1917-08-03

[Stage Direction]
On the Orders of the Day:
Mr. J. P. MOLLOY (Provencher):: I
would call the attention of the Government to this telegram which I received yesterday:
Winnipeg, Man., 1st Aug., 1917.
J. P. Molloy, M.P.,
Ottawa, Ont.
On behalf of the Manitoba Railway Mail Clerks' Association, we beg to draw to your attention the fact that we are almost the only public or private servants that have not had a salary increase to meet the higher cost of living. Post Office Bill 147 of 1914 was thrown out by the Senate owing to contentious clauses having nothing to do with our increase. Other departments received this increase. A recent deputation to the department begged that this Bill be reintroduced and made retroactive. Your influence would be highly appreciated.
Respectfully,
(Sgd.) R. A. Borland,
President.
Is it the intention of the Government to grant an increase at the present session?


Sir ROBERT BORDEN:: The hon. gentleman's observations will be commended to the consideration of the Minister of Finance and the acting Postmaster General.



WAR TAX UPON INCOMES.


[Stage Direction]
The House in committee on Bill No. 117, to authorize the levying of a war tax^ upon certain incomes-Sir Thomas White- Mr. W. H. Bennett in the Chair.
On section 4-Income tax:
Mr. MARCIL:: In regard to paragraph
(a), is any distinction to be made between a married man who has simply his wife and himself to support and a married man who has his wife and three, four, five, six, ten or a dozen children dependent upon him?


Sir THOMAS WHITE:: There is no distinction made having regard to the number of family. So far as I know, there is no legislation in Canada based upon such a distinction. I think in France and in England there is a distinction, but there is this difference between our legislation and theirs, that the amount of exemption with ns is $3,000. In framing the Bill, as I stated when it was introduced, we had regard to the cost of living and to the reasonable requirements of an ordinary family, and we fixed upon $3,000 as a fair exemption. It does not seem to me possible, although it appeals to one's sympathies, to make a distinction based upon the number of members of a family or of dependents.	_	.
It would be unfair to base the distinction *solely on the number of the members of a family, because there are many citizens who have not only children to take care of, but other dependents as well. One man, for example, may have a wife and six children to take care of, and another man may have a wife and two children, and four or five others depending upon him. It seems to me it would be impracticable to hold an inquiry, because a question of fact would be involved -as to whether or not a citizen had dependents to take care *of. One can easily see how the tax could be evaded, and how embarrassing questions would arise. The essential feature of this measure, so far as regards my hon. friend s question, is that there is an exemption of $3,000, which is higher than the exemption granted in the United States legislation now before Congress, and very much higher than the exemption at present in England.


Charles Marcil: I have no objection to
the explanation given by the minister. I do not know exactly how conditions are in England, but conditions in Canada are

very different from what they are in France. The French senate not long ago introduced a measure, which I think has become law, granting aid to the parents of a family of three or four children, for the purpose of encouraging the rearing of children. Under this measure the married man who has no children at all is placed on the same footing with the father of seven or eight or a dozen children, and families of that size are very often seen in Quebec. I think it is unjust to treat them both alike, and I hope the minister will see his way clear to granting exemption in the case of unusually large families. My hon. friend has mentioned the ordinary family. Now the ordinary family is a very uncertain quantity. In the province of Quebec three or four children would be considered a very small family. I trust that the minister will find it possible to make an exception in the case of men with, say, half a dozen children to provide for.


Richard Smeaton White: I do not think my hon. friend need be unduly anxious because it is not probable, although there are no doubt exceptions, that the father of a large family will have an income of $3,000 or more. Usually the large family and the comparatively small income go together. I had the case that my hon. friend has mentioned in mind when framing this measure, and I am quite satisfied that 90 per cent, if not more, of the families he has in mind will not be affected by this taxation at all. It seemed to me impracticable to distinguish between families having regard solely to the number of children, because it is within my own personal knowledge, as I think it is within that of every member of this House, that there are many citizens who have not only their own family to take care of, but also the family of a brother or a sister, or perhaps they have to look after an aged father or mother. I have received many letters since this legislation has been introduced from unmarried men protesting against the discrimination against them on the ground that they had to take oare of many dependents, and they gave particulars in their letters. In one case a man had to look afte'- his sister and two or three children. In another, a young man had not married because he had to look after an aged mother and some invalid sisters, and a brother or two who were not doing very well. I think if we adopt the principle of a fair exemption of $3,000, we need not be anxious about the size of the family or the number of dependents. I do not see how it would be possible for the department to make the necessary inquiries to ascertain how many dependents a man had.


Mr. VERVILLE:: I think an exception
should be made in the case of large fam-lies. The minister is exempting single men up to $2,000. Personally, I think that is too high an exemption for a great many single young men in this country. I have always thought that half that amount would be plenty for a single young man. As the minister says, in some oases these men have many dependents, but it is obviously unfair to place a married man with no children on the same footing with the father of six, seven or a dozen children. I know it is not the minister's intention to penalize the parents of large families, and I think this measure affords the best possible opportunity for recognizing the importance of large families. No doubt there are some single young men who have as many depending on them as the father of a family, but I think the minister would find it a pretty big contract to find out the exact number of dependents a man had. I suppose sworn statements would -be required. If I remember right, if a man makes a false statement about his income, his whole estate goes to the Crown when he dies.
Under the law of Wisconsin-there is no federal law in the United States on this subject-the parents are not allowed to send a boy to work until he is 14, or a girl until she is 16 years old. In view of the fact that the importance of children is thus recognized by the different states, I do not see why we should not make some recognition of them here. I am not speaking for myself, because I have no children, and whatever I have to pay I shall pay cheerfully. But I think it is absolutely unfair to put the man with no children on the same footing as the father of a big family, with the children to feed and clothe and send to school, and so forth. I hope the minister will see his way clear to allowing a certain exemption for each child under the age of 14. It may be said that married men with an income of $3,000 are pretty well off and will be sending their children to college, but that is not always the case. Another man may have to send his children to work. I again appeal to the minister to do justice to the parents of large families, and I claim that now is the time for the state to recognize the importance of rearing children.


Mr. GRAHAM:: I am somewhat inclined to support the suggestions of the two hon.

gentlemen who have just spoken. The Minister of Finance has been preaching production all through the country. Now here is a chance for him to crystalize this encouragement into legislation in a businesslike way. The object of the exemption is to enable a man to support his family in comfort, before he is taxed. I regret that we cannot find many examples of large families in the province of Ontario. In Ontario, when you find a large family, it is extraordinary, whereas in the province of Quebec, when they have a small family it is extraordinary. It does not seem reasonable that a man without any children dependent upon him should be exempt to the extent of $3,000 income, and that another man in similar circumstances but with perhaps ten children to support should only have the same exemption. As a matter of fact, the man with the large family will probably not have anything left for taxation. The minister says all these details will involve an enormous amount of work.


Richard Smeaton White: I was speaking of dependents.


George Perry Graham: Would it be an extremely difficult thing to keep this record? As the hon. member (Mr. Verville) has said, the returns will be made under oath, and the individual will have to swear that he is married, or unmarried, and in one more line he could add -whether he has one child, or five children. This could be done if it were considered that it would complicate matters too much to have the children designated individually. Take an Ontario .family as a fair example. I think if they average three children they are doing fairly well, and let us say that in any family where the number of children exceeds three there shall be a certain amount of exemption per child over and above that number. I believe I could work out a scheme for the minister by which this could be arranged without any difficulty.


Richard Smeaton White: What about dependents?


George Perry Graham: I have convinced the minister so far as the children are concerned. As to the dependents, I suppose my hon. friend refers particularly to single men?


Richard Smeaton White: To married men as well.


George Perry Graham: 
Richard Smeaton White: Take a case where there are three children and seven dependents.


George Perry Graham: My hon. friend will have to agree with me that the children must come first. We have some striking examples of unmarried men in this House. I am not in favour of encouraging a man to laxity in that regard, because I believe a man should get married, if possible, when he reaches a certain age. Of course, with .some of them, it is not their fault. However, the fact remains that throughout the country there are thousands of men who are nnmarried because they have dependents, .and .they have to keep, perhaps, a more expensive household than the man who is married, but has not any family. I urge upon the minister .the advisability of considering making a distinction between an unmarried man without dependents and an unmarried man with dependents; let the latter show that he has dependents before you give him any better treatment than the man without dependents. If .this was a war *measure, to be wiped off our statute books in two or three years, we .might take a general outlook and no tone would be very seriously injured, but I take it lor granted that the principle of an income tax having been once established in the Dominion, it is here to stay. That being so, we should .start out on .an equitable basis, .and we .should remember that in .any form of taxation no matter 'how equitable you try to make it, you will find some injustice. I presume in this clause .the minister will have to change the word " men " to " persons," because there are .many spinsters who have taxable incomes, and who. should pay upon them.


Richard Smeaton White: I .agree with my hon. friend (Mr. Graham) that in clause (a) of .subsection 1, for the word " men " there should be substituted the word " persons," .and I therefore beg to move:
That the word "men" in line 27 of clause (a) of subsection 1 of section 4 be struck out and that the word "persons" be substituted therefor; and that after the word "and" in line 27 there be inserted the words "widows or".
The subsection will then read as follows:
(a) Four per centum upon all income exceeding $2,000 in the case of unmarried persons and widows or widowers without dependent children, and exceeding $3,000 in the case of all other persons.


Charles Marcil: The minister might add to that " except in the case of fathers and mothers with more than say, three, four, or five children.


Richard Smeaton White: I will take those representations under consideration. At the present moment I see certain difficulties in the way of carrying it out. You could add so much to the cost of administration of the Act in the way of the expense of making inquiry as to the number of dependents that it would take a very large toll from the proceeds. If you make a distinction of $1,000 in exemptions between the case of a man who has dependents and a man who has not, it will be found that ninety-nine per cent of the people of Canada will have dependents- in the returns. They will allege that they have dependents, and will prove it to their own satisfaction, and it will be impossible to disprove it. The only effect will be that you will increase your exemption by $1,000. The suggestions made are very important, and have been put forward fairly.


George Perry Graham: I am afraid my hon. friend sees a lion in the path when there is not any. A few months ago he saw a whole herd of lions in the path on account of the expense of collection, but they have all disappeared with the exception of this one little cub. The regulations under which our soldiers go to the front provide for separation allowance to a dependent. Assigned pay is also given to a dependent. A mother or sister dependent on the soldier occupies the same position as if she were the wife, or a child. The information is given, and made good, by the soldier, and it does not seem to have caused any great trouble. I am inclined to think if the minister will consider the matter calmly-and he will have Sunday to think it over-if he is sympathetically impressed he can work out a scheme which would not be very expensive or' impracticable, and which would start us on the right road with this income tax, which will be a permanent institution in Canada.


Mr. KNOWLES:: I do not see why there should be any confusion between a man who has dependents and one who has not. If for any reason it is not practicable to grant a greater exemption to a man who has dependents, then unfortunately he must suffer, but what has that to do with the merits of the case of a man who has dependents, as contrasted with a man who has no children. If it is right that a single
man should have a less exemption than a married man because the living expenses are less, then it is as clear as the chimney on the housetop that on the same principle a married man .and his wife who have no children have less expense than a married man with a wife and children. That principle is not in the slightest way affected by introducing the question of some clerical difficulty in regard to the matter of getting at the condition of affairs, namely, that a man may have dependents who do not happen to be his children. There is no comparison between the position of the man and his wife with no child and the man and his wife with children. There is no comparison with regard to the household expense. The woman is free; she can go out whenever she wants to, or she can work and earn money, or she can look after her own household and save a lot of disbursements. I believe that a husband and wife with children should have a greater exemption than the husband and wife who have no children.


Richard Smeaton White: I do not agree
that the question of dependents can be dismissed from consideration. Take the case of a man who has a wife, two children and no dependents. Then, take the case of a man who has a wife and no children, but who also has a mother eighty years of age and an invalid sister. Does my hon. friend suggest that the latter should not be entitled to the exemption extended to the former? The man cannot turn his aged mother out of doors and he cannot allow his sister to starve. We cannot consider this question solely on the ground of children; we must take into consideration the question of a man's dependents if we want to deal fairly with every one. I have received several letters since this measure was brought down, which impressed me very much, stating that it was unfair to discriminate against unmarried men. These men, instanced their own cases, some with three, some with four, some with five dependents, whom they could not in honour, or with any regard for filial duty, turn out of doors. When we consider the question of children, we must also consider the question of dependents, and if we consider the question of dependents that would necessitate an inquiry, and, in my view, the effect would be that in nearly all cases some dependents would be put forward and the amount of the exemption would have to be increased. There is hardly a family in Canada that could not put forward 6ome de-

pendents. I do not mean to say that in all cases they would sustain their claim under a legal inquiry, hut foT all practical purposes they would claim' exemption on the ground of having dependents. You would have to deal with the claims of the man wjio had two children and one dependent and with that of the man who had one child and two dependents and it would give you a great dealt of trouble in the administration of the Act. I am quite willing to take this matter into consideration because the views with regard to it have been put forward very fairly and are entitled to weight. But, I think that when we made an exemption of $3,000 we avoided cases of hardship, even in oases of comparatively large families. With regard to those families in the province of Quebec who have been spoken of, where there are ten or twelve members, you also have to remember that there is the exemption of $3,000. There is another feature that must be borne in mind in connection with this exemption, and it is that incomes in this country may be subject to three sets of taxes. First, you have the federal tax which is about double, up to $6,000, the average municipal tax; second the provincial tax and, third, the municipal tax. If the provinces and municipalities do their duty in the matter of the administration of assessments covering income, the citizens of this country will be fairly heavily taxed. First, there is the municipal tax averaging two or three per cent; second, there is the provincial tax which may be one, two or three per cent, and on top of that there is this tax of four per cent. Do not let us jump to the conclusion that the citizens of this country will go untaxed because there are three sets of taxes which will constitute a very fair charge upon their incomes.


Mr. RQBB:: Listening to the objections of the Minister of Finance the question occurred to me whether he had looked into the income tax law of the state of Massachusetts which was passed last year. There is perhaps no state on this continent where education is so free as in the state of Massachusetts; yet, in passing their income tax Bill, the state of Massachusetts recognized that a man bringing up a young family was entitled to a certain exemption. I have not the Act before me but my recollection is that provision is made for an exemption for the parent of a family bringing up three or four children of school age. It would seem to me that the minister might very well take into consideration

children of the school age and make a certain exemption for a man with a family whose children are yet at school.
Mr. MIDDLEiBRO: Assuming that $3,000 is the proper exemption for a married man with a family and a household to keep, my chief objection is that the unmarried man has too much exemption. Take the case of an- unmarried man who is living in a hotel. He is entitled to an exemption of $2,000. He gets married and he and his wife live in the same hotel and it costs him twice as much before. Yet, in that case, he only gets an exemption of $3,000. If be takes up a house and has a family he will have more than double the expense that he bad before and as his family increases his expenses will increase. I do think that the unmarried man is being shown an undue preference assuming that $3,000 is the proper amount for exemption of the married man. I would certainly think that we should reduce the exemption of the unmarried man to $1,500 to put him on a fair -and equitable basis with the married man. The man who -can go around unmarried with $162 a month coming in, who is not required to contribute anything to this war is, in my opinion, escaping too lightly. I quite realize the .soundness of the argument of the Minister of Finance that there are some cases in which a married man has dependents but it is the exception rather than the rule and we are legislating for the rule and not for the exception. There may in some cases be an injustice but I venture to say that for every unmarried man who has dependents there are twenty-five or thirty who have not, and, as I say, we must legislate for the rule and not for the exception. For that reason, it would be dealing more justly with the married man with a large family if we cut down the exemption of the unmarried man. In that way you will get at the unmarried man, you are giving to the married man a certain measure of justice and on the whole the tax collected will be more. I move that the amount of the exemption to unmarried men be cut from $2,000 to $1,500.
iMlr.' NICKLE:	The Minister of Finance
might very well pay heed to what the last speaker has said in reference to the allowance to the unmarried man of $2,000 being too great because there is no man in this House who can speak with greater authority .as to the responsibilities of the unmarried man than the hon. member for North Grey (Mr. Middlebro). He was for several years in that class.


Sir WILFRID LAURIER:: He has
changed his mind since.


Mr. NICKLE:: Therefore, he knows well of what he speaks. It may be that I approach this question from a different standpoint from that of the other members of this House. It may be surprising to some members on this side, that, as a Conservative, I am thoroughly enthusiastic over this measure being introduced in this House, because I have always felt that the indirect method of taxation, in a country such as Canada, had this unfortunate effect, that it made the people blind to the fact that it was their money that was being expended, and that a good many things were got away with in times past that never would have been permitted if the people had realized that they were to be directly called upon to meet the expenditures that had been made.


Mr. MICHAEL CLARK:: Hear, hear.


William Folger Nickle: And I think there is another side to the question. When you raise your entire revenue by taxation by customs charges, there is no question whatever that the man who has a small income, the expenditure of the entire amount being necessary to meet his living expenses, is more heavily taxed than the man who has more than he actually needs to live


Wilfrid Laurier: Hear, hear.
Mr. NICKLE-because the man who spends every dollar he earns to live pays taxes on every dollar he spends, whereas the man who has sufficient to put away a surplus for a rainy day escapes paying taxes on the surplus that he saves. Certainly that is unfair to the man who earns a small income; and in a country like Canada, most men earn small incomes. One Finance Minister wittily said that the function of a Finance Minister was " to gather the most feathers with the least squawking," and I am afraid that principle has possibly influenced the Finance Minister in drafting this Bill. I approach the subject possibly more from the point of view of an evangelist than from a business man and tax collector. I believe that every man in this country should have some of the burden of this war thrust upon him, if I may use the word " thrust." To vary the phraseology slightly, I believe that every man who can should bear some of the burden of this war, and I think the exemption of $3,000 to the married man and
$2,000 to the unmarried man is too large. I come from a small community, a city that has somewhere in the neighbourhood of
25,000	people. The great majority of the married men there do not earn $3,000 a year; the great majority of the unmarried men do not earn $2,000. When I was home last week I was told there were objectors to the exemptions because they wanted to pay a part of this tax, and felt they should.
I was not surprised either, because the city from which I come sent many men to the war. The people there are enthusiastically in favour of conscription, and what they say to me is: If you are in favour of conscription, if you think that every man should go to the front who can go, then, to be consistent, you should support a lessening of the exemption, because those who cannot go and ought for national reasons to remain at home, should bear their share of the burden.
I think they were right in saying this. For that reason I urge upon the Finance Minister that he lower the exemption in the case of married men to $2,000, and in the case of unmarried men to $1,000.
I direct the attention of the Minister of Finance to another aspect, and I am particularly immune from criticism because I have not within my riding a single farmer;
I live within a purely urban district. The people in the cities who are earning from $1,200 to $2,000 a year are beginning to feel that the burden of taxation in this war is not fairly distributed. They have no way of increasing their revenue. I am speaking of people with fixed salaries or wages, not of the class who can increase their earnings owing to the increased demand for labour, the university Fellow, the university professor, the school teacher, the bookkeeper who earns $1,500, and that class of man. He says: The increased cost of living since the war began is taking anywhere from 40 per cent to 100 per cent more from me than before the war; the reason I am called on to pay more now than before is that the cost of the commodities that I have to buy for the maintenance of my family is determined by the export price, and I am in competition in my buying with the world; the result is that I am-and I am not objecting to it, I recognize it as necessary because I believe that the exigencies of the case demand it- not as well off as I was. But why do you not put some tax on the farmer, who is-getting many of the good things out of the war, but is getting off practically scot free; he buys but little, and therefore he is taxed slightly; the increased price of the products of his farm is bringing him a much greater

return, and in this Income Tax Bill as it is drawn, the farmer is getting off scot free, because it is the income that the man has earned that is taxed, and in the case of the farmer there will be no tax at all because he takes his living out of what he grows. I should like to direct this matter to the 'attention of the Minister of Finance. I realize that this Parliament has always been singularly sympathetic towards the farmer, but I think the time has about come when we should see to it that those who are getting great -advantage from the war on the principle that I enunciated a few minutes before should contribute something towards its maintenance, that those who are able best to pay should he willing to pay.
I wish to direct attention to one or two points in this -same -section 4. I cannot see the logic o-f giving the married man an advantage over the un-married man of only $40, no matter how big the income on which the tax is paid. I do -not know how carefully the gentlemen of the House have studied section 4, hut it is b-ased on the principle that the married man gets off, if I may use the expression, with a start of $1,000; that is, he saves $40 on the initial taxation. But it makes no difference whether the tax is paid on an income o-f $3,000 or of $100,000, the married man has an -advantage of only $4C That, I -say, is thoroughly illogical, and is not as -it should be. Surely if you have two -men, each enjoying -an income of $40,000, one an unmarried man, the other -a married man with -all -the responsibilities that are entailed by domestic life, it is unreasonable to say that the unmarried man should pay only $40 more income tax than the married man.
I quite agree with what has been said by [DOT]the hon. member for South Renfrew (Mr. Graham). I quite realize that this its our first attempt in income tax legislation, and I realize that, as the days go on, there will be many amendments to this Act. I am impressed with the fact that the income tax, once established in Canada, will continue in force for a long time, -and so it has to be drawn along scientific lines in order that the burden -may be made to rest on those best able to pay, that is, that it shall be a tax on the ability to pay. While it -may not come this year, for, perhaps, it is too late to consider i-t this session, the time is not far remo-te when the question of dependency and family responsibility will have to be considered, because the -people will insist that the burden shall be borne equitably by all.

I am startled by -the proposition that a man with -an income of $10,000 is to be allowed to keep $9,640. The other day the Minister of Finance -s-howed wh-at the taxes would be. I want to approach it from the point of view of the income, and to show you how much -the man is -allowed to keep under this Tax Bill. The amounts retained by married men with different incomes 'axe:
Total income.	Amount not ta
$ 4,000	$ 3,960
5,000	4,920
7,000	6,820
10,000	9,640
12,000	11,460
15,000	14,190
20,000	18,740
30,000	27,540
50,000	44,740
75,000	64,990
100,000	85,240
150,000	120,740
200,000	156,240
In my judgment, the tax on the large income is quite inadequate.


Wilfrid Laurier: Hear, hear.


William Folger Nickle: You may say that in a war like this you cannot equalize sacrifice. But you can do one thing. You can try to apportion the burden. I admit you cannot equalize sacrifice. The wife who lets the husband go, or the parent who lets the children go, if the husband or sons do not come back, makes a greater sacrifice than any man who remains at home can make by monetary subscription or impost. But at a time like this, to tax the man with an income of $12,000 only $540, when you say to another man: "You must go to the trenches because your place is not important in the country," is in my judgment not apportioning the burden in a fair degree. I may be wrong, but that is my opinion. I think the opinion of the people of the country on this Bill will be that the large incomes escape too lightly, and 1 would bring this to the attention of the Minister of Finance at this time, so that if possible, before this Bill passes, he may see his way to increase somewhat the amount of taxes on these men. I do not want to use the word "somewhat," but I would say to increase radically the taxes on the large incomes. It is quite possible it may make many who have given refuse to give further, but I think it would have the effect of making some give who have never given, and if those men give, then the advantage to the State will be great, because previously some have escaped, but under this Act, if it had been framed as

I suggest, all would have to contribute to the burden the State is called upon to pay. I desire to direct the attention of the Minister of Finance to a remark made in the House the other day, as follows:
The House is aware that liability to the Business Profits War Tax of 1916 and the amendment thereto of this year comes to an end on December 31 this year, and it is not the intention to renew that measure.
I do not know whether the intention is by implication to say that the Act we now have under consideration is to take the place of the Business Profits Tax, but I think it would be very objectionable if those making profits out of this war were to be relieved of the burden substantially great cast upon them by the Profits Tax. A man may be making just as large a profit if he makes a small percentage on a tremendous turnover that has resulted from a very excessive trade, owing to this war, as if he made a large percentage on a normal turnover on some business in which he was enabled to make a profit owing 4 p.m. to the scarcity of the article. A man is a profiteer who has taken advantage of the exigencies of the State to unduly increase his income, and I trust the Minister of Finance will keep this in view in any legislation that he may have in contemplation, or the annulling of any legislation that may have existed in regard to war profit taxes.


Richard Smeaton White: Three questions
have been taken up so far, all of which are important. With regard to the unmarried man and widows, or widowers without children, I think we might reasonably meet the suggestion of the hon. gentleman from North Grey, and make the amount 31,500 instead of 32,000. I would be prepared to move, in order to meet what I deem to be the view of the committee, that the words "two thousand" at the end of line 26 and the beginning of line 27, be struck out and that the words "fifteen hundred" be substituted therefor. While I still think it is a fact that many unmarried nen have dependents upon them, and in fact have not married because they have such dependents, still, possibly, having regard to the average condition of the unmarried men, that change would not be objectionable. I do not know that there is any such discrimination in other Canadian legislation. There is a discrimination to the extent of a thousand dollars in the legislation of the United States against the unmarried man. So far as I know there is nothing of the kind in this country.


George Perry Graham: There is in the provinces. I think, unless the statute has been changed, there was a greater exemption for married men given by municipalities than for single men.


Richard Smeaton White: However, the matter is not of great importance, and if this is deemed reasonable I would move that the words " two thousand dollars " be made " fifteen hundred dollars." With regard to children, there is undoubtedly also the fact as to dependents, but I think that if 33,000 could be regarded as a fair exemption in the case of the average man, if we put aside the question of dependents-because that would really necessitate an inquiry as I stated-it might be reasonable to provide that the exemption should be increased somewhat in case of those who have a family, say, of six children. I do not know whether that would meet the views of the committee or not, but we might discuss it later. If the committee think it would reasonably meet the situation to give an exemption of
34,000	in the case of those who have six children or more, I think I would be prepared to consider that phase of it, and have an amendment drafted accordingly. I do not think we can deal so well with the case of dependents, because the principle is undoubtedly there. They have to be taken care of just like children. It might be fair to provide that if a man has six children his exemption shopld be 34,000 instead of $3,000.


Mr. A. K. MACLEAN:: You might reduce the rate.


Richard Smeaton White: I would very
much rather reduce 'the (exemption and keep the rate. The hon. gentleman from Kingston has referred to two or three other important matters. One is as to whether or not the rate is high enough, especially upon the larger incomes. In such experience as I have had with taxation-and it has been considerable-there is only one tax that I know of that is popular, and that is the tax that is on the other fellow. I have received hundreds of letters suggesting various forms of taxation since I have been . minister, and in very few cases indeed has a suggestion been made of a mode of taxation which would immediately affect the writer. We are considering a serious measure of taxation at a serious time. I indicated when the measure was introduced that I had been guided by certain considerations which were regarded of importance in framing these provisions. In the first

place-and I desire to emphasize this now- I have regard to the fact that people of this country have contributed, and are contributing very materially indeed from their incomes, to support the Patriotic and Red Cross and other war funds. That had very considerable weight with me in fixing the rates which we have adoped in this measure. I think this country has raised $40,000,000, by voluntary contributions from the citizens.


Sir HERBERT AMES:: Nearer $50,000,000.


Richard Smeaton White: My hon. friend from St. Antoine says "nearer $50,000,000." That has been raised in three years by voluntary contribution on the part of the people of this country. When you are considering taxing a man with an income of $5,000 or $10,000, the question is not solely one of how much you can take out of that man; you must consider what that man is doing, or, at least, what most men of that class are doing with regard to those funds. I am perfectly satisfied that if we impose too severe a taxation upon men with substantial incomes, we shall at once, I will not say dry up, but very materially diminish the amount of voluntary contribution which will be made to the Canadian Patriotic, Red Cross, and other such funds. Whether the conclusion reached was sound or not, I submit that in considering a measure of income taxation, it would not be proper for us to disregard what the people of this country are doing with regard to those funds. If a severe income tax would dry up their bounty and stop the flow of contributions to the Patriotic and Red Cross Funds, then we should hesitate before imposing such a degree of taxation.


Alexander Kenneth Maclean: Some allowance is made for those payments.


Richard Smeaton White: Yes, but the allowance is comparatively small. My hon. friend knows the principle upon which we have gone in making those allowances. As I pointed out last evening, if we say that we will allow a man from his taxation the amount which he pays to the Patriotic and Red Cross Funds, then there is no bounty, no voluntary giving on his part at all, because the Dominion Government simply furnishes him with the money to pay his contribution. I pointed out last night, and I emphasize again to-day, that not only is it good that those funds should be maintained, but it is very much in the interest of the prosecution of this war that
[.Sir Thomas White.]
men should continue to give to those funds. It is a mistake to assume that if a man gives to a fund, that man is in some way damaged or injured by his giving. It has often been pointed out that A gives to the Patriotic Fund; that B does not, and the conclusion is drawn that A is injured as compared with B.
On the contrary, A is benefited as compared with B. B is damaged by reason of the fact that he does not give, and A is benefited by reason of the fact that he does give. The more that a man gives, the better man he is; the more it makes for his character, and the more it will make for his interest in this war. As I stated when this Bill was introduced, I reached the conclusion that if we imposed unduly severe taxation, we would dry up the source of funds of the Patriotic, Red Cross and other funds, and I believe that is so.
There is another feature that I want to point out, and I do- not believe it can be lost sight of. Unless for grave reasons of national necessity, this income tax should not be higher than the income tax imposed by the United States Federal Government. Why? Because if it is materially higher, you will find that men will decline to come into this country and contribute to its upbuilding by their energy, enterprise and capital, because this tax is a tax not only upon personal earnings, but upon the earnings of individuals, firms and companies engaged in business. Therefore, if we have a substantially higher tax than exists in the United States, we shall undoubtedly lose. We may gain more in immediate taxation, but we shall lose without doubt in ultimate results. In framing our taxation, we did not compare it with the existing income tax legislation in the United States, because there is before Congress now legislation increasing that income taxation, but we framed it having regard to .the proposed increased taxation on income now before Congress. This is a comparative statement of the taxation of income in Canada and in the United States under the legislation now before Congress on persons other than unmarried men and wddowers without children:
Amount of	Taxation in the	Taxation iIncome.	United States.	Canada.$ 4,000	$ 40	$ 407,000	ISO	18010,000	35S	36020,000	1,180	1,26050,000	4,780	5,26075,000	8,880	10,010100,000	14,180	14,760200,000	42,180	43,760


Alexander Kenneth Maclean: Within the last few days the Finance Committee of the American Senate have been considering a proposal to increase the tax on income from $20,000 upwards to such an extent that it will give them an increase in revenue of $230,000,000.


Richard Smeaton White: They may be considering an increase now, but -the figures given were the figures before me -when I was framing this income taxation measure. This income taxation measure is not a finality. If it is found necessary to increase it, it may be increased, but the committee should bear in mind the two points I have mentioned: First, by the effect of severe taxation upon the Patriotic, Red Cross and other wiar funds

and that is what weighed with me very heavily-and, secondly, the question of income taxation in the United States.


James Alexander Robb: I would understand from the minister's argument that he concludes that the greater part of 'the contributions to the Patriotic and Red Cross Funds have been given by people who have revenues- of over $3,000.


Richard Smeaton White: I would not say that, because I do not know, offhand, whether that is so or not, but I know that many a man with an income of $10,000 has given $500 or $1,000 to the Patriotic Fun-d, and the question I have in mind is this: if you tax him to the extent of $1,000 or $1,500, will he continue 'to give to the same extent to -the Patriotic Fund? My opinion i-s that he will not be likely to. Many such a man certainly will not.
I have not the slightest doubt that if we increase this tax to a certain point of severity we shall dry up the contributions to the Patriotic and Red Cross Funds, which mean so much to the dependents of our soldiers overseas. That would simply mean that the Dominion Government would have to take over the Patriotic and Red Cross Funds. If we came to that point, I would -be the first to say, I shall increase the Tates of income taxation under this measure.


James Alexander Robb: Does not the minister think that, perhaps unintentionally, his argument is -a little unfair to the thousands of people throughout Canada who are drawing less than $2,000, but are contributing generously to the Patriotic and Red Cross funds?


Richard Smeaton White: I am not reflecting on them in any way -at all. They would continue to contribute, because they are
not liable to this tax. I was speaking of those who would he affected by this tax, or by a severer one, and of their probable action in connection with the Patriotic -and Red Cross funds?


Charles Marcil: If a man has invested in Dominion war loans and has derived -a certain revenue therefrom, is that revenue exempt?	.


Richard Smeaton White: All war loan
issues -are exempt from Dominion taxation.


Charles Marcil: If he invested in one of
our domestic war loans, would that be treated the same as a contribution to the Patriotic Fund, and the revenue derived therefrom be exempt?


Richard Smeaton White: Those issues of Dominion bonds which have been made in Canada for the purposes of the war, and were issued income-tax free aTe income-tax free there is no question about that.


Charles Marcil: The man who is wise
enough to invest in Canadian war loans will escape taxation.


Richard Smeaton White: The man who
invests in Canadian war loans will not pay on income derived from that investment, but it must -be borne in mind that these things adjust themselves. The imposition of this income tax should -have the effect of improving the market for Dominion war bonds, which would mean that the rate of interest which they will yield will be less and less. My hon. friend might ask if it is fair that the holder should be exempt. My answer is this: It i-s open- to -an ordinary holder to invest money at 6 or 7 per cent on mortgage. If he takes the income-tax free Dominion bonds he will get a yield of a little over 5 per cent only. So the matter -adjusts itself; substantially it is as broad as it is long.
I now come to the other point with regard to the Business Profits War Tax, -and I am glad the hon. member for Kingston brought that up because it has been adverted to, -and the situation has been entirely misunderstood. It has been stated that this income tax is to take the place of the Business Profits War Tax Act. It is intended to do nothing of the kind.
This income tax legislation does not refer to the Business Profits War Tax at all, except to this extent: If an individual or a firm or a company has to pay the tax imposed by the Business Profits W-ar Tax Act, and if that is greater than the amount for which that individual or firm or com-

pany would be liable under this income taxation measure, then the individual or firm or company pays the greater tax, and does not pay the income taxation.


Mr. KYTE:: That is for this year only.


Richard Smeaton White: I will come to that in a moment. I say that that is the only reference in this income taxation measure to the Business Profits War Tax Act. Let us consider what the Business Profits War Tax Act is. It was introduced in 1916, and at that time it was stated, and it so appears in the measure itself, that liability to taxation under section 3 of that Act, which is the operative clause, would terminate on December 31, 1917. It was so stated at the time that measure was introduced; my remarks on February 1, 1916, were:
The duration of the measure will be limited to August 3, 1917.
Afterwards, in committee, that was changed to December 31, 1917. So that before this income tax measure was introduced at all, it was well understood in this House that the Business Profits War Tax terminates, so far as its operative provisions are concerned, on December 31, 1917.
Now, when the matter was under discussion this yeai there were pretty strong protests from some hon. gentlemen opposite against continuing the tax. For instance, my hon. friend from Pictou, who I am sorry is not in his place to-day, said:
When we point out to him that he is taxing industry, and to that extent checking the demand for labour as well as checking production of articles so essential to the country's welfare, that he is preventing capital from doing all that it might do for the development of the country, and ask why he does not tax accumulated wealth, he gives statements which, I submit, are not adequate reasons for the course he is pursuing.
Again, on May 3, 1917, the same gentleman said:
He should have gone to other sources this year because the taxation which is paid by the business people of this country is so extraordinary and unusual that it is bound to create an onerous condition of such a character as will impair and interfere with industries. That is the criticism I make in regard to the policy, but not in regard to the principle of the Business Profits Tax itself.
Further on my hon. friend said:
But my hon. friend's proposals do not come under that proposition, and the exactions he is taking will slacken the industry, impair the prospect of capital investment, and dampen the patriotic enthusiasm of the party who is being taxed.
What I am trying to establish is that it was fully understood before this income

taxation measure was brought down, that the Business Profits War Tax Act, was a limited measure. My hon. friend from As-siniboia (Mr. Turriff) on page 1529 of Hansard, said:
I hardly think my hon. friend is quite fair in this proposed legislation. I do not want to do my hon. friend any injustice. When he brought down last year the legislation that he is now amending he said that the legislation would be operative during a period of three years. Any one reading his speech would come to the absolute conclusion that that was a fixture for three years. My hon. friend now goes back on what we understood him to mean last year and is now putting an extra burden of taxation on the same shoulders on which he put it last year, after stating, as every one thought, that, that that was the end of that system of taxation.
There are many other extracts that 1 could place on Hansard substantiating that position, but I do not think it will be seriously controverted, because in the measure itself it is provided that, so far as the operative section is concerned, it terminates on December 31, 1917.
Let us see what the position is. I pointed out to the House that this measure was introduced in 1916, and was retroactive in effect. It applied to profits made in 1915, although such profits had in many cases been distributed to shareholders or invested in plant. What is the position of the Business Profits War Tax Act today? It is this: the individuals, firms and companies who are liable under that tax paid out of their profits of 1916, because the tax was retroactive, the amount to which they were liable in respect of 1915, and they pay this year, 1917, upon their profits of 1916. Next year, 1918, they will pay a heavy taxation -I think the heaviest in the world-against their profits of 1917. There are firms in Canada which will pay next year $800,000, $1,000,000,. and $1,500,000 in respect of their profits on this year's business.


Wilfrid Laurier: They are lucky to be able to do it.


Richard Smeaton White: I agree with my right hon. friend. They are fortunate to be able to do it, and that is what I told them when they complained. The point I make is that this was a three-year measure, retroactive for one year, and that is the feature which is lost sight of. They paid in 1917, and they will pay in 1918, the heaviest business tax in the world. That holds the situation until 1918, so far as concerns those who are making abnormal profits out of the war. This income tax provides that if by chance there should be any firms-and I

believe there will be very few indeed- whose taxation under the business profits war tax payable next year, in respect of their earnings this year, will be equal to or less than the taxation which they would pay under this measure, they ihay deduct it. That is all it means. The idea is simply they are not to pay the heavy business profits war tax and this income tax as well. I do not believe any one will say there is anything unfair about that.


Mr. PARDEE:: Do they deduct the
amount of the income tax under this Bill from their original business war tax, and pay the business war tax in full5


Richard Smeaton White: No, it is the
other way around. Supposing my hon. friend was fortunate enough to be taxable next year, 1918, to the extent of 5100,000 under the Business Profits War Tax Act.amend-ment of this year, and supposing if that Act were not in existence he would be liable under this legislation to pay $50,000, he would pay the $100,000. He pays the larger tax. The business tax in England is not nearly as severe as this, because it has relation to the .average profits before the war, which were much higher than seven per cent in most cases. For the year 1918, there is not a Government in the world that will levy a more severe business profits tax than the Government of the Dominion of Canada.


Charles Marcil: Is not that largely because the profits are greater in Canada than elsewhere.


Richard Smeaton White: Nto, I do not
think so. It is because of the progressive tax. It is one-quarter u.p to fifteen per cent; one-half between fifteen per cent and twenty per cent, and three-quarters over twenty per cent. There are companies in this country which will earn $2,000,000 and they will pay the Government out of that $1,100,000 or $1,200,000. There was a case brought to my attention not long ago where a company makes $1,500,000, and it will pay us $900,000 in tax.


Wilfrid Laurier: Thiat is all
right.


Richard Smeaton White: I am not complaining at all. I take the same view as my hon. friend. He and I have the distinction of being poor, or comparatively poor-probably I had better speak for myself. I said to the party in question. " Well, it is true that I am taking $900,000 from you, but do not forget I am leaving you
$600,000." We are coming towards the end of this war. I do not know how soon it will be. I do not think my opinion or the opinion of anybody on the point i.s of much value, but we are necessarily coming towards the end of the war with each year.


Wilfrid Laurier: Next year.


Richard Smeaton White: With the end of the wiar there will come ia time in this country when business will be confronted with the trying period of dislocation, in which capital will be required, in which extensions will have to be made in order to increase the productivity of plants 'and business enterprises. It has been our view that so far as the average business firm is concerned, ia tax of this character is not a good tax in peace time. That has been said in this House, not only by myself, but by .many members, when the Bnstness Profits Tax has been under discussion. When I refer to the welfare of business in the period succeeding the war-.a period of dislocation, of unsettlement, when working capital will be required and when banking accounts should be kept .strong-I speak also of the welfare of the labour community, because the welfare of the business community .and the welfare of the labour community are tied up together. Upon the welfare of the one depends the welfare of the other, land we must have regard to both in our measures of taxation. Our first duty is the prosecution of the war. We have attended to that duity, and I emphasize the point, because in 1918 there will be collected upon the profits of 1917 the highest business tax in the world. My hon. friend (Mr. Graham), in .his objection to my amendment to the Budget this year, in regard to the Business Profits War Tax Act, .said:
Not a few industries engaged in the manufacture of munitions and other commodities influenced by the war assert that after the war there will be a very critical period of readjustment. Some of them fear that during that period of readjustment they will be able to do nothing more than pay running expenses. The most conservative of these have been preparing for that period by placing to one side each year a reasonable reserve, feeling that when their present large business ceases -as we hope it will very shortly-they will find themselves, under the new system of taxation, in a serious financial plight. They tell me that during the two or three years succeeding the war these reserves will hi used up in their effort to readjust themselves to new conditions and to prepare for a staple business in the future. Some of them, I understand, think that the action of the Government in taking such a large proportion of the amount they now have on hand will cause them -to come to a condition of practical bank-

ruptcy during the period of readjustment. I feel confident that the minister, far from having that in mind, would like to protect our industries against this result. To my mind this is the most serious aspect of the matter; the figures that have been presented to me by some concerns lead me to believe that there is a good deal in the contention.
In the opinion of my right hon. friend's lieutenant-the hon. member for South Renfrew (Mr. Graham)-there is to be a period of readjustment, having regard to which this tax is so heavy that it will bring many firms in Canada to the verge of bankruptcy.
This Parliament will be in session in 1918. If this war goes on more and more money will be needed. The business of the country is the prosecution of the war and to find money with which to prosecute the war. We have done it up to date, and we are going to continue to do it. We have taken the largest portion of profits of any country in the world. I have been criticised, in this House and outside of it, as I believe no Finance Minister has ever been for imposing such heavy taxation. Nevertheless, this Government stands for the principle that, if abnormal profits due to the war are made by business, there must be abnormal taxation in order that the Government may take a substantial share of those profits. The situation is secure until the end of 1918. My own view is with respect to existing legislation that there are some defects in it. The question of allowance for extension of plant and the question of the amount of bank indebtedness present themselves. But I desire to say just this, that having as our guiding principle that this war must be carried on to a successful conclusion to tbe utmost of our power, and that the man at the front must be backed by the dollar at home, this Government can be depended upon at the next session of Parliament (if this war still continues and the financial demands upon us are increased) to take the step the moment it appears necessary that there should be abnormal taxation upon abnormal profits derived from the war.
I am glad that my hon. friend from Kingston has given me an opportunity of dealing with this matter. I just want to leave the thought with the House that the situation is held securely until the end of 1918. In 1918 we will know absolutely what the profits of concerns are in this country and what the outlook is both from the standpoint of war and the standpoint of business. In the light of those conditions we can take such action as may be necessary having

regard to the public interest and our supreme duty to carry on this war.
I want to say a word or two with Regard to the question of large profits. Take a balance sheet which shows that a concern makes, we will say, $1,000,000. The man who is not acquainted with a balance sheet thinks that that means that this firm has made $1,000,000 in cash. How are these profits carried? They may be in stocks of goods bought at the top of the market, at the high prices prevailing in war time, in raw material bought at higher prices than have ever prevailed before; they may be represented by extensions of plant which have been made during the year, and instead of the firm or company having $1,000,000 in cash, or they may owe the bank $100,000 or $200,000 at the end of the year. It has a bearing upon the amount of actual cash it is proper to take out of these firms by means of the Business Profits War Tax.


Wilfrid Laurier: The balance sheet will show that?


Richard Smeaton White: The balance sheet will show that but the statement goes out to the country that a company has made $1,000,000 and an uninformed man might reach the conclusion that they made $1,000,000 in cash, whereas it may have gone into extension of plant, or stocks of goods which will depreciate next week or before they arc sold, or into raw material which, when worked up into finished product, shows a loss. Thus, in dealing with the question of how much cash a company or a business has, you must have regard to the situation that prevails in that way. The situation is that the taxation power of the Government is not exhausted and it will be exercised at the proper time, having regard to the conditions that then prevail and to the necessities with which we are then confronted arising out of the war.


Wilfrid Laurier: Under the conditions which my hon. friend has just stated, a balance sheet showing $1,000,000 of profits, one part of which has gone into extension of plant, another into goods on the shelf and another into raw material, is my hon. friend to tax the business in accordance with the principle laid down in section 3 of the Bill in the following words:
And shall include the interest, dividends or profits directly or indirectly received from money at interest upon any security or without security, or from stocks, or from any other investment, and, whether such gains or profits are divided or distributed or not.


Richard Smeaton White: There is no doubt that under this income tax measure, if a company such as my right hon. friend has in 'mind-let us say a commercial compa y -shows by its balance sheet that it hi,s made a net profit of $100,000, even althougn that net profit is represented in goods, which will be taken according to the inventoried value, the tax will apply to the $100,000.


George William Kyte: I take it that this income
tax Bill has been brought in by my hon. friend (Sir Thomas White) in obedience to the general demand that has been made throughout Canada, since the Bill providing for compulsory service of men was introduced into Parliament, for an equally drastic and universal conscription of wealth. It was pointed out from time to time that the term "conscription of wealth" was extremely misleading and did not actually convey the idea that was in the minds of the persons who desired that the wealth-producing portion of this country should contribute more largely towards the supplying of money to carry on the war than it had done heretofore. During every session of Parliament since the war broke out the suggestion has been made on this side of the House that the Finance Minister ought to introduce a system of taxation for the purpose of augmenting our revenue, but [DOT]as frequently as it was argued and demanded from this side of the House that this step should be taken, the Minister of Finance argued that it could not be done. He proved to the satisfaction of his supporters that an income tax law ought not to be introduced as a part of the revenue-producing legislation of this country. But new light has come to the Minister of Finance, and in the language of the maiden who, vowing that she'd ne'er consent, consented, the Minister of Finance, after vowing that he could not introduce an income tax Bill, introduced it.


Richard Smeaton White: Is my hon. friend quoting from Don Juan?


George William Kyte: He has made a point of the fact that the Business Profits War Tax is still in force in this country and that it will continue until 1918. But I would like to make it perfectly clear that the business profits war tax ceases on the 31et December, 1917, and that any tax payable in 1918 with respect to business profits will be paid upon profits earned during the present year. As regards individual companies, liability for this Business Profits War Tax will cease 261
at that date in 1917 which coriesponds with the accounting period of each particular company. Take the Ogilvie Flour Mills Company, whose period of accounting is the 31st August, the present month. They are liable 'in respect to the business profits wiar tax upon their income up to the 31st August. The tax will be payable in 1918, but they will not be levied upon with respect to any profits earned subsequent to the last day of the present month. Am I correct in respect to that?


Richard Smeaton White: They will not unless they are taxed subsequently. As l said, the Government adheres to the principle of abnormal taxation of abnorma1 profits. I said that in 1918, that matter could be dealt with if there were aDnormal profits. This is where my hon. friend is wrong, that while what he stated is legally correct, the Ogilvie Company paid in 1916 upon their profits of 1915; they paid in 1917 upon their profits of 1916; and they will pay in 1918 upon their profits of 1917. My hon. friend overlooked the fact that this Act has been in effect only two years, but there is a three years' term, and those companies, most of them I believe, are in that position, that they paid out their profits in 1915, and had to find, out of their profits in 1916, the tax which was imposed and which was retroactive. Similarly, in 1917, they paid out of their profits for 1917 their tax for 1916, and they will pay out of their profits for 1918 their tax for 1917.


George William Kyte: That only means that the excess war tax applies to the earnings of companies for 1915, 1916, and 1917, up to the end of the accounting period of each individual company. The Finance Minister has said that next session we shall consider whether or not there are abnormal profits earned, and if so we shall deal with them. But this is the language of the Finance Minister the day he introduced his Income Tax Bill:
The House is aware that liability to the Business Profits War Tax Act of 1916 and the amendment thereto of this year comes to an end on December 31 this year, and it is not the intention to renew that measure.


Richard Smeaton White: No, not to renew that measure.


George William Kyte: Then that is the end of the measure so far as it is applicable at the present time, according to the statement of the Minister of Finance.


Richard Smeaton White: Of this particular measure.


George William Kyte: Parliament meets next year, and we may do things that we have not in mind at present.


Richard Smeaton White: Supposing I had not said that, would the Act have come to an end by its terms or not?


George William Kyte: 
Richard Smeaton White: Assuming that the business profits taxation applies to 1917; and assuming that the income tax proposals apply also to 1917, which of those taxes would the firm in question pay in 1918?	*


George William Kyte: It would pay upon its earnings of 1917 the business war profits tax.


Richard Smeaton White: The larger one.


George William Kyte: But it will pay nothing in 1918 in respect of the excess profits, as the law is at present.


Richard Smeaton White: My hon. friend is not able to say it will not, because abnormal profits will be taxed abnormally.


George William Kyte: 
Richard Smeaton White: Which tax will
it pay?


George William Kyte: In respect to its earnings
foT 1917, it will pay the excess profits war tax. _


Richard Smeaton White: How much in
respect of its income for 1917, the same year?


George William Kyte: It will pay nothing with respect to its income in 1917.


Richard Smeaton White: The Nova Scotia Steel company will pay in 1918 the larger tax my hon. friend mentions.


George William Kyte: It will pay in respect of its earnings for 1917.


Richard Smeaton White: To what income is the hon. gentleman referring? The income in 1917 or not?


George William Kyte: 1918.


Richard Smeaton White: But this Bill relates to 1917.


George William Kyte: I stated that in respect of
its earnings for 1918, assuming they are the same as for 1917, instead of paying $237,252, it will pay $84,056.


Richard Smeaton White: On the assumption that there was no other legislation.


George William Kyte: I am taking the language of the Minister of Finance, and I am justified in doing so. The Ogilvae Flour Mills company, net profits, 1916, $1,336,040. Its war tax was $280,885. In 1918, in respect of its earnings for that year, under the income 261*
tax, its taxation will be reduced to $53,440. Take the Canada Foundry, net profit, 1916, $653,852; war tax, $222,368. Under the income tax that will be reduced to $26,152. The Steel Company of Canada earned $3,728,494. It has distributed $814,741, a dividend of less than one-fourth of its earnings. This large company has not distributed, as is well known, all its earnings. Large proportions of earnings have been put to one purpose or another, all of 5 p.m. which goes to increase the value of its plant and stock, so that when it comes to distribute its earnings amongst the shareholders, it is done, I have no doubt, with a view to reducing its taxation as much as possible. Under the new income tax the balance of $2,900,000 would have been exempted entirely from taxation. The Canada Foundries distributed $249,600. The income tax on that would amount to $11,984. The corporation will pay $26,152, or a total of $38,136, compared to $222,368 paid under the war profits tax. The Ford Motor Car company, with a capitalization of $5,909,000, had profits in 1916 of $3,202,678, equal to 54-2 per cent. Under the old war tax profits tax, 1916, it paid $697,323. Under the present war tax it will pay $1,782,095, whereas under the income tax, which we are now considering, that taxation will be reduced to $127,987. The Canada Explosives capital employed $9,377,000; profits in 1916 were $3,094,410, equal to' 33 per cent. The excess profits tax in 1916 were, $609,537. For 1917 the war tax would be $1,337,631. Under the present Bill the income tax will reduce the amount to $123,656. The Northern Aluminum Company, capital employed $3,860,000; profits, 1916, were $1,636,640, equal to 42.4 per cent. War tax, 1916,	$341,679.
War Tax, 1917,	$822,332, but that
taxation under the present Bill will be reduced to $65,565. The Nova Scotia Steel Company, capital employed $7,687,387; profits, 1916 were $1,487,125, equal to 19.34 per cent. Business profits tax,
1916,	$237,752. Business Profits Tax, 1917,
$30,754. The income tax for that company will be: $59,365. The Canada. Forgings, capital employed $1,456,526; profits, 1916, were $991,359, equal to 68.11 per cent! War tax, 1916,	$222,368. War tax,
1917, $590,689. The income tax will be $39,534. Steel Company of Canada, capital employed $13,963,000; profits, 1916, were $2,210,343, equal to 15.83 per cent. War profits taxation, 1916, $308,240. War profits tax, 1917, $337,055. Income tax will be

888,293. Imperial Oil Company, capital employed $27,161,000; profits, 1916, $4,837,374, equal to 17.81 per cent. Excess Profits Tax, 1916, $734,046. Excess profits tax, 1917, amounted to. $924,849. Tihe Income Tax will be $193,374. The Fairbanks-Morse, capital employed, $3,686,500; profits, 1916, $669,100, equal to 18.15 per cent. Excess Profits Tax, 1916, $102,748. Excess Profits Tax, 1917, $135,767. Income tax will be $26,640. Now, Mr. Chairman, these figures will illustrate in what respect the income tax will affect the companies earning the largest profits, and there are companies that have more or less direct concern with manufacturing commodities, the prices of which have been affected by the. period of the war. The Canadian Explosives Company have a present tax amounting to $1,337,631. Under the income tax, its taxation will be reduced to $123,656; that is to say that the taxation on its earnings in 1917 will he $1,213,975, less than the taxation of the previous year.
This income tax will scarcely fulfil the expectations of the people of this country as regards the obligation of this Government to compensate as much as possible for the men who are going to the front and giving their lives in the service of the Empire, by making the wealth of this country contribute to the operations of the war. There are engaged in business in Canada concerns that, since 1915, have made prbfits as high as 800 per cent. There is no reason which the average man can see why such a change has come over the policy of this Government in such a short period of time. It is argued that the business profits war tax has a tendency to prevent capital from coming into this country, and that view is shared by a large number of business men, but when you consider that the burden of taxation in respect of excess profits is felt only after the earnings of those concerns exceed 20 per cent, it ought not to be a serious deterrent to the introduction of capital. Previous to the outbreak of war very few companies in Canada were earning more than 20 per cent, but .since then the profits of many firms have increased so enormously that they can be calculated by the hundred per cent. There is, therefore, to the ordinary person no sufficient reason given for the Minister of Finance thus changing the basis of taxation-.
The hon. member for Kingston (Mr. Nickle), in the excellent speech he addressed to the committee this afternoon, stated that he believed there were in this country certain interests that were not paying their full share of the financial bur-
[Mr. Kyte.l
dens of the war, taking into account the sacrifice made by those who go to the front and lose their lives. In that category he included the farmers. He said that as the farmer bought but little, he was not suffering so much on account of the increased cost of the commodities of life as the man who was not a producer of food. The farmer is relatively quite as large a purchaser as any other class of persons in this country. In the West where mixed farming is not engaged in to any great extent, the farmer has to buy everything except his wheat and one or two other articles which he produces. Im eastern Canada, although our farmers are largely engaged in dairying and mixed farming, there are still many articles of consumption which they have to purchase. While it is true the farmer in- eastern Canr ada produces his own butter and, at certain seasons of the year, his own meat and vegetables, he does not, manufacture such requirements cf niimelf and his family as clothing, boots and shoes, sugar, tea, cotton, hardware, building supplies, tall of which have increased in cost enormously since the war broke out. Therefore, the hot*, member for Kingston did not speak with that reflection with which he usuahy speaks when he stated that the farmer^ were not paying their full share of taxation in respect of the increased cost of living which is being experienced in Canada oni account of the war.
So far as the contributions by the people of Nova Scotia to the Patriotic Fund are concerned, at least half of the- money subscribed is contributed by municipal taxation which falls equally upon all the taxpayers of that province, quite irrespective of individual contributions. Therefore, when the Minister of Finance states that under this income taxation measure he is relieving the taxpayer of that portion which he contributes in the form of a Patriotic Fund contribution, it is after all not so much a reduction as would appear on the surface, because the great majority of the people who contribute to the Patriotic Fund would not be included in this income taxation legislation, but would enjoy the exemption which is mentioned.


Mr. PAR  GEE@: I wish to emphasize the opinion expressed by the hon. member for Kingston (Mr Nickle) in regard to the inequality of taxation upon the classes which this Bill affects. We must realize that when we conscript men, we conscript their all, and if we are to conscript wealth or, not to use that term with which so much fault

is found-if we are to bring in an income tax, we must bring in an income tax which really does what it is intended to do, namely, make those pay who can pay. Although it costs much more to live in Canada to-day than it formerly did, we must realize that the well-to-do man is getting far more money than he ever had before, and that those men who are getting more money on account of the war are getting it without very much greater exertion. If that be the fact, then they ought to be able to pay more, and they ought be made to pay more. When one considers that after this tax is deducted, a man with an income of $7,000 still retains $6,820, a man with an income of $10,000 retains $9,640, a roan with $20,000 retains $18,740, a man with $30,000 retains $27,540, a man with $75,000 retains $64,990, a man with $100,000 retains $85,240, and a man with $200,000 retains $156,240, surely no one will say th.ait the sums that I have mentioned that are left to those men are not plenty, and more than enough, to keep them in affluent circumstances, no matter what their position may be. If we are Teally honestly intending to conscript wealth, or to take the well-to-do man's money in lieu of his blood, we should leave him with only enough to keep him in ordinary circumstances, and, even although we shall thus be depriving .him of many luxuries, it is right that he should suffer at least some of the hardships .that the man .at the front is suffering in order to protect that wealth.
The Minister of Finance says: If you impose very severe taxation you will dry up the flow of contributions to the Patriotic and Red Cross Funds; or, in other words, if you touch the big .man with the big income you stop the source of your Patriotic .and Red Gross Fund subscriptions. No one knows so much about such subscriptions as the hoo. member for St. Antoine (Sir Herbert Ames), and this is what he said last night when this matter was being discussed. He did not argue that the big man was paying those subscriptions. He said:
All that we are pleading for is that the money which is subscribed and paid in 1917 by the comparatively small portion of our population who have an income of over $3,000, and who therefore come under this tax, may be regarded as having been paid to the Government. Three-eighths of all the money we get comes from taxation; probably as much more comes from small subscribers, and perhaps one-quarter of all we get comes from the large subscribers who have incomes of $3,000 and upwards, and who will therefore he hit by this tax.
So the hon. member for St. Antoine apparently does not take the same view as the Minister of Finance.


Richard Smeaton White: I did not say all.


Frederick Forsyth Pardee: I quite agree, but I think the minister will agree that he left the impression on the House, and intended to leave it, that the big contributor would not contribute to the Patriotic Fund if he was taxed any more severely under this measure; that was the logical inference from the minister's statement this afternoon.
I repeat again-and I cannot repeat it too often or too vehemently-that in view of the figures set out in this Bill there is to my mind no conscription of wealth at all in this country; this is not a real income tax. The Finance Minister says: "We have the most heavily taxed country in the world." That may be, but if we are the most heavily taxed country in the world there is no reason why we should not her the most heavily taxed country in the-world, because no country stands to lose-more through this war than Canada. If we-are to keep our men at the front, if money has to be raised to purchase the necessary supplies, where do the rich men get off, and where do the people of this country get off? Why should a man with an income of $75,000, which is an enormous income, be allowed to keep $64,990 in his pocket, after paying this tax? I am bound to say that to me that does not savour of conscription in the slightest degree. It imposes no hardship whatever on that man, except that when he comes to tot up his bank book at the end of the year, he has not got quite so much as he had, but still has more than any man has a right to have.


Richard Smeaton White: I do not believe there are 'many men in 'Canada who have an income of $75,000. My hon. friend is overlooking the fact that most incomes of that amount will be incomes of companies. A business that a man might engage in as an individual or as a partner might yield that amount, but it would he in competition with joint stock companies having a similar amount o.f income. It is not like the income of an individual.


Frederick Forsyth Pardee: I will take my hon,.
friend's own statement. He says that most of them will be joint stock companies.


Richard Smeaton White: Most of them
would, hut there .are other firms in competition with joint stock companies.
.Mr. PARDEE: Why should not the joint, stock companies pay?


Richard Smeaton White: They do pay.


Frederick Forsyth Pardee: Only the amount stated here.


Richard Smeaton White: In the case of a joint stock company there are many shareholders.


Frederick Forsyth Pardee: I quite understand that.
What the minister says is that this tax shall be deducted from the profits, and Ahen the rest shall ibe distributed as divi-cdends. But that is not very much. You .are leaving a tremendous balance there yet. What I cannot understand is why people with such an enormous income-I do not -care whether they are firms of joint stock [DOT]companies or anything else-should be left with such an enormous profit, when to-day 'we are sending men to be killed to save Those very profits. You cannot get away from that argument. The people of this country are demanding to-day that the men who have made enormous profits out of the war should pay. Why should they not pay for this war? Why should they not pay for the men who go>
to the front? To my mind it is the one unanswerable reason why almost all that they have go-t should be taken in order that what they have left may be saved.


Richard Smeaton White: They are fighting to save capital as well as income, aTe they not?


Frederick Forsyth Pardee: You are only taking their income. Their capital is so enormous that they are .able to earn these enormous salaries, or dividends, whichever you like to call them. The minister has told us that the business profits war tax, or at least the proceeds of it, go on until the year 1918. From the figures we have examined we kno w that the business profits war tax would yield to this country vastly more than the sums that will he yielded under this income tax measure; there is no doubt about that. It is true that a very heavy tax might keep people out of this country, hut at the same time the money that we need has to be raised from some source, and we might just as well be honest with ourselves now as later on. Taxation has to come if we are to stay where we are. There is no man of business acumen in the country to-day who looks facts in the face who does not say to himself: Taxes have to come because of the position we are taking in this war. So we might just as well make an early start and avoid a further piling up of the national debt. One hand practically washes the other, and it might just as well be done in this way as in any other.

In conclusion, I repeat that I do not think this tax is sufficient. I think it should be increased, and increased materially. I think that on an income of $20,000 to $30,000 the tax should be 15 instead of 8 per cent; on $30,000 to $50,000 it should be 20 instead of 10 per cent; on $50,000 to $100,000 it should be 25 instead of 15 per cent; on $100,000 to $150,000 it should be 30 instead of 25 per cent; on $150,000 to $250,000 it should be 35 instead of 25 per cent; on $300,000 to $450,000 it should be 40 instead of 25 per cent; on $700,000 to $1,000,000 it should be from at least 50 to 70 per cent instead of 25 per cent; on $1,000,000 to $2,000,000 it should be 75 instead of 25 per cent. I want to repeat that the corporations, firms, and others, are having their all protected. In order that they might be further protected, this Government has asked that there should be conscription of men. If you take the last reserves, as this House has voted, for the conscription of men, for the conscription of blood, and for the sacrifice of life, you have the right to make those who are protected pay, and they should pay to the last shilling.


Richard Smeaton White: My hon. friend has an advantage which is always enjoyed by an opposition. I am quite satisfied if I had brought down a measure embodying the percentages my hon. friend has suggested as representing his views, he would rise in his place and double them. It must not be lost sight of that the men who will pay taxation under this measure on incomes of $3,000 and upwards, also have their sons at the front. It is quite easy to speak of the people of the country who have incomes of $3,000, $4,000, $5,000 or $10,000, but so far as my observation goes that class has been and is represented in the field just as much as any other class in this community. I think we must not assume the country is divided into two camps, one of which consists of those who will not be subject to this tax, but who have their sons at the front, and the other those who are subject to the tax, and who have no sons at the front. My own belief is that all classes in this country, the labouring classes, the artisans, the merchants, and the professional classes, are represented practically pro rata in the field. There has been an equal patriotism, and I think we should bear that in mind. It seems to me we must not reflect needlessly upon those who have been successful through their exertions, and who enjoy no undue profits from the war, but who are carrying on their professions as they did before

the war, in many cases with diminished incomes. We must not reflect upon their patriotism because of the fact that they are subject to this income tax, nor need we reach the conclusion that because there are men in the field, some of them being their sons, we must over-severely tax . them upon income.
This measure is a stiff income tax. Eyen the normal tax is double the municipal taxation prevailing in this country. It is more than double the prevailing income tax in the United States. It is not a mild taxation. It is a heavy supertax, much heavier than the United States taxation. We must not reach the conclusion that it is mild as an income tax measure, because this is not the case by any means. I do not mean to say it may not be more severe, or that we may not have to increase it, but having regard to the present situation it is a fair measure, in its graduated scale, imposing a greater burden upon those who are enjoying a larger income. Taxation has many aspects. Personally, I do not believe it should be imposed for the purpose of punishing any citizen because he happens to have an income. That is not a sound principle. A Government must be sagacious in imposing taxation, else it will defeat its bbject. Place too heavy a tax upon liquid wealth-that is to say bank credits- and they disappear. Place too heavy a tax upon income, and you do not collect your tax, because people will not come into the country, and in many cases investments will be placed elsewhere. There is much more in taxation than the consideration of how much a man's income is, and how much he can possibly live upon, with a view to taking the balance away from him. It would injure this country greatly, and it would impair our power of raising money for the purposes of this war, and injure the prosperity we are enjoying, if our income tax measure was too heavy. I do not mean to say this is an ideal measure at all, but it is a pretty good start. Any Minister of Finance, myself included, could add to it as the necessity might arise. At the same time, it meets the situation as it is to-day. You cannot compare the sacrifice which is made by the man who goes to the front and offers his life for his country with the sacrifice made by writing a cheque, however large it may be.


Some hon. MEMBERS:: Hear, hear.


Richard Smeaton White: To me it is almost a sacrilege to talk of equalizing the
sacrifice made when a man sends his son to the trenches in the one case, and when a man is called upon to pay a tax bill, no matter how large, in the other. The cases cannot be compared, because they are essentially and fundamentally different. One touches human life. It is a spiritual sacrifice.


Wilfrid Laurier: No man makes that comparison.


Richard Smeaton White: I am not accusing my right hon. friend of making it. The expression "equality of sacrifice" cannot be used, because it is not a true expression. There is nothing to equal the sacrifice made by the men who have gone to the front, and the sacrifice made 'by their parents, and their wives, in sending them.
I think it is advisable to adopt the suggestion made by the hon. member for North Grey (Mr. Middlebro), and make the exemption $1,500 in the case of unmarried persons and widows or widowers without dependent chilren, so that the section would read:
(a) four per centum upon all income exceeding fifteen hundred dollars in the case of unmarried persons and widows and widowers without dependent children, and exceeding three thousand dollars in the case of all other persons.
I have given careful consideration to the suggestions offered in regard to grading the tax according to the number in family. The difficulties I see and have seen in connection with that are such that I am against any .amendment of the measure in that particular.


Alphonse Verville: Is the exemption of
$1,500 for single persons?


Richard Smeaton White: Yes, unmarried persons.


Alphonse Verville: If a single man has dependents, he is on exactly the same footing as a single man who has no dependents?


Richard Smeaton White: Yes, he is.


Alphonse Verville: Does my hon. friend believe that is fair? As far as the $1,500 exemption is concerned, I claim that $1,000 is far more than any man can spend on himself alone, but the man with dependents really has .a family to support. The 'Single *man who has dependents is in the same category as the man with no dependents; that is, both have an exemption of $1,500. When I asked the minister abont the single man's exemption he spoke of his dependents, a mother or ia sister, and, perhaps,

others. We are not looking after them >ajt ia.ll now, if I understand the Aot aright.


Richard Smeaton White: I think there is a little misunderstanding here. I thought that " 'Without dependents " would govern the case, but the wording here is " without dependent children." I think we can put in there " unmarried persons without dependent relatives."


Mr. McKENZIE:: Why not say "dependents " and leave out " relatives?"


Richard Smeaton White: I am afraid that they would all have dependents.


Daniel Duncan McKenzie: They may have dependents who are not relatives.


Richard Smeaton White: I move that it read: " unmarried persons without dependent relatives." I am perfectly satisfied that i.f we do not cover it in some way there will be no tax collected at all.


Daniel Duncan McKenzie: A man might have his stepmother to support. His stepmother would be no relative, but she would he a very legitimate dependent. I think the word " dependents " (alone would he better than " dependent relatives."


Wilfrid Laurier: I would suggest to my horn, friend that he might let the section stand and think it over. There will always be difficulty in connection with a matteT of this kind. You must have a rule, absolute, and, it may be, arbitrary. No matter how you place this taxation it will weigh upon some persons more than others. You cannot avoid that. The statement was made a moment ago that you should consider the case of a bachelor with dependents. It may happen that a man who has no wife, a bachelor, will have dependents. It may happen, also, that a bachelor will have no dependents and still further that a married man will have dependents. Besides his wife and children, he may have poor relatives to look .after. But you .have to apply a rule of some kind, .and when you have .applied that rule you must take the consequences. I would suggest to my (hon. friend that he allow the question to stand over for further consideration later on.


Richard Smeaton White: All right.


Wilfrid Laurier: I would like to , call my hon. friend's attention to .the drafting of the Bill. Section 4, paragraph (a), reads:
Pour per centum upon all income exceeding two thousand dollars in the case of un-
married men and widowers without dependent children, and exceeding three thousand dollars in the case of all other persons.
That is intelligible. But, when you come to paragraph (b), which is the first provision in regard to the supertax, you find the following:
Two per centum upon the amount by which the income exceeds six thousand dollars and does not exceed ten thousand dollars.
There is a gap between $3,000 and $6,000.


Richard Smeaton White: The four .per
cent, normal tax, applies to that.


Wilfrid Laurier: You collect
two per cent upon all incomes exceeding $6,000 and less than $10,000. But between $3,000 and $6,000 there is no .provision for collecting the tax.


Richard Smeaton White: It is perfectly
clear. In the first .place four per cent is collected upon all incomes exceeding $3,000. That is the starting point. If a man has an income of $100,000 the way you start to determine how much he is to pay is this:	You substract $3,000 from $100,000,
that leaves $97,000 and of that you take four per cent.


Wilfrid Laurier: The normal
tax runs all the wiay up?


Richard Smeaton White: All the way up
to $100,000. Take the concrete case of a .man with an income of $7,000. In the first place he is entitled to be taxed at the rate of four per cent upon all his income in excess of $3,000. Four per cent upon $4,000 is $160. Then, las the income exceeds $6,000 by $1,000, there is two per cent additional upon that $1,000 which is $20. Add $20 to $160 and you have $180 as his tax.


Wilfrid Laurier: It is not
aptly expressed but it is all right.


Mr. BUCHANAN:: I may not have an
opportunity of speaking on this measure again and I would like to enter a very strong objection to the lightness of the burden imposed upon the heavier incomes. This tax has a very close relation to the .conscription measure, in my estimation. We must do our best to induce men to go under conscription to fight in Europe, we must put them in .as good humour as .possible and to put them in good humour we must impose a moderate tax on the wealth of this country. We cannot impose any taxation that will measure up to the sacrifice the man makes who goes to France and gives up his life or who receives wounds

that probably main him for the balance of his life. We should do our utmost to tax the people who are left at home and make them realize that they are sacrificing something. This taxation, in (my judgment, does not bring a sacrifice to any person. It should be of a character which will be a real sacrifice. The imam with $100,000 is not making any sacrifice. I would like to have $100,000 and contribute the percentage that is asked on such an income under this measure. I would be very glad to do it. I feel that the people with the smaller incomes aTe paying far more proportionately than the people with the larger incomes. The Finance Minister should aim to tax the heavier incomes until the people with those incomes realize that there is a war and that they must make a real sacrifice-something that will hurt. The President of the Patriotic Fund had a slogan'-give until it hurts.
Let the Finance Minister adopt the same principle in connection with his income tax. He says it will have to be altered when the war is over. Then, while the war is on, make the income tax something that will hurt the wealthy people of this country, and, after the war, the taxation can he altered.
I also feel very strongly that the excess profit tax should he continued, that the industries that are making large profits, especially those engaged in the manufacture of munitions or of other goods used in connection with the war, should pay heavily during the progress of the war. We need the revenue, but we also need to impress upon the men whom we are going to force to fight for us that we are making the people who are staying at home and making money out of the war bear the real burden of its cost.
Mention has Ibeen made of the Canadian Patriotic Fund. I may be wrong, hut I have believed in the voluntary system. I have always been able to go out and appeal for the Patriotic Fund on the ground that men were going to fight voluntarily and that the people at home should contribute voluntarily. I have been able to make the people in my neighbourhood see it in that light. But I am satisfied that in the next campaign for the Patriotic Fund the introduction of conscription will interfere with the raising of money by voluntary means, and I believe that the Government will eventually, if not immediately, have to raise by taxation all the money that has heretofore been raised voluntarily through the Patriotic Fund. I believe that is the
only fair method, too. It may be possible that within the next year the Finance Minister may have to devote some of the proceeds of this tax to the carrying of the work now carried on by the Patriotic Fund.
I do not mean to say that I would make the Patriotic Fund a Government undertaking; I am quite satisfied to have it operated as at present, that is, that the expenditure should be handled through the Canadian Patriotic Fund. But I should think that the money should be raised by taxation, and it may have to be raised through income taxation. For that reason we should keep in mind the necessity of making this tax as heavy as possible, at least during the war. I feel very strongly on this question because I do not want to see any men remain at home and make more money than will keep them comfortably while, other men are going away to bear the hardships of war, and possibly lose their lives.
I want to see the sacrifice as nearly as possible equal throughout the length and breadth of the country, and it cannot be an equal sacrifice until our taxation makes the people who stay at home feel that there is a war, and that they are doing something to help the men who have gone over to fight for us in Europe.


Charles Marcil: Has the minister decided that the married man who has only himself and his wife to keep shall be in the same position in relation to this tax as the man with half a dozen children?


Richard Smeaton White: I have reached the conclusion that it is not possible to discriminate in this taxation, having regard to the number of children in the family. In justification of that, there is an exemption of $3,000, which I think is ample. I agree with the right hon. leader of the Opposition (Sir Wilfrid Laurier) that in a measure of this kind there are bound to be anomalies, and we must draw the line somewhere, decide upon a scale, and then allow the anomalies, such as they are, to exist. Otherwise you would be making so many exceptions that the measure would be unworkable.


Charles Marcil: I am sorry the minister has taken that stand, because it is placing Canada in a position different from that of any country in Europe. The nations of Europe are trying to increase their population. France, which, according to Lloyd George, in an interview of two days ago, is .bearing the burden of the fight against Germany, pays a premium on families of three and four children in order to increase

the population. Lloyd George says that to-day, without France, the war would be at an end, that, great as is the sacrifice of Great Britain, it is nothing to that of France; that the spirit of the French people is the mystery of the present war. In France they encourage large families; here we do nothing. We declare by this legislation that the mere fact that the man is married, although he has no children, places him on the same footing as the man who may be called upon to rear half a dozen or a dozen children. The minister should reconsider that point. I make this appeal in the best interests of the country. Canada wants a native population in preference to a foreign population, and I think that, all things considered, we should make the married man or the married woman who assumes the responsibility of bringing up children-and we all know what a burden that is these days, with the high cost of living-is entitled to the first consideration of the state, not only for himself or herself, but for the sake of the children.


Mr. PROULX:: The Minister of Finance said this afternoon that he intended to reduce the exemption for unmarried men to $1,500. Did he consider the dependents whom the unmarried may have to support?


Richard Smeaton White: No.


Edmond Proulx: I think it would be more just to reduce the exemption to $1,000 to an unmarried man without dependents, $1,500 for an unmarried man with one dependent, and $2,000 for an unmarried man with two or more dependents. An unmarried man may have his mother or young brothers and sisters to support, and may be in the same position, in regard to the burden on his financial means, as a married man with children. In France the tax is graded on the principle of the number of dependents a man has to support, either children, or parents, or brothers, or sisters.
At six o'clock, the House resumed and then took recess.
After Eecess.
The House resumed at eight o'clock. PRIVATE BILLS.
Considered in committee-Third Readings.
Bill No. 105, to incorporate The English Valley and Hudson Bay Railway Company. -Mr. Webster.
Bill No. 114, respecting The Montreal Central Terminal Company.-Mr. Girard.

Bill No. 96, to incorporate Dominion Good Roads Association.-Mr. Achim.
Bill No. 113, for the relief of William Henry Bishop.-Mr. McCraney.



WAR TAX UPON INCOMES. CONSIDERATION OF BILD IN COMMITTEE.

[Stage Direction]
The House again in committee on Bill No. 117, to authorize the levying of a war tax upon certain incomes-Sir Thomas White-Mr. Rainville in the Chair.
On section 4-Income tax:
Alexander Kenneth Maclean: I wish to join with those hon. members who have taken the position that subsection 1 of section 4 does not impose a sufficiently heavy rate of taxation. It has been urged as a justification for the imposition of an income tax that we are enacting a military service measure. It is said that because we are possibly to have conscription of men, we should, therefore, have conscription of wealth. That in itself is a pretty good ground for increased taxation, and I do not dispute that view as presented by hon. gentlemen this afternoon, but rather do I affirm it. There is a further reason for augmenting our revenues, and upon that ground alone this Bill is justified. We are spending in this country from $850,000 to $900,000 a day for war purposes. That will amount to something over $300,000,000 a year. The Minister of Finance informed us a few days ago that for the quarter ending June 30 of this year there was a surplus of about $37,000,000 which might be applied to war expenditures. If the balance of the fiscal year produces a similar result financially, there will be, from current revenue, a surplus of about $140,000,000 to apply to war expenditures. Our necessity in this country for a large revenue will be as great next year as this year. It will be almost as pressing five years hence as it is to-day. Therefore the maximum revenue from the present time on for a number of years will be the greatest amount that we can possibly exact from our people without doing injustice to any class. We should not model our rates of taxation under this legislation on the income tax legislation of the United States. They have barely entered the war. It is true that in their first year they contemplate an expenditure of about $11,000,000,000, and they have already increased the rates in their Income Tax Act. I anticipate	that next year	therewill be	a further	increase and
possibly the following year a still further increase. When comparing the two^ ooun-

tries we must remember that in most of the states of the Union many forms of direct taxation that we have not in this country are imposed by the Federal Government and state legislatures. With few exceptions, I think direct provincial and municipal taxation in this country is very light, and, therefore, the example of the United States is not an infallible guide for us in the circumstances prevailing in this country. We must not allow our national debt to accumulate 'any more than we can prevent, lest we have national disaster in the future and find ourselves in a .position of inability to meet the interest upon our national debt and at the same time carry on the public services of the country.
It, therefore, matters little how this legislation compares with the Income Tax Act of the United States, o:r with that of England. The question is rather: what is the utmost we can secure by taxation from the people of this country to meet our great financial necessities and augment our current revenues so as to keep down as low as possible our rapidly growing national debt? I think, therefore, the rates proposed under this measure are not sufficiently high, .and I join very heartily in the statements made this afternoon by the hon. member for Kingston (Mr. Nickle) on the other side of the House, the hon. member for Richmond (Mr. Kyte) And other hon. gentlemen on this side. I cannot add anything to what they said this afternoon. The matter was put clearly and strongly by them. I have nothing further to say in reference to incomes under $5,000, nor as to the exemptions. When the resolution - was introduced I stated that I thought, perhaps, $2,000 was too high .an exemption in the case of unmarried men. What I really thought was that the amount .should be reduced, but I thought possibly the rate was a little high and might be made lower than 4 per cent for incomes taxable below $2,000 in amount. There .are in Canada .a great number o.f unmarried .men liable to taxation, and even if the amount of taxation is small, still the .aggregate might be very large without any great burden being imposed upon them. I have, however, nothing further to s-ay about that.
The tax on incomes of $10,000 .and upwards might very well be increased. While that m.ay impose a burden on many who will have to pay the tax, still that burden must be imposed upon some one in order to meet partially our wtar obligations. Business conditions in this country te-diay are exceptionally good; they are better than
the normal. It shall he much easier to secure a substantial amount this year, and possibly next year, than four or five years from now, and it is important that in the days of our plenty as much as possible be taken from our people to keep the Federal treasury in a healthy condition.
In the case of an income of $10,000 unmarried men and widowers without dependents are obliged to pay a tax of $400. If that were doubled to $800, do you think, Sir, that any taxpayer would object? Would it mean a very substantial additional burden on those liable to taxation under this Act? I do not think so. In the case of an income of $15,000, they have to pay $850. I do not think anybody would seriously object to paying a tax of $1,700 in such circumstances. A man with an income of $50,000 has to pay a tax of $5,300. I do not think there could 'be any valid objection if that were raised to $10,000. In the case of an income of $75,000, it is proposed to make the tax $10,000. If it were raised to $20,000 I do not think any legitimate protest would be made. It is true that in this country there are a very few people in receipt of such a large income, but there are undoubtedly some, and I think they would be content to pay a very much higher rate of taxation than is proposed by the minister. But whether they like it or not, I think they should be made to pay. I think that the rate of taxation might very well be doubled at lea^t,. on incomes of $12,000 up, if not from $10,000 up, and in many cases I think they might be. trebled.
The minister would have us Temember that very generous contributions have been made by the Canadian public to the Patriotic Fund, and that if we entrench too far upon incomes it will result in curtailing voluntary contributions to the Patriotic Fund. I submit that that is rather a weak principle upon which to .base a taxation scheme. I agree with the remarks made by the hon. member for Lethbridge this afternoon, when he suggested that hereafter the Patriotic Fund had better be sustained directly from the federal treasury. I think that from now on appeals to the public to sustain the Patriotic Fund will not meet with the response which they have met with in the past. I think it is only fair and reasonable to expect some diminution in interest on the part of the public. It is true that a great sectior of the public will contribute to this fund to the extent of their ability, but I really believe there will be serious impairment of the fund in the future if we

are to rely solely upon voluntary contributions. It is worthy, I think, of serious consideration whether or not some special tax should be imposed directly upon the people to sustain the Patriotic Fund, and to be collected by the provincial governments. It might be better still if the provinces were to take this matter up and make an annual assessment on the citizens of the province, equal to the amount collected on an average during the last three years, and pay the money over to the fund. Some room, however, should be left for those who wish to contribute voluntarily to the fund. I repeat, I do not think that payments to the Patriotic Fund should be considered when establishing a taxation scheme of this nature.
Before closing, I just wish to say a few words in reference to the business profits tax. There has apparently been some confusion in the minds of hon. gentlemen in reference to the position of the Business Profits Tax Act after the end of this year, and I should like to feel that I understood this matter thoroughly. As I understand it, the excess profits business tax is in. force for the years 1916, 1917 and 1918- and I want the minister to correct me if I am wrong-but the taxes levied come from profits of the previous year; that is, from Jhe profits of 1915, 1916 and 1917.


Richard Smeaton White: My hon. friend says that the taxes are paid out of the earnings of 1915, 1916 and 1917. I say, no. Although the taxation is in respect of those earnings, it was not possible that the tax should be paid out of the earnings of 1915, because the taxation was not imposed until 1916, and most companies and firms had distributed their earnings as dividends or invested them in plant or material. In the result, by reason of this taxation being retroactive, the taxes in respect of 1915 were paid in most cases from the earnings of laid, and the taxes in respect of 1916 from the earnings of 1917, and the taxes for 1917 will be paid from the earnings of 1918, or from the accumulated earnings of this year.


Alexander Kenneth Maclean: I understood the minister correctly; that is what I intended to say. For all practical purposes, the Business Profits Tax Act is in force in the years 1916, 1917 and 1918.


Richard Smeaton White: Practically.


Alexander Kenneth Maclean: It is true that the taxes payable in each of these years is from profits of the preceding year, but for the purposes of the revenues of the country,

the Business Profits Tax Act is in force in the years 1916, 1917 and 1918. Now the minister stated the other day that the Business Profits Tax Act expires at the end of this year, and that he does not propose renewing it, although for all practical purposes, as a revenue producing Act, it is still in force in 1918. The- last amendment to that Act imposed quite an onerous tax upon business, and may have had the effect of seriously hampering the extension of business in this country. I fear that business interests in the country will consider the minister's statement that he does not propose to renew that Act as equivalent to saying that he does not propose again to impose any tax of any nature upon business profits beyond the provisions of the Income Tax Bill. There was a great deal of objection to the last amendment to the Business Profits Tax Act, for the reason that when the minister introduced the Business Profits Tax Act he was understood to say that it would remain in force for three years, and that statement was taken as tantamount to a declaration that there would be no increase or modification of that tax.
I think it would be unfortunate to have the statement go abroad now that the principle of the Business Profits War Tax Act in, part at least is not to be renewed without that statement being accompanied by a declaration that possibly, and probably, some substitute therefore will be imposed. If in 1918 a Bill is introduced imposing taxation upon business profits, it will mee; with a great deal of opposition, and the statement now made to the effect that the Act would not be renewed will be construed as a promise that there would be no further taxation of that nature. I think that would be a very substantial objection to the statement made by the minister for some equivalent of the business profits tax after 1918. I am, of the opinion that it would be better to provide in subsection 2 of section 4, so that business people will know in the future what excess business profits tax is likely to be. It would not me operative in 1917 or 1918, except as against companies with a capitalization of less than $50,000. I ask the Minister of Finance to take this into consideration, and I submit it would be better to spend a little time now working out some scheme of the nature of the Business Profits War Tax Act as against business profits, and make it a part of this Act. Surely some taxation is in contemplation further than income tax of corporations. That is not at all substantial.

I want to say a word in regard to subsection 2 of section 4 which imposes a tax of four per cent on corporations and joint stock companies on incomes exceeding $3,000.
In the United States this particular tax has been increased, or at least a Bill has been introduced in Congress to increase it from four per cent to six per cent. I would like to suggest that this particular tax should be higher, and it should be graduated. As a matter of fact, a great number of small corporations in this country are making more money in proportion to invested capital than many of the larger corporations. There are exceptions, and of course the largest incomes are being earned by a few of the big industrial corporations. At the same time, there are scores of small corporations which are earning very large incomes and I think they might well be taxed more than four per cent on incomes in excess of $3,000. When the incomes reach $10,000, $15,000, $25,000 or more, the rate should be accordingly increased. I would like to call the minister's attention to the fact that there is no provision in this subsection in regard to taxing undistributed profits. Is there a general clause covering that later on?


Richard Smeaton White: A corporation is liable to taxation upon its profits, whether distributed or undistributed. There is a clause, which we considered for a while last night, to the effect that undistributed profits which were in the opinion of the minister being held for the purpose of evading the tax would be subject to the supertax.


Alexander Kenneth Maclean: I wish to repeat my opinion that the rate of corporation income tax should be increased very substantially in the larger incomes and it would be well to fix a special rate of taxation upon undistributed earnings. It is very difficult to tell when a corporation refuses to distribute its profits in order to evade the tax. It would be almost impossible, I would think, to determine this.


Mr. MEDERIC MARTIN:: I do not want to take much part in this discussion, but I would like to know if the minister will consider the insertion of a clause in. the Bill preventing big concerns which hold a great deal of property for increasing the rents on their tenants. Because if that is not done the poor people will pay the tax in the long run. There are some concerns in Montreal which have a great many tenants, and they have started already to notify those tenants that they will increase the rents. I suppose my hon. friend does not wish to see the poor people pay all the tax, so I think it would be a good thing to put a clause in the Bill to the effect that property owners will be prohibited from increasing their rentals with a view to reimbursing themselves for what they are called upon to pay under this Act. There are many large property-holders in Montreal receiving $100,000 a year and more in rent, if they increase their rents by five per cent it will simply mean that the poor people will pay the tax. Of course, it is always the poor who pay these taxes.


Richard Smeaton White: We cannot exempt landlords who derive substantial rentals from their properties. The presumption is that they are now getting all the rentals they can. If a man derives a net income of $10,000 or $20,000 a year from a property he owns, I do not see how we can exempt him from taxation any more than we could exempt my hgn. friend from taxation on his income as mayor of Montreal. .


Médéric Martin: That is not what I mean. My point is, I would like to see a clause in the Bill prohibiting those people from raising their rents in order to reimburse themselves for the amount they have to pay as taxes un'der this Act. They are simply trying to get the tax back from the poor people.


Richard Smeaton White: I would refer my hon. friend to the Quebec Government, because this is a matter of property and civil rights arising in the province of Quebec. I do not think it comes under the jurisdiction of the Federal Government. My hon. friend might take the question up with the Quebec Legislature. We have no power to intervene.


Médéric Martin: Certainly this Government has the power, to interfere if those large property holders increase the rents without good and sufficient reason. If they do increase the rents, it will be simply for the purpose of making the poor people pay the tax. In any event, I would ask my hon. friend to take the matter into consideration, and consult the Minister of Justice with a view to determining whether some such prohibition could be included in the Bill. They are starting in Montr real to tell their tenants that they will increase the rents. If they do so the tax will be paid by the poor people.


Mr. MURPHY:: May I inquire from my hon. friend from Montreal, St. Mary's, (Mr. Martin) if he knows of cases of this kind having, arisen?


Médéric Martin: Certainly, some of the
big concerns have given notice about it since they have heard of the law.


Wilfrid Laurier: Written
notice?


Médéric Martin: machinery, and that both Acts should be continued in force until the end of the war.


Richard Smeaton White: I think I am in a position now to deal with some matters that were suggested for my consideration before six o'clock. An amendment was suggested whereby the exemption of $2,000 in the case of unmarried persons, and widows or widowers without dependent children, was reduced to $1,500. The question was raised as to whether we would extend any consideration in the case of dependents or dependents' relatives. I have reached the conclusion that the reason I gave before six o'clock, in dealing with the subject generally, why we should not make any allowance of that kind, is a proper one. The result, therefore, is that, so far as the Government is concerned, the exemption in the case of an unmarried person, and widows or widowers without dependent children, shall be $1,500, and in the case of all other persons $3,000. I think it better that the amount should be defined, and if there are anomalies they will have to remain.


Alphonse Verville: Then a single man who has a family to support will have to pay the same tax as one who has not a family.


Richard Smeaton White: There is no allowance for dependents. I am satisfied that if there is an allowance for dependents it would defeat the exemption altogether.


Alphonse Verville: Then is it fair to reduce it? It would be very fair to reduce it to $1,500 or less perhaps, for those who have no dependents at all, living all alone, but is it fair to reduce it, when you are going to put the single men with dependents in such a condition that they are worse off than they were before?


Richard Smeaton White: I do not wish to be discourteous to my hon. friend, but I have announced the conclusion I have reached on the subject, namely that in the case of unmarried persons or widows ox widowers without dependent children the exemption shall be $1,500. In the case of all others it will be $3,000.


Wilfrid Laurier: I am sorry
to see that the reduction has been made, but if that is the conclusion of the Government, that is the end of it.


Richard Smeaton White: Section 4 now reads: "Unmarried persons and widows or 
widowers without dependent children." ] have an amendment to insert immediately after subsection 3 of section 4, which will be subsection 3 (a). It will be recalled that last evening the hon. gentleman from Halifax raised the question as to the husband assigning a part of his income to his wife for the purpose of evading the tax, which would be possible by reason oi the double exemption, the exemption to the wife, and the exemption to the husband. I think it well that both wife and husband should be assessed in respect of their assessable income, and should be entitled to the exemption of $3,000 each, but in order to prevent evasion of the tax, I desire to move that the following be inserted as subsection 3 (a)after subsection 3, of section 4:
A person who, after the first day of August, 1917, has reduced his income by the transfer or assignment of any real or personal, movable or immovable property to such person's wife or husband, as the case may be, or to any member of the family of such person shall, nevertheless, be liable to be taxed as if such transfer or assignment had not been made, unless the minister is satisfied that such transfer or assignment was not made for the purpose of evading the taxes imposed under this Act, or any part thereof. .
The effect of that will be that bona fide transfers, some of which might occur, will of course not be affected, but if the circumstances are such that the transfer is made for the purpose of evading the tax, in order that the benefit may be had of the double exemption, this subsection will meet the case. I understand the view of my hon. friend rather to be that the two exemptions should be allowed.


Alexander Kenneth Maclean: I do not want to go back to what we were discussing, in regard to making an additional allowance for each child in the family, but I want to tell the minister that, in the United States Bill now before Congress, they make provision for $100 for each child under eighteen years of age.


Charles Marcil: I am sorry the hon. minister has not taken my view of this matter. This provision practically means that if you are married you might as well raise dogs as children. No advantage is given to those who have children. Many people in this country raise dogs instead of raising children. You can see them every day of the year. It is an unfortunate state of affairs, and I am not the first to say it. The man who is married without children is placed on the same footing as if he had a dozen children.


Richard Smeaton White: I want to say
that I think my hon. friend's observations are very unjust. There is an exemption of $3,000. No married person has to pay a cent of tax unless the income is $3,000 or more, and I have known some very large families raised on a fraction of $3,000, and most of the large families in this country are those of people who have no such income. I do not believe any hardship will result from this measure at all. The legislation referred to which is being enacted in the United States is easily differentiated, because there the exemption is less than $3,000. It is $1,000 less than our exemption. I think the section is all right in its present form.


William Erskine Knowles: In regard to the assistance we get from the legislation in the United States, they do not give the double exemption to husband and wife, do they?


Richard Smeaton White: They do not.


William Erskine Knowles: The minister seems to
follow their legislation with some confidence in one instance, and does not follow it in another.


Richard Smeaton White: In this case I do not say that I have followed it, but the hon.'leader of the Opposition agrees with what has been done.


Wilfrid Laurier: I wish the
hon. gentleman would pay me that compliment more often.


William Erskine Knowles: The fact that the hon. leader of the Opposition agrees with it has nothing to do with the matter. I can do my own little thinking, and I do not think it is the kind of answer to give a grown-up man. I trust the minister will have a better .answer.


Richard Smeaton White: I did not desire
to be discourteous to my hon. friend. I just made the observation. There is a good deal to be said on both sides, and I think the Act as it stands, with exemptions to each, is probably fair. The law of the several provinces recognizes the Tight of property in the wife as an individual, and it seems to me she should be entitled to exemption.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
On section 5-Incomes not liable to tax:
Charles Murphy: Have you passed section 5?


Richard Smeaton White: Section 5 was passed last night.


Charles Murphy: Is the minister satisfied that under paragraph (g) of section 5 a club or association, with the ingenuity, for instance, of a racing association, could not bring itself within that exemption? If the minister has given the matter thought, I would ask him for an answer. If he has not, I would commend the matter to him.


Richard Smeaton White: I think the word "non-profitable" would exclude such associations. It is not the intention to exempt a racing association that is operated for gain.


Charles Murphy: Racing associations would not admit they are operating for gain.


Richard Smeaton White: The question is one of fact. If any gain were made, they would clearly be liable under this measure. The object of this exemption is obvious on the face of it.


Alphonse Verville: I was not here when section 5 was passed. I see the first exemption is "the income of the Governor General of Canada." Is His Excellency not to be taxed on his income in Canada?
Sir THOMAS W1HITE: No.


Alphonse Verville: I am sorry.


Richard Smeaton White: I may say, so tnat there may be no misunderstanding, that this is the Government's Bill. His Excellency has nothing whatever to do with the arrangement of this Bill, nor has he been consulted in any way about it.


Charles Marcil: His Excellency is exempt anyway. The fact that he is an Imperial officer would exempt him.


Richard Smeaton White: I think the exemption is a very proper one.
On section 6-Payment of tax at source:


Charles Murphy: I assume the minister will have to make a change here to correspond with the one he made in section 4.


Richard Smeaton White: I was just about to do that. I beg to move:
That after the word "unmarried" in line 23 there be inserted in place of the word "men" the words "persons or widows", and that in line 22, instead of the words "two thousand" there be inserted the words "fifteen hundred".


[Stage Direction]
Amendment agreed to.
Mr. MICHAUD:: In several municipalities in New Brunswick widows are- to a certain extent exempted from taxation on their incomes or upon property owned by



them when the assessment is made upon their property. Has that fact been taken into consideration by the minister?


Richard Smeaton White: I do not know that I quite understand my hon. friend. If a widow has children, she is entitled to an exemption of $3,000; if she has no children, she is entitled to an exemption of $1,500.


Pius Michaud: She is not exempted
then by reason of the fact that she is a widow?


Richard Smeaton White: Not by the fact solely that she is a widow.


Alexander Kenneth Maclean: Would the minister briefly state the purpose of this section and how and when it could be utilized? Could you use it for, instance in the case of brokers on an exchange?


Richard Smeaton White: This section covers a class of trustees in whom securities are vested in trust to pay over the income. It is to ensure that the Government Will get the tax from that source. We look to the trustees. Of course, if he pays it on behalf of- the beneficiary, the beneficiary is made the allowance. This is taxation at its source.


Daniel Duncan McKenzie: Is there anything in the Bill to cover estates? There are in this country large estates where money is accumulating, perhaps by reason of the children not being of age.


Richard Smeaton White: A trustee, having property vested in him and having an income in respect of it, is liable to pay. If he pays, in respect of the share of income which the beneficiary receives, the beneficiary receives credit for that payment; but if, under the conditions of the trust under which he is acting, he gets income which he accumulates for those who may come into being, say' a generation from now, he i-s liable as a person in respect of that income, so that the estate is taxed.


Daniel Duncan McKenzie: That is the case of a "trustee" estate, but there are many estates which are not "trustee" estates. Suppose a man makes a will and he appoints an ordinary executor.


Richard Smeaton White: I was considering him as a trustee.


Daniel Duncan McKenzie: If the minister considers him as a trustee possibly the Bill covers that case.
Section as amended agreed to.
[Mr. Michaud. J
On section 7-Annual returns to minister of total income:


Pius Michaud: Are special forms to be sent to the taxpayers?


Richard Smeaton White: There are certain forms in the schedule, but we have power given under a later provision of the Bill to call for such information as we require from the taxpayer, and the mode of administration will be just as under the business profits-tax, to -send the necessary forms to citizens and to have them filled in and returned to the department.
Last night the hon. member for Rouville took exception to the word " suspected " in line 9, on page 6. It is a rather obnoxious word, although it has an apt meaning. Out of deference to my hon. friend's objection, I beg to move that the word " suspected," in subsection 2 of section 7, be struck out and the word " believed " substituted therefor.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
On section 8-Additional information.
Wilfrid Laurier: Subsection 2 gives the .minister power to require " the production, or the production on oath." Why this difference? Is it not sufficient to have simply 'the words " the production?"


Richard Smeaton White: I think it is well that we should have the power to compel the production of these documents bn oath, but, of course, the .power should be exercised wisely. Suppose that you are not satisfied with the statement a citizen has made. It is an extreme case, but it is well that power should exist to make him make the statement under oath.
Section 'agreed to.
On section 9-Penalty.


Wilfrid Laurier: By the preceding section the minister may compel a man to produce letters, accounts, etc., on oath. Subsection 2 of section 9 says that " any person making a false statement " shall be liable on summary .conviction to a certain penalty. Now, if a man makes a false statement under oath he is guilty of perjury, and he ought to have the benefit of a jury, and not be tried .simply by a magistrate.


Richard Smeaton White: I think he would be liable to both. If a man commits perjury he would be liable under the Criminal Code. The provision in subsection 2 of section 9 for .a penalty on summary conviction

is ito addition to the penalties of the Criminal Code.


Pius Michaud: Under subsection 2 he would be liable to 6 months' imprisonment, and he could still be brought before a high court.


Wilfrid Laurier: A man should not be subject to two trials and two penalties. It should be either the one or the other. It is all right to provide for a penalty on summary conviction, but if a man makes a false statement under oath he ought to be tried by jury.


Richard Smeaton White: I think it is very desirable that power should exist to ask for a sworn statement.


Wilfrid Laurier: Possibly.


Richard Smeaton White: If he made a
false statement in the returns he would be liable to the penalties provided here, and I think he could be proceeded against for perjury.


Wilfrid Laurier: The lawyers
will have to disentangle it.


Richard Smeaton White: I do not think
any particular harm will be done bv retainr ing this provision.


James Alexander Robb: I call the minister's attention to what seems to me to be a hardship. In line 26 of page 6 it is provided that:
Such returns shall he delivered to the minister on or before the twenty-eighth day of February in each year, without any notice or demand being made therefor.
Then section 9 provides for a penalty of $100 for each day during which the default continues. Now firms or individuals may unknowingly default.


Richard Smeaton White: Legislation of
this kind always runs this way. There is confidence that the Government will not exercise the powers given here oppressively, in the case of a citizen defaulting unknowingly. It is necessary that the onus be put on the citizen of making the returns. But in the practical working out of the Act, just as in the Business Profits Tax Act, the various officials throughout the country will send the forms out and keep in touch with the recipients until the returns are made. 1 think I can assure my hon. friend that no such injustice as he imagines may result will be done to citizens.


Pius Michaud: The word "shall' is imperative, and looks very severe indeed.


Richard Smeaton White: As my hon. friend knows, it is a penalty not exceeding $10,000. 262i
There is always discretion within the limits fixed. It might be a fine of $10 or $50.


Charles Marcil: Ignorance of the law is no excuse, but how is an ordinary citizen, who does not read our deliberations and who does not get the statutes, to know that he must make his returns before February 28th?


Richard Smeaton White: We will contrive to let him know. We will get the organization, and secure information as to the citizens thought to be liable, give them the forms, and have these forms filled in. I admit it is a big task.


Wilfrid Laurier: What organization has my hon. friend in mind?


Richard Smeaton White: At the present time we have the business profits war tax organization. We have a Commissioner of Taxation, an assistant commissioner, and a staff in the Finance Department. Then we have representatives in every province from Nova Scotia to British Columbia. That organization can be extended by the addition of other officials. We have the province of Ontario divided into districts, with, I think, four men in charge. They have stenographers and such other assistants as are necessary. The whole Dominion is covered, and by the expansion of that staff the business profits taxation assessment could be made, and this taxation as well.


Wilfrid Laurier: There is a good deal of force in what was stated by my hon. friend from Huntingdon (Mr. Robb). Men in the country may forget they are assessable. Will your officers look after the assessment rolls in every municipality, and search out the parties who are likely to he assessable?


Richard Smeaton White: We shall be obliged to do it. We would not expect to administer this tax upon the unsolicited returns of the public. It would not be possible to do it. The country will have to be covered. It will have to be ascertained, so far as it can be, who are properly liable to assessment, and those persons will be notified, just as the assessment department here notified taxpayers. It will take some time to get the system under way, and the organization will be more or less imperfect for a while. It took three or four years to get the United States organization working properly.


James Alexander Robb: Does not the minister think it would be better to impose a smaller penalty, and collect it as a tax? Give the

people proper notice, and if they fail to *comply with it put on a small tax, and collect it. One hundred dollars' a day might be more than the tax would amount to. The penalty might be greater than the . tax. Under the Massachusetts law the penalty is five dollars for each day a person is in default. That looks like a reasonable figure, and it might be collected.


Richard Smeaton White: I am quite satisfied from my experience in office that nobody will be harmed through the infliction of penalties. I think it is desirable that there should be legislation in regard to penalties, so that citizens may be compelled to make the returns called for. I do not think it is necessary to reduce the penalty. I am quite sure no! hardship will result. It is a sanction to the Act.


James Alexander Robb: If the fine is not paid, what will happen? Will a distress warrant issue, or how will the amount be collected?


Richard Smeaton White: There is provision later pn for collection. It is a debt owing to the Crown, and is covered by section 20, which says:
The taxes and all interest and costs assessed or imposed under the provisions of this Act shall be recoverable as a debt due to His Majesty from the person on whom it is assessed or imposed.


[Stage Direction]
Section agreed to.
On section 10-Assessment:
James Alexander Robb: Does the minister not think it would be fairer if the tax were payable within thirty days from receipt of the notice, instead of thirty days from mailing of the notice?
Sir THOMAS WHITE; That brings up a difficult question. You can prove when a notice is mailed, but it is hard to prove when it is received.


Pius Michaud: The notice would be
sent by registered mail.


Richard Smeaton White: It is hard to
know, from the department's standpoint, when it is received. Of course, a citizen will be allowed a certain leeway.


James Alexander Robb: There might be instances
where men would be travelling and would not receive their notices.


Richard Smeaton White: I can assure my
hon. friend that there will mot be any harsh exercise of the powers given under the Act.


[Stage Direction]
Section agreed to.

On section 12-Board of Referees:
Daniel Duncan McKenzie: What is the duty of
these referees?


Richard Smeaton White: Section 13 defines them.


Wilfrid Laurier: How many of these boards will you have and will they be distributed over the country?


Richard Smeaton White: That would depend on the number of appeals. From our experience of the Business Profits War Tax Act I should say that it would not be necessary to appoint permanent boards but if there should be a number of appeals in, say, Nova Scotia, we would appoint a *board of referees consisting of one, two or three member's for the purpose of hearing and determining appeals. There may be very few appeals and there would be no use in appointing a permanent board in each province because that would involve considerable expense. We might appoint a county judge, or some lawyer of standing, or a business man, as the case might be, have a court of revision held and havte the appeals disposed of in a summary fashion.


James Alexander Robb: What remuneration is provided for these referees?


Richard Smeaton White: There is no remuneration fixed in the Act. It would be a matter of arrangement like the appointment of a commission under the Inquiries Act. I am told by the parliamentary counsel that it is no't necessary to insert in the Act the amount of remuneration. It would only hamper us in the administration of the Act to do so-. I should say that the usual fee of $20, $25 or $30 a day for a lawyer or county judge acting as a referee would be paid, but I should not like to be confined to that. At all events, we have not any large amount in view if that is in the mind of my hon. friend from Huntingdon (Mr. Robb).


Wilfrid Laurier: The only advantage of having local referees would be that the appeal would be brought to the domicile of the taxpayer; otherwise it would be better to send it to the court at once.


Richard Smeaton White: Precisely.
On section 13-Court of Revision:


Daniel Duncan McKenzie: Does the minister propose to provide any machinery by which parties will have notice of their rights under this Act? People generally will never see this Act. When a man gets notice of

his assessment he should at the same time get notice that he is entitled to appeal because otherwise he would not know anything about it. There should he forms sent out by the minister which should contain notice that the party assessed is entitled to appeal.


Richard Smeaton White: Surely. My hon. friend is aware that on an ordinary assessment slip sent out there is at the foot, or on the back, or in some conspicuous place, a notice that parties desiring to appeal must make a return within a certain time. If my hon. friend will look .at the schedule, he will see that a form is provided, of a very simple character, on which a man is entitled to give notice of appeal against the assessment on the ground that he has been wrongfully .assessed. There is nothing technical about it.


[Stage Direction]
Section agreed to.
On section 15-Hearing and decision by board:
iMr. ROBB: Does paragraph one of this section mean that the board has only the right to increase assessments?
Richard Smeaton White: The board shall determine the matter. The matter will be the matter of the appeal. The taxpayer will be appealing on the ground that he is wrongfully assessed and it will be for the court to reduce or confirm the assessment. Then the power is given, if the court thinks it is a proper case, to raise the assessment. It is the same power that is exercised by the ordinary court of revision in regard to the assessment of real property.


James Alexander Robb: Should it not read:	"May
increase or decrease the assessment"?


Richard Smeaton White: I submit that the section as it appears is necessary for this reason:	The appeal will be on the ground
Nthat the assessment is too high or that the assessment should not have been made. In determining the matter, it is clear that the board may reduce the assessment or hold that the party is not liable for it. The appeal will not be on the ground that the as-[DOT] sesament should be increased. Therefore we think it necessary to provide that the court shall increase the assessment.


Wilfrid Laurier: I think we
should not use such power as that. The minister has power to increase the assess^ ment himself. The poor taxpayer, who thinks he has been assessed too heavily, appeals to the board and the board should simply have the power to determine whether he has been assessed too heavily or not. It should not go beyond that. If he is not taxed sufficiently, it is for the minister to look after that and not for the board.


Richard Smeaton White: It is extraordinary how often I find myself in agreement with my right hon. friend but I do not on this occasion. This is to be the law. If a party comes before the court and it appears that a mistake has been made, that he has not been assessed enough, he submits himself to the jurisdiction of the court and if the court says that his assessment shall toe increased, it will only be because he is liable for an increased amount.
It is by no means an unusual provision, in fact I think there is a similar provision in many Assessment Acts. It is very seldom exercised, but I think it should be there because the purpose of the court is to see that a proper assessment is made. No hardship can result to the man in question, because the assessment depends upon his return, and if the court should find that he is assessable for more than the amount for which he has been assessed, it only means that he has not made a proper return. So, while in minor matters I usually agree with my hon. friend, I do not find myself agreeing with him to-night.


Wilfrid Laurier: I have been brought up under a system, that of the civil code, under which the court cannot go beyond the prayer of the suitor. I think that is a very sound principle.


Daniel Duncan McKenzie: I agree that if the assessment is not regarded as sufficient the department should have the right to appeal, that either party should have that right. I find no provision for the Crown to appeal. The man who is appealing is the party assessed. He comes before the court prepared to sustain his petition, but how is he to meet the case of an increased assessment sprung upon him there?


Richard Smeaton White: My hon. friend has been a judge, and I have no doubt a very just judge. What hardship would likely arise if my hon. friend, sitting as a court of revision, should find that the man had not made a proper return and was assessable on a larger income than he had stated, either inadvertently or otherwise? That power is vested in the court, it will be observed.


Wilfrid Laurier: I wish to call attention to section 8, which empowers the minister to ask for more information. The ratepayer has made his return to the min-

ister, and the minister may ask for more information. But here you are saying that the court shall have power to say to the man: You are not assessed fully. I say that is not what should be contemplated by the law. The appeal should be made and the prayer should be heard and decided only upon the complaint of the taxpayer that he is taxed too heavily.


Richard Smeaton White: I cannot appreciate the point of view of my right honourable friend. If, in the course of the suitor's evidence, it transpires, under the questioning of the court, that his income, instead of being $5,000, is $20,000, the court says: Not only have you no cause for complaint, but it is clear that under this measure you should be assessed for $20,000. It is most unlikely that any injustice would result from placing this power in the hands of the court.


Daniel Duncan McKenzie: I do not agree with my hon. friend's practice. If, for instance, au appeal is made against an assessment of' $20,000, then the issue is whether $20,000 is the right amount. The position of the department in the court will be to sustain that $20,000 is right. The issue will not permit the minister to show that the assessment should be $30,000 instead of $20,000.
That issue will not allow him to do that. He can sustain what he was done, and the other man's position is to controvert that. But in supporting his assessment of $20,000 he will not be permitted to get an assessment of $30,000. That is a clear cut issue that will be before the court, and the court must stand by the issue.


Mr. DAVIDSON:: In Nova Scotia we have an Act on the statute book for many years which has worked successfully, and just exactly the same powers are given to an Assessment Appeal court in that Act as are proposed under this Act. The Assessment Appeal court has the power to increase the assessment, even though the appeal be made to have the assessment decreased. Having acted in the capacity of a member of the Appeal Court, I find it works very well, because the ratepayer who thinks he is aggrieved must exercise his judgment before taking an appeal. These appeals are made in a frivolous manner sometimes, but if the person who feels himself aggrieved knows there is not only a chance of his assessment being decreased, but a possibility of it being increased, he exercises more care. That provision prevents frivolous appeals. It has worked out very well

in Nova Scotia, and I think in nearly all the provinces that have a similar Act.


Daniel Duncan McKenzie: I am quite familiar
with the provision in the Act to which the hon. gentleman from Annapolis refers. That provision has been in our Act for ma,ny years, but I do not know of any cases where it was acted upon but one, and that was last winter, in the case of some milling concern in the neighbourhood of where my hon. friend lives, and there was the greatest possible row about it. They undertook, of their own motion, according to the language of our Act, to increase the assessment, without dealing with it under proper notice of appeal, and giving notice to the other side. It came up before our Supreme Court, and such men as Mr. Justice Harris decided it was absolutely wrong to use such powers in that way. Mr. Justice Bitchie agreed with him, and it was a divided court, but two such men as Mr. Justice Bitchie and Mr. Justice Harris said such power should never be used, that ample notice should be given to any litigant of any application to have his taxes increased, and the count should not act of its own motion, although the provision happened to be in the Act. I think the hon. gentleman from Annapolis will find that was the only time, in the history of Nova Scotia, 'that it was ' acted upon without proper notice being given to the other side that it was the intention to increase or decrease, as the case may be.


Avard Longley Davidson: I think the hon. gentleman is in error with reference to that. He alludes to the case of the municipality of Annapolis versus the Davidson Lumber Company. In that case, when the Assessment Appeal Court Tai-sed the assessment, it was on the appeal of a ratepayer, and not upon the appeal of the owner of the property. There are very, very many oases in the county of Annapolis, 'and in cither parts of the province, which have come under my observation where the assessment court rtaised the assessment, although the appellant had asked for a decrease.


[Stage Direction]
Section agreed to.
On section 2, subsection (f)-Definition taxpayer.
Richard Smeaton White: My right hon. friend asked that this section be allowed to stand. I think we might pass it now. I desire to amend this section by changing

the word " suspected " to the word " believed."


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Daniel Duncan McKenzie: Section 15 provides for costs. I suppose as a rule the men who will be litigating here will be so wealthy that costs will not bother them very much, but some litigants will not' be wealthy, and the question of costs will be important to them. I find that the minister in section 15 adopts as the scale of fees the tariff of fees in force in the Exchequer Court of Canada. If a man who has only a small amount at stake-the amount may not be very large, but it may be important to him -is thinking about appealing, and he knows there may be a counsel fee of $200 taxed against him, he may not feel that he is in a position to appeal. The scale of fees in the Exchequer Court is the highest in any court of Canada, and I do not quite see why this question of costs should not be left 'entirely in the discretion of the board which could fix a lump sum that would be commensurate with the proceedings. If the board has to say: You are entitled to costs, then they have no discretion but to allow the scale of fees prescribed by the Exchequer Court. This court of appeal should be a simple court, not restricted by any close or hard rules of practice. A lawyer should not be necessary. People should be able to go before this board without any formality, just as they do before the Railway Board. If the Exchequer Court fees prevail, and an appellant is up against a taxing master who will under this scale of fees tax the cost at $300 or $400, when the matter at stake is very much less than that, a man who may have a grievance will be afraid of risking the possibility of being mulcted to that extent.


Pius Michaud: I agree with my hon. friend. I know from experience that costs are taxed fairly high in the Exchequer Court, and under this measure a man should be given an opportunity of appearing before an appeal board without having to pay too heavy costs.


Richard Smeaton White: The suggestion is a very good one. The court should be one in which the fees are reasonable, especially as the appeal will be against the Crown. I beg to move that section 15 be reconsidered.
Motion agreed, to.
On section 15-Hearing and decision by board:


Richard Smeaton White: I beg to move:
That the last sentence of subsection 2, be struck out and the following substituted therefor :
The costs shall be as may be prescribed by the Board.
~ Mr. A. K. MACLEAN: Why not say: "The tariff of fees"?


Richard Smeaton White: Very well. Make it read: "The tariff of fees shall be as prescribed by the board."


Mr. BUREAU:: If the board does not order any costs, there will be no costs.


Richard Smeaton White: The costs will be absolutely in the discretion of the board.


Jacques Bureau: A man may succeed in his appeal and the board may, in rendering judgment, not assess the costs, and he will have to pay his own costs.


Richard Smeaton White: The Board is a
judicial body and the costs are in the discretion of the hoard, but the discretion should be a reasonable one and, I have no doubt, would be. I do not see how we could divest the board of discretion as to costs.


Jacques Bureau: Then there will be no
tariff; the fees are discretionary.


Richard Smeaton White: The costs are discretionary.


Jacques Bureau: As the subsection stands, the costs are as in the Exchequer Court. There you have a fixed tariff. Under this amendment you niay have any tariff.


Richard Smeaton White: It has been
pointed out that the Exchequer Court fees are higher than the ordinary court fees.


Jacques Bureau: No, lower.


Richard Smeaton White: They are lower than the ordinary court fees in Quebec, but not lower than the ordinary court fees in Nova Scotia. The costs might be fixed by the board, and probably they would have regard to the tariff in force in the several provinces, because we shall appoint a board to deal with Nova Scotia appeals and one to deal with Quebec appeals. On the whole I think the amendment makes the matter fairly satisfactory.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Bill reported, amendments read the first and second time and concurred in.
On motion of Sir Thomas White, the House adjourned at 10.30 p.m.
[Stage Direction]
Saturday, August 4, 1917.