1916-03-21

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OF tub;


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6-7 GEORGE V, 1916

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PRINTED BY J. de L. TACHE,

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Douse of Commons Debates

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Speaker: Hon. Albert Sevigny.
Tuesday, March 21, 1916.

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On the Orders of the Day:
Mr. KEMP:: The hon. member for Assinia-boia (Mr. Turriff) yesterday asked the following question:
I should like to ask the acting Minister of Militia whether the report is true that Colonel Bain has been appointed chief transport officer for the Militia Department.
The answer is: "No."



FAIR WAGE CLAUSE IN MUNITION CONTRACTS.

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On the Orders of the Day:
Mr. KNOWLES:: The Ottawa Citizen of March 7 contained an interview given by Mr. J. G. Watters, president of the Dominion Trades and Labour Congress, in regard to a fair wage clause? being inserted in munition contracts, and he is reported to have said:
The Premier had shown him part of a confidential cablegram which he had received from Lloyd George in which he positively asserted that he was opposed to the inserting of the fair wage clause in munition contracts issued by the Imperial Government to Canadian contractors.
I would ask the Prime Minister if Lloyd George, either by cablegram or otherwise, *did communicate with him to that effect, namely, positively asserting that he was opposed to inserting a fair wage clause in munition contracts issued by the Imperial Government to Canadian contractors.


Sir ROBERT BORDEN:: I have no recollection at the moment that such a message was received from Lloyd George. There has been some confidential correspondence in
regard to wage and labour conditions in Canada. I do not recollect a message in' the terms which my hon. friend has mentioned.



RECORD OF DECORATIONS OF CANADIAN SOLDIERS.

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On the Orders of the Day:
Mr. MARCIL:: I would ask the hon. the acting Minister of Militia if it would not be a wise thing to have a Government publication of some kind giving a list of the Canadians who have been decorated either by the British, French or other Governments. I had a request from a constituent of mine for a list of Canadians who have been decorated for their services, abroad, but I understand from the Militia Department that there is no record kept of these decorations. Would the minister give the matter some attention, and see if it would not be possible to have a record of some kind?


Albert Edward Kemp: A record will no doubt be compiled as soon as possible. The hon. gentleman says that he has been informed that there is no record. I think that is correct. I will make inquiries and see what can be done towards compiling such a record as soon as possible.



PLANS OF PARLIAMENT BUILDINGS.

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On the Orders of the Day:
Mr. ROGERS:: I would like to state that the architects have completed the first sketch plans of the proposed rebuilding of the House of Commons. They are on view in Room No. 1. The architects will be there between now and six o'clock, and will be glad to receive and explain the plans to any hon. members who wish to inspect them.



COMMANDEERING OF COASTING VESSELS.

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On the Orders of the Day:
Mr. PUGSLEY:: I would like to invite the attention of my right hon. friend the Prime Minister to the fact that owing, I

think, in a very considerable measure, to the fact that Canadian vessels engaged in the coasting trade, carrying coal more especially, have been requisitioned by the British Government, very serious inconvenience is being caused to people who are using coal, especially soft coal. They are carrying on various industries in the Maritime Provinces, and a continued supply of coal is of the utmost importance to them. When I was in St. John a few days ago I was told that there was a very great shortage of soft coal; indeed, there wae almost a coal famine. We have seen it stated in the newspapers that this Government is being consulted from time to time by the British Government in respect to the various matters which are of mutual interest and concern to Canada and the Empire. I would like to ask my right hon. friend if this Government is consulted as to what vessels engaged in the Canadian trade shall be requisitioned for the purposes of the Imperial Government. I was told in this connection that one vessel engaged in carrying coal from the mines to St. John was lately requisitioned by the British Government, was taken to New York, and was kept idle there for three weeks before it became, necessary for this vessel to carry the cargo for which the British Government had requisitioned it. It does seem to me that this Government ought to be consulted in regard to the commandeering or requisitioning of vessels engaged in the Canadian trade, because it is almost of as much importance that the industries of Canada should be kept constantly going and well supplied with coal as it is that vessels should be engaged in the carrying trade for the Government of Great Britain. Has the Government been consulted in reference to these matters?


Robert Laird Borden: The whole situation in respect of shipping is a very difficult one, because not only the British Empire but the Allied countries have to depend largely upon the shipping facilities which the Empire can furnish. As the necessities of every one of the Allied nations for a certain amount of tonnage are sometimes very urgent, my hon. friend can understand that the situation is attended with considerable difficulty so far as the British Government is concerned.
With regard to the requisitoning of ships engaged in the local trade of Canada, I entirely agree with my hon. friend that the Government of this country ought to

be consulted; and that has been the case sometimes, but not always. The view which my hon. friend has enunciated in that regard has been put forward to the British Government, and I hope that so far as the future is concerned opportunity will always be given for consultation, although I entirely realize that the necessities of the war might be so paramount that we could not refuse our consent, even though it might be attended with some inconvenience to the people of this country, and especially to our industries.
As far as the difficulty in St. John is concerned, I think the Admiralty have endeavoured to assist in every way in that regard. We have been in consultation not only with the Admiralty, but with the Director of Overseas Transport and with the Dominion Coal Company. The same difficulty has arisen at Halifax, and an effort has been made, with some success I think, to fill the temporary needs at that city as well. As far as I am advised at the present moment, the provision which has thus been made will overcome any difficulties that seem to be imminent. That is my advice as regards both St. John and Halifax. If my hon. friend would speak to me on this subject, I could give him some further information which is of a more or less confidential nature, and which it would be undesirable that I should make public at present.



SHIPMENT OF SYRUPS FROM WEST

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,	INDIES.
On the Orders of the Day:
Sir WILFRID LAURIER:: In the absence of the Minister of Trade and Commerce the other day, I brought to the attention of the Government certain complaints made by Quebec merchants against the subsidized service given by the Royal Mail Steam Packet Company between Canada and the West Indies. The complaint was that the vessels of that line will carry sugar, but not syrups and molasses, as sugar is a more convenient and profitable cargo. Could niy hon. friend give me any information upon this subject?	.


Sir GEORGE FOSTER:: With reference to the line plying between Canada and the West Indies, although it has four very excellent and commodious vessels, the trouble at the present time is quite distinct from the situation under pre-war conditions. Both at the West Indies end and at the Canadian end there is a congestion of freight

offering for carriage, and, although the vessels are making their voyages regularly, and carrying capacity cargoes, the freight offering is far over and above the capacity of the vessels. That makes complaints rife at both ends. Exporters in the West Indies cannot get their stuff out, and importers cannot get in the produce they have ordered from Canada; and exactly the same condition prevails at the Canadian end. I have been in close touch with the work of this company, and also with the complaints of patrons of the line. I think the company is doing everything it possibly can in the way of carrying what offers, and also in the way of distributing it as far as it possibly can so as to aid each class of its patrons and avoid filling up the vessels with the produce of one particular class only. But it is absolutely impossible for that line to carry the sugar and molasses which is lying in the West Indies on order at the present time; it is an absolute impossibility for them to overtake the amount that is required to be carried, and some other method will have to be found; such a method, for instance, as a tramp service, and I see that private parties have arranged for a schooner to bring molasses to the city of St. John. Under pressure from the department, the company is doing all it possibly can to get another vessel for that service; but the fact that more than 80 per cent of the commercial tonnage of that large company is now under requisition by the British Admiralty and in service for war purposes, and they find it almost impossible to get a vessel. I think everything is being done that possibly can be done to meet the difficulties of the situation and to serve all classes of their patrons. I have had similar complaints from Quebec and other places myself, and have tried to explain the situation to them.


Wilfrid Laurier: The complaint which I have is that the company discriminates between the freight offering: it takes sugar in preference to molasses, because it is a more profitable and more convenient cargo.


George Eulas Foster: As far as I possibly could, I have brought before the company the necessity of proceeding upon the plan I have just stated, namely, that of distributing the freight as equally as possible among their patrons.
MILITARY DISTRICT No. 12-SASKATCHEWAN.
On the Orders of the Day:


Albert Edward Kemp: Yesterday my hon. friend from Saskatoon (Mr. McCraney) inquired with regard to the boundaries of certain military districts. The province of Saskatchewan has been created into a military district, to be known as No. 12, with headquarters at Regina, and a general order to that effect was approved by His Royal Highness the Governor General on the 16th instant.


Mr. McCRANEY:: Have the headquarters been designated?


Albert Edward Kemp: Yes, at Regina.



RELIEF OF GRAIN CONGESTION.


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On the order for the third reading of Bill No. 58, to amend the Canada Grain Act-Sir George Foster:
George Eulas Foster: Being ardently desirous of as quiet a life as possible both here and hereafter-


Robert Rogers: Especially hereafter.


George Eulas Foster: -I have, after some consultation with hon. gentlemen opposite, come to the conclusion to move:
That Bill No. 58 foe not now read the third time, hut that it foe referred to the Committee of the Whole House to amend clause " e " of that Bill by striking out the words " relieve congestion and."	[DOT]
The effect of that will be to confine the discretion given to the Board of Grain Commissioners to the relief of grain which is insufficiently housed and therefore liable to damage and injury.


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Motion agreed to, and the House went into committee on the Bill, Mr. Rhodes in the Chair.
George Eulas Foster: I beg to move:
That the words " relieve congestion and " in clause " e " be struck out.
The clause will then read:
Whenever after due examination the board considers it necessary and advisable in order to facilitate the despatch of grain which is insufficiently housed and liable to become damaged or injured.


William Pugsley: I think I can assure my hon. friend of peace, for this afternoon at any rate, by reason of his having come to a better way of thinking, and meeting

so completely the views which were presented upon this side of the House. I think his action deserves peace, and I am quite sure that he will get what he deserves.


George Eulas Foster: If my hon. friend will just add to his pledge, of peace, not only this afternoon, but hereafter, I will take it with some real benefit.


William Pugsley: I fear that that would be too much to promise.


Mr. BURNHAM:: It is peace without understanding.


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Motion agreed to, Bill as amended reported, amendments concurred in, and Bill read the third time and passed.
DOMINION LOAN (§75,000,000) BILL.
Bill No. 60, to authorize the raising, by way of loan, of certain sums of money for the Public Service-Sir Thomas White- read the second time, considered in committee, reported, read the third time, and passed.	*

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The House in Committee of Ways and Means, on the proposed resolution of Sir Thomas White (Minister of Finance) respecting the taxation of excess profits; Mr. Rhodes in the Chair.
On paragraph 5:
In the case of any contract extending heyond one accounting period from the date of its commencement to the completion thereof and only partially performed in any accounting period there shall (unless the minister, owing to any special circumstances, otherwise directs) be attributed to each of the accounting periods in which such contract was partially performed, such proportion of the entire profits or estimated profits in respect of the complete performance of the contract as shall be properly attributable to such accounting periods respectively, having regard to the extent to which the contract was performed in such periods.
Mr. A. K. MACLEAN:: Supposing that the accounting period in any business was February 1, 1915, would that tax be on the preceding twelve months?


Sir THOMAS WHITE:: Yes.


Mr. LOGGIE:: I wish to bring a case to the attention of the Minister of Finance, and ask him how he could possibly arrange a basis for taxation in that case. Take, for example, the firm I referred to, that of Armstrong & Ferguson. This firm had an order to supply the army, if you like, with certain commodities. In the course of three
[Mr. Pugsley.J
months they sold $3,000 or $4,000 worth. So far as any record shows, the firm was not in existence before that time, and it went out of business three or four months later, and was succeeded by William Ferguson, who, I believe, is the Ferguson of the firm. It might well be that this firm had no capital at all. They might during two or three months have borrowed a few hundred dollars from the bank which would be paid back at the end of the transaction. I cited to the minister one item of sale by this firm-10,000 pounds of potatoes at 4| cents per pound. This would be, as I pointed out, about $7.45 a barrel, and as there were over sixty barrels, the firm would clear on that item alone over $300. How is the minister going to reach a firm such as that, with a tax based on capital, when, as it seems to me, no capital would he required in the business?


William Thomas White: If the firm had no capital, it would not come within the purview of the Act. The hon. gentleman deals with the case of a firm which had no previous existence and was formed only for the purpose of carrying out a particular contract, on the completion of which it went out of business. If the firm had capital and made profits of more than seven per cent per annum it would be assessable. The question of its capital would be a matter of fact-as also would be the question of its profits-to be ascertained by the department. If the firm had discontinued business after completing its contract, presumably the members of the firm are still in existence somewhere, and I should suppose that they would be responsible for the debts of the firm. My hon. friend (Mr. Loggie) shakes his head. If they would not be liable, then the Act would not apply. But the hon. gentleman will see that the matter to which he calls attention involves a very small amount of business. I do not know what the profits would be in the particular transaction in potatoes to which he has referred; I have not had-time to look into it. But I will have inquiry made with a view of getting at the facts.


William Stewart Loggie: Here is another case in which it seems to me it would be difficult to get at a basis of taxation-the case of the company of Springfield, Ohio, which sold to the Government goods to the value of $344,541.89. How is the minister going to get a. proportional tax on that sale? I assume that the firm does not do business

in Canada, and in that case how would the minister make the collection?


William Thomas White: It is not proposed to make collections against an American firm. In the case to which the hon. gentleman refers the Government of Canada made a purchase from an American firm of goods to a certain amount. It would not be possible for the Government to make a levy upon a firm domiciled in the United States and not carrying on business in this country.


William Stewart Loggie: It would be if you tax gross sales.


William Thomas White: It would not be possible for the Government to revise its contract and make a deduction of five per cemt; it would be contrary to international law.


Mr. NESBITT:: What does the minister mean by "net profits"? Most of the companies are in the habit of allowing a reserve for depreciation of plant-from five per cent to ten per cent, according to the kind of business; does the minister intend that they shall still be allowed that in their statements? Then, some companies have assumed as assets organization or goodwill; does the minister purpose making any allowance for organization in the capital stock in arriving at the basis of taxation?
SiT THOMAS WHITE: The term "net profits" has, I believe, a well-understood significance under legal decisions. Gross profits are, of course, the entire profits derived by the company, and, in order to get at the net profits, there should be deducted from the gross profits all costs and charges of administration, including, of course, interest upon debentures or money borrowed. Thus, in companies such as, I think, the hon. gentleman has in view, it will be proper to deduct an amount for depreciation of plant. We discussed that matter on Friday, in the absence of my hon. friend, and on that occasion I stated that the percentage which should be allowed for depreciation was a question of fact. In one class of business it might be greater than in another, and in the case of an individual business it might be greater than in another business of the same character. In each instance it is a question of fact. But, as to the principle of the charge for depreciation, there is no doubt that a proper charge should be deducted from gross profits in order to reach net profits. The hon. gentleman has asked with regard to
organization and good will. These present difficulties, I should say that, unless in exceptional cases, such as I have not in mind at the present time, organization charges should not be allowed as part of capital. There may be cases in which it would be proper to allow such chargee as part of capital; but, as I say, I have not any such case in mind at the present time. So far as goodwill is concerned, the English Act allows the commissioners discretion in that regard. There might be cases in which a certain amount would be allowed for goodwill, but, generally speaking, the act contemplates tangible capital, that is to say, assets, real and personal, movable and immovable, less liabilities.


Edward Walter Nesbitt: I understood the minister to say some days ago that the matter of what would be allowable as capital in respect of what we call over-capitalized companies would be referred to the Minister of Finance. There are instances where companies not over-capitalized have credited themselves with a certain amount for organization, which, as the minister knows, is a very legitimate and necessary expense in connection with starting a business. In cases where the organization expense was absolutely legitimate, does the minister purpose allowing that expense as capital?
.Sir THOMAS WHITE: I should hesitate to make a general statement about that: I should not like to make the assertion thht it would be allowed in every case, or that it would be disallowed. There might be cases in which a certain amount for organization would be properly allowable as capital, but my judgment would be that, in most cases, it should not be allowed as capital. We should deal with more tangible assets.


Edward Walter Nesbitt: It often occurs that each year such companies as I mention write off out of their profits a certain amount against organization. If that is legitimate, and I think it is, it would seem reasonable that the minister should allow that as capital for the purposes of this Act.


William Thomas White: I do not think that I can advance the matter any further than I have. The desire is, so far as possible, to put the over-capitalized company, so called, upon the basis of companies that are capitalized on the basis of payment in cash for their shares, and on the basis of individuals, firms and partnerships that have a certain amount of capital, as usu-

ally understood, in their business. In the case of a private firm, we have a certain amount of cash, we have goods, we have real estate, used in the connection with the business,' and we have liabilities. Deduct the liabilities from the total assets and you have the capital. In the case of an ordinary company whose shares have been paid in full in cash, if that capital so obtained by the company had not been impaired, then the capital would be the amount paid in on its shares. My hon. friend mentions the case of a company that has paid out a good deal for organization. It would seem to me that that payment is expenditure; that is to say, the capital of the company in one sense at least, has been depleted by payment out for the expense of organization. My hon. friend has in mind that the organization itself representing an amount paid out of capital, is of value; he asks whether that should be allowed as capital for the purposes of this Act. 'My view would be that, generally speaking, it would not. It is conceivable that there might be cases in which an allowance should be made, but if I were to make a general statement, it would be against such an allowance.


Edward Walter Nesbitt: Frequently preferred stock is sold at par. If it is handled by brokers, a commission is paid for the handling, and that commission is charged to organization. As a rule the brokers are given common stock for that commission. Does the minister not think it is fair to allow that as capital, so far as it has been legitimately paid to brokers or otherwise, for selling the stock?


William Thomas White: I think it would not be proper to consider what was paid to brokers for selling the stock We desire to place the over-capitalized company, so far as we can, on the basis of the company that is not over-capitalized and on the basis of the individual and partnership firm that is engaged in business. Therefore it gets down to this question: what is the value of the assets, real and personal, movable and immovable, of the company, and what are its liabilities? If we could ascertain that accurately, and subtract the liabilities from the assets, we would have the value of the stock, of the rest and reserve and accumulated profits of a company, whether overcapitalized or properly capitalized. I do not think that it would advance the consideration of the matter very much to inquire whether common stock given for an intangible consideration, such as goodwill

or organization, should be allowed at its par value. I would eliminate these intangible features. That is to say, I want to eliminate capitalized goodwill, except in exceptional cases. I want to eliminate, organization expenses, in order that all overcapitalized companies, properly capitalized companies, and individual firms may be on the same basis so far as this taxation is concerned.


Edward Walter Nesbitt: If a company owed dividends on its accumulated preferred stock, would that be allowed as a liability?


William Thomas White: A dividend, if
declared-and not until it is declared-is a liability of a company, I believe, as between it and its shareholders. But for the purposes of this Act we could not regard as liability accumulated dividends on preference stock; I do not think it just that we should. A good deal is to be said for the fact that the dividends have not been paid upon the preference stock, but, on the .other hand, if the company becomes liable under this Act, it only means that since the outbreak of the war it has been able to make profits that it did not make before. Therefore we think it proper that they should pay a certain amount of the profits so derived to the State.


Edward Walter Nesbitt: I had not in mind a
company that had made profits out of the war; I meant the ordinary company. During 1913-14, many companies did not pay their preferred dividends. These preferred dividends were accumulated, and, in my judgment, are an absolute indebtedness of the company-that is, if they were earned. Owing to lack of banking facilities, these dividends were not paid. In other words, the banks got very stringent with reference to the paying of dividends. The dividends were carried on the books of the company as a liability, and they were a liability of the corporation proper.


William Thomas White: I think my hon. friend will see where that would lead us. Assuming that a company of that kind has paid no dividends on its preferred stock for three or four years, but, since the outbreak of the war, has earned 25 per cent upon its capital, which includes its preferred capital as well as its common capital, this Act would apply to the earnings so made for the accounting periods ending since the outbreak of war. I think it is proper that it should; otherwise the company would escape from paying, where others were paying, a portion of the excess

profits which it had made as the result, directly or indirectly, of the outbreak of the war.


Alexander Kenneth Maclean: No matter what may be the point of view of the Treasury Department, I fail to see how the minister can logically argue that it is not a liability to the shareholder which must be redeemed; and, so long as it is outstanding, how can you say that there were profits which you should tax?


William Thomas White: Are they declared? My hon. friend as a lawyer knows there is a difference between dividends declared and dividends earned.


Alexander Kenneth Maclean: There is a distinction, but would it be fair for the department to rest upon a technicality of that kind, even if the dividends were declared but not paid? I would assume it was a liability. That liability should be discharged before the profits are taxable. I do not see any reason in equity why the same reasoning should not prevail whether or not there was a declaration of dividends. Of course, the minister can overcome that by some specific legislation on the point; but I do not think that, under his resolutions as they stand at present, he could hold that a company could not pay past dividends, whether declared or not declared; I mean in connection with preferred cumulative shares.


William Thomas White: The Act applies to any profits made in the accounting period. There is really no difference in principle between dealing with preferred shares and common shares. Preferred shares may be cumulative; that is to say, an arrangement may have been made by legislative authority or by the
4 p.m. shareholders among themselves whereby no dividends are to be paid upon the common stock until dividends at a certain rate have been paid upon the preferred stock. But there is no essential difference between the two stocks as to their character; so far as the public is concerned, they are both capital. It would be just as logical to argue that because a company had not paid dividends for some years upon its common stock, that should be taken into consideration, as it is to argue tnat all back dividends upon preferred stock should be paid before this tax becomes operative. My hon. friend, as a lawyer, knows that there is a difference between declared dividends and dividends which are cumulative but not declared. There is a real difference there, and we are dealing with the case of
cumulative dividends not declared. As to what the legal effect would be of a declaration with respect to cumulative profits, I am not prepared to sav for the moment; but the intention of this Act is to assess any profits arising in the accounting period.


Edward Walter Nesbitt: The minister's illustration is so far away from the companies I have in mind that it has little bearing. He talks about the companies earning 25 per cent on both their common and preferred stock on account of the war. That is not the kind of company I was asking about. I am asking about companies that earn nothing extra on account of the war; the war has nothing to do with their earnings. I refer to companies which, say, the year before the war broke out, that is, in 1913-assuming that their financial year ended on the 1st of April-earned their dividends; but were prevented from declaring and paying them owing to the objections of the banks. I am speaking of companies that did not earn any 25 or 20 per cent, but earned their dividend, whatever it may be, 6 per cent or 7 per cent, on the cumulative shares, but did not	pay it in	1914.
The war broke out only in August, 1914, and the next fiscal year ends on the 1st of April, 1915. The minister can see that, long before the war affected them at all, they had made half their earnings for the year; that is, during the period between April and August. They have earned their dividend, we will say 6 per cent or 7 per cent, but they have not paid it on account of the objection of their bank. The directors, perhaps, have not declared it, because there is not much use declaring a dividend unless you are in a position to pay it; your .shareholders expect you to pay it if you declare it. That is what I mean, and I do not think it is right for the minister to impose his tax in such a case. There may be exceptional cases such as ,he quotes, and in these cases I think the companies should pay, where there are earnings of 20 or 25 per cent, or even 10 or 12 per cent. But where they have just earned their dividend out of their own legitimate business, and they, owe it to the shareholders, I think the minister ought to except them; and I believe that when he thinks it over he will come to the same conclusion, because all we want is what is fair in this or in any other business.	-


Mr. HUGHES:: In the case of an ordinary industrial company that made last

year 5 or 6 per cent, but did not declare any dividends because of the unsettled condition of trade and, perhaps, because of lack of banking accommodation, and allowed earnings to go to profit and lose, but this year earned another 6 or 7 per cent and so was able to declare a dividend of 10 or 12 per cent for the two years, but did not earn 14 per cent in the two years, or more than 7 per cent in either year, would the company be taxable under this legislation?


William Thomas White: As I understand the hon. member, he saye, supposing for the first year the company earned 7 per cent but did not pay it to its shareholders," and the next year earned 7 per cent, and at the end of the next year paid the 7 per cent which it made the first year and the 7 per cent which it made the next year, to its shareholders, namely 14 per cent, would the tax be upon the 14 per cent? The answer is that! during the accounting period in question, only 7 per cent was earned, and therefore the tax would not apply.	'
In answer to my hon. friend from North Oxford (Mr. Nesbitt), he will realize that, if they did not pay the dividends at the end of the accounting period terminating before the war, but had earned them, the dividends would be in rest account, or in reserve account, or in profit and loss account. They wou'ld then be taken as forming part of the capital upon which the earnings in the succeeding accounting period were estimated. Those profits or earnings not distributed would not be added to the profits of the next accounting period, and the company then taxed upon them both together. But I cannot see on what principle we could allow dividends not declared but cumulative, or dividends earned but not paid, upon common or preferred stock, to be considered as -a liability of the company. I think it would be in violation of the principles of law.


Mr. BOBB:: Would the minister make
the same application to bondholders? Industrial concerns, being unable to finance before the war, have evolved a scheme by which their bondholders have agreed to allow interest on the bonds held by them to remain in the treasury unpaid for two or three years. They would be in identically the same position as preferred shareholders?


William Thomas White: No.


James Alexander Robb: Perhaps the minister would explain it, then.


William Thomas White: A preferred shareholder is a stockholder of the company; he is one of the proprietors. A bondholder is a creditor of the company. There is no question that an allowance for interest owed by a company upon its bonded indebtedness is clearly a liability. I pointed out

I think my hon. friend was not in the House at the time-that there might be a distinction between dividends declared but not paid and dividends which had not been paid but had also not been declared. I am not quite sure wliat the legal position would be there; but I am quite clear that there is a distinction between interest upon bonded indebtedness and dividends which have been earned but not paid by the company. The one is interest owing to creditors, the other is profits not yet distributed to shareholders or proprietors.


Mr. TUBEIFF:: I have in my mind the organization of two companies. One of these companies sold their stock for cash at $100 a share and did not allow one cent for organization expenses other than the outlay in cash for securing the charter either under the Companies Act or from this Parliament. They did not allow any commission for selling stock. They did not charge up a dollar for organization purposes except for procuring the charter, and I think that the total expenses of getting the charter and everything in connection with the organization were under $1,000. They sold a million dollars' worth of stock, and, as I say, did not charge a cent for the selling of-that stock. The other company sold their stock at $125 a share. They paid 10 or 15 per cent for selling their stock, and they charged up all sorts of expenses for the Organization of the company, so that when the company was organized it practically had $100 a Share net in the treasury. One company had twenty-five per cent more stock , issued and paid up than the other company, and the company that did not make any charges whatever would have nothing on its books to show what expenditures it had in connection with organization and the sale of stock. It would seem to me that it would not be exactly fair that one company should draw profits on a million dollars only in refernece to its stock, and that the other company could draw profits on $1,250,000 in connection with its stock before being called upon to pay any part of this tax. I want to have

the minister's view as to whether the first company that did not charge anything for the work of organization will be allowed, in paying this tax, to be on the same footing as the other company, which allowed twenty-five .per cent for organization.


William Thomas White: I think section 9 meets the point.
Any incorporated company may-
By the way, I am going to ask the committee to change that "may" to "shall."
-include as part of Its capital Its actual unimpaired reserve, rest or accumulated profits.
Let us consider for a moment the question of the second company, to which my hen. friend drew our attention. Here is a company whose stock was subscribed at $125 and paid up to the extent of a premium of 25. If none of that money had been expended in the capitalizing of the company the position of the company would be this: It would have the capital representing the par amount paid in on its stock, it would have a reserve of $25 upon each share of its stock, and,, therefore, on the supposition I have made, its capital would be $125 per share for the purposes of this Act. But my hon. friend says that the company dissipated $25 per share in getting the stock subscribed.


John Gillanders Turriff: Approximately $25.


William Thomas White: Well, its capital for the purposes of this Act would be $100 a share; in other words, it would be on the same basis as the other company.


John Gillanders Turriff: They would not be allowed their capital at the price at which the stock was sold?


William Thomas White: Not if they had spent it.


Alexander Kenneth Maclean: I would like to put a case to the minister. I think it was up at the last meeting of the committee. Take the ease of a partnership, with a total capital investment of $100,000, half of which is represented by buildings and plant. The other half is not paid-up capital, but is borrowed capital, and it is the capital with which the business is carried on. The borrowed capital is of course a partnership liability, but inasmuch as it is the capital, or the money, wiith which the business is conducted, it is claimed by many who are liable to taxation under this Bill, that the borrowed money should be construed as capital, and in the case of a partnership
it should be' exempt to the extent of ten per cent. Construed merely as a liability, I suppose they could ask for an exemption to the extent of ten per cent just the same as df it were capital; so that up to that point it would not matter very much whether it was construed as capital or a liability. But in the case which I have mentioned, and in the case of a partnership, would it not be fair to allow them an exemption up to the extent of ten per cent? You will remember they are allowed up to the extent of ten per cent on the actual cash investment in building and plant and only up to the extent of seven per cent on the capital which perhaps has gone into the stock and which keeps the business going. They are only allowed an exemption of seven per cent in that case. It would seem to me a disparity, and in that case they should be allowed an exemption up to ten per cent and that the liability should be construed as capital. I would like to hear the minister's view upon that.


William Thomas White: As I understand my hon. friend, he has in mind the case of a partnership that has its business premises and its stock in trade and that owes its individual partners a certain sum of money representing its working capital. Is that the case?


Alexander Kenneth Maclean: Well, that is just the same as the other.


William Thomas White: My hon. friend does not mean the case of a partnership which owes a bank a certain amount of money?


Alexander Kenneth Maclean: I do not see any distinction between owing to a bank and owing to partners.


William Thomas White: I do not either. Money owed is money owed. Whether a firm owes the money to a bank or to an individual partner, there is no doubt it is a liability. Let us take first the case where the money is owed to the bank. That presents no difficulties in my mind, because the partnership accounts will show a certain amount in office premises, a certain amount in stock-in-trade, and a certain amount in accounts payable to the firm. Those would be among the asests of the business. On the other hand, there would be the indebtedness to the bank. Now, among the charges which would be deducted from those profits in order to ascertain the

net profits of the firm, would be the interest paid upon the money borrowed from the bank.
Mr. A. K. -MACLEAN: Should they not be entitled to some profit for carrying that liability?


William Thomas White: There is no essential difference between that case and the case of a company that has a bond issue. A company which has a bond issue, which is a liability, is using the proceeds of the bonds which have been sold for the purposes of its business. I do not know how you can call liability capital: they are opposite. Now, take the other case where the money is owed to one of the partners, whether for convenience or because the firm regards it as an advantage. They may allow their profits to go back into the firm, and the position of the firm is legally one of liability. The firm owes money to the individual partner from what it has borrowed, and pays him or them six or seven per cent. Now they would be entitled to deduct that interest from their gross profits in order to ascertain their net profits, but I do not see on what principle we could allow that indebtedness as part of the capital of the firm. My hon. friend says, and says truly, that if that were allowed the ten per cent would apply. Quite true, but I want to point out that one of the criticisms made of this Bill has been that it has been too fair to firms as contrasted with joint stock companies, where the basis is seven per cent. I think, therefore, that partnerships will have nothing to -complain of if, being on a ten per cent basis, they are -compelled to treat as a liability what undoubtedly is a liability, that is to say, the amount they owe to an individual member of the firm.


Mr. GRAHAM:: I see that one of the sections provides that, except under extraordinary circumstances, no salaries will be allowed to directors or managers in excess of that paid prior to 1915. Now, there are some companies that before 1915 were struggling along, and whose directors and president worked for nothing, and in some cases did not even accept their expenses. It strikes me that a case of that kind might well be considered a special circumstance, and that a fair salary might be allowed to the officers and directors of these companies. I see the wisdom of the section, of course. As I understand it, it is to prevent any evasion of the taxation by paying out a large amount of the profits as salaries, but I think in the case of companies I have

mentioned it would be only fair to allow them to pay a fair salary to the directors and president.


William Thomas White: My hon. friend is entirely right in his View. This section is for the purpose of preventing evasion by the payment of large amounts for the clear purpose of reducing the amount liable to taxation. But a balance sheet, while prima facie evidence, should not be conclusive evidence either against a firm being assessed; or against the Government. In the case my hon. friend has in view, undoubtedly a proper allowance should be made in order to ascertain the true profits of the company in question.


William Stewart Loggie: Iif a private individual with $100,000 invested in houses and lands makes a profit of eleven per cent from his rents after paying taxes and repairs, would he have to pay taxes under this legislation? I understood the minister to say the other night that in such a case an incorporated company would be liable, and I want to know whether -a private individual would be liable.


William Thomas White: I should say that if he were carrying it on as a business h-e would be liable; otherwise, we should be getting on an income tax basis. A man might have -an income of $2,000 from real estate, just as a professional man might have that income from his profession. Now, if we had income taxation, undoubtedly in both cases there would be an assessment. The case that was put to me the other night was this: A man ninety-nine years of age has $100,000 invested in real estate. I said I should be disposed to let a man off who was ninety-nine years old. However, if a man was carrying it on as a real estate business, I think he would be liable under the Act. On the other hand, if he was not carrying it on as a business, I think he would not. I do not think any difficulty is likely to arise, -because I do not think any man is likely -to make eleven per cent on a fair valuation of -the capital invested in real estate.


John Gillanders Turriff: Take the case of a middleman who had made $100,000 during the present war by getting contracts for war munitions, and letting them out to other parties. This man may not lbe in business of any kind himself, but be a man of leisure, walking around all the time, as many of them do. Would he be liable under this Act?


William Thomas White: I think he would be, provide he did not walk across the border, which he might do. In subsection "a" of section 4, I inserted language which I think will meet oases such as my hon. friend has cited. My hon. friend will observe that the subsection refers to a business which is, or has been, manufacturing or dealing in munitions of war, or	in materials or supplies
of any	kind, for war	purposes.
The difficulty, in applying a scheme of taxation to all these so-called middlemen and some of those men who were spoken about the other night, who had made profits on-flotations of common stock, is to find them, because their domicile may be here to-day, in the United States next month, and in England a month later.


John Gillanders Turriff: To make the matter a little clearer, let us take the case of our friend Col. John Wesley Allison.


William Thomas White: Who is that?


John Gillanders Turriff: John Wesley.


William Thomas White: John Wesley?


Mr. MACDONALD:: My hon. friend does not mean to say he does not know him.


John Gillanders Turriff: Suppose that this gentleman made only 25 cents on each of those of which there are about 4,000,000. That would mean a profit of $1,000,000, and probably his profit was a great deal more. His residence is in Canada, I do not think he has any business of his own. The question is: Will he be liable for taxation?


William Thomas White: My hon. friend has put what I think might be called a hypothetical or academic case.


John Gillanders Turriff: I beg the hon. minister'e pardon. It is a very practical case.


William Thomas White: A court, let alone a minister, will not answer academic questions. I do not understand that any such profits as my hon. friend has suggested have been made; at all events, they have not been brought to my attention, and I do not think there is any evidence to show that any such profits have been made. I refer my hon. friend to the subsection in the resolutions in which it is stated that any one in Canada dealing in munitions will be liable under the provisions of this measure.


John Gillanders Turriff: I do not think there is any question about the profits, because those
fuses were let at a price of $4.25 on an average, and since then they have been made in Canada at about $1.30 less, so that 25 cents apiece is a very small profit for John Wesley, the way he figures his profits.


The CHAIRMAN:: I hope the hon. member will not pursue this phase of the subject at length. Under this parapraph we are considering the computation of profits.


John Gillanders Turriff: It is the net profits we are discussing.


Mr. MICHAEL CLARK:: I understand
the minister to say that he first catches his hare and then cooks it.


Edgar Nelson Rhodes: Order. The point which I understood the hon. member to raise was whether this measure would apply to a certain person. His point had nothing to do with the question of profits at all.


John Gillanders Turriff: My hon. friend the Chairman has misunderstood me. The information that I was trying to get' was whether such a person making such profits would be liable for taxation; and, so that the matter might be easily understood, I gave the concrete case of our friend Col. John Wesley.


Edgar Nelson Rhodes: Order. I still think
the hon. gentleman is out of order, because the paragraph that we are considering refers to the method of computation of profits, and has nothing to do with the question as to whether it applies to an individual or not.


John Gillanders Turriff: I will bow to your ruling, Sir, but it strikes me that you are drawing the line particularly fine when you want to say exactly what the discussion shall be on any particular clause.


James Alexander Robb: The minister has told us that sub-paragraph " a " of paragraph 4 applies to munitions. Will it also apply to a purchaser of horses? I have in mind a lawsuit in which it was shown that considerable profits had been made on horses bought in the United States and shipped through Canada by Canadians who apparently had no capital invested in the business.


Edgar Nelson Rhodes: I am in the judgment of the committee. Of course, if they choose to discuss what ought properly to have been discussed at an earlier stage of these resolutions, when the word " person " was defined, I shall have no objection; but I must submit to the committee that the paragraph

now under consideration refers to the computation of profits and not to the question of to whom it shall apply. I do not wish to rule at all rigorously, but I must point out to the committee that, if we are going to [DOT] carry on the discussion with some semblance of order, we should adhere more or less to the individual paragraphs.


Michael Clark: Surely computation of profits would include the finding of a particular source and even of a particular profiteer. The question of finding a profiteer and of the liability of a special profiteer would distinctly come under the *question of computing that profiteer's profits.	'


William Thomas White: Perhaps the committee will permit me to answer my hon. friend (Mr. Robb) with regard to the case that he drew to our attention. I understood him to say that the parties had no capital. If so, this measure would not apply to them; but, if they had capital and were dealing in horses and supplies for the war, then the provisions of this measure would apply.


Edward Walter Nesbitt: If you could get at them.


William Stewart Loggie: Let me state a case to the minister. I understood him to say a moment ago that those who deal in war supplies should pay. Let us take the case of a firm selling $15,000 worth of war supplies. The case would be this. The firm in question would be an incorporated company having a capital of $40,000, and a turnover, during the accounting period, of $100,000, of which $15,000 worth was sold to the Department of Militia and Defence, At the end of the accounting period that firm made a good profit on the $15,000 worth of goods sold to the department, and also a profit on the other $85,000, and they made a total profit of 20 per cent on their capital of $40,000. Would they pay $1 to the Crown?


William Thomas White: The company, on the statement of my hon. friend has a capital of only $40,000 and no reserve which would make it up to $50,000. Therefore it is exempt under the provisions of the enacting paragraph. Then, we come to the exception. The exception would not apply, because 20 per cent of the company's business was not employed in furnishing war material and supplies. It is necessary to fix arbitrarily on a percentage.


Edward Mortimer Macdonald: There is a matter
which relates to a previous paragraph, and, with the consent of the committee, I would
[The Chairman.]
like to speak in regard to it now, because I was not here when these sub-paragraphs were taken up.
It has been suggested that it would be in order for the minister to consider the case of concerns which, under the general definition of paragraph 2, would be liable to pay this tax, and which had made contributions to such organized war funds as the Canadian Patriotic Association or the British or Canadian Red Cross. It has been suggested that the effect of the tax proposed by my hon. friend unless some regard is given of past or future contributions to these funds, will be to cut down to a very great degree the aid that will be given in future to those very worthy organizations which, although not dependent upon the Canadian people through taxation, yet have to be and are supported by contributions given voluntarily, although under conditions which really make them a matter of taxation. I have in mind a firm which will unquestionably come under this taxation measure, which subscribed very handsomely to the Patriotic Fund in response to an appeal which was made last March. The attitude which has been taken by gentlemen connected with that firm is that, pending the determination of the question as to whether the contributions are to be given credit for -as credit was given in the case of the banks who paid their taxes last year on their circulation-they would not contribute any further. In other words, the collection of this tax will be taken by them as a discharge of their obligations in the way of contributions to these funds. The Canadian Patriotic Fund, of course, does not share in the revenues of the country in any way. But it was instituted by this Parliament to perform a very important part of the duty of the people towards those who go out to fight; it takes the place of a service that would otherwise be rendered by the Militia Department. While the generosity of our people has responded well to the appeals for this fund, I have heard suggestions from worthy sources, on more than one occasion, that the result of this tax would be to cut down largely the contributions that would be given in future to these organizations. Has the minister considered the effect, in that regard, of his legislation, and has he thought what might be done to mitigate this result of the operation of the measure?


William Thomas White: The hon. member for Pictou (Mr. Macdonald) has raised a question to which we gave consideration.

But we reached the conclusion that it would not be possible to do more than to allow these contributions as an expenditure. It would be difficult to draw the line in the case of patriotic and philanthropic contributions. A taxation measure has to stand largely upon its own basis. I am sure that the party to whom the hon. gentleman refers will realize, upon further consideration, that this is a taxation measure adopted for the purpose of enabling us to carry on the war, and I should hope that he may find himself in a position, besides paying this tax-for it is only a fraction of what he earns over seven per cent-to keep up his contribution to the Patriotic Fund. I do not think that citizens, imbued as they are with the worthy object served by the Patriotic, Red Cross, and other funds, will be led to discontinue their contributions because we find it necessary, as a war measure, to take a certain fraction of their profits in excess of seven per cent. It has been proposed-and my own sympathies would be with such a course if it were practicable, which I do not think it would be-to make allowance foT these donations for patriotic and philanthropic purposes.


Edward Mortimer Macdonald: The Patriotic Fund is a fund created by this Parliament. To a certain extent it is a legislative production, just as the Canadian Red Cross fund is, officially recognized for war purposes. This tax and a contribution for philanthropic purposes might be considered by some as in the same class. I put the idea to my hon. friend because I have no doubt he has heard, as I have heard, of the views that are taken by some concerning it. But he has considered the point and I understand that that consideration has ended in the view that these contributions should not be taken into account.


Mr. McCREA:: I said on Thursday, in
speaking about this measure, that it was all wrong in principle and in practice, and the minister has just given an argument in support of that view, which, I think, should appeal to his own common sense and fairness. Take the case of a middleman, dealing, let us say, in munitions of war. He has no capital, and so you cannot tax him -you cannot reach him. He has no office, and contributes nothing to the taxation of the country. He takes an order for munitions of war or any other article, and he hands it over to somebody else, making a clean profit which he puts into his pocket and carries away. The man to whom the
contract is handed over may have a plant in which millions of dollars are invested. He contributes greatly to the revenues of the country by the customs duties paid on his importations and otherwise. He makes the article, and then the minister says to him: You must pay over twenty-five per cent on everything you have made over seven per cent. So the manufacturer pays this tax, while the middleman, perhaps a foreigner and resident in a foreign country, the man who has nothing in this country but his hat and his umbrella, makes a nice clean profit, which cannot be taxed. This should appeal to the minister, to show the unfairness of his method of taxation. I think this is one of the worst measures ever put upon the statute book, because of the effect it will have to discourage thrift and industry. I hope the minister, before he gets through', will try to add something to his Bill to reach the man 'whom I have described, and whom he himself has described, the man who has no capital and, nothing at stake.
Sir TH0MAS WHITE: I think the hon. gentleman (Mr. McCrea) is dealing largely in hypothetical, or even fanciful, cases. We have had this middleman introduced several times this afternoon. We might call him Mr. X, for he is an unknown quantity. It has not been called to my attention-that is, no substantiating evidence has been given-that any middleman has rnadp the enormous profits that are spoken of. These merely hypothetical cases are put forward, and the House is asked to believe that these great profits are made by men with absolutely no capital and therefore free of taxation. If the middleman, or anybody else for that matter, makes a certain sum of money in the course of the year, and does it without capital, he would be liable, undeT a system of income taxation. But this taxation is not income taxation; it is not taxation upon capital; it is taxation following he precedent of the principle of the Imperial Finance Act No. 2,; imposing a levy upon what might be called excess profits. We allow what is regarded as a normal rate of profit to a business, whether incorporated or not, and we say that on account of the war we think it proper that if profits in excess of that normal rate have been made, one-quarter of them may fairly be paid to the state. My hon. friend has raised the question of the possibility of imposing taxation upon the individual who is here to-day and away

to-morrow. That difficulty is as old as taxation itself. One of the strongest arguments in favour of the land tax, which is the principal tax throughout this country under municipal taxation, is that the land is visible; it cannot get away. On the same principle, most of the provinces have adopted a business tax, because, when they come to levy, the business is there. One of the weaknesses of income taxation, from my experience of it, is that many assessments cannot be collected at all because when the collector, following the assessor, goes to discharge his functions, he finds that the party has moved. So that the argument put forward by my hon. friend is by no means a new one. We must impose taxation where it will be effectual, where it can be collected. My hon. friend referred the other night to the matter of imposing taxation upon thrift and industry and ability. Well, an income tax does that. One man has more ability than another man, he earns $20,000 a year, and he pays more taxation in amount, and, frequently, in percentage. According to the argument of my hon. friend, such a man might complain that a tax was being placed on his superior ability. The state answers: You have your superior abilty, but out of it you are able to make $20,000. Your neighbour, who. has not as much ability as you have, makes $2,000 a year. We are going to tax you more than we tax him, because we think you can stand it better than he can. You have the ability; you have the superior industry; that is one of your advantages over him. In the same way, this tax applies to those who make excess profits beyond a certain percentage. The greater the excess profits, the more they will pay. I prefer to put it another way-and this may be helpful to my hon. friend-the more of this tax they pay, the more money they will make.


Francis N. McCrea: I wish it to be understood by this committee that I do not object to paying. I shall be only too glad to pay the tax; the more it is, the better it will please me. What I am complaining of is that this tax as proposed will not touch 50 per cent of the people. More than 50 per cent of the population, composed of people who are able and willing to pay, will not in any way be affected by this proposed taxation.


Edward Walter Nesbitt: Has the minister decided to include in the Bill the provision that the tax shall not apply to any business the capital employed in which is less than 
$50,000? So far as I have been able to discuss the matter with the people, those businesses that are capitalized under $50,000 are perfectly ready and willing to pay their proportion of this war tax. This is evidenced by the subscriptions that are being made to the Patriotic Fund and to the Red Cross and other similar funds. I appealed to the minister on a former occasion not to limit this tax to those businesses capitalized at more than $50,000. Is it absolutely necessary to mention that limitation? Certainly, under this provision, practically none of the people in our ordinary towns will be affected by this legislation.


William Thomas White: My hon. friend knows that in income taxation it is not unusual to exempt incomes up to a certain amount, and it is not unusual, with regard to incomes in excess of that amount, to provide that a higher percentage shall be paid. In other words, there is a line of demarcation. We thought it advisable to draw this line of demarcation at $50,000, and I will tell my hon. friend why. If you reduce it below $50,000, you really get down to an income basis. Ten per cent of $50,000 is $5,000; seven per cent of $50,000 is $3,500. If you adopted $30,000 or $40,000 as the line of demarcation, ten per cent would be $3,000 and $4,000, and seven per cent would be $2,100 and $2,800. I do not mean to say that some parties having a capital of less than $50,000 would not be willing to pay. That was not the principle upon which we proceeded. In the first place, we wanted to place this tax on those who could well afford to bear it, and, in the second place, we had regard to what is a very important matter in taxation, namely, the cost of administration of the measure. If we did not state an exemption, if we said: This tax is going to apply to everybody carrying on business in Canada, then we should have to establish a system, with a Civil Service to administer it, under which every business in this country, small and great, would have to be visited. We should have to have a staff of assessors and other clerks in every village, town and city in this country. They would have to visit every baker's shop, every tailor's shop, every grocery store. They would have to visit all the floors of all the office buildings in order to make the assessments. The cost of doing that would be very great, considering the geographical extent of this country and the comparatively sparse population. My be-

lief is that if we should reduce this amount below $50,000, the amount that we would get in additional revenue would be consumed by the additional cost of administration. Under this measure as drafted, I think we shall avoid heavy cost of administration. The cost will be considerable, but the percentage, I believe, will be small as compared with the amount that we will collect.


Edward Walter Nesbitt: Was my hon. friend-talking about income tax when he spoke about having to go around to the flats to make assessment? *
SIR THOMAS WHITE: No. I was talking about making this applicable to the particular business that my hon. friend suggested.


Edward Walter Nesbitt: My hon. friend will send-out a certain form for the companies to fill?


William Thomas White: Yes.


Edward Walter Nesbitt: Does he mean to insinuate that a man whose capital is less than $50,000 will be more dishonest in his statement than the man with $50,000 or over?


William Thomas White: I do not say that for a moment.


Edward Walter Nesbitt: There is no more necessity to go around to ordinary business houses to get statements than to the bigger houses.


William Thomas White: In order to send out the statements, it will be necessary to ascertain all these businesses.


Edward Walter Nesbitt: That is easy.	.


William Thomas White: My hon. friend says it is easy, but I do not agree with him.


Edward Walter Nesbitt: It is very simple.


William Thomas White: I have had some experience of it.


William Stewart Loggie: All the business firms are registered with Bradstreets and Dun & Company.


William Thomas White: All the large ones.


William Stewart Loggie: I differ with the minister. He will find that some of the ratings are very small amounts. I am persuaded that the minister would have a much more equitable Bill if he would reduce the minimum capitalization. He has already taken power to force any business firm to have an accounting period. That, I think, will be a good thing for the firms doing business,
and also for their creditors; in fact, for the business of the country as a whole. I would suggest that the minimum capitalization be reduced to, say, $20,000. Certainly any firm with such a capital should have a set of books and an accounting period. I do not see why the reduction of the minimum capitalization should entail any additional expense. I have already stated my strong objection to the spread between seven and ten per cent. It is not fair as between two companies, one with, say, $40,000 and another with, say, $50,000, in the same town. The one with $50,000 capital may have $10,000 tied up in its real estate, but its stock and turnover may be the same, and its profits may be even less.
Mr. MeCREA: In the resolution as originally introduced the basis of taxation was $50,000 of paid-up capital. I understand that that has been amended so that a company may be taxed even if its capitalization is under $50,000 if the capital employed is $50,000_


William Thomas White: They are liable if the reserve and accumulated profits, with the capital, exceed $50,000. That will bring in a great number of companies that are prosperous.
I wish to move an amendment to subsection 2 of section 5. I move to substitute for the present subsection the following:
The profits of a non-Canadian company shall he the net profits arising from its Canadian business.
I may say that is in accordance with the English measure, and in ac-5 p,m. oordance also with the principle adopted in the United
States.


William Stewart Loggie: How do you get at the capital of the Canadian business? In the same way as in the case of any other incorporated company?


William Thomas White: That is provided in section 7:
The capital employed in the business of a non-Canadian company shall be such portion of the amount paid up on its capital stock as shall bear the same proportion to the amount paid up on its entire capital stock as the value of its assets in Canada bears to the value of its total assets.
We found that we could not apply section 5, subsection 2, to companies, such as insurance companies, which have large investments in Canada, and altogether I

think the amendment which I propose is a decided improvement.


William Erskine Knowles: Will this amendment not have the effect of permitting American automobile companies, which are manufacturing atuomobiles in Canada for shipment to Great Britain for military purposes, to evade the tax?


William Thomas White: No. This Bill applies to the export business of every Canadian company, as-well as to its domestic business.


Edward Walter Nesbitt: Would it not be better to .have that worded, "the business transacted in Canada"?


William Thomas White: If there is any change required to make it clear I would suggest the following:
The profits of a non-Canadian company shall be the net profits arising from its Canadian business-including its domestic and export business.


Edward Walter Nesbitt: That is a better wording.
Paragraph as amended agreed to.
On paragraph 5, sub-paragraph 3:
(3) No deductions from gross profits for depreciation or for any expenditure of a capital nature for renewals, or for the development of a trade or business, or otherwise in respect to the trade or business, shall be allowed except such amount as appears to the minister to be reasonable and to be properly attributed to the accounting period and the minister when determining the profits derived from mining may make allowance for the exhaustion of the mine.-


John Gillanders Turriff: Practically every clause of this resolution, in its last analysis, comes down to the minister having to define what capital is, what profits are, and what the tax shall be. That cannot be got at altogether by getting statements from the various companies ^and just taking them at their face value. My hon. friend will require to have the officials of his department go out and make investigations in many cases, I would imagine. Will there be publicity in this matter? One official goes out to look into the affairs of a company that has $100,000 of capital, some rest, and certain liabilities, and that official will have t.o decide how much real capital there is. In another case another official goes out and he may decide these questions on a different basis altogether. No two men will be absolutely alike. Will there be any system of publicity whereby the public will know what the capitalization and what profits are of any individual concern which is paying taxes under this Bill?


William Thomas White: I stated, when a similar question was asked some time ago, that if the House desired returns of this taxation, the House would be entitled to the information. I think it extremely inadvisable that publicity should be given to the details, of private businesses throughout the country. My view is that the officials who carry out the provisions of this Act should be exceedingly discreet in the matter of giving information. As a matter of fact, i put in a special provision to cover the case. I do not think that publicity should be given to the details of private businesses unless they are being ventilated before the Board of Referees or befoye the Exchequer Court. At the same time, if Parliament desires information as to the amounts which have been levied under this taxation measure, I think Parliament will be entitled to it.


Edward Walter Nesbitt: I did not notice this
clause when I spoke to the minister in reference to the allowance for depreciation. I notice that rhi" c-lause is the one that deals with depreciation. While the present minister may be perfectly capable of judging as to what depreciation should be allowed in different businesses, he is only mortal, like the rest of us, and some other minister might take his place who might not be so well posted in the business, or as reasonable in his views as to what should be allowed for depreciation. He has quite truly said that he could not state the amount to be allowed for depreciation in all eases, because businesses vary. All businesses allow for depreciation, but not for renewals, because some pay for their renewals out of what they call their expense account. The minister has, however, explained that this afternoon, and I shall not dwell upon the point further. The clause with respect to mines is in these words:'
The minister when determining the profits derived from mining may make an allowance for the exhaustion of the mine.
The present minister may be quite capable of judging the allowance that should be made for the exhaustion of a mine, but I confess it is a very difficult question for any human being to deal with. It depends on what may be down below, and that is something that the engineers of the mine themselves probably do not know. In no mine in existence do they know that. I believe though that mining companies are under the 7 per cent clause. I would like to draw the minister's attention to the fact that

there are very few mining stocks that are considered by stock exchanges to be worth par unless they are paying 10 per cent. I think that is the rule in the minds of most men who are dealing in mining stocks. I do not believe that the stock of any mining company that is not paying 10 per cent is' worth par. Therefore I would urge upon the minister putting mines under the 10 per cent clause, that is that a mine, like a private individual or firm, must earn 10 per cent before the law will apply. It is only fair that the stock of a company should be worth par before it should be taxed. It also puts it on a more permanent basis than to say a reference shall be made to the minister as to an allowance for exhaustion. That will have to be done too, in my judgment. I think the minister should allow mining companies to be put in the 10 per cent class.


William Thomas White: I think that, with the allowance that will be made for exhaustion of capital, there is no necessity for making any change with regard to mining companies. I explained on Friday that the percentage of exhaustion would vary with different mines. For instances, a coal mine may last for generations, but some of the metalliferous mines, such as gold, silver, and copper, have an average life of only eight or ten years. If my hon. friend would figure out the amount that would be allowed for exhaustion in the case of a mine whose average life is eight or ten years, then make an allowance for depreciation of plant, and then apply the Act, he would find that there is no ground for apprehension that an unduly large amount would be taken from mining companies under this Act. I agree ' with my hon. friend as to the returns, except that I think he has placed the figure too low. He knows that a return of ten per cent to shareholders in the case of these mining companies would mean ten per cent per annum actual return, whether it represents capital or net profits. Now, we are going to take out of the so-called profits of mining companies the amount which would properly be allowed for exhaustion, and it will run to a very considerable sum, because it will be a percentage upon the value of the mine; and the residue, less the charges of administration and the amount allowed for depreciation, will be the amount upon which the mine will be taxed.


Edward Walter Nesbitt: On what basis is exhaustion going to be allowed? Will the mining companies themselves fix the basis?


William Thomas White: A standard cannot be fixed. Different mines will have to be dealt with on different principles. A gold mine, for instance, will have to be dealt with on a different basis from a coal mine, because it is exhausted so much quicker.


Edward Walter Nesbitt: It might be or it might not be.


William Thomas White: It might be or it might not be, but generally speaking it would be. In the case of such a mine as my hon. friend has in mind, we should have to apply a different standard. I think we shall have to adopt some standard of allowance for, say, the gold mining district of Porcupine and the silver-mining district of Cobalt, and some standard with regard to copper mines. But I have no apprehension of difficulties in this regard. There are only 25 mining companies in Canada that are paying dividends at all.


Edward Mortimer Macdonald: This section illustrates the weakness of this kind of legislation. No taxation measure, it seems to me, should be placed on the statute book unless it clearly provides a well-defined method for collecting the tax. There is nothing in this section to prevent the Minister of Finance arbitrarily taking from one company a certain sum of money and from another company a very much greater sum. There is nothing in this section to guide him. He may say to A, " No standard has been laid down to guide me, so I say that you must pay me $10,000." And he may say to B, " You must pay me $20,000;" and if B ventures to ask what is to be allowed for exhaustion, the Finance Minister may say, " I have allowed you so much." There is no standard or principle upon which he is to act, and if that is so, we might as well give the minister authority to go out and tax everybody according to his own whim. The first portion of this sub-section requires very careful consideration, apart altogether from what has been said about mining companies. It says:
No deductions from gross profits for depreciation or for any expenditure of a capital nature for renewals, or for the development of a trade or business, or otherwise in respect to the trade or business,-
I should like the minister to define the words "otherwise in respect to the trade or business." We have here four distinct and separate classes. The section also declares that no deductions should be allowed except such amounts as appear



to the minister to be reasonable. The minister's discretion is absolute. There is nothing to prevent him from making A pay $10,000 and B $20,000, or from saying: "We will allow you a certain amount for depreciation, and you we will not allow such and such amount." The section goes on:
-and to be properly attributed to the accounting period.
Supposing that a company liable to this tax, before ever there was any notice of this legislation, had in all good faith, within its accounting period, decided to expend a very large amount of money to rebuild their whole plant; or, being sufficiently ahead, had decided to employ some system for advancing their business which would involve the expenditure of a very large sum of money; suppose all this had occurred before the Finance Minister was given this power, do I understatnd that under this section it will be open to him to revise the decision of that company, a decision which was arrived at a year before this taxation measure was brought down? Will the minister have the power to say: "We will not allow you to take into consideration the amount of money you voted in 1915 for this, that or the other purpose, because you should not have devoted your profits to that purpose in that particular year." In other words, will the minister have the right to set aside the decision that the board of directors, or the members of a partnership, made a year ago,? I should also like to know the minister's definition of "otherwise in respect to the trade or business."


William Thomas White: If my memory serves me correctly, this section is taken from the English Act. Its purpose, I think, is obvious. In the administration of this Act it is not intended that there should not be a proper allowance for depreciation, or for expenditure on renewals, or for the development of a trade or business, or deduction otherwise in respect to the trade or business. The purpose of this section is to prevent those who might desire to evade the Act, by reducing the amount of their net profits which are taxable under the Act, from writing off an undue amount for depreciation, or for expenditure of a capital nature for renewals. It has been stated on more than one occasion by myself in committee that we recognize that allowance should be made for depreciation and renewals. My hon. friend says that sup-

posing last year before any one could imagine this Act was coming down, the board of directors of a company set aside a certain fund	for renewals,
or had written off a certain amount. Then he says: "Would the minister disallow that? How would he deal with that?" Well, I should say that in all probability it would be allowed. It would not necessarily be allowed, but in the administration of the measure it would prima facie be taken to be correct, because the board of directors would have no motive except that of dealing with their business in a businesslike manner in writing off a certain amount for depreciation or for renewal.
Power must be given to the department to prevent an undue amount being allowed for depreciation; but it will be very improbable that unreasonable or high-handed action will be taken in a matter such as he has in mind, and that in the ordinary course the action of the directors would be very strong presumptive evidence that what they did was the proper thing to do.
My hon. friend has stated that the minister is to have discretion as to the percentage to be allowed for amortization in the case of mines. That is true, and I agree with him that, so far as it is possible to have legislation clear and definite, it is advisable to make it so, in order that as little as possible may be left to the discretion of a minister or department. In the nature of things, however, where facts have to be determined, that is not always possible. Take the case of the assessment of real estate values in Canada. There is nothing about which men differ more than the value of real estate, and yet the assessors of municipalities have to place a certain value upon this or that piece of real estate according to their judgment. In cases of assessment, the appeal is to the court of revision or to the county judge. All the matters to which the hon. member has referred are matters of fact, to be determined, as the department may be able to determine them, in carrying out its-duties, with the intention of dealing fairly by the public and by the parties themselves.
Mr. MeOBEA: The matter of depreciation and exhaustion is one that must deleft very largely to the discretion of the minister. There is no fixed rule that will apply to every investment; some are of a permanent nature and some are not. That

applies to mines as well as to other forms of investment. As regards the manufacture of munitions, . we hope the war will not last forever, and when it is over, the machinery and equipment used in the manufacture of munitions will have very little value. One mine may be' of a permanent nature, with inexhaustible supplies of mineral in it, whereas another may he a pocket. So far as a lumber firm is concerned, when all its wood is cut, its mill is of no value. The minister, therefore, will have to have a very wide discretion in dealing with such matters.


Edward Mortimer Macdonald: Has any statement been made as to what appeals may be made from the minister? Such a point is particularly important where discretion is to be exercised.


William Thomas White: The matter is dealt with in paragraph 11. It is the intention that there shall be an appeal from the decision of the minister to a Board or Boards of Referees, because I think there will be more than one necessary throughout the cpuntry, and a further appeal from such board or boards to the Exchequer Court. I think that is absolutely necessary in order to safeguard the rights of the public under this measure.


George Perry Graham: A person would not have to get the consent of the Government to appeal to the Exchequer Court ?


William Thomas White: No, that is a matter of right.


Alexander Kenneth Maclean: What would be the case in a past accounting period where no provision was made for depreciation, and the department claimed to make its assessment upon that business? Would the proposed Bill permit an appeal that an amount for depreciation be deducted? I assume that the accounting period has passed and that the firm's books have been kept according to well-established methods in that particular business which has never provided for depreciation. Would such a case be opened and the firm permitted to provide for depreciation?


William Thomas White: The true principle to apply there is this: what is the capital invested in the business? If, for example, a man's books showed a certain capital, and yet he had never written off anything for say twenty years, it is clear that his capital is not as great as he
125}
thought it was at the beginning of the accounting period. The true thing to say is: Your capital at the beginning of the accounting-period is so much; your depreciation during the accounting period is so much; your net profits for the accounting period are <so much.


Edward Mortimer Macdonald: There is a question
of remedy by appeal. Appellate tribunals exercise their corrective judgment only according to the limitations which are laid down in a particular statute or in the principles of common law. The effect of this measure is to say that the minister may determine those various things that are mentioned in the different paragraphs. Of what use will it be to ask a board of referees to revise the judgment of the minister on a point, when the sole power is given to him to determine it? Suppose you come before a board of referees and say, in regard to a question of deductions for depreciation or renewals, that the minister has acted on wrong principles. There is no use in addressing them along these lines, because you cannot suggest to them any new principle on which they can act. There is nothing provided in this measure; the whole thing is wide open. If the minister chooses to come to a conclusion in regard to a matter, there is no way in which any mistake he may make can be remedied. Of what use would it be to go to the judge of the Exchequer Court on that question, because the Crown counsel would say to you: This is a matter subject to the determination of the minister; the judge of the Exchequer Court ' cannot determine the thing in any way different from the statute, by which the power is vested exclusively in the minister. It lays down no lines of demarcation, and the minister's decision will be final in any particular case.


William Thomas White: I think I understand my hon. friend's point. The minister or his department is the assessor or the assessing agency. Unless there is Some special provision that the minister's judgment shall be final and conclusive, the assessment would come before a board of referees upon an appeal for consideration as to what is the amount of capital. It is true that the minister or the department will have to determine what, in their judgment, the amount of capital is, just as the Minister of Customs may determine a valuation for customs purposes. It is true that the minister or the department will have to determine the amount of net profits; but

all that will be open to the board or boards of referees to revise in order to see, as a matter of fact, whether the facts are as determined by the department which is making the assessment. I do not consider the fact that the measure states, that the minister is to determine precludes the board of referees or the Exchequer Court from looking into the facts; otherwise, I do not see how the assessment could be revised.


Edward Mortimer Macdonald: This section is very clear in giving to the minister sole power. There are other sections where the measure undertakes to define certain things and as to which the Appellate tribunal could say that the minister or the department erred in their application of the section, but they could not say that in regard to this particular section. Take for instance a concrete illustration.
The language of this part of the Bill is very clear and very broad. I understand that 'in other matters there is to be a board of referees, with an appeal to the Exchequer Court; but in this case there is no poweT to set aside the minister's decision; and if the minister does not see fit to make an allowance for the exhaustion of the mine, he is not _ required to do so. I think the word " may " in this section should read " shall " and later, when we come to the provisions of the Bill in regard to public tribunals and the fixing of their powers in relation to this taxation, we must see to it that the language is broad enough to allow the minister's decision to be revised.


George Perry Graham: I think there is a good deal in the point raised by my hon. friend from Pictou (Mr. Macdonald), and that the minister will do well to see to it that the Act is so framed as to make it clear that his own finding can be revised. There was a case in point that came up isome years ago. A decision given by the Department of Railways was, by consent, allowed to go before the Exchequer Court. But when the case got before the court it was found that the statute so clearly declared that the Minister of Railways had the right to decide the matter, that the Judge of the Exchequer Court threw out the case, saying that he had no power to deal with it, the minister's decision being final.


William Thomas White: I will bear in
mind what has been said, and We can refer to it again when the Bill is before us. I think that the language of the Bill is enough to cover what my hon. friends have in

view. In one or two oases it is intended that the minister's decision shall be conclusive. Subsection 2 of section 9 is a case in point- dealing with the determining of the amount of capital. Of course, we have not yet considered that section; but I cite it to show that in some cases the power of the minister is specific, though not in others. In the section under discussion, I think that the reason why " shall " was not used was that there might be a case in which an allowance should not be made. But that is no real objection to the use of the word " shall." Therefore, I move:
That in subsection 3 of section 5 the word " may " be struck out and the word " shall " be substituted.


Edward Mortimer Macdonald: In regard to the first portion of this subsection:
No deduction from gross profits. .. shall be allowed except such amount as appears to the minister to be reasonable.
That is open to the argument that unless the minister says a deduction shall be made, none can be made, and the question to be reviewed might be only the amount that the minister would allow.


William Thomas White: In this, we follow the precedent of the British Act. They seem to find it a proper clause.


[Stage Direction]
Amendment agreed to.
William Stewart Loggie: In this subsection, are the words "or otherwise in respect to the trade or business." What does the minister include in that? Later, it reads "-shall be allowed except such amount as appears to the minister to be reasonable and to be properly attributed to the accounting period." I can imagine some difficulty in regard to the amount to be allowed on account of book debts. Some businesses are much more hazardous in regard to credit than others are. In many concerns, when a book debt turns out to be actually bad during the accounting period, that debt is charged direct to profit and loss, and appears in the account of that year. But there ' may be a very large proportion of the book debts contracted in that period that will eventually turn out to be bad debts. So, an estimated amount of the book debts, together with an estimated amount for depreciation of plant, is written off. And when a book debt of that class is actually written off the books, it is not charged to profit or loss but charged to, let us say, suspense account. In the case of a concern that has kept its books in that way, not dividing this entry into so much for depre-

ciation and so much for bad debts, would not the minister consider it fair that that should be allowed?
1 am not talking about the future, because a business firm might have a motive in writing off more than they should; I speak only of the past. In any case, when the owner of a business writes an amount off, he knows that it is speculative as to what his losses will be so far as book debts are concerned. Further, when a firm has had, a fairly good year, it is possible that they may write off a little more than they would if their profits had been very small. It seems to me that in this respect the minister is drawing a line which is, perhaps, rather fine, and that it may require considerable litigation, if I may use the expression in this case to settle matters.
Sir THOMAS WHITE; The purpose of this provision is not to give the departments power to deal harshly with individuals; it is merely to prevent an evasion of the Act.


Mr. COPP:: In subsection 3 of section 5, which deals with deductions from profits, special reference is made to the mining industry. It is provided that the minister, when determining the profits derived from mining, may make an allowance for the exhaustion of the mine. It is quite proper and right that such allowance should be made, but why should not the same provision be mad.e with respect to timber limits and lumber concerns?


William Thomas White: There are many classes of business to which this principle would undoubtedly apply. In some cases a large percentage would have to be allowed-in the case of mines, for example- and in the case of other properties a less percentage. In my judgment it is not necessary that we should particularize all the classes of business to which the principle should apply, because we .are using the expression "net profits." In determining the net profits a proper amount would have to be allowed for depreciation or waste or exhaustion. In the resolution as brought down, the words "net profits" were, in my judgment, quite sufficient to indicate that we would make an allowance^ for exhaustion of capital. But there was some apprehension on the part of the mining industry, and we put in tfhese words to show the intention of the legislation in that regard. Without doubt 'it is proper to allow for depletion or exhaustion of capital
in connection with many classes of business, as, for instance, oil companies and timber companies, as my hon, friend -has suggested.


James Alexander Robb: What does the hon. minister mean by " net profits?" Are they to he reckoned after the dividend has been paid?


William Thomas White: Oh, no. Dividends are paid out of net profits. A company has many sources of income; from the gross amount of its profits, so-called, there must be deducted charges of administration, interest on bonds, allowance for depreciation, and other proper charges such as we have been discussing this afternoon, and the result is the net profits. The net profits represent the amount which it would be proper to disburse to the shareholders, if the board of directors saw fit.
.Sub-paragraph 3 of paragraph 5 agreed to.
On paragraph 5, sub-paragraph 4:


Alexander Kenneth Maclean: In the case of a business where the directors are the shareholders, or in the case of a partnership where the partners are the managers, and it is not their practice to accept any salary, would that circumstances he taken into consideration when determining the assessment for the past accounting period?


William Thomas White: I think it should, undoubtedly.	.


Francis N. McCrea: In many cases the people in charge of a concern in its early stages, in order to help it along, are very moderate in their requests for remuneration for their services. Owing to the war, the profits of many industries are larger, and, as a rule, people are more generous when the profits are larger, and are inclined to pay higher salaries. I assume that this is what the minister means by this provision: having regard to the remuneration of the officers of any particular company in past years, it would be in the discretion of the minister as to whether the remuneration now paid is or is not reasonable.


William Thomas White: The section is intended to prevent increase of salaries for the purpose of evading the Act.
Sub-paragraph 4 of paragraph 5 agreed to.



SOLDIERS' PENSIONS.

[Stage Direction]
The House having resumed:
Robert Laird Borden: Before you leave the Chair, Mr. Speaker, with the consent of

the House, I should like to move, seconded by Sir Thomas White:
That Mr. Nickle and Mr. Nesbitt be added to the committee appointed on the 14th inst., to consider and report upon the rates of pension and matters connected therewith.


[Stage Direction]
Motion agreed to.
At six o'clock the House took recess.
The House resumed at eight o'clock.


[Stage Direction]
The House in Committee on Private Bills, Mr. Rhodes in the Chair.
Bill No. 29, respecting certain patents of the Pedlar People, Ltd.-Mr. Smith-in committee. '
Edward Walter Nesbitt: I have no desire to delay this Bill, but the other evening it was left over so that some one could tell us the reason for this application.


Mr. SMITH:: About two years ago the head of the Pedlar People died very suddenly, and this patent expired about that time. They are now asking a renewal of the patent. Mr. O'Halloran, the deputy minister, appeared before the Private Bills Committee and said that all conditions had been complied with, and that be agreed that the Bill should go through. The patent is on an improvement jn connection with metal shingles manufactured by the Pedlar People. No one will be injured by the passing of the legislation.
Bill reported.



SECOND READINGS.

[Stage Direction]
Bill No. 62, respecting a certain patent of Harvey Hubbell, Incorporated.-Mr. Coek-shutt.
Bill No. 63, for the relief of Mary Phyllis Lasher.-Mr. Nickle.
Bill No. 64, for the relief of Mabel Mills. -Mr. Douglas.

[Stage Direction]
The House resumed on the proposed resolution of sir Thomas White (Minister of Finance) respecting the taxation of excess profits, in Committee of Ways and Means, M. Rhodes in the Chair.
On paragraph 5, sub-paragraph 5:
(5) In the case of any contract extending beyond one accounting period from the date of its commencement to the completion thereof and only partially performed in any accounting period there shall (unless the minister, owing

to any special circumstances, otherwise directs) be attributed to each of the accounting periods in which such contract was partially performed, such proportion of the entire profits or estimated profits in respect of the complete performance of the contract as shall he properly attributable to such accounting periods respectively, having regard to the extent to whidh the contract was performed in such periods.
Edward Walter Nesbitt: Would the minister tell us just what he means by that?


William Thomas White: Suppose that a company has a valuable contract from which it would derive large profits, and that in order to evade taxation it should determine not to take those profits during the accounting periods within the period over which this legislation extends, but to take them after the expiration of that period, this provision is for the [DOT] purpose of defeating any such action. Let us assume, for instance, that a firm manufacturing munitions or furnishing supplies should, during the last accounting period in which it would be liable, and during the period of this legislation, be entitled to take substantial profits from its contracts, but refrained from doing so for a few months, or until the next accounting period to which this Act would not apply, say in 1918, the department would have the power to say to it: " Take the profits that you are entitled to from your contracts during this accounting period."


Edward Walter Nesbitt: I quite understand what the minister wants to get at, but I can hardly appreciate how a company would so manage its business that it would not take account of a contract executed.


William Thomas White: Only to evade the Act.


Edward Walter Nesbitt: Then, it would be proper for you to get after it. A company making war munitions, or shells, or a company working on a contract, that did not have the whole of its raw material in stock, might make a loss at the latter end of its contract by reason of the price of raw material advancing very greatly. The price of woollen goods has gone up so rapidly during the last year that there is no telling from week to week what the price of wool will be. If this tax, at the end of 1917, should apply to 'companies or firms handling these things, and if raw material should have so advanced that they would not make a profit at the other end at all, it would not be equitable to charge them with the unearned portion of the contract.
If the minister only intends to charge them

with the earned portion of the contract up to the end of 1917, as it were, then I can understand it.


William Thomas White: Let me read to my hon. friend a part of the language of the clause:
There shall be attributed to each of the accounting periods in which such contract was partially performed, such proportion of the entire profits or estimated profits in respect of the complete performance of the contract! as shall be properly attributable to such accounting periods respectively.
The company that was carrying on its business properly and not seeking to evade the Act by postponing the taking of profits would have no difficulty with the department. This merely gives the department power, and that is the sole intention, to prevent the evasion of this taxation by deferring of taking profits from the accounting period to which they properly belong. I may say that this is taken directly from the English Act, and its purpose is the same as the purpose of the provision in the English Act.


George Perry Graham: They might defer the
dividends also.


William Thomas White: They might to
evade the taxation. But this injures nobody who is carrying on his business properly.


Edward Walter Nesbitt: He might be carrying on his business properly. Suppose a man's year ends on the first of April. He has to give an accounting first on the 31st of December, 1914, ,so that in that accounting he covers part of the year before. Then at the end of 19117, he will have the benefit of that portion of the year, because he will not have to account after this Act expires for that portion.


William Thomas White: I think my hon. friend is right in his statement; that is to say, if his accounting period expires, say, in April, 1917, he would have all the months free from then to the end of 1917. But that does not touch the point of this provision. It is designed to prevent men in business from deferring taking profits which they have earned in an accounting period for the purpose of keeping down their earnings in that accounting period and consequently paying less than they might be properly entitled to pay under the provisions of this Act. The provision means that the minister or the department may say to such a party: " Now, your earnings are greater than you have returned. It is true that you have not taken all out of that contract that you
should, and you should take more out, because, if you do not, the result is going to be that in 1918 you are going to take account of the profits out of the contract, although you earned them in 1916 and 1917."


Edward Walter Nesbitt: If he keeps his books
right, he will have to show how the profit was earned.


William Thomas White: There will be no trouble if he is not trying to evade the Act.


George Perry Graham: I would like to ask a
question as to the disposition of profits. This case was put up to me the other day. A member of a company took his profits as they were distributed. His share amounted to about $20,000. He invested that money in the war loan. In figuring the profits of the company, will the fact that he, after drawing his profits, invested them in the war loan, be taken into account?


William Thomas White: My hon. friend
will realize that a company is different in law from all or any of its shareholders. It is a separate entity. It is distinct from the body of its shareholders, and from the shareholders themselves, as A is from B, and this taxation is levied against the company and the company's net profits. What happens to these profits after the company has paid them out to its shareholders is a matter with which we are not particularly concerned for the purposes of this Act.


Francis N. McCrea: The minister stated that
the power contained in the remuneration clause as it now stands is not for the purpose of holding directors and officers of a company down to a hard and fast rule that they shall not increase salaries, but that it is in order to enable the minister to use discretion, and they will be allowed to vote just such remuneration as he may consider reasonable. Does the clause, in its present form, permit the minister to use discretion in that respect, or is it not a little stringent as it now exists?


William Thomas White: It will permit the payment of proper sums for salaries, although it is in the power of the minister to say: "You have increased the salaries unduly."


Francis N. McCrea: Does the clause give the minister that power?


William Thomas White: It says:
-unless the minister, owing to any special circumstances, otherwise directs.


Francis N. McCrea: I want the minister to
have latitude enough to deal with the matter.


William Thomas White: I think there is sufficient latitude.
On paragraph 5, sub-paragraph 6:
(6) Where an incorporated company conducts its business whether under agreement or otherwise, in such manner as either directly or indirectly to benefit its shareholders or any oil them or any persons directly or indirectly interested in such company by selling its product or the goods and commodities in which it deals at less than the fair price which might be obtained therefor the minister may determine the amount which shall be deemed to be the profits of such company for any accounting period and in determining such amount the minister shall have regard to the fair price which but for any agreement, arrangement or understanding might be or could have been obtained for such product, goods or commodities.


George Perry Graham: Is this clause intended to protect the Government against the possibility of a large concern forming a small company, say, and selling its products to them, both dealing in the same products, and possibly having the same directors?


William Thomas White: The purpose of
this clause is to enable the. Government to levy taxation against a company whose shares are held or controlled by a corporation domiciled outside of Canada. Now, that corporation domiciled outside of Canada and holding, let us say, all the shares of a subsidiary company carrying on business in Canada, could take its profits from that subsidiary company in one of two ways. The subsidiary company might carry on its business properly, charging the holding company to whom it sold its product a proper price for such product, and keeping its accounts in all respects as a company would keep its accounts that was not so. owned or controlled, but dealing directly with the public. In that case, the holding company would derive its profits from the subsidiary company just the same as the shareholders of an ordinary company derive profits from their investments by way of dividends from the company whose shares they hold. The other way in which the holding company could derive its profits would be by making an arrangement with the operating company, the company which it controls, to sell its product at, let us say, cost price. Then the holding company would make its profit by getting that product at less than the market price, working it up into a more finished product in the foreign country. No one would raise any 
question against that procedure, because all the shares in the case I am instancing are held by the holding company domiciled outside of Canada. Therefore, but for this provision, when the department came to assess the subsidiary company, they would be able to say: "We have no profits; we sell all our product at cost, and we declare no dividends; we have made no money." In order to get over that, we have inserted this provision, which puts it within the power of the department to say to such a company: "It is true that you do not make any profits, but that is on account of the way you conduct your business; if you conducted your business as other companies conduct their businesses, dealing with the public at large, and not with the company that controls you, you would sell your product at a much higher price; we want you to make a calculation, and tell us how much you would earn if you sold your product at a proper price to the company which controls you."


George Perry Graham: Does that apply to the Nickel Company?


William Thomas White: In that way the subsidiary company would be put on the same basis as any other company not so controlled. In 'other words, this is an attempt to place all companies on the same footing.


Mr. CARVELL:: Take a concrete case.
Would this clause cover the production of nickel in Canada?


William Thomas White: My hon. friend
means nickel matte.


Frank Broadstreet Carvell: The production of nickel.


William Thomas White: I do not know
myself the precise relationship between the mining company and the refining company which is domiciled and has its establishment in the United States. But if the mining company-the company which produces the nickel matte-sells its product to the refining company at less than the proper value of that nickel matte, this clause would apply, and it would be fop the department to fix the profits, having regard to the fair price which would be obtainable for the nickel matte if sold upon the ordinary commercial terms governing sales of that kind.


Edward Walter Nesbitt: How would you arrive
at that fair price?


William Thomas White: That, like everything else under this Act, and under all assessment Acts, is a question of fact.


Edward Walter Nesbitt: Supposing there are no
facts.


William Thomas White: There must be
facts.	.


Edward Walter Nesbitt: But there are not.


William Thomas White: There must be facts. Any of my hon. friends who are lawyers will tell the hon. gentleman that although it may be exceedingly difficult to ascertain what the facts are, a court .will always undertake to ascertain the facts.


Frank Broadstreet Carvell: The facts are fiction in this case.
* Sir THOMAS WHITE: It might be difficult, but I should think it would he possible, to determine what would be a fair price for the nickel matte.


Edward Walter Nesbitt: I am not disputing the view of the minister, but the reason I said there were no facts is because there is no such a thing as nickel matte in the world's market. The matte has first to be refined.


William Thomas White: It has a value.


Edward Walter Nesbitt: How will the minister arrive at that value? I know the minister knows a great deal. I see he is taking the right to determine this fair price, and I suppose we shall have to leave it to him.


William Thomas White: Let us assume for a moment that a mining company whose product was nickel matte had no refinery here', and was endeavouring to sell its nickel matte. My hon. friend might say there was nobody to buy that nickel matte, but that nickel matte would have a commercial value, just the same as any other product, and it does seem to me that its value would be susceptible of determination. When I was in assessment work years ago, when we were in doubt about anything, we would( make the assessment. That puts the onus on the other party to disprove, and in that manner you can get the matter fairly before the tribunal.


John Hampden Burnham: If the hon. member for North Oxford (Mr. Nesbitt) will allow me, I would say that when he attempts to establish a negative he is establishing a positive. He cannot establish a negative without first establishing his positive.


Edward Walter Nesbitt: That settles me.


George Perry Graham: I am not sure whether it will not apply to what I am going to say. I want to give the minister a converse case to the one we have been discussing. There
is a company that was doing business in Canada, and that either got an order for shells or nearly got an order, I foTget which.


Frank Broadstreet Carvell: Quite a difference.


George Perry Graham: The two or three gentlemen who had control of the stock formed a new company, and leased to it the plant of the original company. The smaller company got all the war orders. Whatever profits there were never went to the shareholders of the original company, and they have had no dividends for some years, although their plant is manufacturing the shells. So soon as the tax was announced, the smaller company transferred to the original company whatever it had left of war orders. I am not sure that my hon. friend has any section in this legislation that will enable him to chase around between those two companies after the profits that have been made. The original company has never had any profits on the production of war supplies.


William Thomas White: The smaller company has?


George Perry Graham: The smaller company, composed of men holding a little over half the stock of the original company, has received all the war orders.	,


William Thomas White: And is that company in liquidation now?


George Perry Graham: It is not exactly in liquidation; it is transferring the balance of its war orders back to the original company. The original company will not be assessed because its shareholders have not , seen a dividend for years. There may be more than one such company, and it may be a little difficult to determine who is responsible for the taxation.


William Thomas White: I think that presents no particular difficulty. I understand from my hon. friend that certain shareholders of a company formed a new company to which it leased its plant. Now, so far as company No. 1, that is, the company whose plant was leased, is concerned, its profits during the period of that lease would be derived' from its ordinary business and from the lease. My hon. friend says that the net profits so derived would not be sufficient to bring it within the provisions of this measure.


George Perry Graham: It has not paid a
dividend for years.


William Thomas White: Now, take the smaller company that leased the plant of the other company and got the war orders. For the period that it was carrying on that business it would be liable, under the pro' visions of this measure, if its profits were sufficiently large.


George Perry Graham: Supposing it has disappeared.


William Thomas White: A company cannot. disappear so as to get rid of its liabilities. If it is still in existence and has turned over its assets to the other company, presumably the other company has assumed its liabilities.


George Perry Graham: I will not say that for sure. The matter is very complicated.


William Thomas White: Otherwise that
company would be liable to be thrown into liquidation; that is, the smaller company which was formed and which made the profits would be liable during the period in which it made the profits; and, if the older company makes profits on the contracts which have recently been assigned to it by the new company, of course it would be liable during the accounting period for its earnings if they exceeded 7 per cent on its capital.


George Perry Graham: The profits may be so arranaged between the two companies that neither company will come under the taxation.


Frank Broadstreet Carvell: Mr. Chairman, before you proceed to the next section, I would like to ask the minister if he will be a little more explicit in regard to one proposition than he was before, as reported on pages 1920, 1921 and 1922 of Hansard. The proposition is as to the right which the minister would have under this measure of taxing profits which have been invested in the Dominion war loan. It was discussed, but I was not here at the time, and on reading over the discussion in Hansard,
I was not able to form ^n exact opinion as to what the minister had decided. I will give him a concrete case. A company has been carrying on an ordinary business and making some profits, and, let us say, it had taken its actual profits out of the business and invested them in the Dominion war loan during the months of October and November last. Of course, that would not prevent a minister from having legislation passed now making that portion of the profits liable to pay its share 
of this taxation, just the same as any other profits, but at the time the war loan was being asked from the people of Canada, it was advertised in all the newspapers and stated by the Government that the money invested in those Dominion bonds would not be subject to taxation so far as the Dominion of Canada was Concerned. I suppose the idea was that, in case an income tax, or any other method of taxation were adopted later on by the Dominion Government, such investments would be exempt, although, of course, they could not be exempted from provincial taxation. Assuming that the actual profits of the business, which otherwise would come under the provisions of this measure, had been invested in the Dominion war loan under those conditions, would the minister say that such a company should pay one-quarter of those profits under these provisions?


William Thomas White: The net profits of a business, no matter how invested, would be liable under the provisions of this legislation; but, in so far as the net profits consisted of interest and, returns upon the Dominion war loan, they would not be taken into consideration.


Frank Broadstreet Carvell: What about the capital invested in the Dominion war loan which actually was the profits of the year's transactions?


William Thomas White: My hon. friend knows the distinction between capital and profits. If a company or a firm buys Dominion bonds, those bonds form part of its capital. We are not taxing capital; we are taxing net profits beyond a certain amount. In so far, therefore, as the net profits of an individual, firm, or company are derived from interest upon Dominion war 'bonds, they are exempt from this taxation.


Frank Broadstreet Carvell: The minister, I think, ought to appreciate my point-at least, I tried to make it clear to him-that it was the net profits of the business that were invested, and invested under a pledge that those moneys would not be subject to Dominion taxation. The minister, I think, intends to convey the idea that the Government will not tax that portion of the profits which represent the interest on the investment, but do I understand him to say that, while he would not tax the income from that investment, he would

really take twenty-five per cent of the capital of the investment?


William Thomas White: My hon. friend is confusing ideas, if he will permit me to say so. The net profits of a company aTe one thing; what is done with those net profits is another, and very different thing. If a company makes $100,000 of net profits it has made $100,000, whether those net profits are retained, in the form of cash, distributed to shareholders, or invested in a war loan. The assessment is not upon the investment into which the net profits find their way, but upon the amount of the net profit. Therefore, a company, in the case my hon. friend has in mind, would be liable for its net profits, no matter how it invested them; but, having invested them in bonds of the Dominion war loan, those bonds become a portion of the earning investment of that company, and interest derived from them would not be a part of the net profits which would be subject to taxation. That is the view I would take of the proposition of my hon. friend.


Frank Broadstreet Carvell: According to that, the principal invested in the war loan would be taken by the Government to satisfy the provisions of this measure.


Alexander Kenneth Maclean: In that case the profits would be $100,000.


William Thomas White: We would, not be assessing the principal of the bonds; we would be assessing the net profits made by a company which it afterwards invested in bonds.


William Stewart Loggie: The minister would be assessing the principal if he did not ded(uct the principal from the capital. Unless he deducted the portion of the capital with which the bonds were bought from the capital, and then applied the rate of interest, he surely would be assessing the capital.


William Thomas White: I think not. We
are not assessing capital but net profits.


Frank Broadstreet Carvell: Does not the minister
think that under this arrangement he is appropriating to the use of the Government moneys which he promised three or four months ago should not be subject to taxation for Dominion purposes?


William Thomas White: I certainly do
not.
Paragraph 5 agreed to.
On paragraph 6:
C. That the capital employed in the trade or business of an incorporated company having its office or other principal place of business in Canada shall be the amount paid up on its capital stock.


Alexander Kenneth Maclean: According to the statement of the minister this afternoon, which, of course, must be accepted, borrowed capital will not enter into the computation of capital-bond issues, of course, represent a liability and not part of capital. But suppose the case of a company having a nominal share capital of $10,000 and a bond issue of $1,000,000. Such a company does business on the capital derived from the sale of the bonds. Except in the case of its engaging in munitions contracts, it would not come within the provisions of the Bill?


William Thomas White: Not if its capital was only $10,000.


Alexander Kenneth Maclean: That is a case where the treasury would fail by not considering borrowings as capital.


William Thomas White: No, but where
the hon. gentleman's case fails is that a company with a capital of $10,000 could not make a bond issue of $1,000,000.


Alexander Kenneth Maclean: It is possible.


William Thomas White: But not at all
probable.


Edward Walter Nesbitt: Section 8 says:
Where stock was issued before the first day of January, one thousand nine hundred and fifteen, for any consideration other than cash, the fair value of such stock on such date shall be deemed to be the amount paid up on such stock.
That is rather contradictory, is it not? In the course of the Budget debate reference was made to companies that issued common stock with nothing paid up. What is the use of that part of the clause? Besides, it is practically repeated later in the section, as it goes on:
And where stock has been issued since the first day of January for any consideration other than cash, the fair value of the stock at the; date of issue shall be deemed to be the amount paid up on such stock.


William Thomas White: One is before 1st January and the other after. If there is any excess, it will be in reserve. If the amount should by any chance exceed the par value of the stock, it would still he a part of the capital by reason of being part of the " reserve, rest or accumulated profits" of the company.


Edward Walter Nesbitt: In other words, if they had invested their accumulated profits in plant or in additional stock-I mean not capital stock, but raw material-you would allow them to apply their cash assets against that stock. The provision is not very plain, I must say. It is a sort of contradiction.


William Thomas White: Perhaps my hon. friend will allow me to explain the section. The first sentence is:
The amount paid up on the capital stock of a company shall be the amount paid up in cash.
That is clear. Then, the next sentence:
Where stock was issued before the first day of January, 1915, for any consideration other than cash, the fair value of such stock on such date shall be deemed to be the amount paid up on such stock.
How do we- ascertain what the fair value of such stock on such date is? Look at the sentence before the last:
In estimating the value of stock issued for any consideration other than cash, regard shall be had to the value of the assets, real and personal, movable and immovable, and to the liabilities of the company at the date as of which such value is to be determined.
Let us make the application. Here is a company with assets valued at $5,000,000, and with liabilities of $3,000,000. Its real capital, the difference between $3,000,000 and $5,000,000, is $2,000,000. But the company may have been over capitalized; it may have been capitalized at $6,000,000, whereas it has only $2,000,000 of real capital. You would allow, therefore, $2,000,000 as the true capital for the purposes of this Act. In other words, we are shrinking the over-capitalization; we are putting the overcapitalized company, on the same basis, 60 far as we are able, as the company which has not been over-capitalized and whose shares are paid in cash.


Edward Walter Nesbitt: I thought that was what the minister meant, but, with all due deference to him, I do not think that the clause is very clear.


William Thomas White: There is no doubt that it is a complicated subject, but I think the language is apt. If there is any suggestion for improvement, it goes without saying that we shall be glad to consider it.
Paragraphs 6, 7 and 8, agreed to.
On paragraph 9:
9.	An incorporated company may include as part of its capital, its actual, unimpaired reserve, rest or accumulated profits.
(2)	The minister may determine the amoirt 
of the capital of any incorporated company issuing stock after the fifteenth day of February, one thousand nine hundredi and sixteen, and if, after the said fifteenth day of February, one thousand nine hundred and sixteen, the capital stock of any incorporated company is increased or additional stock is issued, or 'if the stock is in any way changed or re-organized in such manner as to increase the amount of the capital the minister may decide whether or not it is fair and proper to include such increase or any part thereof when determining the capital of such company, and the decision of the minister shall be final and conclusive.


Alexander Kenneth Maclean: Could the minister give the committee a comprehensive definition of accumulated profits?


William Thomas White: If my hon. friend will observe the balance sheet of a financial company, he will find capital stock, reserves and accumulated profits. If a company makes $100,000 of net profits and pays dividends of $70,000, it has $30,000 to carry forward in some form. Not infrequently any such balance is carried forward partly to reserve and partly in open profit and loss account. Perhaps $20,000 of the $30,000 is carried forward to reserve, and $10,000 to profit and loss account. That would be accumulated profits; that is, profits accumulated in profit and loss account, and not specially taken into reserve. In reality, reserve, rest and accumulated profits all represent assets of the company in excess of its capital stock. It has its capi-
9 p.m. tal stock, it has its reserve, and it may have some accumulated profits, not yet taken out of profit and loss account and appropriated to reserve.
Paragraph 9 agreed to.
On paragraph 10, sub-paragraph 1:
10.	That the capital employed in the business of any person other than an incorporated company shall be taken to be the fair value of all assets real and personal, movable and immovable, used in connection with such business.


Edward Mortimer Macdonald: Does the mdnistez
purpose sending an appraiser to ascertain the fair value of assets, or will he ask each firm to make a statement?


William Thomas White: We will proceed by asking all firms and companies liable to the taxation to make a return. The Act provides for penalties for false returns. Then it would be for the department, and for the staff which we intend to organize to carry on the administration of this Act, to consider those returns, and to obtain such information as they may be able to obtain in regard to the firms making such returns.

If they have any reason to doubt the accuracy of any return, it is for them to investigate and make an assessment. Reports of mercantile agencies will be -available to them, and I think that they will be able to make their assessment, first, by calling for the return, and afterwards by carefully checking it up.


Alexander Kenneth Maclean: Will the minister outline the form of departmental organization he has. in mind to carry out these resolutions?


William Thomas White: I have not settled v the details, but the organization which I have in mind is after this fashion. The assessments will be made from the department here. Returns will be made to the department, and the assessments as finally determined will be sent out from here by registered letter, under the provisions of the Act. We shall have to somewhat enlarge our staff here, which will be, so to speak, the Ottawa departmental staff. Then we shall have to have an organization, not very extensive, in each province, or in each area of the country, for the purpose of obtaining information as to those thought to be liable for the tax, and other information upon which we could call for returns and make the assessments.


Alexander Kenneth Maclean: Will these appointments be made by the minister directly or by the Government?


William Thomas White: I had not thought that out, but I think they would be made by the Government on the recommendation of the minister.
On paragraph 10, sub-paragraph 2:
(2) So far as the capital consists of assets being debts due to the business the value shall be the nominal amount of those debts, except bad, debts proved to be such to the satisfaction of the minister. [DOT]


William Thomas White: I would ask permission to strike this clause out. I think that its substance would be implied, and the clause would raise too many questions of detail in the administration of the Act. This is taken from the English Act. Undoubtedly, in estimating net profits of a business, proper allowance would have to be made for bad debts, and I do not think it necessary to provide in such detail that they should not be allowed unless the minister permits.
Amendment agreed to and sub-paragraph as amended agreed to.
On paragraph 10, sub-paragraph 3:
(3)	Accumulated profits employed in the business shall also be deemed capital.


Edward Mortimer Macdonald: Would the minister make a short statement of what is to be deemed as capital in the case of firms?


William Thomas White: The capital of a firm is the difference between its assets and its liabilities. In the accounts of a firm there would be, for example, office premises, goods in stock, accounts receivable, and any other assets that might belong to the business. The liabilities need no definition. If one subtracts the liabilities from the assets as I have defined them, the difference will be the amount of capital actually invested in the business. If private individuals or firms have accumulated profits over a course of years, and put them back into the business, of course they would appear as part of the assets of the business.


Frank Broadstreet Carvell: Suppose they put these profits in some outside investment, as many good business men do?


William Thomas White: We are assessing only businesses, and if a man has taken profits out of his business and invested them in something privately, in some other part of the country or of the world, unless that was an investment relating to his business it would not come under the provisions of this Act.


Edward Mortimer Macdonald: Will this apply to firms of professional men?


William Thomas White: I think that professional men are not engaged in business in the ordinary acceptation of the term. I had thought of that, but I do not think it is important, as very few professional men will have $50,000 invested in their business.


Frank Broadstreet Carvell: Very few would have it altogether.


Edward Walter Nesbitt: This law comes in force on the 1st of January, 1914. If a partnership came within the $50,000 provision and were liable under the Act, and had made a profit last year and had invested it in outside business, would that money be liable?
. Sir THOMAS WHITE: If they make the profit they are liable, no matter what they do with it.
Sub-paragraph 3 agreed to.
On paragraph 10, sub-paragraph 4:
(4)	Any borrowed money or debts borrowed or incurred in connection with the business shall be deducted in computing the amount of capital for the purposes of this section.


William Stewart Loggie: I presume the minister does not here mean money borrowed from a bank on a note discounted. That is an indirect liability and should not be counted unless you count customers' notes in the assets. Money borrowed on a customer's note would not be regarded as a debt, because it is only an indirect liability.


William Thomas White: The customer's note would be part of the assets of the business, and if the proprietor of the business borrowed from the bank by way of discounting the note, that would be a liability to the bank.


William Stewart Loggie: That has the same effect.


Edward Walter Nesbitt: Will the minister tell me of anybody who ever borrowed debts? The clause says: "Any borrowed money or debts borrowed or incurred." I never heard of anybody borrowing debts. I can get mine easily enough without borrowing them.


William Thomas White: I beg to move:
That sub-clause 4 of clause 10 be amended by striking out the words " borrowed or " in the first line thereof.


[Stage Direction]
Amendment agreed to, and paragraph 10 as amended agreed to.
On paragraph 11:	[DOT]
11.	That provision be made requiring persons liable or believed to be liable to make such returns as may be necessary to assess the tax ; and that provision also he made for the assessment of the several persons liable to taxation ; for the appointment of a Board of Referees to determine assessment appeals; for a further appeal to the Exchequer Court of Canada; and for the collection of taxes, interests and costs in the Exchequer Court of Canada and o 1 courts of competent jurisdiction.
George Perry Graham: I suppose that when the Bill comes down it will have all these provisions in detail?


William Thomas White: Yes.


George Perry Graham: The majority of these companies are provincial incorporations. It will not be very difficult in each of the provinces to get a complete list of the incorporated companies having provincial incorporation, with all the details connected with them.


William Thomas White: We have that in mind.


James Alexander Robb: The minister tell us that he proposes to collect these taxes through a special staff, which will be organized in hi6 department. I suppose he wish to economise as much as possible, and, if so, has it occurred to him that this work might 
be done more economically by using the chartered banks of Canada? They have branches in pretty nearly every place where business ie conducted, and of course the minister could collect the taxes and get reliable information very much more cheaply than by a special staff engaged for the purpose and which it would be pretty hard to get rid of at the end of the three-year period.


William Thomas White: I think we musj; have our own officials. I do not believe it would be advisable to delegate to the officers of a bank the assessment of the different businesses. Judgment must be exercised, and we must have the principle of responsibility as between the official and the minister, as between the minister and the Government, and as between the Government and Parliament. It is not like an automatic process of merely receiving money; it is a matter of making assessments, exercising judgment and discharging responsible duties. I do not believe we could devolve it upon any institution even as capable as the chartered banks.


Alexander Kenneth Maclean: Will these officials be appointed temporarily? Will that be understood?


William Thomas White: They would be appointed for the purpose of administering this Act. [DOT] They would be appointed temporarily-yes.


Alexander Kenneth Maclean: That will be understood?
tt Sir THOMAS WHITE: Giving the word temporary ' as wide a definition as would cover the operation of this Act.


Frank Broadstreet Carvell: Does it occur to the minister that, while he may feel like retaining the spirit of responsibility, and properly so, in making this assessment, he could get much valuable.information by applying to the chartered banks. You could go into any city in Canada, and, by stepping into one or two of the chartered banks, you could practically get all the information you wanted, and you might very well ask the banks to receive the taxes also. Following up the suggestion made by my hon. friend (Mr. Robb), I think that might be a very proper method to pursue.
I know that the banks know all about those of us down in the Maritime Provinces, and we cannot get away from it.


William Thomas White: I shall be very glad to take that suggestion into consideration, but I think the banks might raise the

very reasonable objection that they could hardly be expected to give us information in regard to their clients.


Frank Broadstreet Carvell: I think the minister should take power in the Act to go to the banks and get that information. I can quite understand that in the absence of authority the banks might very properly say, "We do not like to give away information regarding our clients," but the minister should take every possible means of obtaining this information, and I know of no way in which he could get it as rapidly as from the banks.


Edward Mortimer Macdonald: 
William Thomas White: The term "board of referees" is taken from the English Act. It in reality corresponds with a court ol revision under our municipal assessment system. Assessments will be made against firms and companies. They may desire to appeal. If so, they will appeal within a certain time to this Board of Referees, or to boards of referees, because I can see that more than one board will be required to cover the entire country. As to the personnel of the board, it is not in my mind that we shall appoint judges. The judges have their own duties. What I would hope to get would be reliable men capable of exercising good, sound judgment. I do not say that they should be expert lawyers, nor, on the other hand, that lawyers should be excluded. I think a mixture of business men and lawyers would give us a good court.


Edward Mortimer Macdonald: How many will there be?


William Thomas White: Three on each
board. We might have a number of such boards throughout the country for the purpose of dealing expeditiously with these appeals in the different sections of Canada.
The procedure, of course, would be by notice claiming over-assessment. The Board of Referees would then give a hearing, and determine in the usual way the merits of the appeal. An appeal would be allowed from them to the Exchequer Court of Canada, in the case of parties who felt dissatisfied with the finding of the Board of Referees.


Edward Mortimer Macdonald: These men are to be appointees of the Government, and, for the time being, civil servants, I assume? Is it the intention of the Government to constitute these boards as courts with power to summon witnesses and all the other powers of a court? Will the Act my hon. friend is going to introduce contain ample provisions for the working out a court of that kind? The situation will be something like this: A man may be dissatisfied with his assessment; then he has the right to appeal to the Board of Referees. Now, I assume this board is wholly in the selection of the Government. True, it may be a permanent one, but after all it is a sort of anomalous creation. It ought to be absolutely independent and very high class, if it is expected that the appeals will be numerous and tne amount of money involved large. What has been the practice in England with regard to the constitution of these boards?


William Thomas White: In England they appointed business men of high standing, nominated by the Board of Trade, I believe, but I am not quite sure as to that. I considered the question whether the Boards of Referees should consist of officials like our Customs Board, or be independent, and I came to the conclusion that they should be independent, containing men of high standing who would give a fair decision, and not feel that they were in the least degree under the influence of the Government because the Government had appointed them. In other words, they will exercise judicial functions. Under the Act, they are given the powers of a commissioner under the Inquiries Act; that is, they have power to summon witnesses and take evidence. In other words, they are a court.


Alexander Kenneth Maclean: Will the minister be as magnanimous as the Minister of Militia and say he will be very glad to have recommendations from gentlemen on this side of the House in order to ensure absolute independence i'n the constitution

of these boards of referees? I do not say the Minister of Militia carried that out.


William Thomas White: I will try to exercise a wise discretion in naming these boards, so far as I have anything to do with them, because I realize the importance of the matters that will be adjudicated upon. Undoubtedly the men should be of high standing.


Edward Mortimer Macdonald: I hope you will carry out the suggestion of the Minister of Trade and Commerce.


George Perry Graham: The minister will have some difficulty in securing a board of high class men who will not in some way or other be interested in this taxation. The business men on some of the Government Boards would not do for these boards of referees; the men on the Munitions Board, for instance.


William Thomas White: They are busy.


George Perry Graham: Possibly the reason why the minister refuses to assess incomes is that he is going to put on these boards men who have large incomes.
Before the resolution passes I should like to know whether the minister is still hard-hearted and stiff-necked in favour of certain classes who have very large incomes, and who, under this legislation, will not be taxed at all. Even at this late stage I ask the minister to consider whether he cannot devise some method whereby these men will be mad,e to bear their fair share of war taxation. For instance, a man who speculated with a few thousand dollars in land in one of our big cities a few years ago is worth a million dollars to-day; he has made at least 500 per cent on his investment. He is adding nothing whatever to the sum total of the business of the country, or to the improvement of that city; he is getting rich on account of the industries around him, and, on account of the enterprise of his neighbours, who are going to be taxed. Now, this man, who has made 500 per cent on his investment, goes scot-free, while his neighbours, who are engaged in industries, are allowed to make only 7 or 10 per cent before being taxed. It does seem to me that without getting down to the real ground of income taxation, as we understand it, some provision might be made whereby these large land speculators in our big cities who have grown rich because of the efforts of the people around them should be made to con-

tribute to the treasury. Hamilton not many years ago was not the great industrial town it is to-day. It is now one of the hives of the Dominion of Canada, and the same might be said of the city of Brantford. The wealth of those who have invested in real estate in large centres has come to them on account of the industries and push and enterprise of the various manufacturing establishments around them. It does seem to me that in a Parliament of this kind, with such an able Finance Minister as we have got, now that we are endeavouring to . tax the people who ought to be taxed, we ought to devise a section that would cover the particular class of people I have described. I am not referring to farmers at all, but to land speculators in our great centres. In the city of Winnipeg for instance, men have become wealthy through buying land a few years ago, and just standing on one side and watching the enterprise of their neighbours making their land grow in value. These enterprising neighbours are to be taxed, but the land speculator who has made ten times as much as they escapes scot-free. I would again urge the minister to see whether some method cannot be devised which, while not necessarily going the length of income taxation, would get at these people. I am sure that the minister and his staff are quite competent to do it, and I think I am safe in saying that it would add millions to the amount to be derived from this war taxation. It would apply to the people best able to bear it, and would return to the public some of the money that has been made out of the efforts of the public.


John Hampden Burnham: This is the first time in four years I have heard a gentleman in this House refer to the unearned increment. This matter has been developing for a great many years, and is gradually dawning on the public. Of course, the latest economists do not call it unearned increment, but community-earned increment. There can be no doubt, as the hon. member for South Renfrew (Mr. Graham) says, that when the people understand that the silent partner in these transactions is the public, the assessment which he refers to will be made. The time is coming, unquestionably, especially as the state is gradually being initiated into that condition in which it resembles the individual in all its qualities and properties.


William Thomas White: My hon. friend
has raised a large question. This measure of taxation, as I have stated before, is a temporary measure, not a permanent measure. It deals with excess profits, or profits beyond the normal, derived since the outbreak of the war. It will apply to many who have, directly or indirectly, made large profits out of the war. It will apply to others who, while' not having, directly or indirectly, made large profits out of the war, have still, for one reason or another, been able to maintain a rate of profit upon capital in excess of what we have deemed to be the normal pre-war rate. If we were considering, as my hon. friend from Halifax (Mr. A. K. Maclean) suggested in his reply to the Budget, a comprehensive system of taxation, vitally different from that upon which we have relied up to date, we should have to consider the questions of land taxation, taxation possibly upon personal or businesses, and income taxation; but these would involve many considerations. We should have to consider the expediency of embarking upon such an extensive system of taxation, having regard to the requirements of the municipalities and the provinces. Under the British North America' Act, while the Dominion Government is not confined to any particular mode oi taxation, the provinces^ and, by consequence, the municipalities, are confined to direct taxation.
My hon. friend has spoken of those who make large profits out of real estate. 1 think there have been very few instances of such profits having been made since the war broke out. On the contrary, I think the trend of real estate values has certainly not been upward since the outbreak of the war. They may have remained stationary; in some cases, they may have receded somewhat; but personally, I do not know ol oases in which real estate speculators have made money out of their holdings of real estate, either directly or indirectly by reason of the outbreak of the war. There is no doubt that the trend of legislation in all countries has been towards taking a part of the so-called unearned increment. In the United Kingdom there is legislation to-day under which an amount is taken upon sales of real estate, representing a portion of the increase in value, and I think that tendency will increase in the legislation of this country, because there is certainly very much to be said for taxation which takes a part of the increase in value due to the growth of a community
and not to the ability or energy^of those who happen to hold the real estate. I do not think it is necessary to consider that in connection with this measure or at this time. It would be proper to consider it in connection with a comprehensive scheme of taxation, if it were thought advisable at any time to consider such a scheme.
So far as incomes are concerned, I have stated to the House the reason why I consider it inexpedient to impose income taxation at this time. It is not necessary to go over the arguments again, but I think 1 could add this to what I have said, that, so far as I know, professional incomes and incomes generally have not increased since the outbreak of the war; in fact, professional incomes are probably less than they were before the outbreak of the war. Therefore, this principle, which we have adopted of assessing those who, directly or indirectly, have been enabled to earn more than the normal percentage of profit, would not apply in the case of most citizens who have incomes that would be liable to assessment under an income assessment system. This measure must be judged as a temporary measure, designed to meet what we hope to be a temporary condition, in which we find it necessary suddenly to raise a considerable sum of money for our war expenditures, and also for the purpose of maintaining our credit and to enable us to raise further sums for the prosecution of the war.


William Stewart Loggie: Before the resolution
passes I want to make a final appeal to the minister in order to see if he will not be persuaded to remove the apparent anomalies or inequalities in it. The first anomaly or inequality to which I want to refer is the spread between the 7 per cent applying to incorporated companies and the 10 per cent applying to other than incorporated companies. The result of this taxation, as I have already explained to the committee, will be this: in the case of earnings amounting to 11 per cent, an incorporated co'mpany will pay $4 as compared with $1 which an individual or partnership will pay; that is, the incorporated company pays 400 per cent greater taxation than does the individual or partnership. That is a matter which the minister ought to consider, for this reason. He tells us that, in the United Kingdom, there is a spread of one per cent. That means that an incorporated company would pay $2, and any other concern $1; whereas the minister is making an incorporated COm-
IiE VISED EDITION

pany pay $4 as against any other concern paying $1 on the same earnings on the same capital.
Another anomaly to which I want to draw the attention of the minister is this: a firm with $40,000 capital, doing business in a city or a town, and having practically the same turnover and practically the same profits as a company having $50,000 capital, pays not one cent into the treasury, whereas the latter company has to pay its quota. I think the minister should consider that anomaly and see if there is not some way of removing it.
Another inequality is this: a firm having $5,000 capital and selling $1,000 worth of war supplies pays its quota of taxes, provided that it makes the requisite profits on its capital, whereas another firm selling fifteen times as much of war supplies pays not one cent into the treasury as a war tax. The illustration is this:	the firm having
$5,000 capital and selling $1,000 worth of war supplies must pay its quota of taxation provided that it has made a profit of over 7 or 10 per cent as the case may be; whereas the company having $40,000 capital can sell $15,000 worth of war supplies, provided that its turnover is equal to about $100,000. Here is another case of inequality that is certainly worthy of consideration. The minister told me the other night, referring to one of these inequalities, that he would give the matter consideration; but I have not heard a word from him since. I am sorry my persuasive pleas fell-what shall I say?


William Thomas White: In blessings on our heads.


Edward Walter Nesbitt: On stony ground.
Mr, LOGGIE:	If they fell on stony
ground, they should have come up quickly. Perhaps they came up and have withered already. However, I once more appeal to the minister to remoye the inequalities in these resolutions.


Mr. COCKSHUTT:: I have not had the opportunity of saying anything on these resolutions up to this time. The hon. member for South Renfrew (Mr. Graham) has kindly mentioned Brantford as one of the great industrial centres that have prospered very much and should be a fit mark for the minister's axe to fall upon in raising more revenue. In my judgment, the tendency on the part of critics of these proposals has been to exaggerate the amount of profits being made by industrial institutions in Canada.


George Perry Graham: I do not want the hon. gentleman to go wrong; that is exactly what I said; I was agreeing with him.


William Foster Cockshutt: I h^ive had a little experience in industrial concerns. I think I hold stock in twelve or fifteen different companies of greater or lesser magnitude, and I only wish that these companies could qualify to come under the taxation provided for in this measure. But, so far as I know, of the twelve or fifteen companies in which I am more or less interested, not one can qualify as having paid seven per cent. It may have been that in isolated cases, where war munitions have been manufactured, the profits of manufacturing have been unusually large; but this applies to a very small number of industries, and in many cases these high rates of profit in munitions are a very small factor in the total business of these concerns. A very large concern capitalized at millions may have $200,000 or $300,000 engaged in the production of munitions, while all the rest of its capital is used in its ordinary operations. It is a matter of common knowledge that conditions, up to six months ago, had been very depressing in the manufacturing [DOT] line; profits not only had not been up to normal, but they have been down to the vanishing point in many yf these industrial institutions. I think the minister has given us a liberal allowance of profit in seven or ten per cent, as the case may be, and even then he takes only twenty-five per cent of the overplus. I think that anybody who is making profits on that scale cannot reasonably complain of what the minister is doing. It will depend on how the Act is administered; but I have confidence that the minister will arrive at an equitable basis for the adjustment of all such taxation.
Now, a word with regard to the suggestion of the hon. member for South Renfrew with'regard to the taxation of property. I cannot follow Sir John Burnham-I beg his pardon, the hon. member for Peterborough (Mr. Burnham)-in his suggestion that now is the time to tax property. I think the Minister of Finance was very moderate in his statement of the profits accruing to the real estate owners at this time. I would remind the hon. member for South Renfrew that many of the properties that have reached these fabulous prices are not in the hands of those who made profits on them, but in the hands of people who are loaded up with real estate, who bought the

properties at higher figures than they could dispose of them for to-day.


Edward Walter Nesbitt: Gone' over to the mortgagees.


William Foster Cockshutt: Yes, many of them. Many of these properties are not paying the Interest on the mortgage and the taxation, and some are not even paying the taxation as it is at present. So, if he will think the matter over, I think that he will come to the conclusion that this is not a good time to levy on real estate values in this Dominion. I speak of this seriously, because I! know a little of the subject and am familiar with a good many towns and cities that have been very prosperous but very few of whose properties will sell on the basis of the prices paid by those who bought 'them two or three years ago. Any person who has been watching the course of events in that respect, I think, will bear out what I say. Therefore, I do not think it would be prudent for the minister to consider the taxing of real estate, especially as in the province of Ontario and, I judge in some of the other provinces, a tax for war purposes has already been laid on these properties, so that they are to-day bearing . all the way from twenty to thirty mills on a pretty high valuation. Any one who is getting six per cent, after paying taxes and repairs on his property, is a very fortunate real estate owner. That is, speaking well within the mark, for I have no wish to exaggerate.
If there is any subject of taxation to which the minister might well turn his attention, and which is not covered by the measure before us, I think it would be the matter of income. That would cover properties, possibly, that are doing well, but would exempt properties that are not doing well. After all, there is a great deal to be said in favour of the man being called upon to pay who can pay. The man with the large income is the man who can pay, and whether that income be derived from property, stocks, transportation companies, or anything else, the men who receive these are the men who can afford to pay it. I think the proposals of the Minister oi Finance are very equitable. And he himself is a fair-minded man, and an expert in these matters. My hon. friend from Northumberland (Mr. Loggie) need ' not have so worried for the last week or ten days. If he will leave these matters in the hands of the Finance Minister, he will find that no injustice will be inflicted upon him.
I have not heard that the industry in which he is engaged is being attacked-I hope not, it is a legitimate industry, and I hope it is flourishing. But the hon. gentleman must allow some latitude to the Minister of Finance, and after all is said and done I think the Minister of Finance is more familiar with this question, perhaps, than any other gentleman in the House. He is fair-minded and just and will not unduly exact from any industries taxation that he does not think they are qualified to bear.


Mr. PARDEE:: The hon. Minister of Finance, in making his explanation to the hon. member for South Renfrew (Mr. Graham), said that this was a temporary tax, that he did not think it would last much more than this year and next year. I sincerely trust that that is right; but I should like to know upon what he bases that assertion. If this is only temporary taxation, will a permanent measure of taxation b.e substituted for it later?'
Sir THOMAS W1HITE: The Bill and its terms expire on December 31, 1917. When I used the word "temporary" I had in mind the period of three years over which the Bill extends-that is, three accounting periods of one year each, and no more. So that by its terms it is a temporary, not a permanent tax. I stated the other day that the enacting part of the Bill would come to an end on the date mentioned, although it was true that in the succeeding year a payment would be due in respect of the accounting periods ending in the year 1917. I stated also that if at the expiration of the period of this legislation further measures were required, the Government would have to consider what measure would meet the situation. I made the statement positively, and I make it now, that so far as this measure is concerned, it is the intention of the Government that it should come to an end at the date mentioned in the Act.


Edward Mortimer Macdonald: You will not continue this form of taxation; you will substitute some other?


William Thomas White: I do not know what the condition may then be. My own view, although it is of no more value than that of any one else, is that it is extremely improbable that this war will continue until December 31, 1917. As I have said, if it does continue, and if the condition is such that, this taxation having come to an end, further taxation shall be re-

quired, it will be for the 'Government at that time to consider what measure of taxation will be necessary to meet the situation.


Edward Mortimer Macdonald: 
William Thomas White: There is no desire on the part of the Government to withhold information as to the cost of the war. My hon. friend will recall that in the Budget speech I dealt with the matter of our war expenditure, and showed the amount which had been expended for war purposes. I may say that we are spending at the rate of about 111,000,000 or 112,000,000 a month upon the war; our expenditures here and in the United Kingdom are running to about that amount. I am speaking from memory, but I am quite sure that I am substantially correct in my statement.


Edward Mortimer Macdonald: That is about $350,000 a day.


William Thomas White: Yes, I stated also to the House that the British Government was supplying our men actually at the
[Sir Thomas White. [
front with rations, equipment and munitions. In the nature of things, it is not possible for us to settle that account with the British Government until a later date, possibly until the war is over. It may be that that account will be settled on the basis of an estimate; it is difficult to see how precise accounts could be submitted and dealt with. Just to recall to my hon. friend's mind what I stated in the Budget, I shall read from page 845 of Hansard:
From the outbreak of war to the end of January, 1916, our war expenditure amounted to $158,000,000.
Last year the Prime Minister, in introducing his War Appropriation Bill providing for an estimated expenditure of $100,000,000, gave in general outline the purpose of the expenditure. I think he also laid on the table of the House details of the expenditure to date. The Prime Minister will bring down during this session a further war appropriation Bill for probably $250,000,000. I think he stated in the House the other day that the Militia
10 p.m. Department was preparing a statement of the expenditure up to date, but enlarged upon the fact that it was quite a formidable task, and that time would be required before he could present these details of expenditure. I do not think that I could make . any further statement even in connection with the second reading of the Bill, but if my hon. friend is not satisfied with the statement which 1 am making, I can get the information a little more accurately from my department. As I say, I think that during the past twelve months the expenditure has been about $11,000,000 or $12,000,000 a month.


Edward Mortimer Macdonald: Exclusive of our
share of Imperial expenditure?


William Thomas White: Exclusive of our share of Imperial expenditure, which can only be determined at a later date. It is to be borne in mind that as our forces increase, our expenditure increases. Therefore the amount which we shall expend during the "coming fiscal year will depend upon the number of our forces and the time at which enlistments occurred. That is to say, we might have 300,000 men in June, 350,000 in August, and so on.


Edward Mortimer Macdonald: The minister has
given us the clearest explanation that we have had, and I assume we will have a fuller and more accurate statement when the Prime Minister moves his vote for $250,000,000. It would be desirable for the

Government to give to the House and to the country a statement of the cost of maintenance in Canada of the men who are now in training. I assume the Government bear the cost of maintenance of the men in Great Britain preliminary to their going to the front. I understand that they have maintained an organization there, under General Carson, through which the Canadian Government pay our men there. When they go to the front, they will, of course, come under the Imperial control. The determination of the minister that this measure shall be only a two-year proposition is one whose genesis I am hardly able to appreciate. Why does he say he will not pursue this form of taxation as a permanent form?


William Thomas White: The principle of this taxation is to take a poftion of what might be deemed to be excess profits. I pointed out that there were many businesses in Canada which directly or indirectly had made and were making large profits out of the war, and that there were others which, while not making their profits directly or indirectly out of the war, still were making larger profits than were normal, and the taxation is based upon that principle. It is obvious that when the war comes to an end, these companies, the munitions companies for example, and those furnishing war supplies, which made and are making money out of the war, will no longer be making money in that way. Therefore this would not seem to be a natural measure of taxation after the period of the war, because it is based upon the principle of taking a part of the excess profits.


Francis N. McCrea: I made a suggestion on
Thursday evening in regard to the inequality of the tax as between incorporated companies and individuals. I was somewhat of the same opinion as the hon. mem her for Northumberland (Mr. Loggie) in the first stages of the Bill; but after hearing the reasons and arguments advanced by the minister why an individual or partnership should be allowed a higher rate of profit, I felt that there was some force' in the minister's argument that the partnership or individual is liable for the whole debt of the undertaking, whereas the incorporated company is liable only for its paid-up capital. That would, in my judgment, apply where the industry is not a very large one; but when it reaches proportions of one, two, or three hundred thousand dollars, it ceases to have the same risk that it would have in the smaller capitalization stage. For instance, if an
individual has a capital invested in his business of a quarter of a million dollars, the great chance is that his eggs are not all in one basket; he probably has several branches of his business; and then, in case of fire or any other loss, he will not suffer a total loss, any more than the hon. member for Brantford, who is connected with twelve or thirteen corporations and has not all his wealth invested in one company. The individual or partnership, when the capital used or controlled by the business reaches proportions of several hundred thousand dollars or upwards, would probably have it distributed over a considerable number of business enterprises, and consequently would cease to have the risk that a small concern would have. It would be only reasonable that an individual or partnership carrying on business with a capital reaching up to several million dollars, should come under the same rate of profit that an incorporated company would come under. There are many industries carried on by individuals or partnerships which have large amounts invested, and it is hardly fair competition. I cited the other evening the case of the largest industry in Ottawa, which is controlled by one individual and is competing in my own line. I feel that it is not quite fair that the business with which I am connected should pay 25 per cent of its profits after making 7 per cent, whereas our competitor is allowed 10 per cent., There is a further reason. The hon. member for Brantford (Mr. Cockshutt) has told us, and I suppose the minister must have been listening, that he is connected with 14 or 15 different institutions; and, according to his theory, they are all lame ducks, so that the minister is not going to get anything from them. Thus it is up to the minister to be wise and see where he is going to get some revenue. He should adopt my suggestion of putting individuals and partnerships on the same basis ae corporations, after they reach a certain limit, whatever he might think wise. It is surely not wise that individuals or partnerships with millions of dollars. invested, competing in the same lines as companies, should be allowed 10 per cent profit, whereas corporations, perhaps having many more difficulties to contend with, should be allowed only 7 per cent. I hope the minister will consider my suggestion, and add a clause to that effect.
Resolutions reported, read the second time, and agreed to.


William Thomas White: I shall not present the Bill now. There have been some slight changes made in the committee, and I will present the Bill on Thursday.



DOMINION LOAN-$75,000,000.

[Stage Direction]
Sir THOMAS .WHITE: I desire, with the consent of the House, to call attention to Order No. 17:	.
Second reading of Bill No. 60, an Act to authorize the raising, by way of loan, of certain sums of money for the public service.
The House was good enough to-day to facilitate the second and third readings of this Bill. By an oversight the Bill did not contain the provision of the resolution limiting the amount to be borrowed to $75,000,000. ' The House will recall that the provision in the resolution provided for the borrowing of an amount not exceeding $75,000,000. The result of the mistake, purely a printer's error, is that the amount is left out of the Bill which passed its second and third readings to-day. I therefore, by leave of the House, desire to move:
That the rules of tbe House be suspended in order that the third reading and passing of Bill No. 60, intituled an Act to authorize the raising, by way of loan, of certain sums of money for the public service, given this day, be rescinded, and that the said Bill may again be placed upon the orders for the third reading forthwith.
This is for the purpose of correcting the error.
George Perry Graham: Certainly, it will be the pleasure of the House, I imagine, to adopt the motion; but it must impress the House with the wisdom of the rules and the great danger that always is imminent if these rules are violated even by consent. It is a dangerous thing to rush legislation through the House in violation of the rules, which have been created by the mother of Parliaments for the protection of the public and in order that every facility may be afforded, for investigation, discussion and scrutiny. If we had prorogued without this having been detected, it might have necessitated the calling of a 'special session of Parliament in order that this loan might be effected. Certainly, we are in favour of the resolution going through.


[Stage Direction]
Motion agreed to.
William Thomas White: I beg to move:
That the third reading of Bill No. 60 be rescinded and that the said Bill he forthwith placed on the orders for the third reading.


[Stage Direction]
Motion agreed to.
[Mr. McCrea. [
William Thomas White: I beg to move that Bill No. 60 be referred back to the Committee of the Whole for further consideration.


[Stage Direction]
Motion agreed to.
The House in committee on Bill No. 60, to authorize the raising, by way of loan, of certain sums of money for the public service.-Sir Thomas White; Mr. Rhodes in the Chair.
William Thomas White: I beg to move:
That clause 2 be amended as follows: by inserting after the word " required," in the eighth line of the said clause, the following words: "not to exceed in the whole the sum of $75,000,000. '


[Stage Direction]
Motion agreed to, Bill reported, read the third time, and passed.

[Stage Direction]
On the Order for resuming from February 28, the adjourned debate on the proposed motion of Mr. Boulay:
That in the opinion of this House, Canadians of the French language should hold positions in the employ of the Intercolonial railway, and in the public service of Canada, in proportion to their number in the country; and that it is urgent and in the public interest that all civil servants holding higher offices, and drawing salaries of $2,000 and over, should understand the two official languages of this country, and that no official in the said service should he admitted into the civil service in future unless he . can fulfil such conditions.
Robert Rogers: The debate was adjourned,
I believe, on motion o'f the hon. member for l'l'slet (Mr. Paquet), and, as he is not here, we had better let this stand. We have done a pretty good day's work.
On motion of Mr. Rogers the House adjourned at 10.27 p.m.
Wednesday, March 22, 1916.