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3$70 },fobili:ation Act-Mr. Cloutier COMMONS the welfare of his fellow human iDg at heart beings and actuated by patriotic reelings can thus countenance the destruction of a whole race by ruining the health or its young girls.

The ractory girl of to.day is the mother of to-morrow and if she has to overwork her eelf, the very vitality of the race is threatened thereby.
No doubt this will please Mr. Carson and his fellow·members of the Grand Lodge of Orange who view with alarm the "mirae1e of the cradles" in French Canada.

But no one who is the least bit scrupulous will accept the responsibility for such a crime tolerating night by either encouraging or I take the liberty of labour for young girls.

drawing the attention of the government to this matter.
Mr. Speaker, if, in spite of everything, we .continue to long for the fullest cooperation, ;particularly with a view to national unity, knO'Wing the price we have paid so far for that is for the sake of our native land unity, llnd because we are of good heart.

Because of this price we paid for national unity, I cannot allow it to be sabotaged and threatened with destruction through the ensctment of conscription for overseas service.
it if If the question of the plebiscite had been squarely put to the Canadian people_uFor or against con~ription for overseas service"_ one may well wonder the result would have been the same.

At a time when the enemy is sinking our ships in the St. Lawrence, attacking our Pacific coastline and landing troops on the North American continent, I wonder if there lTe still many Canadians who favour sending our best men overseu and run'ning the risk of being unable .foo cope with the enemy's attsck.
The French Canadian does not shirk from doing his share in our war effort and, despite innuendoes of a handful of the shameful Toronto imperialists, the province of Quebec is as anxious to win this war as any other provlllce.

We can rightfu)ly be proud of our war effort, and we shall further it with pride and patriot iSID, but the right let us be grllnted at least to s:lfeguard a principle based primarily on the country's best interests and our home defence needs.
My own constituency eet an example which 'might well have been followed in others reporting Ii majorily of affirmative votes.

Every appeal on behalf of war loans has met with the most gratifying response.

Most of our quotas were oversubscribed to the extent of 14.0, 150 and 160 per cent, even though my own is peopled entirely by farmers and labourers.
It is no centre of great wealth and national revenue authorities would vainly seek there of Drummond·Arthabsska county (Mr. ClO\l\ied an opportunity of lining their coffers out of lnrge income taxes.

In the last Red Cross campaign, our objective was reached almost a whole week before the closing date.

In terms of milit.a.ry service, our cooperation has been no less full and unstinting.
Our )"Qung men have re!l.dily responded to com pulsory training and many of our volunteers are now fighting on all theatres of war.

Some fifteen Drummondville youths were among the heroes of Hong I{ong and, only recently, the county of Arthabaska lost three of its bravest young men, one of whom died on duty with the Canadian nav;v while the 5Ccond, Sergeant.

pilot Tourville, gloriously laid down his life in Libya, and the third, Pilot Dionne, lost life in a Byin.

accident.
accident.

May I be his allowed a word of tribute to the memory of tJI05C heroes and of gratitude and sympathy for their families.

All of which, Mr. Speaker, but serves to emphasize the fad that, in opposing con scription for overseas service, we have no wish to impede the country's war effort.

On that, because the contrary, we believe it the voluntary system provides better soldiers, is likely to give better results.
I may say Hlat Once again, I regret this lack of frankness toward my fellow citizens and deplore the breach of tru;tt in the pledge<!

word.

To sum '5hall oppose up briefly, Bill No.

80 and in '50 doing remain tme to my word, comply with the views of my electors: and serve my country by working for the preservation of nalional unity and better understand ing between the two main ethnical groups in Canada, I On motion of Mr. Mulock the debate was adjourned.

At six o'clock the house took recess.


After Recess The house resumed at eight o'clock.

THE BUDGET ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE Ron, J. L. ILSLEY (Minister of Finance) moved,: That Mr. Speaker do now leave the chair for the house to go into committee of waya IlDd means.

He said: Mr. Speaker, as we approach the end of n third year of war, we find ourselvea in the midst of undertakings vaster tban we ever hoped to assume for the defence of the world's freedom.
We are surrounded by united nations more numerous and powerful JUNE 23.

1942 The Budget-Mr. [ulev "''' is are our nations national strength The programmes of to be allied than we ever dared to expect with us.

Our war programme is great.

and growing in &ize and effectivenese.

More and being of more the absorl>ed into it.

daily becoming more united in mutual aid.

Yet t<Hiay it is closely knit bitterly plain that we have far to go before victory is in sight.
The financial task of facilitating and we guarding these developments hu aleo grown in size and difficulty, but in the record and plans disclosed in this fourth war-time budget in speech, principle, of execution.

it has become simple and direct increuingly difficult though I iWONOf>[IC AND PlNANCLU.

uvmw The budget proposals which I ahall present to the house neces.sarily grow out.

of the experience of the past and are shaped by what we know of the work ahead.
recall increasea Let me first lome of the economic and financial events and policies of the put It wu marked by great shiite fiscal year.

and employment, in production, income, and private spending.

The prime movel':!l in our war economy are, obvioualy, our sales of goods abroad and our own govern· ment expenditures.
Taking the twelve months to the end of March u a basis of comparison, our exports to the United Kingdom increased by 36 per cent, our exporta to the United Statel by tot.e.l exports by almost 4.1 per cent, our 50 per cent.
In the face of restrictions abroad on non-essential buying and the use of trana port facilities, these increases, much greater in amount than in any preceding year may be taken as evidence of our greatly enlarged contribution of war supplies and ellllential goods to allied and friendly eountriea.

that For our own war programme, in the fint quarter of this calendar year, our war direct eJpenditures were S500 million as compared with $275 million in the same months of Jut is, more than 80 per cent higher.
year, General employment at the end of the fiscal year was up 22 per cent over the level of in manu preceding March and employment facturing was up 30 per cent.

From the beginning of the war, employment in manu~ facturing has expanded by more th&n 80 per cent.

Average weekly earnings of emploYeeIJ rose throughout the year.
Retail wei at the close of the fiscal year were running about 20 per cent above the previous year's level, more than 60 per cent above the pre-war level, and showed few .ipu of slackening.

Making allowance for the differences in priCN, .

the qU&ntity of gooda being sold (uide from from 20 to appeared to be automobiles) 26 per cent above pre-war volume.

CONTBOL 01' PBICEB, INCOWai AND 8t7PPt.IBB As the year pused, numerous and marked shortagea became apparent.
The mountina: war output of the united nations, greally accelerated by the entry of the United Statell into the war, created scarcities of one strategic material aHer another.
The widening 01 the area of conflict, the submarine menace on our coasts, and the los.s of sources of supply in the far east shut off or reduced many im ports on which we were accuatomed to depend, The widening scope, the increasing speed of our own war programme, both in the armed services heavy dem&nds on our man-power until no one any longer denies the scarcity 'of labour.
To these have been added shortage of power, congested transportation facilities, and widely ramifying limitations of productive capacity.

It has been clear these many months that our economy is in the zone of full employment, is still p08llible to a condition in which it expand our programmes for production and the armed services but only if we are prepared to make careful and wise choices as to what is urgent, what is more urgent, and what we can.

do without.
do without.

in production, made and This is not an unexpected nor wholly un~ welcome ailuation.

It was clearly forees.n in the budget speech, which I delivered in September, 1939. is reassuring evidence that we, All well as other the nations as.sodated with UII, have 80 set scale of our war programme it will engage our full strength and more than we knew we had.

the most part, that For it A clear sign of developing scarcities wu provided in the rapid rise in prices in the summer of 1941.
By October, 194.1, the index of wholesale prices had rislin by approxi mately 22 pointa since the beginning of the war.

Of that, 10 points of rise occurred in the four months of 1939 when our exchange rate changed and shipping rates increased.
Of the remaining 12 points of rise, 8 occurred In between March and October of 1941, living' costa, half the war the lull period occurred between March and' October of 1941. rise of supplies These accelerating changes in production, employment, and pricea produced hy October of last year a aituatioD which wu in degree from that substantially different which could be discerned on April 29, 19U, when the budget of that year w~ presented The Budget-Mr. l/sley CQMMO:s'S It was dear to the government to the house.
that new fiscal measures, which could be adopted when parliament met, \\'ould be too late in effect and not sufficiently specific in applirafion to meet the situalion.

H was, therefore.

decided that direct contN)ls should be established promptly over prices, wages and salnries, and lhat contN)ls over production and supplies should be extended and made more rigorolls.

(1) (3) for the into been except things: earnings industry; restricted, so the War length in the house.
The gO\'f'rnment's policy of over-all control on prices, wages, and salaries has already been I would disrussed at point out here four the policy has in rart worked and has won support at home and admiration and emulation abroad; (2) though increases in some wage rates have been severely of labol1T have not been "froten".
On the con trary, depressed wage rates have been, and are being, adjusted by the war labour boards, while the Dominion Bureau of Statistics reports that for its sample of over a million and a half employees, weekly earnings per employee which reflect more continuous employmer.'

increased nearly 8 per cent and o\'ertime, since October last.
This increase in the aver age took place, despite the introduction of inexperienced pro many women and other duction workers the government by guaranteed prices, minimum prices, and export prices, whl~h could not have the high terms of .4.ppropriation <United Kiogdom Financing) Act, and the interven tion of the government, hilS contributed to a in farm inrome while desired improvement farm efforts to the endeavouring to direct In the cnlendar year most needed products, 1941, with reilltively poor in many lo~alities cash income from the sale of farm products was only 17 per cent below the income of 1928, the year of the biggest crops in our history.
Good Cropl in 1942-43, with assured prices, will bring cash farm income close to the best rerords of Canadian agriculture, Excluding wheat, which has been in surplus supply since the beginning of the war and has required special measures, the prices of larm products on the average are now about 2 per cent above the level of 1926 and prices of animal products on the average are relatively aWl higher, these prices on a wide range of this season's crops, and will receive, by go\'ernment action, higher prices than those on last year's crops for wheat, (4) flax, &oy beans, sugar beeta and apples; price and iocome control are essential weapons in combating inflation.
They must be u~d.

however, in close coordination with direct control of supplies and productive equipment, Farmers are assured of crops [Mr.

Jloley.]

with direction and management of man-power, with consumer rationing.

where necessary, and with fiscal policy.

No one of inlttnl_ mp.nts is itself powerful and pervasive enough to do the whole job of directing our resources to the end desired.

thl'~e Measures for the direct control of supplies multiplied during the year.
The Mini~ter of Munitions nnd Suppl)' and the Wartime Prices and Trade Board h:n'e ordered the discontinu ance or curtailment of manufacture of a large and growing number of non-{'s..~n1ial produrtl!

using metals and other scarre mllterials, Build ing construction and the installation of equip_ ment, other than for war production, were more severel}' curtailed.
The Wartime Prices and Trade Board is rapidly elo:tendin~ its orders on simplified practice to effect reductions in costs and provide the most ample suppliE's of essential product9 that the funrlamentallimila_ tions will permit.

Though delllf'rs' storb are large, it simply will not be possible during the present fiscal year for consumers to obtain the quantities of goods which they hll\'t' bel'n Pllr~ chasing during the past ·year.
Restrirtions on civilian industry to save materials and man power will unavoidably multiply.

We need not antidpale se\'ere hlllds:hip; the govcrnmf'nt will do all it can to ensure equitahle di~tribu­ tion of essentials.

There must be.
howe\'er, rigorous economy in consumption if the neres sary matcrials, productive caparity, and labour are to be available for the winning of the war, PROVINCIAL TAX AGREEMENTS and Since ga~oJine the Dominion-Prol'incial Taxation Agreement Act has been debated and passed by parliament and the agreements tabled, I need do no more than remind the house of the tax agreements with the provinces, In my budget speech of April 29, 1941, the prodncial governments were offered compensation in respect of personal and corporation income taxes the guarantee of t~x revenues, if they would vacate the personal and corporation income tax fields for the dura tion of the war.
This offer was accepted by the provinces, and I should like to pay tribute to the patriotic and constructive I!pirit in which the provincial governments cooperated in bringing the long and invoh'ed negotiations to is that I !I.

successful conclusion.


The effect am now free to recommend such tax changes as appear to the government necessary and equitable, and parliament is free to enact such changes, knowing tliat persons and corporations affected will be paying the same tax on similar incomes in no matter what province they are located, These are war-time agreements, and their duration is limited, but they make a JUNE 23, 1942 The Budget-Mr, lls/eJl 30" great contributio?
to the possibility of an effectil'e and equitable tax policy duriog the war.

STERl-INa AND DOl-LAB EXCHANGE PROBLEMS the finances of the past fiscal year, In the last Concerning our exchange problems as they I affect nced speak only briefly.

three they were dealt with at speeches, budget length beeallse they then were to a degree separate problems requiring measures peculiar to thCOl.

They have now, by reason of events and measures taken, become merged with the general budget problem.
le53 slightly deficiency the tisral year, 1941-42. in which the gO"ernment In introducing the resolutiona On the War .

'\prropriation Wniled Kingdom Financing) Act.

on March 18 last, I explained fully the \\"lI,V~ financed the in Canadian Unitf'd Kingdom's dollars since the beginning of the VI'ar.

Dllr iOl!

the entire detici ('nr)' Ilmounted to approximlltely SI,loo mil lion and IVas tinflneed by Caoada.

Of this than S48 million wall totn!, fillanced by private repatriation of seeurities.
gifts and othcr private transactions.

Of the remalOing required $1,050 millioo, which 136S million wall gO"ernment fim.nced by repatriation of government and gO"ernrneol sccurities (illcluding SZ23 million of the repatriation of the Actl.
8295 million prol'ided for under The remaining sum, $685 million, represents sterling Ilccumulated to our credit during tbe yNlr, Such part of this as is oot required for working balances, together with accumulations of $215 million prior is bdng tllklln care of by the remAinder of the $295 million repatriation, by the 1700 million loan Ilnd to the extent of 576 million by a charge to the SI,OOO million gift provided in the War Appropriation (United Kingdom Financing) Act.
to March 31, 1941, guaranteed fioaocing, dollar This act, in addition to the real advantages and es..oential rightness of its principles: which wcrc recognized by the house, has the minor financial advantage of picture an element financu, which was very confusing to the layman, For the financing of the the fiscal year, 1942-43, in Canadian United Kingdom's deficiency doJ1af8 will appear as an integral part of C:lOadian war expenditures.
removing from our in our national I turn now to the problem of United States exchange which has occupied a good deal the war of attention sioce the beginning of and has required special legislation and admini~ stnltive Our action from time imports of war materials from the United States have increased from month to month; time, Lo fiscal year the highest recorded imports from the United States for both Wlir and non-war purposes during the amounted to over SI.lOO past figure for any twelve million, Faced as we were month period on record.
with this growing need for United States resources would not have been dollars.

our the caJrs on them, had it sufficient agreement, not been for especially the sales of munitions of war to the United States under the government of the legi~lati\'e and administrative it.

and for steps taken to conserve United Statea exchange to which I have referred.
the Hyde park to meet As I informed the house in introducing the United Kin~dom War Appropriation Bill on Mnrch 18 this year, liquid reserves of gold and United States dollars held by the Foreign Exchange Ct>ntrol Board and the dominion government dcclined by 1142 million during 1941.

In the first quarter of 1942, there wus a marked, though in part a temporary, improve_ the decline in our liquid ment.

As a result, the fiscal year 1941-42 waa only reserves for about $50 million.
This welcome change Wfl8 due to two fuctors: purchases of Canadian securities by investors in the Unitl'd States, a method of obtaining exchange which cannot be dependl'd on for really substantial amounts the limited snpply of securities in "iew of availnble in Canada payable in United States dollars; and payments for salf's of ml1nitions under ineludiog some substantial advance payments.
While we have reason to believe that these sales ""i11 iocrease, as new contracts are arranged and as larger deliveries are made under existing cOntrllCtS, the advance payments are, of course non-reoeurriOlI;.

the Hyde Park agreement the full The outlook for the fiscal year, 1942-43, ill distinctly morc cheerful than the result.

!l of the calendar year 1941.

We cannot expect, improvement which took however, place from January to Mnrch to continue.
Other unfavourable facton have enlered the picture, particularly the adverse effed 00.

!.he tourist trade of the necessary re~triction.s on the use of gasoline and rubber and the recent decline in newsprint exports.

Nevertheless, look forward with reasonable assumnce to I transactions under the Hyde Park agreement to safeguard our exchange being sufficient position during the present fiscal yenr.
The various measul"Co8 which we have taken since June, 1940, have been sufficient to restrict what I may call our "civilian imports" from nOD.-steriing countries t.o limits well within our ability to pay.
The uncontrollable item the is imporl5 for war purposes which for calendar year 19-:12 it total sppro.timately 1500 millioo, of which about is eatimated will The Budoet-Mr. llslell COMMONS is to be per cent supply As matters stand, we are hopeful the whole of a net drain on the United 45 Kingdom and other Empire countries and It is our 55 per cent for our own needs.
the Hyde estima~ that were it not for this Park transactions almost our amount would resources in United States dollars, or would be 8S Jong as we had any such resources left.

that the Hyde Park agreement will ensure our ability t.o purchase essential materials and war sup plies in the United States to the full extent that that country is able to supply them.
In effect, the agreement may be thought of as eliminating the dollar sign in our war·time transactioIls with the United States by pro viding a convenient technique for an exchange of raw materials and other components of war goods for the finished war supplies we are equipped to produce.
By the collahoration of our good neighbour and ally, we hope to be able to meet our exchange requirements, which arise out of our need for war materials, in the way most effective for a nation st war, namely, by the provision of munitions of war for whichever of the united nations and whichever of the world's battle fronts require them most urgently.

saved us welt over This is a most defiirable situation, but let it not be misunderstood.
We are able to do this only as long &s we continue to exer cise care and prudence in our non-war trans actions.

The restrictions on pleasure travel have now been in force for nearly two years and it can be st.ated with assurance that these reatrictioos have 100 million United States dollars since they were imposed.

The amouots saved by the War Exchange Conservation Act are also very substaotial.
During the past fiscal year, it is likely that the savings under both these heads the neighbourhood of bave amounted to iD.

Sl30 millioD., about equally divided between' the two items.

In the light of these figures, it is fully apparent that these measures have played an essential part in the past and that we are not at present in a position to relax them.
OOVERNM~NT ACCOUNTS AND FINANCINQ 1941-42 Against this background, I wish now, Mr. to review the government accounts Speaker, for the put fiscal year and report on the fin ancing which has been carried out.

Followiog the useful custom which has now been elltab lished, I shall only summarize the estimates of our revenues and expenditures, and, belore I resume my seat, I shall table a White Paper which will include full ,information concerning these estimates.
The house will that, though these estimates are close approxima- recall [Mr.

Daley.]

tions to the final figures, the Public Accounts will not be available until towards the end of this calendar year.

HVENUE8 they will Revenues are again very greatly increased, Our present estimate is that total 11,481 million, an increase over the previous year of $609 million, or approximately 70 per cent.
This is some 134 million higher than I last year, in preseo-ting the budget forecast and is neady three times the Dominion's pre· war revenue.

Total tax revenues are now estimated at Sl,360,915,OOO as compared with '778 million in the preceding fiscal year.

In contrast with previous years, direct taxes on incomes and profits made the largest contribution to thil total.

The graduated tu: on personal incomes, the 18 per cent corporation tax and the epecial tax on dividends and interest prorluced S404.
in exceSll of million, more than 80 per cent last year's yield.

The national defence tax produced $107 million nnd the excess pro6tIJ tax, for what was really its first full year of operation, as it is collected on the profits of the previous year, yielded SI35 million.

Succession duties, introduced in laet first year's budget, produced S7 million, a figure which gives the futuJ'fl liltle indication of revenue to be derived from this source.
Excise tues, though no longer the largest source of revenue showed a greater increase than that for the preceding year, rising from $284 million to $453 million.

The largest item in this group, the Bales tax, at S236 million was S56 million or 31 per cent higher than the previous year.

The other excise taxes inelud· ing the new taxes imposed last year fully reached or exceeded the estimates of the last budget.

Excise duties yielded '110 million 8ll com pared with S89 million in the preceding year.
Customs duties, as was expected, showed the smallest increase recorded during the year, from S131 million to '142 million.

Non~tax revenue, to which the largest con tributor is the Post Office, is estimated to be 1103 million.

Special receipts and credits will be approximately S18 million.

IUU'ENDITURES Turning to our expenditures, we now esti mate that ordinary expenditures for 1941-42 were slightly under S444 million, about $53 million more than last year.

Of this increue.
Of this increue.

115 million is attributable to increased interest on the public debt, ,to million to increased cost of loan flotations and bond amortisation, 121 million to compensation to the provinces under the taI agreements and SIO million to JUNE 23.

1942 so-called the income paymentl wiU, the Unemployment Insurance Act.

Other item.

of ordinary expenditure ate aJight!y reduced.

Capital expenditure.

at 13,3671'00 were about the ume I I the previous year.

The category apeci&!


of expenditures, which coata of unemployment and includes agricultural relief, Prairie Farm Allliatt.uc:e Act wheat acreage reduction pa.ymentl, and ill prairie farm.

estimated, ahow expenditure.

of 162,879,000. relief and "orb projecta Expenditure!

figures, but paymentl ha~'e fallen to amall under the wheat acreale reduction and the prairie farm income pa)'menta have olfaet thia decreaae and occasioned an increase of t20 million in the total.

To meet deficit.
To meet deficit.

resulLin& from the operations of the Canadian Wheat Board, which had not been previously provided for, 112,571,(100 haa: been placed in reserve.

the Prairie Farm Aasistao.ce AcL, for it In 1940·...U. govemment-owned enterpriau required 118 million.

In 19U~, becaUM of the immenae increase in railway earninp, this was reduced to 11,215,(100, only the Prince Edward Island car ferry and terminala and the National H&l'bours Bo&rd requiriug IUch expenditures.

In the Iut.
In the Iut.

budcet, I estimated that war ezpendituTe8 for 1941-42 "ould be bet.een It is now $1,300,000.000 IDd 11,~.ooo.ooo.

estimated that they will be 11,351,553,000. ezcluding ouUays of 142,480,(100 charged to &Ctive uaeta.

Thia camparel with 1752 million spent in the preceding year.

OVEll-AU, DUlCJ1' Adding to the amounta, which r have Jiven, miscellaneous other chaTl68 representing chieB.,.
write-down of aaaeta, we get an aggregate ezpeoditure for the year 1941-42 of 11,894,966, 000 an amount more thlUl 50 per cent higher tha~ the expenditure.

of 1940-41, viJ:., 11,250 million.

Deduction of revenues of $1,481,2&5,000 givea 14.13,681,000 aa the over all deficit or increue in the direct net debt, which on Mareh 31, 1942, waa approzimately $4,062,372,000.

1 estimated last year tbat we would pay between 73 and 79 per cent of our It now direct ezpenditures out of revenue.
appears that we will have paid 78 per cent.

total On March 31, 1942, debt funded the outstanding un_ matured treasury (inc1udina: bills) was 1.5,866,071,000 on which the nerag:e rate of interest w.. 2·90 psr cent .. compared In addi~ with 3'06 per cent a year previouaJy.

tion there were outstanding bond, and deben tu~ bearing the guarantee of the Dominion to the amount of 1818,8(2.000, a cieerease of '1M million duriol the fiacal year.

The Budget-Mr. 1['lell BOItIlOWISGe .

".


Total borrowings durina the year, ezc1udil1l debentures of over 133 million reiuued to the western provinces in continuation of the school l&nds aetUement.

amounted to approzimately this total, 11,834 million S2,rn million.

Of wu borrowed from thl!


public in the two the laIe victory loana; $85,291,000 representl savinp certificate& and of war stamps;; 14,553.000 Don-interest bearinl certificatea; $10,000,000 was borrowed in New York for refunding; 1450 million w... borrowed from the Bank of Canada and the chartered bank.. replacing issues of identical amounts held by them and which matured during the yeu; the in remainder, 140,ono,ooo, t.l'easury bills outstanding durinS the year.

ThUi.
ThUi.

aide from the increue in treasury bill.. there wu no new direct boTTOWina: from the Bank of Canada or the chartered.

banka durina the year.

incre.. the ill .

..... redeemed debe.ntures) wers in Dominion of Canada direct obliptioDi the amount of 1931,.Q42,ooo (ucludinl IChoo1 lands durin, 1941~, leaving net borrowinp for the yeat of $1,493,000,000.
This flUID was used to meet the ove....all deficit of 1413,681,000, to advance S400 million to the Foreign Exchange Control Board, for use in financing the aterling area'.

Canadian-doJlar deficit, to advance $252 million to the CanadilD National RAilways (nearly al1 of which waa used to elIect a redemption of railway aecurilies).

and the remainder (t42'1 million) to make varioW!

other advances and raise the working halances of the lovernment.
To obtain from the people of this country loans to the amount of $1,673 million (allow ing for the redemption of securities in New York and London), to obtain from the people thi, country .uch an and corporations of amount after they had contributed nearly $1,500 million in revenue ia a great financial It reflects the wiltingnel!ll of achievement.

Canadians to do what ill necessary in finaoce in in other fields to resolve this conflict all It ill an achievement whirh complete victory.
refleeta the greatest credit on the National War Finance Committee and on the campaigna which it bas 80 successfully carried out for the ule of war savings certificatel and atampa and victory bonds.

To them, to the prtl!B, radio, aod other agenciea, which have made special contributions to this succe., and to the thousanda of worken who cooperated in the campaignl, the government and the people of thia country are grateful.
Our whole financial rtCOrd for IIHI~ is an &Chievement but I wish to add a word of 35" The Budget-Mr. llsley COMMONS this purpose.

take account of warnmg.

When we say that 78 per ceot of our expenditures was paid out of revenue8 we are perfectlJ' correct by the principles of the figure is open to mis bookkerping, but In addition to our expenditurea, construction.

the financing of we mllst It was neceSllllry duriog the United Kingdom.
to find approxi the year for the government mlltE'ly 11.050 million for In exchange for the Canadian dollars transferred to the United Kingdom.

we acquired as5eU, certain Canadian government obligations held in London and sterling baJlIllces which have now heen converted inlo the SiOO,OOO,ooo loan.

tbe accountants Irc Since we f,,:quired assets, in classifying these outlays 8S quite correct iOl"estments.
But just as an individual faces financial problem in the fiDdillg SIOO whether it is to be used 10 pay {or the winter's coal.

buy a government bond to his Bon, so the immediate or make a gilt finanl·illl and economic problem of our financ ing of United Kingdom purchases has been the SIlme a8 thllt of our own war expenditures.
We mu~t realize that is correct though it in 1941-42 we paid 78 per cent to say that of our expenditures out of revenue, the signi thing to say is that we paid just over ficant 50 per cent of our expenditures and war ad\'anccs out of revenue.
immediate same The government Further, we must not be misled by our achie\'emenls in borrowing from the public and the corporations, The conditions, under which a government may most easily borrow from its people and have its loans always ovef!ubscribed, are the conditions in which incomes there is a considerable inflation of and of bl\uk balances, is committed to a policy of "pay as you go as far as it haa set its face against distributing the cost of war through the medium of inflation.
We must if it bear in mind that is easy for some of the people of this country to lend, easy for the government there is a pre to borrow, sumption, unJess most of the opportunities for that we are expenditure have been blocked, I shall falling short of our declared policy.

have occasion to say something further on this subject a little later.

it may be practicable"j n BUD<:ET FORECAST 1942-43 AND PROPOSALB SO much for the past.

and.
and.

1 hope, policies of the budll:et of 1941-42. that I have given a brief, the financial the past year and the results of 1 realize, however, in the the bouse has a greater interest lucid account of IMr.

l~ty.J estimates of our expenditurel the new fis\:al year and in the measures and policies we propole to meet these expenditures, for ESTIMATE OF EXPENDITtiRES the fiscal ending March 31, 1943, has before the For estimates of non-wllr house it expenditure amounting to S4~5 million.
To this will ha ve to be added supplementary and possibly estimales, including about $20 million to provide for payments under the Whea t Acreage Reduc tion Act, and perhaps amounting altogether to, ssy, sao miliioD, supplementary further It will be recll.lled that The Dominion-Provincial Taxation Al[ree ment Act provides for payments to the prov inces of 184,428.000.

This does not indllde any payments which it may be necessary to make as a result of the guarantee of pro vincial gasoline tllX revenue.
Howe\'er, any amount which will fall due on this gUllrantee in the present fiscal year is likely to be small.

the War Appropria tion Act makes provision for war expenditures of $2,000 million.

the war actual expenditures were likely to fall short of estimates.

At they are more likrly to reach or exceed the estimstes and I may have to ask the house for an alhli tional appropriation at a later date.
Indeed, as I pointed out to the house in March, thOlll[h the total appropriation requested was 12,000 items in the estimlltcs, million, submitted by the departments at time, totalled $2.200 million, In the early yl'ars .of the individual this stage, thllt The War Appropriation (United Kingdom Financing) Act provides for expenditures of SI.OOO million to furnish food, raw materials, and munitions of war to the United King\lom.
Of this amount, the sum of $76 millioo was used to purcbat>e sterling al'cumulated during the month of March and this sum logically, and as intended, should have been charged It was, to expenditures for the year 1941-42. impossible to determine the amount however, and effect the necessary accounting entries before April 30, the last date on which charges could be taken into the accounts for the list fiscal year.
While the gift to the United Kingdom is limited to $1,000 million, it already appears hkely that ways and melDS will have shipments found- to pe before March 31, 1943. to finance further Adding !helle estimates together, we arrive at a total of $3,570 millioll.

In view of the considerations I have mentioned, the figure is that therefore, likely to be exceeded, it would not be safe nor to the house and the people of Canada to make financial than expenditures of 13,900 plans million.
feel, fair less for I JUNE 23, 1942 The Budget-Mr. 1181ey ESTIMATE OF REVENUE To meet these requirements, it is estimated taxes and tax rates, our that with present total ordinary revenuea for the fiscal year 1942-43 will be approximately '1,672 million.

The following statement shows how the esti· mate is made up and, for comparative pur the estimated yields for 1941-42: poses, Customs duties Excise duties.............

Sales tax... .. .

.


..... ... .. War t:Xcbange tax........ Olb~r excise taxes.... .... Incolue laXC8- PenKlnal Corporate.

.

Iuterest alld dividendll.. National defence tax.....

Exc!.'"
Exc!.'"

profits tax ..... ,.. SuccI'Rsion dutiCl......... Miscellalleou8 1912·43 (milliorul) '135 123 218 95 85 240 200 28 150 275 15 3 10U·42 (millio~) , 142 110 236 101 116 190 186 28 107 135 7 8 Non-tax revenue.......... $1,567 105 $1,361 103 Total ordinary revenue ... '1,672 $1,463· It will be noted that we anticipate sub increases in revenuee from national stantial defence tax and personal income tax and a very large incretl8e in the yield 01 the excess profits tax.
These will result Irom increases in incomes and the application 01 the rates 01 the 1941 budget to incomes for a lull yetlr, We al80 look for a sizable increase from excise duties.

We anticipate that the yields 01 the sales tax, the war exchange tax, and other commodity taxes ·will decline by about S55 million since a large number of goods subject to t.!lX will not be availabl~ in the quantities purchased last year and inventories being used taxed.
the amount of such decreallCS is ObvioUl,]y, very hard lO estimate with aecuracy.

The figures which I have given are the most care ful guesses which we have been able to achieve.

up will already been have THE FINANCIAL TA8X Expenditures of '3,900 million and revenues 0111,672 million will leave an apparent deficit of $2,228 million to be covered by new taxes and borrowing.

On the basis of these esti mates.

we should be paying less than 43 per cent of our expenditur~ll out 01 revenue.
To make a comparison with last year, we can exclude the United Kingdom financing and reach a deficit of '1,228 million as compared with 1414 million as estimated for the put fi9Cal year.

Last }·ear.

I refeTTed to the financial require.

ments of 1941-42, which were difficult to define clesrly, II!

"staggering."
"staggering."

Confronted now with tbe Rough requirements, the much larger simplest of 8ums in arithmetic, I must perforce drop all adjectivea and try to state, as clearly 8B ooe who isn't a prophet may state, what they mean in terms of the future.

set out as impossible.


During the last fiscal year, we appeared w achieve estimates indicate that we increased the dollar value of our national output 01 goods and services by nearly 25 per cent, (bringing the increase dur to about SO per cent), but we ing the war increased our expenditures on war (including expenditures for United Kingdom purchases) by a greater absolute amount.

One might have expected that this would necessitate reduced expenditures lor private consumption.
On the that expenditures lor private consumption were substantially increased, Our own observation confirms this.

estimates contrary, indicate Tbe explanation of this lICeming paradoJ: is twofold.

On the side of goods and services, some of the goods, ·which were purchased Ian year, did not come out 01 our own current output.
Apparently, we reduced our inven tories somewhat during the fiscal year, and ended the year with lower stocks on hand than we had at the beginning, having used more than we produced in the interval.

We did not maintain our capital equipment by eJ:pend.

lull ing on repairs and ,replacements depreciation charged as an expense.

Slrortage of materials, in many cascs, made wch main tenance impossible.

We did not pay lor all our imports Irom the United States out 01 current production.
D~line in our reserves 01 United States funds and imports of capital provided in the neighbourhood of S200 million 01 imports paid for out of capital not out 01 income.

the On the side 01 money, not all the funds which the government acquired by taxation and borrowing came out of income, even out of gross income.

A substantial amount, in fact, came in this the first year in which really big bond-selJing campaigns were carried on, from idle bank balances or directly or indirectly from private bank loans.
We obtllined from an increase in our treasury bill issues 140 million.

As J read the experience of tbe past fiscal year, we were not able to draw enough goods from sources other than our current.

output to match the idle balances and bank credit which were drawn into the treasury and paid out again in incomes.

Of the 11,673 million which we borrowed from the people 01 this country, by no means all could have come out of cur rent saving.
This, and similar sitr.dtions in countries with which we trade, together with the insatiable demands 01 war for goods and services, occasioned the rapid rise 01 pri~es la.st 3578 COMMONS The Budoet-Mr. Il&kll wmmer, and, but for the prompt action of the ,ovemment in imposing drastic restrictions on prices and incomes, would bave led to a furtber Ind disastrous inflation.

Scarcities In the present year, we must and can again total output but by no IUcb increue our amount a.s was added to it last year.
Short ITe daily growing more ages of materials driogent.

transport facilities and labour have placed narrow limits on the production of .Imost everything.

The need for war production, and it is only too apparent how urgent that need is this year, will absorb all our capacity to expand output and more.

power, of Looking at the problem from the side of goads and services, we shall not be able to ohtain mhstanlial imports from the Un..ited State/!
without paying for them out of current output, for we expect 10 meet, or nearly meet, our exchange problem by deliveriell of goo<lI under the Hyde Park agreement.

We can probably again draw on inventories of civilian goods but by how much I do not know, for information as to inventodell is very deficient.
Deferred maintenance and replacement must again contribute a robstantial sum, Making allowances for these sources outside of current output, the conclusion is inescapable th&t in dustry will not be able to supply goods for civilian consumption and private investment on the scale of last year.

Looking at money income, the conclusion is the same, Increased go\'ernmeot expendi.

tures of the amount!l which I have given will, leave in the rates of taxation.
with present hands of persons and corporations spendable inr.ome rar in exress of what can be matched at eurrent prices by goods and services, In our it would be dangerous folly to borrowing, depend on the investment of idle balances, Even if we needed to borrow from the public no more than we borrowed last year, there must be a very substantial increase in current saving.

It is a ID09t difficult task to deal with suma of the magnitude involved here.
It is an even more difficult and sobering experience to reach decisions affecting such large fractions of the incomea of our people, I have given the most careful and earnest consideration to the prob lem confronting us, and have inevitably come to the clear decision that my proposals in this budget must include me&SUres to increase our revenues within the fiscal year substantially, at least to the point where our dependence on borrowing will be more nearly within the Iimitll of our current sa"ing; they must provide for increased saving, both corporate and personal; they must include also measures to ensure that IMr.
I1a1ey.1 the t&llk of contributing to the required in crease in current saving is more widely and equitably distributed.

It is not These fiscal measures are neeessary if we are to follow honestly our declared policy to is practicable.

pay as we go in so far as it They are necessary if our war debt is not to create post.-war difficulties.
the size that is a matter of chief concern of the debt for alter all is an obligation of the people it to the of Canada through their government people of Canada, Rather, we are concerned It is a matter of about the distribution of it.
the first importance that those who have tbe right to receive payments on government obli_ gations shall be those who will use the repay ments to provide needed improvements in their standard of living, maintain themselves against insecurity, and contribute to the im· provement of our productive equipment.

These fiscaJ measurea are necessary also to success in our four-front battle against infla tion.
The price ceiling, control and rationing of supplies, the direction of man-power, and fiscal policy are complementary, not alterna tive measures.

The offensive must be main tained on aU lour front!l.

No ooe front can be held unless the others are held.

The price ceiling, a sound policy which is being adminig... tered wilh great courage and imagination, cannot itself defeat inflation.

If I may venture it can prevent another military metaphor, the enemy from winning by infiltration.
PEBSOYAL INCOME TAXES From what has been said it is evident that fiscal necessity forces us to look again to the income tax on individuals, or some similar device, for a large amount of additional funds.

In devising measures to meet this need I have had to keep in mind three other important considerations-the need for equity, for incen tive.

and for savings.

• As regards equity, I am sure we all agree that the income tax on indi\'iduals is the fairest method of taxation.
By and large, a person's income is the best single measure of taxable capacity, particularly when we his the number of persons de~ take into account It is by no means a perfect pendent on him.

measure, however, and as we increase the rates to higher levels we must attempt to take iuto account other factors affecting ability to pay.

Therefore I have several suggestioos to put forward in a few minutes, intended to take into account additional speeial circumstances affecting ability to pay.
The problem in regard to incentive is less and to overcome.

A pra-- easy to assess but more fundamental therefore more difficult JUNE 23, 1942 The Budget-Mr. ]hlet/ 3'" rely upon other I'ftllive income lax must of neceeeity take more out of an additional dollar of earninp the average d )lIar of than it dUel out of earnings.

CoD.lleQuenUy it must bear heavily iocome earned throu&b eztra on additional effort or efficiency.
There ia a danpr that income w may high pfOJTeSlive rates of interfere with the incentive for lu.rder and better work for eflicienl production.

We taD and must than ecooomic motives to a large e3:t.ent theae days.

Never theles we csnnot afford to dillpense entirely with the incentive of improved e&rn.inga II a Itimulus in the continua.l week-in, week-out the nation at a time production work of when production ia of vital I imporlance.
to frame theee hive endeavoured therefore, income tax measurel 10 D.I to preserve II much as possible of the earnings incentive for the great majority of the working population.

The third consideration is the' need to eIlllure the increase in taxes is reflected in a that decrease in expenditures Ind not in reduced SAving.

There would be little net gain if the putting into effect of higher income tu resulted in a corresponding decline in ratel laving.

It is vitally necessary UlaL.


while tax revenuel increase, the flow of liVings into the treasury shall alao increase greatly.

Equity, incentive, and the encourasement of IIvinl-theee are the considerations wbich I have kept in mind, but liscal neeeMity and the rude facte of war press us hard.
In order to obtain the increued yield from income tax ...hich is required, I am propoling that we combine the present national defence tax and the graduated income tax into a lingle &Measment to be collected II far II possible by deduction at the source, or, where that is impracticable.

by a compulsory inatal ment plan, This total assessment will conlin.

in part of a f1.at rate tax on the tota1 income like the present nltionll defence tiX.
Ind in part of a Iteeply graduated tax at aubstantill1ly It will be higher &SSe!

!led in respect of incomes of the calendar year 1942. but will be collected and payable over the tll'elve months from September 1 01 this year to AUlUst 31 of next year.

Returtll are to be filed.

a.a at present.

on or before Mitch 3t.


National defence tax a1ready de ducted from 1942 incomes will be credited toward the total payablt' under the new tax; tbil lI'iIl a60rd conaiderable alleviation of the immediate burden for the lower bracketl.

rates than the present.

those i.a.

As at present, aingle perwoDl with income.

of less than S660 per year and married pel'8ODI with lea than 11.200 a year will be exempt from tax, and the Lu: will not reduce incomee below these staTtin, pointl.
The f1.at rate tax corresponding to tbe present nationaJ defence tax.

will be at tbe rate of 7 per cent for married penons, and at the same rate for lingle pefBOns with incomes not eJ:teedina '1,800; it will be 8 per cent on lingle penoDi with incomes ueeedinc $1,800 but not eIteed ing 13,000. and 9 per cent on aingle pel"8ODI with incomes ueeedinc 13,000.
The alloll'ance of S20 for a child under the national defence tax hu been increued to 128 for this f1.at rate tax-that is, in direct proportion to the increue in the rate.
It will be noted that the differentia tion between the single and married in the rate of • tu cornel more graduillly and at higher income than in the present national defence Wi the effect of this on tbe relative tax payable will be more than counteroalanced in the bratkete between '1,200 per year and 13.000 by the chlnges in the graduated tu: and by other meaDl to be noted in a moment.

The chanles in the graduated tax are more In pllce of the present exemp complitated.
tions of 1750 for lingle persons, 11.500 for mamed pel"8ODI and 1400 for each child, we are shifting over to a mile blllic exemption of S660--whicb is also the present starting point f1.at for national defente tax-and .. allowance off the tax for mamed peTlODI and for children.

Married persona will deduct '150 from the graduated taI.

and the aOowance for children (or other dependenta) will be ISO eath.
These figures were reached by taking the present exemptions of 1750 for .. wife and S400 for a child and evaluatina: them in terms of a tax SAving at the rate of 20 the lowest rate of the per tent.

lI'hich is not the rate in the present graduated tax, but aecond thOlllll.nd of·unble income.

[0 e!fect, therefore, we are "freeling" the value of theat present exemption.

at about the amount they have been lI'orth to a taxpayer having an income of around 12,500 or 13.000.
This, I believe to be a better way of increasing the tax on persona with families than reducing current exemptions, particularly under the present changes circumalances when other are being made which will have the effect of lI'idening the difference between the levies the married, and those with on the single, children.

substantially higher first The proposed rates of the graduated tax ate set forth in detail in the resolution.

They are than the present thousand dollars of net rates.
ta.xahle iDCOme (i,e.. after the exemptioDl are deducted) the rate of 1.5 per cent.

Under the new acbedule the first to a rate of 30 per 1500 it is DOW tued at to be auhjeet The 35!l() COMMONS The BlIdget-Mr. Ilsley cent, the next $500 to 33 per cent, aod the following 11,000 to a rate of 37 per cent compared with the 20 per cent rate on the I 6econd thousand in the present schedule.

shall give a number of eX:1mples in a moment to illustrate the effects of these increases.
These new rates, together with the chsoges in exemptions and allowances, will increase very substantially the amounUi to be obtained from t.axpayers, although they will not impose taxes on any who would not be liable for taxes under present rates and exemptions.

For example, these new rates would require from a married man without children and having an income of 13,000 a year a total of in place of the amount of $400 under $884, the prescnt law.
While the total yield these rates will produce is still something short of the smounts we should like to obtain and tberefore considered more than enough from the point of view of our they place Buch Ito severe war I believe burden Ullon many taxpayers that we must now be prepared to make certain new types of adjustments in order to meet the considerations which I mentioned a few momenta ago-considerationa of equity, in centive and savings.

the}' cannot.

be requirements, to for permit.


to the extent One type of special proVISIon which I am the most.

suggesting, although not important, an exemption from taxable is income in respect of unusually large medical or hospital expenses which a U1llpayer has had to meet during the year out of the income on which he is being taxed.
This will take the form of permitting as a deduction from income, the purpose of calculating tax, amounts spent by the taxpayer during the tax year on medical, dental, hospital and nursing sen·ices these exceed 5 per cent of the taxpayer's income.
A limit is to be set on the amounts that may be claimed in this way, of $400 for one taxpayer, plus 1200 [or his wife and 1100 for I eaeh child, up to a maximum of 11,000. should point family that while of .live, for example, ia more likely to have a large excess of these expctlses in any )'ear likely to have than a single person, it is not five time8 the amount to be is not it five will be subject expected that all to in the same year.
serious illness or accident I may say by way of explana.tion of the 5 thnt studies of family expenditure per cent that indicate expenditure on average that out the for a rMr.

Ilalt)·.l medical services, et cetera, are in the neigh bourhood of 4 or 5 per cent of income, and we desire o:lly to provide exemption for those who ha\'e more than average expenditures of Those claiming this exemption this kind.
will be required to submit evidence that these pa}'ments have, in fact, been made in respect of services received by the taxpayer or hiJ dependents within a specified period.

REFUNDABLE TAX the the increased important a portion of for him until after The second snd most type of alleviation I wish to recommend in order to render equitable the increased rates which I have outlined involves a substantial inno I am proposing vation in our tax machinelJ'.
to make tax refundable within a specified period after the war, with accrued interest at 2 per cent.

Th~ portion of the assessment on his income will therefore constitute a form of savings for the taxpayer, rather than simply a tax.
This saving will be a part of the taxpayer's war time earnings, kept the war, when it can be spent to better advantage, By means of this principle we are able to meet immediate fiscal needs to a substantial our degree without io.centive endangering afforded by the possibility of higher earnings for more and better work.
In the case of those with incomes in the lowest brackets to tax, the refundable portion will be subject greater than the increase in the total taken, so thllt the oct tax on these lower paid gI'OUP!

will be somewhat than at preseot, lighter although they will be required to provide a fair share of the increased tOlal assessment.

This refundable portion of the tax we may It term a "minimum savings requirement".
the taxpayer not only pays will ensure that his certain minimum saves taxes but amount, dependent on his income, his tax, and his family responsibilities.

In general, it will be collected in the same way and at the same time as the income tax.

Allowance is to be made, however, in this refundable por tion of the tax for certain types of savings already being made by the taxpayer under contract, which the taxpayer cannot cease substantial making without loss or danger.
Payments made by the taxpayer within the tax )·ell.T8 as net premiums on life insurance contracUi to-day, Or as principal payments on a mortgage on one residence, or in force a JUNE 23, 1942 The Budget-Mr. ll&lell 3581 all paymenta into & peDBion fund, retirement fund or superannuation fund, will be accepted all an alternative to the liability to turn over funds directly to the trftSUry as part of the minimum ISvings requirement.
Theile aller- native types of uvingll cannot readily be drawn upon during the war, and of COU1'8e to thc extent they are drawn upon in I.ny year, they cannot be included.

The use of fundi for these purpoaea by the tupayer does not compete with war requiremenll for good!

or services, nor add to the problem.

of price control and raliooing, the use of funds for expeoditure.
By pennittiog theM !Avings under existing contracbl to be counted a 'psrt of the minimum savinlll requiremenll, we are able to ensure that everyooe aa\'ea the minimum amount without creating hardahip for those who have contracted to save sub.

stantial amounta by meanl of life insurance, morlgage paymenll or penaion funds.

a.s does it in war Let me emphuiae clearly that thia minimum of Aving.
to be required of all doea not release any of us from the obligation to Ave as much 1ft is humanly possible in addition to tbis, and ta in\'cst II.vingll certifieetu or victory loanll.

We are not subatituting com· pulsary for voluntary savinp, On the con.

trary, we must aecure a very large inereaae in vIJluntary uvingll from iIldividual.

this year, in addition to the minimum uviop now to be rrquired by I.".
The 6J\lreB I than Jive in • few mioutell af the amount "e shill have to borro" in addition to the revenue to be obtaintd from nisting and increased tuu will make it quite evident that savinp must g:'eatly increase.

There ia no doubt .. whole have the 6nlncial means ta make lUeb hving!.

Under the pressure of Vllt war expenditures their aggregate income it reach- that Canadialll U ing levels which would have l!Jeemed impoaaible a few years 11:0 or even in the palmy days of 1929.
Under the meuurn being proposed we are going as far as we feel we can to eD5Ure .. equity in reasonable millimum degree nf respect of .."ar savin., But the great majarity of Canadian.

un lave "more than this basie minimum, and lOme can ave very much mote, I have in mind, for instance, family group.

income h.. inerea.sed very 1Ub .."hose total stantially because of the "ar.
Under a fiacal system whieh is based on the individual rather than the family as a unit, the fnll mobiliution af pOSllible IlIvings by sueh groups ean nnly take place on the \'oluntary principle.

It ia therefore dear that the National War Finance Committee, which directs our savings campaigns, has' an even bil;lter and more difficult job to do than it haa had in the paat.
The majtnitude .nd the character of its tllsk is IUch that the eommittee does not believe it cln .ucceed unless it becomea to an even is now a people's greater extent organization.

SUCCesll will depend upon the edent to which it can draw upon every group in the community for men and women wha will help in planninl ita activities I I well I I ill carrying them out, and arganiutioD is now proceeding with tbis end ill view.
than it The una and minimum saviDgs required (rom pel'SOlll with varioua incomes are illu.

trated in a table which I would like to place on Hallaard at this pcillt, .."ith tbe consent of the bouse.

The table givu the ligures for single pel"8OQI, marritd persona without children and married persol1ll with two children, for selected ineomea from the exemption limits up to high figures.
The .mount of tu payable at current rates, including national defence t!lX, is shown for the purpose af camparillOn: The Budget-Mr. Jklcy COMMONS TABLE ILLUSTRATING EFFECT OF PROPOSED INCOME TAX RATES WITH REFUNDABLE FEATURE (Amounts shown in even dollarll for purposes of iII11atratioll) Annual Income Tal at Pre!ent ..... Propoeed Illcreallll in TIU Alone TaJ at Proposed New Ratcs Refundable Portion.

or Minimum Savings Require.. ment SINClLE PERI!oONlJ.
WnltoUT DJ:PJ,NnENTS 700....................... 860....................... 1,000, ......................

1.2.'iO.......................

I.MlO................ , •.•..• 1.760....................... 2.000....................... 2.500....................... 3,000 .

.

.

........ .. .

....... .


4,000 ....................... 6.000 ....................... 7.500 ....................... " 67 87 162 217 273 3<0 m 622 '" 1.332 2,400 10.000 ....................... 20.000 ....................... 30,000 ....................... 1iO, O()l).

• • • • • • • • • .. •• • • • • • • • • • 100.000 ........... -......... 600,000, ...................... 3,6IlIl II.

lOS 15.082 28.392 64.347 411,720 -15 , , , 30 20 " " 167 2" " 101 151 202 319 396 67.
712 1.1124 3.314 6.511 15.990 50,,", 321 4<, 626 6" 1,274 1.728 2,1170 4.312 II.

029 18.396 ".903 80.337 472.3lK MAKllnr.n ~ll8ONII, WnIJOOT CIJ1LDR&N '" " " '" 176 2" 275 .00 1.000 '" ','" 3.080 8.330 14..085 26 -15 .. -" " " ,., '" "6 134 378 "2 1.949 3.361 26.

V6Ii 61.876 401.120 6,688 16.112 60,83' 109 " '" '" ... '"' 231 316 <0, 1.378 2.620 3.762 10.279 17.446 33.553 77.987 461.
954 1.250....................... 1.300 .... ................... 1.500 ....................... 1.750 ....................... 2,000 ....................... 2,250 .... .............. .... 2,500 ....................... 3.000 ............••......... .

,000 ....................... 5.000 ....................... 7,500 ................... 10.000 ........ ......•....... .

20,000 ......... ,' ............ 30.000 .

...................... 50.000.


...................... 100.000....................... liOO,OOO....................... [Mr.

IIaley.)

20 80 " 12' 100 1<0 16' 200 '" 320 400 6IlIl 6IlIl 800 8CO '00 800 '00 " '" lOS '50 200 2" 2'" 300 .00 800 760 ',000 ',000 1.000 1.000 1.000 1,000 Total.

Le., New Tat plus Refundable Portion or Minimum Raving.
Require.. ment <0 116 172 267 267 m 601 626 I,'" 1,594 2.128 3.570 Ii, 112 11.829 19,196 35,703 81.137 473,1{H. '" 100 217 321 431 '41 " I Sst 1.364 1.878 3.270 4,762 11.279 18.446 34.553 78.987 462.954 JUNE 23, 1942 The Budget-Mr. I181ell TABLE ILLUSTRATING EFFECT OF PROPOSED INCO)fE TAX RATES WITH REFUNDABLE FEATURE-OOftdlld~d (Amounta Ihown in even dolll!"

for purposee of illustration) Annual Income Tax at Preeent Ratee Propoeed Incre&ll8 in Ta't Alone TlU at Pro"""" New Rate.
Refundable Portion, or Minimum Saving.

Requira- ment Total.

i.e., ~ew Tax pIli!

'Refundable Portion or Minimum Favinll:l Require-- ment MARBlED PIRSONS, WIl'lf 2 CHILDREN 1.250. , ... , ..... " .. , , ..... , 1.300., .. " .. , ... , .. " .... , , 1.400 ............ , ...

I.

500.

.....................

I, i50."

.. " .. , .. , ......... , 2.000..... .......... , ...... , 2.250. , ... , , ..... , .. " .... ,.
ViOO..... ................. , 3,000 .... , ... , .. " ......... , 4,000 .... ............... , ... 5,000.•• , .••• , •• " .•.

, •• 7,500 ....................... 10,000 .•• , ••.

, ••..• " .•.•.... 20.000 ... , ................... 3<1,000 .••...•..••.•••.•••.

, .. 50.000 .................. 100.000 ....................... MlO,OOO ....................... 22 " 30 35 48 60 73 116 '" 480 73' 1.637 2. ilO 7.890 13,621 26,437 61.299 400,408 -\0 -7 -.

-.

, " "' .,.
-.

, " "' .,.

218 327 '\2 \02 47 1,973 3,409 6,700 16.272 61,130 16 \8 '\ 53 107 153 217 " ... 334 1,062 2.IM 3.346 9,863 17.030 33,137 77.

Iii!

461.538 16 \7 2\ " " loa 162 218 534 460 oro "" 1.200 1.200 1.200 \.200 1,200 1.200 32 35 .. " I'" 216 32' ... '" 1,148 1.662 3,OM 4,Mll 11.063 18,230 34.337 i8,7it 462,738 KO'R.-In calculating the above taxel it h811 been llMumed that all incomel up to 130,000 are entirely eamed incomel.
and that incomel of more than 130.000 include earned income of that amount and addi tional investment income to make up the total.

law for a tax of 1175.

Under Let me gh-e a Cew examples from the table.

A married man without children and with all income of 52,000 a year is liable under the the present rates proposed he would be liable for a total amOUnt of 1431. of which $231 would be tax and $200 would be his miDimum aavings requirement to be reCuDded after the war, with interest.
A single man with the same income WOllin be paring 1340 under the present rates, and would pay a total of $601 under the new rates.

of which 1160 would be refundable and 1441 would be tax.

A single man with an income of 51,000 is at present rates subject to a taJI: of $87.50, and at the new rates would to a tax of 192-0nly a Blight he !.IUhject to a minimum savings increH5e-and as well requirement of sao.
Going up to the middle a married man without income children, earning 14,000 a year, who is sub ject to a tax of 1675 at present rates, would unrier the new rates be liable for a tax of 1964, and, in addition, for a minimum savings brackets, If he had two dependent requirement of $400.

children, the tax liability would be Only 1668, compared with 1450 at present, and the refund llasessment would be able portion of the total 1480, making a total of 11,148.
A married man with two children and an income of $1,500 ie at present liable for a national defence tax of $35.

Under tax liability would be reduced to 124.50, and he would have a minium savings requirement of an equal amount.

that leaat a portion of in many of these casea at the minimum savings requirement will undoubtedly be met by the contractulll savings already being made by the taxpayer in the form of life insurance premiums or pension fund deductions from wages or salaries.
I should point out the new pilln his It will be noted that on the amount of any the raLe of income in excess of 1100,000, to which, of graduated tax is 85 per cent course, must be added "he fiat rate tax r,f 7 per cent for married persons and 9 per cent In addition to this we must for single persons.

358' The Budget-Mr. [Me" COMMONS lIUrtu on investment add the " per cent iDCome, ainee any income in exce8lJ of '100.000 ill alm09t certain to be investment income in this country.
Therefore we have an effective top rate of tax of 96 per cent for married persona and 98 per cent for sioile person..

This leaves 1II'h!t for such persons will amount to only.

IoOken residual of 2 per cent or " per cent.

The effect of these rate.

will be that while.

married person with • 1100.000 income, of which bl.OOO is earned income, ..ill be left with about 121.000, aoother baving a toW income of $500,000 "ill be left with about sa,.000.
there trh.tever his aclual I have considered the luggestion tbat • maximum level should be set for net income aIter'tax-that we should place.

"roof," 10 to speak.

on 1I'hat a person may be allowed to iucerne may be.

retain.

is an In the United Statel.

where awkward problem .riling from the exilltence of large incomes from to:-exempt seeuritiea, there may be $Orne spet:iaJ need for legislation In this eountry, h01l'ever, of this character.
there would be no substantial amoutt of revenue to be gain!d from imposing a 100 per cent top rate rather than the 98 per cent rate I am proposing.

There may be &Ome political allurement in the principle of establishing by pel'5OnaJ legislation incomes, instead of adhering to the principles of progressive taxation even though at very I can only say that high rates.

there have been and far-reaching decisions to be made in framing this budgd for me any consideration to its political adornment.
too many difficult absolute to live limit on an I would estimate the yield of the present income tax, including national defence tax, for a full year at the pruent rates on the cur level of incomes.

at about SUO million.

rent The increase in rates, and chan,!!

:es in exemp I believe, tions, whirh are proposed would, yield an additional 11I5 million in a full year in the form of tax revenue proper.
It would also impo~e a minimum savings requirement of about 1250 million in addition, but we must expect a very aubstantial portion of thia to be met by the alternatil'e contractual forma of leaving possibly 1125 million as the &!Lving.

I Sol not including )'ield of refun,dable tues. tax with the estimates of this revenue.

however, as it is properly regard!d as borrowing rather than revenue.

refundable CllLlZCTION AT SOURes 1 mentioned th::lt it ..aa propO&e<!
to collect sa much &II possible of the new tax at the .curee or by a compulsory instalment plan.

{Mr.

n.-ley.)

it rates is obviou!

it slJould be tee new income tax rates, The inrtalment plans that have been in effect on a voluntary basis for the last two years have been welcomed by many, but they have been u~ by only a minority of taxpayers.
With the h~her rates now being put into elIect, including the refundable portion of the the income tax is that tn, something for which almost evel')'one subject to it must budget the year round.

From the national pain' of view, ill necessary that reflected in these higher redul:ed spending power as soon as reasonably p<mible, a:ld regularly thereafter rather than in fits and starts.
Consequently it is proposed to commence in September of this year to deduct at the souree as much u is practieable including the of It will not be adminis refundable portion.

tratively possible to deduct 100 per cent of the to: the cue with the is national defence tax in some cases, but we shall aim at something like 85 per cent or 90 per cent.

leaving only a moderate remainder to be paid when the return is fil!d.
During the first four months the neductions will not be on the full scale that will be in effect from January 1943 to August of that year, but will be at an intermediate le\'el between that and the present national defence tax level, in order to give taxpayers an opportunity to them!elves to the change.
As 1 have adjust uoted, the national defence tax deducted dur~ ing the fil'St 8 months of 1942 will he credited against the tax payable 00 1942 incomes, and this will be reflected in the scale of the deduc tions.

particularly in the first four months.

IiabililY a.s it I am moving.


The tictual details of the deduction plans remain to be worked out and are not provided for in the resolution that In is expected that employers will general, he llsked to deduct specified amounts from ('mployee~ of a specified family statU!

within a specified enrnings range.

Thus, for example, it mny be that for married employees without lIay .33 and 136 children earning between, per week, thE' emplo)'er will be asked to deduct, sa)'.
15..50 a week to be forwarned to the income' tax office and to he credited to the employee's tax liability and minimum sav ings requirements.

Tables wiII have to be prepared showing the amounts to be deducted for various wage and salary ranges for aingle and married penons and so forth.

is It believed that to be the amounts though deducted by employers will be much greater, the work of calculating and recording will not be greatly increased.
Deductions will be bued upon the income of the pay period aA:ainslo It will be MCelSary which they are made.

for each L3:cpl)'er to meet any excess of bi, the amount.

to: and Mvings liability over JUNE 23, 1942 The Budoet-Mr. /la/ev actually deducted during ,the twelve montha: of deductionil or to claim a refund in cue of over-deductioDS.

to deduction at It will obviously not be possible to deduct the major part of the tax at the source on all It is therefore proposed that fonns of income.
those persons having incomes in such forms as are not subject the source shall he required to pay th£>ir taxes and their minimum savings requirements on a compul S'Qry instalment plan extending over the same period as the deductions from other incomes.

For thia purpose it will be necessary to provide for only four instalments rather than twelve in order to reduce the administrative work in.

valved in such frequent payments.
for that th<N!e typeil of this effect is offset by the fact The collection of moat of the income t&:l: .t the source, heginning in September, and the compulsory u!e of the instalment plan of psy_ income where the ment tax iii Dot deducted at the source, would have the effect of increasing the amount of income tax to be received in the current fiscal year, hut the natiol'lal defence tax deducted during the first eight months of 1942 will apply loward the payment of the new total tax, and part of the revenue from these national defence tax de· ductioDS has already been taken into last year's accounts.
As a consequence of the Jalleral factors affecting the time of payment, u well as the changes in rates and exemptiot18, ret'eive from it income tn on individuala, including deduc tioDS for national defence tax, a total of 1435 million in this fiscal year, which amounts to an increase of S45 million over the figure I galle a rew minutes ago for the porential yield this year· of income tax and nationaJ defence tax under the existing law.
Thelle figures do include the portion of the ta::c which will not be refundable; we might expect 1140 million of refundable ta::c or minimum savings require ment during the fiscal year, but a large portion of this-we may say 170 million-is likely to be accounted for in.

the altemative forms of contractual sa\·ing.

iii estimated that we shall There are some minor changes proposed in the personal income tax which I will mention only briefly.
I am proposing that the age up to which children may normally be claimed sa dependent~ should be reduced from the twenly first birthday to the eighteenth birthday except in eases where the child is attending school G1' college.
Under present cirtumstances all able bodied persoDS of eighteen years of age or over lIhould, I believe, be engaged in some useful work or service unlesa they are com pleting their education, and cOIllleQuently chil dren of th~ age ehould no longer be presumed to be dependent on their parents.

Those dependent by reason of physical or mental infirmity will, of course, continue to be regard_ ed all dependent for the purpose of income tax, irrespective of age.
if their For those at the other cnd of their working lives I am proposing BOrne alleviation by pro viding that anyone over tbe age of 6lS yeal"l shall not he liable for the minimum aa.vinp requirement, incomes do not exceed 13,000 per year.

Old persona with small incomes cannot reasonably be forced to save a substantial amount for a future which they may not live to enjoy.
I would hope, however, that a large proportion of those entitled to them this exemption will choose not to avail selvell of it, or to llave even more in other forms, they may llhare with their so that younger compatriots these the burdens of historic yeara.

WAR SERVICE Pl:NBION8 In addition to the changes in the rate struc ture and the other proposals which I have iilllt mentioned there are several other itema which are of general interest.
I am pleased to announce that I am going to recommend to the house an exemption from all taxes uDder the Income War Tax Act in respect of war they arise out of the past war or the present oDe.

r feel sure that this will meet wilh a hearty response not only in the house but in the country &8 a whole.

regardless of whether .

service pensioOll, OTS>;R INroME TAX CHANGES Legislation will be introduced to prevent tax avoidance in certain directioD8.
For example, it is proposed that income received from oil or gas wells organized on the sD-called royalty basis shall be deemed to be income received by the person or personll actually operatiog the oil or gas wells on behalf of the royalty holdera and taxed at that point.

Also, when property is sold on an iDStalment basis the capital paymenta shall be deemed to include interest at a reasonable rate in casea where there is no interest provided for or where the interest provided for ~ unduly low.
Our tax on noo-reaidents which now appliee to interest, dividends, rents, royalties and car.

tain other income will be extended to cover salaries and annuities.

'This will bring our tu on non-resident.

more nearly into line with those imposed by other governments on our citiseDS.

At the same time I propose to remove the present limitation on the personal exemp tion applying to non-residents who but for this limitation would pay tax under our law on the same baN as tesidenta.
This provision, which will be on a reciprocal baa~, will be 3586 The Budget-Mr.

ll.

!lell COMMONS of particular interest to persona who commute across our international border.

Several other minor changes in the law will be introduced ,..hich I nef!d not mention here h••t which will appear in the resolutions.

Rates of tax in tax schedule will be increased 3 per the gift cent.
This concludes the section on proposnls relating to personsl I wish to turn now to some proposals concerniog the excess profits tax.

income taxes.

EXcr.SS PROFITS TAX The excess profits tax as it was drafted- in the budg!

't of June, 1940, and revised in many details in last year's budget, has been appro priate to the period of expansion during the early years of the war.

During this time it has produced substantial revenues for the treasury in a reasonably equitable manner.
It has imposed a heavy tax on increases in profits.

It has served to keep the over-all increase in profits of all corporations within moderate limits, so that the total of all profits has increased by only a small percentage from )'ear to year despite the very much larger increases in the total of business carried on.
At the same time it has permitted rapidly expanding businesses to retain a fraction of their increased profits in order to meet their reqllirements for additinnal working capital during this expansion period.

The time bas now come wben we can and should make the excess profita tax more severe The rate of expansion in business will now be much less than it has been heretofore.

In the case of many civilian businesses the vol ume of their production or turn-over is likely to decline rather than expand.
Even in the field of wllr production we are getting close to the levels of full capacity.

Consequently, b\lsinesses in general no longer need to retain substantial amounts of their current profits for reinvestment in working capital and can to pay a large proportion to the afford treasury.

the machinery required to administer the excess profits tax has now been built up and is operating efficiently.
We are, therefore, able to undertake changes in the tax which eould not be readily under~ taken when we did not have the adminis trative machinery to carry them out effec tively.

in the past year we have adopted a much more rigorous general eco nomic policy, involving control over many forms of incomes as well as over production and distribution.

This more rigorous economic policy makes appropriate the more rigorous excess profits tax.
Secondly, Finally, I have given a good doeal of consideration increasing to various alternative means of IMr, D.ley.1 tax.

in mind that I believe that the the excess profits increaSE' should affect the tax on excess profits rather thRn on profits that have not increased levels.

Already substantially over pre-war the tax on profits that have not increa:M!u is those heavy when we bear profits when distributed as dividends are "11fl.
ject to all the peT!onal income taxcs in addi· tion to the corporntion taxes.

This involves, in effect, a discrimination agaiJU't income earncd in the form of corpol'llt.e profits as distinct from other types of income, such 8J interest.

Some discrimination may be justi fied, but I believe we have already ~one far enough in that direction.

Consequently, I propose to increase the rate of tax on excelll profits but not tax which applies to profits generally.
the Hat rate of In proposing this increase I think it im that we should not portant remove entirp'ly for incenti\"e continuing, day to day, the economy and efficiency in production.

If that incentive were entirely removed by making the tax such that it would take the whole of any increase in profits, leaving no benefit to the producer, then we would be exposing ourselves to the danger of slackness and care lessness in regard to costs and efficiency.
I am not suggesting that Canadian producers, or distributors for that matter, or thosp' en gaged in any other type of business would in this any way 8/Ihotage our national effort at time, but simply that the complete removal of the standard, by which business meo are accustomed to determine whether expendi tures are justifiable or not, might make them forget the minor e<'onomies and opportunitIes lor increased efficiency which do not appear significant in themselves in relation to the national effort but which in the aggregate have very great cllnnot afford now to waste labour, materials or time.
We net'd to preseorve efficiency by evf'ry reallonabJe means at our disposal.

Secondly, I believe that in making any change we should not deprive businesses of all chance to build up roservcs for the post-war period.

Some reserves will be needed if business is to press ahead actively arter the war with the con version of its operations from war purposes to peace purposes, to modernize its plant and thereby place itself in the best position to pro vide in the poat-war period.
Thirdly, we must beware of making too severe an instrument of taxation that can never be perfe<'tly fair and equitable, however much we endea vour t.o provide for various types 01 If we had a tax that cases lind situations.

Wa.
Wa.

!l extremely severe treatment of so-called excess profits, yet something short of perfect in determining standard profit8, we importance, We employment in its JUNE 23, 1942 35&7 be templed continually to make should special allowances of one kind or another to temper in an endeavour to be equitable and these would be apt to add up in total to a tax that Wa.!

far le59 severe than wu intended.


severity in" hard cases its time not On the other hand our need for funda at the present time is very pressing, All I have already emphasized in connection with the personal income taxes.

We must obtain every dollar that we can.

Moreover.

it is desirable at the present those who have to permit substantially increased profits to disperse them in higher current dividends since this would be dirpctly contrary to the government's policy of stabilizing incomel.
Any increase in profits would better be reserved to enable the bUlli· ness in port-war reconstruction.

to play an active part Balancing these various considerations I the rate of tu have decided to propose that on excess profits he raised from 75 per cent to 100 per cent, and, at the same time, that provision he made for refunding after the war 20 per cent of the uceas profits taken, over the range where this 100 per cent rate is e£rective.
I am also proposing another more eompli cated chaog1l which is le59 spectaculu but serves to increase the effective rate of tu very substantially on businesses whose profits have increased aignificantly over pre-war levela.
Let me remind the house that under the present act a corporate taxpayer pays aD 18 per cent corpora~ion income tax on all of its profits and then under the Excess Profits Tax Act pays either (a) 75 per cent of the excell8 profits over standard profitll after dedlreting the corporation income tax paid on this excess or (b) 22 per cent of its total profits, which I am now prop<ning that ever is the greater.
under the Excesa Profits Tax Act a company shall pay a flat rate of 12 per cent on its total profit/; in addition to the 18 per cent corpora tion income tax, and then shall pay as well either 10 per cent of its total profits or 100 per cent of its excess profits after deduction of the corporation income tax and the 12 per rate thereon.

whichever is the greater.


cent therefore, I am taking the 22 per In e£rect, into cent in the present act and splitting it 12 per cent to apply to total profits in any event, and 10 per cent to apply as an alter native where that is greater than the amount produced by the rate on excess profits.

The e£rect of this change, which may appear inCOD is to increase BUb sequential at first aight.
atantiaJly the tllX liability of all those whose profits have increased by more than one-eix.Ul of their standard profits.

of after The amount the deduction to he refunded to those cor to the 100 per porations which are subject cent rate on exce8l!l profits will be 20 per cent of the amount of profits in excess of the tax on the amount at which the 100 per cent corporation excess income tax and the 12 per cent rate equals the 10 per cent tlOl: on the total profit.
This rather complicated pfl:'vision results in the 20 per cent refund applying only where the 100 per cent rate effectively applies on The amouot any additional profits.

to be iuterest but will be refunded will not bf'ar returned taxpayer after tax liabilities have been paid.
the war, provided ooly that his unconditionally flat the to The result of limitation on the these chan.l[es in the rate structure of the exce~ profits tax will be that no corporation will be permitted to retain more than 70 per cent of its pre-war standard profits, though it will be j[i"f'n the opportunity to earn a post-war credit through economie!

and efficiencies and increased production that to earn higher profits bf'fore tax.

enable it Thi!
enable it Thi!

amount of profits which may be retained may eventually require some corporations whose profits or dividends have incresaed substantially in recent yeal1l to reduce their current rates of dividends.

If certain reductions of dividend!

should be am proposing required by the measure I I do not bt!lieve it will be too mllch of a burden to place on these corporations or their shareholders at this critical time.
The amount tax which will be refunded will not be of lost enable it to safeguard its post-war position and to make itself ready to take part in the important work of reconstruction.

to the corporation but will I have decided that Because these changes impose a 100 per cent rate on many corporations and because in many cues available earnings have already it been disposed of, would be impossible to make it retroactive.

these new rates of excess pro Consequently.


fits tax will apply as from the lst of July onwards.

the taxel In order to ensure that payable under tbis act snd by corporatioDll under the Income War T8ll.

Act are remitted at as early a date as possible to the treasury is proposed to require monthly innalment it tax liability, payments on account of including the refundable portion.
The pay ments made before -the end of the fiscal period of the business will have to he based upon anticipated earnings or earninga in the preceding period.

The result of thioi chan.ge in timing will mean a very substantial increase in the amount of to be obtained from the excc811 profits tall: during the curreat fiacal year.

revenues the 3588 The Budget-Mr. llsley COMMONS in.
the that tax exemption designed Certain other amendments to the Excess For Profits Tax Act will be brought eumple, to encourage mineral production which previously 'Va9 obtained in the Income War Tax Act will be transferred to the Excess Profits Tax the present Act.

The house may recall exemption expires December 31, 1942.

It is proposed that a generally similar exemption shall he granted under the Excess Profits Tax Act where the tax relief rather than under the Income War Tax Act.
The new exemption will apply to producers of base metals and strategic minerals.

This exemption may he regarded as complementary to the measure of assistance being granted under the Income War Tax Act which encour· ages the seareh for these minerals.

is greater In the interests of achieving greater equity in our taxes on business enterprises which now of necessity are at such very high levels, I pro· pose to allow in future II; one-year carry-for ward of losses.
This will apply in the case of corporations to both income B.nd excess profits tax and in thc case of sole proprietor ships snd partnerships to excess profits tax.

a proposed amendment The law at present gives complete exemption to small businesses with profits of $5,000 or less.

Under this exemption will be withdrawn in respect of tne new 12 per cent rate which applies flat generally to total profits of corporations.
Other change~ of a technical nature which I need not explain here will be found in the resolutions.

1 have already given an estimate of $275 million as the yield in this fiscal year of the excess profits tax if there were to be no changes made in it.

This revenue would be largely derived from the tax on profits earned in 1941.
The introduction of the compulsory instalment plan for the payment of this tax will increase substantially the revenue to be expected from it during this fiscal year from taxes on income earned during 1942.

Exclud ing the effects of the changes in rates, this increase would be about $14.5 million.

The changes in the rates of the excess profits tax which I am proposing would, it is estimated, yield an increase in rcvenue of about $58 million on the basis of a full year's application their current levels.
Because with profits at of the instalment plan, we shall get some of this increase during tlle current fiscal year, and allowing for the fact that the changes go into effect from July 1, it is estimated that the amount will be about S20 million.

In addition to these amounts of actuat revenue, the amount we shall receive in the form of refundable tax under the excess profits tax is estimated at about S60 million on the basis of IMr.
1l1!~)'.1 a full year's application with profits at current levels, of which we may anticipate receipts of about 125 million during the current fiscal year.

The application of the instalment plan to the corporation income tax will bring sbout an increase in revenues from lhat tax during the present fiscal year, even though the rates are not changed at all.

It is estimated this will amount to 1105 million.

In the Succession Duty Act there will be few significant changes.
The rate structure will not be allered.

As a matter of general interest, however, I may call attention to the new fonn of exemption which will allow charit the estate to p868 able gifts up to one-hall entirely tax free where previously the duty was one·half the ordinary rate.

is also proposed to offer exemption on a reciprocal basis to representatives of foreign governments.

Certain other minor changes will be made with a view to clarifying the law and assiliting in its administration.
It INOiRECT TAXES taxes.

I come now to indirect I would remind the house that, in the three previous war budgets, we have made a highly selective approach to indired taxes.

We have attempted to collect revenues on specific expenditures rather than on all expenditure".
Remembering that we already had an 8 per cent sales tax at the outbreak of war, we have avoided, since the first war budget, except in last year's increase in the sugar tax, indirect taxes which the necessaries of would raise the cost of life.

The imposition of the price ceiling has added conclusively to the weight of argument against general rather than selective increases I propose to follow in consumption taxes.
approach and again, recommend substantial increases in taxes which fall on luxury expenditures.

It is hoped that these taxes will discourage such expenditure.

they do, current savings To the extent that that such will be increased.

To the extent expenditures persist, the treasury will benefit from the revenue.
therefore, a selective furt.her The excise duties on alcoholic be\'eragcs have already been increased substantially since the outbreak of war, but the record of sales leads large increases me to conclude that can again be made.

I shall recommend that the excise duty on spirits, which was increased from S4 to 17 a gB.J1on in September, 1939, be raised to 19 and that on Csnadian brandy from 56 to 17.
The pre·war excise duty on malt was 6 cents a pound and was increased to 10 cents in September, 1939, a.nd to 12 cents in April, llKI.

My recommendation is tbat it JUNE 23, 1942 'the Budget-Mr. II.del/.

be now increased to 16 cents a pound and that corresponding increasea be imposed on malt It is ~rup nnd on beer imported a.lJ such.

proposed that the excise tax on wines be raised from 40 to 50 centll and on aparlding wines from S2 to $2.50 per gaIlon.
is anticipated that in lin incrense of revenue of $11,650,000 in this fiscal yenr and $15,600,000 in a fuil year.

It these changes will result It is recognized that the provinces, u well as the dominion, derive revenue from the taxation or sale of alcoholic beverages.

They ha\'e also the responsibility for regulation of If the tax increase here proposed the Sllie.

should seem likely to affect revenues they have it in their own power to raise their prices or taxes.
The purpose of these increuea is tbe dominion at the ex-penae of the consumer, not to make inroads on provincial revenues.

to provide additional revenue their for Relati\'e cigarettes, rll.ised from 10 cents increased by 25 per ccnt, Sales of cigarettes, now taxed at 56 per thousand, hllve increased very rapidly despite war-time increases in excise duties of SO per It is 'proposed, therefore, to amend the cent.
Speciul Wllr Rel'enue Act to provide for an additional excise tax of one cent for each five cigarettes or fraction thereof contained in any smoking to package.

tob:1CCO has been less highly taxed.

While not .seeking lo equalize lhe rates, I propose an additional tax of one cent per ounce on manu It will be recommended factured tobacco.

further that the rate on raw leaf tobacco be It will raised from 10 to 20 centll a pound.
the tax on cigara he recommended also that he the tax on ~ignrctte papera be increased from 5 centll to 1) cents per 100 and that on cigarette tubea to 12 cents per he It is estimated that these increBllCs hundred.

on tobacco, in ita various forms and uses, will produce additional revenue of $17,205,000 in lhe fiscal }'ear and $22,950,000 in the full year.

I shall r<'commend thll.t a number of excise ':IX!

'S be increased and that some new taxes be imposed.
The increlllles propol!E'd are briefly follows: On 80ft drinks, of which the :18 supply is at present the <Jemand.
a specific lax of I cent a bottle in :1ddition to the present 25 per cent tal:; on l'arbonic acid gllll, a cOtreaponding increase fronl 25 cents to 50 cent8 a pound; on playing l'arus, an increase from 15 cents to 20 Ce.DtlJ trallBportation, a rise a pack; on passenger to 15 per cent with the from 10 per cent cxemption limit raised from 50 to 75 cents; on berths, from 10 per cent to 15 per cent with a minimum tax of 35 cents, and on inadequate to meet IUI1l_227 parlour-car seats, from 10 cenle to 15 cents; on loog distance telephone calls an advance from 10 per cent to 15 per cent with a corre· aponding ll.djuBtment of the utes on pay station calls, the maximum lax being limited to 75 cents; and on telegrams, cables aDd radiograms an increase.
from 5 cents to 7 cents per message.

On furs, which are at to sales tal at 12 per cent, present subject is proposed to advance the rate to 25 per it cent and change the form of tax from a sales tax lo an excise lax.

I laxes shall propose new cltcise to be levied, at the manufacturer's level, on candy and chewing gum at a rate of 30 per cent and photographic films and plates, except for industrial and professional use, at the rate now imposed on cameras, 25 per cent.
I recommend a new tax of 2.5 shall cents per month on telephone extension.s in private households.

trusury will be snyone glad to have the rel'enue but, if chooses such to discontinue the telephoDP.

companies will be extensions, glad to have the instruments.

their use of further The that I was unable at It was my opinion, at the time of the lut budget, that expenditures in dance halls and cabareta were a proper occasion for taxation, but time to find a I shall suitable formula.
recommend that a tnlt of 20 per cent be collected on all expen ditures in dance halls, night clubs, cabaret.IJ find other such ClItablishmentlJ which combine any two of tfie followin&: features: provision for {lancing by the patrons, the sale of alco holic bcvcTIIges, the offering of musical or other entertainment by paid performers.

This tax is to be pa)'able by excise stampe affixed· to the bill or account which must be ren It is dered by the proprietor to the patron.
proposed that this tal take effect on July 1 next.

I shall recommend also that excise taxes be levied on the retail purchases of certain luxury articles.

The tax of 2.5 per cent of the retail price is to be sCcounted for by thl."

affixing of excise stllmps to the bill, cash slip or the article itllelr.
The articles, on the retail price of which it is recommcnded that this tax be applied, sre (I) articles of per jewel cascs, 'purse!, sonal luggage, brief esses, hsndbags, sports bags, etc., with an exemption of articles selling for $1 or less; (2) diamonds, jewellery and' imita~ion jewellery end all goldsmiths' and silversmiths' products, arti cles of jet, amber, mother-of-pearl, etc., with cxemption of articles selling for (3) articles of cut glllS8 or 50 cents or lell8; leaa for 50 cents or crystal, articlcs sellitli ivory, 3500 TI,e Blitlael-.1/I', lIalc:;.
COMMONS the last In respect of being exempt; (4) articles of china, porcelain, stonewnre, etc., except luch articles for use in the prepafntioD or serving of food or drink, thc 50 cent exemption also applying to this (6) ash (5) clocks nnd wntches; catcgory; cig:uetle cig:lr tm}"s. and pipcs, tobacco holders, and dgllrette and rolling dcviccs other smokers' accessories; (7) fountain pcns, propelling pencils, dc!k sets aod dtsk ncees three groups sorie!.
of articles the tnx will not apply to articles 5(!lIing for II or leu.
I am sure that the house l'\"i11 agree that thC:!e e:::cise taxes will fall on articles which it time and thnt almost wholly on fall persons ""ho make unnecessary expenditures, they are in a and thus gil'e evidence that position to contnbute to the rennues of the country, expect in excise taxes will produce addil.ional rel'enue in the fisul )'esr of 120,995.000 and S2S,025,OOO in the full year, to purchase in war is not essentinl the increases they will that I bevernges the price for the Pllrposea of In tbe case of tales on commodities and services which are levied on the retail price aDd paid hy the consumcr or puron when his is paid, the lal will be ,t.ted.
Sl.

'parately bill from the price .nd will be deemed not to be part of the malimum prices regula lions.
Of the commo dities on which new or increued taxes are assessed on the mllnu(:u:turers' pri<'e it may be from the mui noted that furs are exempt tIS :Ire :also sales of mum prices rrgUlatiOIlS, alcoholic liquor by boards, The olher commodities aff~t.ed are subject to the mnximllm prices regulations, viz., alcoholic bever:tges sold otherwise, ci,llar· cttes and tobacco, cigarette papers and tubes, candy and chewing gum, photographic filffi!
and plates, soft drinks and playing cards, On cigaret.tes and tobnceo, the new taxcs are separately stated and will be so indicated by stamps on the packages, The lnx will not be considered part.
of the price for purposes of the maximum prices regulations, In respect ot t.he other commodities, the wartime prices and trade board will permit such adjustments all are necessary lIud equitable, pro\'incial transportation, are Expenditures on one commodit.y and one service affect.ed by tax inCfCases, cigarettes and pasaenger included in the Dominion Burtau of Stati~tics cost of living index.
That indn has since the illSti tution of price and income control acquired an importance which it did not previously have.

It is calculated by precisely the aame methocl6 that have been used since ita incep tion.

No considerationa of policy or e:r:pe<ii- 1M., 1101.,.,) encl' can be permitted to affect it.

HOlI'ever.
HOlI'ever.

there tax increases will be> sep:uately st:'lte<l and clenrly identifinblc as laxes on the can.. 1 pl'opose that- in the case of l.'ign.r sunwr, they rna)' be clles which, desirable as in oiher eircumsl:lncell, are clearly uot nece.. the population as a whole, saries of life for the new tax shall not be deemed P:l.rt of the price for the e.alculation of the cost of living inde:r:.

In announcing lhe offer 10 pro\'inei:ll gov.


tax agrecmenls l:lIt )'e:u', ernments reprdin::; if certnin taxes lI'ere gh·en up I stated that by the provinces thl' it was possible thn.t dominion, in order to pren:nt cerlsin I.

'latsell of companies from benefiting by the cbnnge, might impooe special t:u~ in these directions.
On reviewing the situation, it bns been de cided to levy a Las: of 2 per cent on premiums in paid on life, fire and casualty insurance, additioo to the taxes lI'e n.l pN'!ent imlKlSC \\'hith are confined to fire and (:lslIalt)· in.sur In the c:llle of other clnSSf'S of com ance.

lhe incrta~ in it w:tS found th!l~ pnnies dominion \.

:l:'l:CS on profit!!

mort than offset the special taxCI which thc)' bad been p:ayifl~ 10 the pro\'inces and accordingl)' no Ipccial taxes by the dominion are nec~I1o'.
Since thc tnxes collected in this fiscal )·enr will co\'er both 1941 and 19t2 the reveoue in ~he fiscal year should be $13 million or double the animal yield.

The changes propo$('d in the eu.noms tariff provide for a number of tariff reduclions and amend lhe lI·ording of IM!l'crol items 10 facili tate administra.tion, The retolutiona nbout to be t:lbled nffect lwe:lty./il'e items and also provide for inrreased· additional duties on imports of alcoholic bevcrages.
The changes being m:lde in these additional duties equalize the incre~SEs being made on the same com· modities under the Excise Act, The existing excise duty on beer is being remo\'ed from the schedule to the Excise Act Ilnd replaced by a gallonage tax in the customs tariff.

New dut)' free items are being provided to cover machinery lind apparatus for operating oil sands by mining operations and for e:ttract.
ing oil from the sands !O mined, fuel injection pumps lind nozzles for diescl and se-mi-diesel engines, magnesium Sl:rap and crude cotton seed oil for canning fisb.
Additions to existing items pro\'ide for reduced rates on semi·finished piston castiOis of any material, parts of saggers, gln.ss tubing: in the manufacture of vials and am for Ust poules, e!pecially designed pins for markina: sntcm" unhraided wick (or the manufacture of wax candles or tapen, belting, non-elastic woven fabrics for the manufacture of abdom· .

JUNE 23, 1942 The Budoet-Mr. Ilslell.


359' inaI supporters and spinal braces, mouthpieces the manufacture of and wood bowls tobacco pip~_ for The wording is being amended to facilitate the ndministration of the Hems covering parts for use in the manufacture of motor b'ucks, truck bodies, motor bus motor buses, motor bodies, preserved vegetables, blended orange and grapefruit juice, silicate of soda and resin or rosin.
prepared or This completes the tax changes which I am, recommending and I shall put on Hanaard two.

tables, one showing _the estimated increa9Cs in.

revenue which are expected in the remainder' of this fiscal year and in a full year from the, nelv and increased taxes,.and the other Eho_ ing the full revenue estimates for the present fiscal year after giving effect to s.ll the changes and tax rates and time of payment: Yield, from Propo'ed Change, in Tall:ation Increased yield.

from change.
from change.

in existing tuea- Personal Income Tax ...............•...............••..... Corporate Income Tax .•..........•................••...... Excen Profits Tax.....••.............•............•...... Inlurance Premiums ......•....••••....••••..••.....•...... Excille Dutiea-- Spirib {potable) ...............•.....••...........•...... :Malt '" .............•......•.....•.....•.......

Malt Syrup aod Beer ..........•.....••.....•....••...... .
Tobacco (raw leaf) ..........•••.....•.....•..... , Full year $IIll,OOO,OOO 58,000,000 6,500,000 6.000,000 9.000,000 200,000 350,000 Balance oC current fiscal year 1942·43 $ 45,000,000· 105,000.000· 165,000,000· 13,000.000t UOO.OOO 6,700.000 150.000 260.000 , 15,5S0,000 , 11,610.000 Excile Tuell- Wines .............................••....••....••....... Cill:arettes ...................•.
, ...•••...••....••....... Tobacco (manufactured) ............••.....•....•••...... Cigara .........................•...••.

, ...•.....•....... C;jarette Papers and Tubes .. , ......••..•..•.... , •....... .

So t Drinks Carbonic Acid Gaa .

Playing Card•......................••.... , •..... , •. "

.•.

P-aal"~nger TTansporta.tion.............•.....•.....•....... Bertha and Parlor Car Seat .

.

Long Distance Telephone C.lls Telegraml and Cablee ................••....•.....••...... Furs.
_..................................••.....•....... : , 400,000 17,600.000 4,000,000 100,000 900,000 5,000,000 300,000 100.000 3,000,000 500,000 900.000 250,000 750,000 , 300,000 13,200,000 3,000,000 75,000 670,000 3,750.000 225,000 75.000 2.250.00() 375.000 670,00() 190,000 560,000.

Yields from New Excite Taua- C.ndy and Chewing Gum ...............••....•.....••.

, .. ,.

Filma and Photographic Suppliee .


Telephons Extensions ...........•......••.................. Cabarets, Dance Halll, etc .............................•...

Stamp Tax on- , Luggage .

Jewellery, Clocb, W.tches Cnt GllUlll and Chins .

Aah TrsYI, Pipea, Fountain Penl, Pencil., etc . "


'1,500.000 5,000,000 750,000 500,000 , 33,800,000 , 25,340,OO() , 7,000,000 350,000 125,000 2,000,000 , 5,250.004)' 260,OO() 00,000 1,500,00l) 7,750,000 5,800,000' , 17,225,000 , 12,900.000 TotaL , ...•..••... , " .•.••...•.
, •.. '246,075,000 '377,850,000 • Theae eatimatea for the balance of the current fiaeat year include IUhatantial effect, of propoaed changel in the time and method of payment, t Two yeara revenue will be col1~ted in the halance of the current liacal year, the propOftd rate increUN heini retroactive to January 1, 1941.

TI".

13U'/l/rl-.lf 1'.

lI~k II.

COMMONS Forecast of Total Ordinary Revenue for Fiscd Yenr 1942·43 Custom.

duties .

EJ:cille duties..............•.............. _...••......... Sale.
taJ: 'Var exchaoge taJ: .

Other eJ:cise taxe Income taJ:es- Personal ...................••.....•... National defence taJ: .........•....... ,.

Corporation .................•.....•... Interest and dividend •........•.

, ...••.. EJ:eess profit.

taJ: ...............•........ Succes.ion dutil,!ll ................•........ .

hliacellaneou.

taJ:es .
Revenue from existing tax('s 135.000.000 $ 123.000,000 218,000.000 95,000,000 85,000,000 240,000,0001 150.000,000 200,000,000 28,000,000 275,000,000 15,000,000 2,600,000 Increase in re"enne resulting from budgct Pl'oposals S B,6IO,OOO $ 38,240,000 45,000,000 105,000,000 185,000,000 13.000.000 Total ordinary revenue 135,000.000 134,610,000 218,000.000 95,000,000 123,240,000 435.000,000 305,000,000 28.000,000 440.000,000 15.000,000 15.800.000 Total Non·tax revenue tax revenue ...............•........ .
$ 1,666,600,000 10.5,000,000 S 377,850,000 $1,944.450,000 105.000,000 Total ordinll"y revenue .

$ 1,671,600,000 S 377 ,850,000 $ 2.049,4.50,000 OONCLU810N If our estimates of the yields of new and increased taxes during the balance of the cur rent the fiscal year are reasonably correct, dominion's total revenues for 1942-43 should be :'l.pproximntely 12.050 million.

With expendi lures of sa.900 million, this leaves a budgetary deficit of Sl.850 million which wiII have to he (~o,"ered by borrowing.
On these estimates, we tihall ha\'e paid somewhat more than 52 per cent of our expenditures out of revenue.

The enactment of the budget proposals will provide for the eollection in 1942·43 of addi· tional sums to be refunded after the war and to 195 is estimated will amount which it million.

This will leaI'e for other methods of finan eing $1,755 million.
I shall put a brief tabular statement on Hansard to summarize these rnlculations in convenient form: I'iacal Ycar 19~2-~3 $3,900,000.000 2,050,000,000 1,850,000,000 95,000,000 Elltitnated total expenditure Estimated ordinary rel·enue..
Budgetary deficit ,... .. Estimatt'd refundable lsxes...... .\mount to 00 met by de(;linc in easb and h)' borro.....ing .... , ... I.i55,OOO,OOO After milking full allowance for some reduc tion in our cash balances which were unusually large at the beginning of this year, for moneys available fOI" investmcnt from the Unemploy ment Insurance Fund :md other special govern ment accounts and for subscriptions from in surance and trust companies and other cor porate investors, it is apparent ,that the balance which should be provided by individual pur chases of war savings certificatCll and bonds is I'ery large, perhaps as much II.S two-thirds of the total.
I~r.

lisle)'.)

No great fraction of this un be provided by individuals "dth incomes of more than $3,000 or $4,000.

Individually they must do their share but the total of their subscriptions will he limited by the smallness of their numbers.

It must be provided by people of lower in comes especially those in families whose in comes ha\'e increased during the war.

Now, ,the house will understand what I meant when I said that I was not proposing to substitute compulsory savings for voluntary savings.
The refundable tax snd other pro "isions which I am recommending are merely to equalize the base from which voluntary savings .start.

Subscriptions to victory loans and war savings certificates indicate that tbe curreot savings of individuals for the purchase of government securities are certainly not in excess of $12 million a week and may be somewhat lower.
Over and above the higher taxes, over and above the minimum savings these eurrent savings must not requirement, only be increased; they must be increased greatly if we are to finance this waf the sa.ne and the equitable ,way, if those of us who are Dot in armed forces afe to demonstrate that, as a democracy, we are capable of meeting the $tcru tests of war as we expect those who dare physical destruction to meet far sterner tests.

Will this mean a reduction in our standard of living?

Certainly.
Certainly.

The war will not be won by disputing as to whether labour or agricul ture or employer or employee should get a larger share of a swollen national income.

It will be '\\'on, not alone by the valour of fighting forces Qnd the skill of generals but by tbe willingness of the people at home to make necessary sacrifices-willingnen to make those sacrifices first Qnd not after all other groups hQve made them.

JUNE 23, 1942 3593 The Budget-Mr. Jlslcy.


I am asking that there should be by every individual the most rigorous economy.

Every dollar we spend means that someone is work· ing for us.

Let us not spend it if that someone I am might instead he working for victory.

not asking that anyone's standard of living should be reduced below the level of personal efficiency :lnd decency.

I am asking that it ,Let us should be no higher than that level.
compete with our neighbours, in saving, not spending; in making shift with what clothing and house furnishings we have, not in buying more; in hard work and plain and thrifty li\·ing.

All this has an immediate and necessary purpose.

All the equipment, materials and labour thst we Cllll possibly spare must be used It has a in this bitter conflict for victory.

further purpose which gives hope for the future.

The savings that we make 00'" will be available after the war.
We can then replenish our wardrobes and build our houses and take more leisure, knowing that not only will we be increasiag the comfort and vitality of our f~milies but providing work and pay for thousands of people who will come out of the armcd services and war industries and earn their livelihoods once more in civilian indU8 try.

By all means let us have a new world after the war.

It will not come from speeches and laws.

We must work and save for it and for victory now.


The :National War Finance Committee is engaged in the denlopment of an organization in each pro~'ince which will undertake a con tinuous campaign for the regular sale of bonds, war savings cerificates and stampa tn the public supplemented throughout from time to time, by special campaigns.

I bespeak for them every dollar of savings that can be made and the active help of everyone in their campaign.
entire year, the I should like to say a word to the business men who operate large and small businesses throughout tbis country.

A big part of the earnings of business must during the war fiow into the treasury.

That ia not because it is gO\'ernment policy to penalize business enter prise bllt because 80 large a part of all our incomes and all our WGrk must go to winning this war.
I realize fully that wbere most of the profits lire absorbed by taxes it is difficult to be as vigilant in w"atching costa as when Sl of expense 98ved is $1 added to profits and the mark of a well-run business.

Never theless it imperative that business men is conversion for unnecessary work, job of conversion to do.

should be vigilant also in the national interest.


Let 00 one have it on his conscience that he took man-power that he permitted cost increases which could have For business too there is a been avoided.

longer view.

Industry is going through a tremendous to war production.

When \'ictory is achieved, it will ha\'e another great It must be prepared to serve again the civilian popula tion, perhaps with many new and different It is the business interest and the proclut1.s.
nation'a interest that men of business come to that tDsk with costs that have been kept rigorously under control and with funds avail· "able restocking their plants and shopa.

The refundable portion of the excess profits tax will be available for that adjustment but it will be of less than its full value if business ends the war with highly inflated costs.

reequipping and for This.

Mr. Speaker, concludes my presenta tion of the budget.

The prnposed tax increase!!

are substantial and severe.


They are imposed on the assumption that Canadians appreciate the critical gravity of recent events and the necessity of making a supreme effort in the the atmo present year.

A few weeks ago, sphere W:1S surcharged with optimiBm which in many of its manifestations was almost light hearted.

The war would be over by January; the tide had turned; Germany waa facing Japan had overextende<i internal herself; Haly was a joke; and so forth.
More and morC' Canadiana were putting forward demands IGr their own material betterments.

and increasing numbers were transferring their interest from war to post-war problems.

collapse; The events of the last few days must aurely have had a sobering effect.

This is no time for airy overconfidence.

Events in China, events in the Ukraine, events io the Crimea, events in Libya-do not these convince us that the war may not be won this year, may not be won for many years?
It was not recklessly that Gennany and Japan brought the United States into the war, as they did.

What fOGlish atatements we have madel Not long ago, how often was it said that Hitler was a. madman, irrationally running headlong to destruction, that Japan was committing there seems to have been hara-kiti I Alaa, nothing irrational-certainly nothing inten tionally suicidal the plans of our enemies.
These aggressor nations prodded the United States into the war because they about The Budgcl-Mr, !lslev, COMMONS this moment the situation is at they could, nevertheless, were convinced that win-win in 1942, Do Canadians realize how critical in Russin, in China, lind in the middle east, and how critical it may be elsewhere before long?
their I believe that DOW they do and that individlHl.1 desires for gain, and ease, and advantage are submerged in the nation's will In this belief, I present this budget to win.

to the IlOusc snd to the Canadian people, RESOLUTIONS 1011".

Speaker, I desire to give notice that when we are in committee of ways and means I shall move the following resolutions: I:fCO~fl: WAR TAX ACT nesolved, that it ia expedient to amend the Income War Tax Act and to provide: 1.
That the rates of tax applicable to versons other than corporations and joint atock com panics shall be increased to the rates set forth in the following schedule: A, Rutcs of tn applicable to person, other than {,ol·,>orations and joint stock companieR: I. N"ormal tax (J) In the eaae of (a) a married person, (b) a widow or widower with a son or dau):hter under eighteeu years of age and wholly dependent upon aueh ta.3paycr for support, or a SOD or daughter eigbtccn years of agc or ol'er and dependent on account of mental or phl'sical illfirmit)·, or a !lOn or daughter under twenty-one yean of llge who for support is delJCmlent upon such parent ou proof II.
student at lIudL child is ~ecOLHlar)' school.

university, or other educa tional institution; that (el an indil'idunl.

other than a manied person, who maintains lIeH--contained a domestic c~tablishment and who actually sup ports thcL'cin a person wholly dependent upon him nUll COlllH)(:te<l with him by lllood rela tionship, waniage or adoption; (dl a minister 01' e\crg)"lllan.
other than a married !lCI'SOIl, in charge of II diocese, parish ;'),' COll;:1L·,'gatioll, whose ,lnties require him to maintain at his own and sale eXllelllle, a self contained ,lomcstic establishment an.l who emplo)"l1 tlH:reill on full time II.

hou~ekeeper or lICLTant; PrOI'idc,L h the cnse of (al, the sponse, and in elise of (bl, the said depcndent, is resillcnt in Canada or in nny other part of the territory of th~ TIdU.,h l;.
:IItIIllOnwelllth of Kation5, or ill a cOHlltr}' eOI,ti,;nl'lIs to Canada, or is a national or eiti?

'Cll cf a C"Illltrr nllied wiU, Canada in the pre~pnt wai' n.nd i~ llrel'entc<l from cntry inlo Can:u!.a ,Ill" to the exigencies of the war, is Icgall:1 deb;Hl"ed fr01il entry into Canada: 0" Sel'cn 1'('1' e('ntuill of the i:Jeome, if tlle income eJ[e..eds Sl.~OO per rear; And ill tilt CIlI'lC of {(') a hHsband nod wife hadng each a s(':'~t'a!c income, ~Mr.
l1~:ey\ Sel'en pCI' centum of the income of each, the income of each exceeds $660 per year; if And in the C&Be of (0 a aingle per80n, or (g) 0. married per!lOn wlLOse spou&(' iI not in Canada or in any other part of re9ident tho:> Dritillh Commonwcnlth the tenitol'y of of Nntions, or in " country contiguous to Cannda or in a country allied with Canada in the present war, or whose spouse is not from entry into Canada, Icgally debnrrecl the Seven per centum of income excecds $Il60 but does not exceed $1,800 per year; income, the if Eight per centum of the the income, $1,800 but doea not exceed if income $3,000 pCI' )'ear; and exeeeels Nine per centum of the income, if the income exceeels $3,000 per year.
And in the case of having income taxable (h) Estl\tell III providce!

by subsections 2 and 4 of s<x:tion ) 1 of this act; Nine per centum of the income.
(2) From the Normal Tax there ~hllli be allowed a deduction of $28 for the year 1042 and for each year thereafter the following perllOnR who is resident in Canada the or in an,V other part of British Commonwealth of Nations or in a coun try contiguouR to Canada or coun try allicd with Canada in the present war or who is legally debarred from entry into Canada, and wholly dependent upon tl,e taxpayer for Rupport, namely the territory of for each of in a (i) a child, grandchild, brother or fliRter of the taxpayer under eighteen rean of age, or if eighteen )'ears of nge or over, is wholly depcndcnt on account of mcntal or physical twent)'-one yearR of age illfirnlit)" or under on proof that "ueh child is a student at a secondarr school, university or other educa· tionnl (ii) institution; II plIl'ent or grandparent of a tax pllJ'cr, wholll' depen\lellt on account of mental or physical (iii) II child under eighteen yean of age maintained by the taxpayer in Canada under a coopcrntivc schemo:> spon!lOreu by the gov ernments of the Unitcd Kingdom ond of Cauada or ully of the provinces of Canada, for cllilc1reu hl'ougllt from the United King dom under 01' under a gOI'cI'nment pllln, twenly-one )'CUI'$ of age, an<!
Iikewi~e main tained, upon a student at a seeoillbry school, uuh'ersit)' or other educntional such child is institution; infirmity; proof that excellt one ~\lch dependent prol'idec1 for in (b) and (c) of subparagraph (1) hel'cof; (3) lf the ta:; cxi';:bJe tuuler the ;':01'10,,1 Tax shoulel cau~e the income of a sin<;lc penon O\' a husband OJ" a wife to be reduced below the the ca"tl of tho~c persons amoullt of $llllO or ill l'eferre,1 to ill (el) of su!J.· narlll!
"Ollh (I) hereuf, helow :;\1,200, thcn to the extcnt that \\"ould so reduce the income of the taxpayer, such tax ~han uot be payable, (el an(l tal, (1.;), it