tion B.P.

duty be established for certain items in recommendation on polyethylene.
This is an the chemical sector and that parliament grant important issue but I am not willing to pro- authority to the governor in council to lower pose any changes in the duties on polyethyl- this duty from time to time.

This authority ene as recommended by the board without a I am therefore proposing that a 10 percent in particular relates to [Mr.

Benson.]
Benson.]

October 22, 1968 COMMONS DEBATES 1691 The Budget-Mr. Benson review of the current status Of obligations our new chemical and plastics tariff must be in effect by January 1 next.

further study by the Tariff Board.

According- must raise substantially more revenue to ly, I a m asking the board for a thorough but meet it.

prompt polyethylene.


I n selecting further changes to accom- plish this purpose I have in mind that next In order to meet our new international year we shall be engaged i n our major tax reform legislation and will then have in view our requirements for 1970 and beyond.

We will be-taking into account the fact that our income and corporation t a x surcharges of 3 I have received a number of represents- per Cent enacted early this year will temii- tions for other changes in the Customs Tariff.
"ate a t the end of 1969.

Regard must also be However, I have decided that these should be had to the non-recurring revenue effects of the change in timing of the payment of tax held over for consideration until a by corporations.

occasion.
occasion.

~ I am also tabling a resolution regarding the ~ Other Tariff Questions T~~ M~~~~~~~ later ~ ~ ~ h t i t - ~ ~ ~ ~ ~ the duties have I payment tax-bringing Central Fiscal Problem that we are committed, I return now, Mr. Speaker, to our central The changes in the chemical tariffs which I have proposed above and in the anti- implementation of our obligations under the In view of this consideration I feel w e can code".
A proposal regarding a ~ ~ ~ d i bill to achieve this objective is already before Secure a part of what we require for 1969-70 members in the form of a White Paper.

I b y completing the moving forward of the would not suggest that we proceed with this dates it then in line with the current resolution until the standing committee has examined the draft bill, Members will be payments on account which we are required aware, of course, to make from wages and salaries.
I therefore under the GATT, to revise our anti-dumping propose that in taxation years following their next taxation year corporations be required procedures by January 1 next.

to commence payment of their instalments of tax in the first month of their taxation year to which it relates and complete the instal- a merits in the twelfth month.

They will make their final adjusting payment, as now provid- minor effect on customs revenues.
I t is very hard to set a figure on them because of the ,d, by the end of the third month of the rather complicated changes in many small following taxation year.

In order to make the flows of import trade that are involved.
transition to this system I propose that corpo- rations be required to pay their instalments of tax in respect of their next taxation year in ten instalments commencing in t h e third fiscal problem and the revenues that we must month of the taxation year and terminating in the twelfth* month.

This acceleration will raise to meet our forecast requirements this fiscal year and next.

yield us about $275 million of revenue in the I n respect of the current fiscal year I have 1969-70 fiscal year.
The effects of this acceler- come to the conclusion that tax measures ation on corporate liquidity will be offset to a introduced now to secure enough revenue to significant degree by the completion of repay- balance the budget this year would have to ment of the refundable tax on corporate prof- be so severe that they would be damaging to the Canadian economy.
Therefore I feel we the additional revenue should look ahead to next year and determine required I propose to obtain by adding to the what we need, and put it into effect as soon Old Age Security Tax on personal incomes a n as we can.

additional similar Social Development Tax a t the former.
This Social should increase our total budgetary revenue Development Tax will be 2 per cent on taxa- for next fiscal year, 1969-70, by $130 million ble income up to a maximum tax of $120 per and add $10 million to our extra-budgetary annum.

~t would go into effect January 1st.

I leave our estimate it would add some $55 million to our receipts.
However, they would budgetary revenues about $710 million short revenues in the current fiscal year and about of the initial forecast of aggregate expendi- tures I made of roughly $11,670 million.
$440 Clearly a deficit of this order of magnitude to alternative next year is quite contrary to the economic sources of additional revenue, including for and fiscal policies I believe necessary, and we example an increase in our general sales tax The measures I have already outlined half 1 gave Serious attention its during 1969-70.

The remainder of the rates of In the next year.

1692 COMMONS DEBATES October 2 2 , 1968 The Budget-Mr. Benson which would produce comparable amounts.
trate the effect of the new Social Develop- But I concluded that what I am proposing ment Tax on the total of taxes on income paid would be the fairest and best, all things con- by a married man with two children.

The sidered, including the desirability of not add- second one gives the estimated yield of our increase of prices and costs various taxes in the current fiscal year, after ing to the rate taking account of the changes I have proposed.

of production.
of production.

I also include last year's figures for corn- I recognize table summarizes our will be concerned about parliament using any budgetary position for the current fiscal year form of income tax at this time when clearly and for the next fiscal year, talring the the provinces would like to get a larger share revenues from the tax changes into account.

of it.
of it.

I believe however that the total hcome I shall also include with the Budget papers at tax including this addition and the higher the conclusion of this speech, if the House rates of ~ r o v i n c i a l tax applicable in Manitoba will agree, tables giving the budget for 1968- and Saskatchewan is within the capacity of 69 0, a national economic accounts basis and Canadians to bear.

a reconciliation with the budgetary accounts.

that provincial governments parison.


Tile third At this point Mr. Speaker, I would like to have the permission of the house to insert some small tables in Hansard.

One would illus- Mr. Speaker: Is this agreed?

Some hon.

Members: Agreed.

TABLE 1 To ILLUSTRATE Married taxpayer-two THE PROPOSED SOCIAL DEVELOPMENT TAX ON INDIVIDUALS children eligible for family allowances Income Present Tax(.)
Development Tax Proposed New Social (')This is the combined federal and provincial income tax including t h e old age security tax and the temporary surtax, in all provinces except Quebec.

Manitoba and Saskatchewan.

The taxpayer is assumed t o take the optional standard deduction of $100 in lieu of deductions for medical expenses and charitable donations.

[Mr. Benson.1 October 22.


1968 COMMONS DEBATES 1693 T A B L E 2 The Budget-Mr. Benson B U ~ G E T A R Y AND OLD AGE SECURITY REYEKUEE ($ million) 1967-68 Actual 1968-69 (After tax changes) Personal income tax.. ...................................................
Corporation income tax.. ................................................ Non-resident tax.. ...................................................... Estate tax.. ............................................................ Customs duties.. .......................................................

Sales tax.. .............................................................. Other duties and taxes.
................................................. Total taxes.. ................................................... Non-tax revenues.. ..................................................... Total budgetary r e ~ e n u e s .

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............................................ OLD AGE SECURITY REVENUES Personal income tax.. ...................................................

Corporation income tax.

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Sales tax.. .............................................................. .

2,850 1,671 221 102 746 1,601 826 8,017 1,060 9,077 800 150 545 Total O.A.S.

taxes.. ............................................ 1,495 880 190 555 1,625 T A B L E 3 BUDGETARY REVENUEB AND EXPENDITURES 1968-69 ($million) 1969-70 (I niillion) Budgetary Revenues before Tax Changes.. ..................................

Revenues from Tax Changes.. .

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P: ..........

Budgetary Revenues after Tax Changes.

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Budgetary Expenditures.. ...................................................

Budgetary Deficit (-) or Surplus (+).


...................................... 10,050 55 10,105 10,780 -675 10,830 845 11,675 11,670 +5 a t this early stage, on a national economic accounts basis the budget would involve a surplus of roughly $250 million.

Our extra- budgetary requirements, apart from foreign exchange transactions, will probably be in the neighborhood of $600-700 million.
Budgetary Position after Tax Chanqes As these tables indicate, our position for the current fiscal year, 1968-69, would show total budgetary revenues of $10,105 million and total budgetary expenditures of $10,780 million, leaving a deficit of $675 million.

Our net extra-budgetary requirements, apart from exchange transactions, I am now forecasting a t $600 milllon for the vear a s a whole.
For next year, 1969-70, the t a x measures I In spite of its timing, I think it will be obvious to all, that this is no "baby" budget.

It is a new budget, by a new government, but it is not an easy budget.

I t is one which, I have proposed should bring the budget into believe, will ensure that we have a sound balance.

I forecast total budgetary revenues economic and financial base from which to of $11,675 million and budgetary expenditures 'move through a new ~ e r i o d of a t $11,670 million.
As far as can be estimated balanccd expansion and social progress.

iorward - - 1694 COMMONS DEBATES October 22, 1968 The Budget-MT.

Benson As I have suggested, this is the prospect for the years immediately ahead.

Our trained and growing labour force, our resources, our industrial plant and our ability to save, will make it possible to do more and more of the things we recognize as essential and worth while.

But there are problems to grapple with, as well as opportunities to seize.
The government, through this budget, is prepar- ing to meet both challenges.

With your permission, Mr. Speaker, 1 should like now to table the resolutions which 1 propose to move in committee of ways and means.

In accordance with the usual proce- dure, these contain some detailed points which have not been mentioned in the speech and I should like them to be attached as an appendix to today's H a n s a ~ d .

[Editor's Note: FOT W a y s and Means Reso- lutions, see Appendix.]
FEDERAL GOVERNMENT REVENUE AND E X P E N D I T U R E ON NATIONAL ACCOUNTS BASIS 1966-67 1967-68 1968-69 Forecast after Tax Chan~es - s (millions of dollars) A.

REVENUE 1.

Direct taxes, persons.. ..................................... 2.

Direct taxes, corporations.. .

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3.

Withholding taxes.. ........................................ 4 .

Indirect taxes.. ............................................ 5 .
Investment inrorne.. ....................................... 6.

Employer and employee contributions to social insurance and government pension funds.. ........................ 3,153 1,673 205 3,648 689 700 3,750 1,665 226 3,683 836 723 4 > 290 1,915 230 3,905 915 870 7.

Total revenue.. ............................................ 10,068 10,883 12, 125 B.

EXPENDITURE 1.

Goods and services: defence.. .............................. 2.

Goods and sewices: others.. ............................... 3.
Transfers to persons.. ...................................... 4 .

Interest on public debt.. ................................... 5 .

Subsidies .................................................. 6.

Capital assistance.. ........................................ 7.

Transfers t o other levels of government.. ................... 8 .

Total expenditure.. ........................................ C .

S u ~ ~ r .
S u ~ ~ r .

u e (+) or DEFICIT (-) ................................. :..... 1,698 2,317 2,573 1,156 381 64 1,712 9,901 1,816 2,572 3,021 1,267 395 72 2,142 1,820 2,960 3,350 1,440 415 85 2,490 11,285 12,560 -402 -435 [Mr.

Benson.]