1926-05-27

[Stage Direction]
Mr. W. F. KAY (Brome-Missisquoi) presented the second report of the select standing committee on Agriculture and Colonization as follows:
Your committee recommend to the House that they be given leave to sit while the House is in session.
He said:	By unanimous consent of the
House I beg to move:
That the second report of the select standing committee on Agriculture and Colonization presented this day be concurred in.
Right Hon. ARTHUR MEIGHEN (Leader of the Opposition):: I do not wish to direct
any special opposition to this motion, but I think there are already just about enough committees sitting while the House is in session; there are more committees than House. I hope the precedent thus set will hoc be pursued very far.


[Stage Direction]
Motion agreed to.

Hon. CHARLES STEWART (Minister of the Interior):: With reference to the further
inquiry yesterday of the hon. member for East Edmonton (Mr. Bury) with respect to the recent sale of Saddle Lake lands, it is now possible to answer two of the three questions to which definite answer was not given some days ago. The questions were as follows:
8.	What were the names and addresses of the successful allottees and how many acres were allotted to each?
9.	How many and who among the said successful
allottees were at the date of the said allotment farmers actually engaged in farming operations in the district ?	.
10.	Have any of the said allotments been approved by the government? If so, which and when?
We are now in a position to reply to questions 8 and 10, but it will be necessary to obtain a special report from Agent Ostrander before reply can be made to question No. !>. The answer to question No. 8 is as follows:
Joseph Gagnon, Brosseau, Alberta, 320 acres.
Eclw'in McPheeters, St. Paul, Alberta, 320 acres.
Joseph W. Beaudry, St. Paul, Alberta, 320 acres.
John Pratch, St. Paul, Alberta, 320 acres.
Arthur Fontaine, St. Paul, Alberta, 320 acres.
Alphonse Fontaine, St. Paul, Alberta, 320 acres.
Henri Fontaine, St. Paul, Alberta, 320 acres.
Antoine Fontaine, St. Paul, Alberta, 320 acres.
Oliver Bussieres, St. Paul, Alberta, 320 acres.
Flore-ida Charest, St. Paul, Alberta, 320 acres. Fortunat Charron, St. Paul, Alberta, 320 acres.
Henri Charron, St. Paul, Alberta, 320 acres.

Alphonse Turnul, St. Paul, Alberta, 160 acres.
Joseph Leroux, St. Paul, Alberta, 320 acres.
James Cormack, St. Paul, Alberta, 320 acres.
Ernest Belzil, St. Paul, Alberta, 160 acres.
Victor Tessier, St. Paul, Alberta, 160 acres.
Cyrice Lafrance, St. Paul, Alberta, 320 acres.
Charles Lambert, St. Paul, Alberta, 160 acres.
Joseph Parent, St. Paul, Alberta, 160 acres.
Alphonse Poitras, St. Paul, Alberta, 160 acres.
Donat Bougie, St. Paul, Alberta, 320 acres.
Napoleon Garneau, Legal, Alberta, 320 acres.
Elzear Tremblay, Legal, Alberta, 320 acres.
Frank Jakubik, Edmonton, Alberta, 320 acres.
Pierre Charron, St. Paul, Alberta, 320 acres.
Ed. LeBlanc, St. Paul, Alberta, 160 acres.
Question No. 10 may be answered by stating that the allotments as indicated above and reported by our agent have been approved by the department.
With reference to the return ordered at the request of the hon. member, calling for the production of copies of correspondence, documents, data, etc., in connection with this sale of Saddle Lake lands, some delay must occur in preparation of this return, as it will be necessary to obtain considerable of the information desired direct from Agent Ostrander, at Saddle Lake.



PEACE RIVER ELECTION

Hon. R. B. BENNETT (West Calgary):: I beg to present the petition of James Arthur Collins of Chisholm, Alberta, praying that the House of Commons of Canada will investigate the conduct of the Chief Electoral Officer of Canada, the returning officer for the electoral district of Peace River, Edward Henry Sheppard, aforesaid, the deputy returning officer, Peter A. Robb, aforesaid, and such other officer or officers as may be necessary in connection with the establishment of a polling place at Brule Mines poll No. 4 aforesaid and the taking of, the counting and recounting the votes cast at such poll in the electoral district of Peace River aforesaid, and that such Chief Electoral Officer, returning officer,'deputy returning officer or other officer or officers be directed to take such action as may be requisite and necessary to secure the return to the House of Commons of the candidate who secured the greatest number of votes cast by the electors of the electoral district of Peace River on the 29th of October, 1925, aforesaid, and for such other and further relief as may seem meet in the premises.



QUESTIONS

[Stage Direction]
(Questions answered orally are indicated by an asterisk.)

Questions

Mr. FOSTER:: 1.	Has the property known as the Stephens property, on Dorchester street, Montreal, adjacent to the tunnel, been purchased by the Canadian National Railways?
2.	If so, at what price and for what purpose?
3.	Is it the intention of the Canadian National Railways to purchase St. Pauls church property and a number of other properties in the vicinity, for terminals ?


Hon. Mr. DUNNING:: 1.	Yes.
2.	(a) $550,000.
(b) For the protection of the interests of the Canadian National Railways.
3.	No present intention.


CANADIAN NATIONAL RAILWAYS-TORONTO BUILDING
Mr. MANION:: 1.	Has any new agreement been made regarding the erection of a building corner King and Yonge streets, Toronto, formerly occupied by C.N.R.?
2.	If so, with whom?
3.	On what terms as to Tental?
4.	How many stories is the building to consist of, and how many stories are the government taking?


Hon. Mr. DUNNING:: 1.	No.
2,	3 and 4. Answered by No. 1.


SCHOOL LANDS
Mr. BLACK (Halifax):: 1.	How many acres of land have been set aside by the federal government for school purposes in each of the provinces of Canada?
2.	What were the conditions under which the land was set aside?
3.	What is the amount to the credit of each province on account of school lands with the federal government ?
4.	What amount has been paid by the federal government to each of the provinces to date on account of school lands?
5.	What is the average amount received per acre in each province on account of school lands?
6.	What is the approximate value of the school lands unsold in each province?


Hon. Mr. STEWART (Edmonton):: 1.	School lands are designated as such only
as survey progresses. When provinces have been fully surveyed, it is estimated that the total acreage allotted for school lands will be approximately as follows:	Manitoba,
7,993,600 acres; Saskatchewan, 8,421,100 acres; Alberta, 7,798 600 acres.
2.	See Section 22 of the Statutes of Canada, Chapter 55, Victoria, 1872.
3.	Manitoba, $5.840,489.21; Saskatchewan, $14,834,655.86; Alberta, $7,826,970.26.
4.	Manitoba, $5,596,575.18; Saskatchewan, $10,384,483.21; Alberta, $6,724,069.73.
5.	Manitoba, $9.76; Saskatchewan, $17.76; Alberta, $14.02.
6.	Impossible to estimate even approximate value, as unsold school lands, even in surveyed territories, have not been inspected and valued.


PROTECTION OF ESKIMO
Mr. ROGERS:: 1.	In view of the great decrease in the Eskimo population of the Canadian Arctic and the marked increase in the Eskimo population of Alaska, U.S.A., and Greenland, Denmark, are any steps being taken to provide local medical service such as is being done in the countries named?
2.	Are Royal Canadian Mounted Police posts generally established where new trading posts of importance are set up amongst the Eskimo of the Northwest Territories?
3.	Are there any Indian agents amongst the Eskimo of Northern Quebec or Hudson strait and the bay?
4.	If not, what protection can they obtain corresponding to the protection afforded the Eskimo of the Northwest Territories by the Royal Canadian Mounted Police?


Hon. Mr. LAPOINTE:: 1.	Yes.
2.	Yes, as far as possible, up to the present.
3.	No, the Department of Indian Affairs is represented by officers in charge of established posts of the R.C.M. Police.
4.	Answered by No. 3.


WAR REPARATION CLAIMS-MR. JAMES FRIEL
Mr. DOUCET:: 1.	From what date has Mr. James Friel, advocate, been performing the duties of investigator of war claims?
2.	What sums of money has he drawn from the public treasury during his term of office?
3.	Of the total amount what was drawn as salary and what was drawn for expenses?
4.	How many claims were heard and how many decisions were rendered?
5.	What action has been taken following the decisions rendered ?


Hon. Mr. LAPOINTE:: 1.	11th July, 1925.
2.	$11,015.92.
3.	Salary, $7,258.06; expenses, $3,757.86.
4.	2S2 heard. 560 decisions made. These include cases heard by the late Mr. Pugsley.
5.	No report has been submitted.


CHICOUTIMI HARBOUR COMMISSIONERS
[Stage Direction]
Hon. P. J. A. CARDIN (Minister of Marine and Fisheries) moved that the House go into committee at the next sitting to consider the following proposed resolution:
That it is expedient to bring in a measure to incorporate the Chicoutimi Harbour Commissioners, and to make provision for the improvement, management and regulation of the Harbour of Chicoutimi, in the province of Quebec.	,
Business of the House
[Stage Direction]
He said:	His Excellency the Governor
General, having been made acquainted with the subject matter of this resolution, recommends it to the favourable consideration of the House.
Motion agreed to.

[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Railways and Canals) moved that the House go into committee at the next sitting to consider the following proposed resolution:
That it is expedient to amend section 262 of the Railway Act, 1919, and to provide that the total amount of money to be apportioned and payable from any annual appropriation shall not, in the case -of any one rail level crossing, exceed forty per cent of the cost of the actual construction work, and shall not, in any such case, exceed the sum of twenty-five thousand dollars.
He said. His Excellency the Governor General, having been made acquainted with the subject matter of this resolution, recommends it to the favourable consideration of the House.
Motion agreed to.


Right Hon. W. L. MACKENZIE KING (Prime Minister) moved:: That on and after Monday, the 31st of May, instant, and every Monday thereafter to the end of the session, government notices of motions and government orders shall have precedence over all business except questions by members and notices of motions for the production of papers.


Arthur Meighen: I do not think the extra
Monday which was promised private members has ever yet arrived. The budget debate, of course, had precedence on Mondays as on other days, and last Monday was a holiday. So far there has been no day available for the discussion of one or two important motions which I understood the government to guarantee. Personally I would not object if one more day were granted, and that, I .think, was the understanding of the House.


William Lyon Mackenzie King: As I recollect, the extra Monday was desired in order to afford my hon. friend from Toronto East Centre (Mr. Bristol) an opportunity to go on with a motion he intended moving, but I understand he has since decided not to proceed with it. The government has no desire to prevent any hon. member from going on with private motions, but most of the motions have been dealt with and there is a general feeling that we should get on with the other work of .the session.


Arthur Meighen: There are some private motions remaining to be considered. What the Prime Minister says does apply to the hon. member in question, but there are one or two others who would like to take up motions standing in their names. I would suggest that the motion stand until to-morrow so that we may have an opportunity of considering the matter in the meantime.
Motion stands.
INQUIRY AS TO PUBLIC BILLS On the Orders of the Day:


Mr. T. L. CHURCH (Toronto Northwest):: I would like to direct the attention of the government to pages 12, 13 and 14 of the order paper, on which appear public bills and orders. In these public bills and orders are a number of bills standing for second reading, including many matters of public interest and public importance. I wish to also direct the attention of the Prime Minister to the fact that I moved the second reading of Bill No. 2, to amend the Post Office Act, but the Prime Minister asked me to have the bill stand over, although I was prepared to go on. I want to ask the Prime Minister, is he prepared to carry out the bargain he made with me in that debate, and to give me an opportunity to move the second reading of this bill?
I would further draw his attention to the public bills on the order paper for to-day, on pages 12 and 13, standing in my name, under Orders Nos. 23, 24, 26 and 27. Is this a free parliament or not? Are private members to be prevented by the rules of the House from bringing in and going on with a bill? What are we meeting for? I would ask the Prime Minister if an opportunity will be given to give these bills a second reading, which will take only a very few moments, so that they can be referred to a committee. I would direct the Prime Minister's attention to the undertaking that was given.


William Lyon Mackenzie King: I agree with
my hon. friend that it is regrettable that the session has occupied such a long time. With respect to the public bills that he has mentioned, I think they will have to take their chance in the regular way. Any agreement that has been made with my hon. friend, though, with respect to any particular measure will be carried out.
RESOLUTIONS WITHDRAWN On the Orders of the Day:


Hon. H. H. STEVENS (Vancouver Centre):: I w-ant to ask the permission of the House to drop from the order paper certain resolutions

Hudson Bay Railway
which the Minister of Customs (Mr. Boivin) asked should be transferred from their proper place to another order, wherein they have remained in cold storage, from the time of their transference until the present moment, without any possibility of their being reached. As they are simply cluttering up the order paper unnecessarily and as there is no likelihood of their being discussed I would ask that they be dropped. The resolutions to which I refer are, on page 22, numbers 17, IS, 19 and 20, and on page 23, numbers 22, 23 and 24. I want to congratulate the minister on his success in preventing me from reaching these motions.


Mr. BOIVIN:: They all came out in the committee.


Mr. CLARK:: No, they did not.


Mr. SPEAKER:: I understand that the
hon. member for Vancouver Centre (Mr. Stevens) wishes to drop certain motions of his now standing on the order paper. In order to do this, according to the procedure of the House, a motion should be made that the hon. member be given leave to drop the notices of motion standing in his name on the order paper, being Nos. 17, 18, 19, 20, 22, 23 and 24.
Is it the pleasure of the House that the hon. gentleman shall have leave to drop those motions?


[Stage Direction]
Motion agreed to.

[Stage Direction]
On the Orders of the Day:
["I am glad my hon. friend has raised this question. At the time he made the inquiry I hesitated to give an assurance that\n\nthe papers would be tabled, because I was not sure that it was proper to do so before I had prepared a recommendation to the Governor in Council in this matter. However, I see no objection to doing so now, and I think my hon. friend and the House are entitled to have these documents tabled, which I now hand to the clerk. With regard to the second part of my hon. friend's question, the matter is under consideration and no decision has been reached."]
Hon. R. J. MANION (Fort William):: It has been the custom in the past when questions are answered to have duplicate copies handed at once to the members interested. At present this practice is sometimes followed but occasionally it is not. For example, a duplicate of an answer to a question of mine to-day was handed to me, but yesterday I could not get a copy of an answer that was given; I had to wait until to-day to read it in Hansard. I would suggest that the government insist upon all departments forwarding, for the convenience of members, duplicate copies of answers to all questions appearing on the order paper.



[Stage Direction]
On the Orders of the Day:
Mr. C. H. CAHAN (St. Lawrence-St. George):: When members apply to the distribution office for documents and public reports, no copies of which are available there, may they receive such papers from the Printing Bureau free of charge or must they pay the cost charged by the bureau? I am quite willing to pay my share of any expenses incurred by the Printing Bureau in connection with documents procured there, but I think that when members of the House are required to consider bills, with respect to which necessary information is to be obtained only in public reports, they should be allowed to obtain those reports from the bureau. I have in mind Bill No. 8 now before the House, about which I know nothing. I wanted to read the report of the Royal Grain Inquiry Commission, and I sought also to obtain a copy of the Canada Grain Act of 1925, unbound. I cannot find these in the distribution office and on previous occasions, when I have applied to the Printing Bureau, I have received from them a bill for current reports. These reports and papers should be made available to members in order to facilitate the discussion of matters under consideration in the House.


Hon. J. C. ELLIOTT (Minister of Labour):: Members have a right to apply to the distribution office for any documents they may require. These documents are distributed subject to certain regulations as to quantity and so on. I shall be very glad to make inquiries with regard to any particular matters that my hon. friend refers to, and perhaps to-morrow I may be able to give him a statement as to those.


Charles Hazlitt Cahan: Mr. Speaker, when I applied to the distribution office I was treated with great courtesy, but the officials told me that they have not these documents on hand and that I should apply to the Printing Bureau. When I applied there I was told that I would have to pay for them at certain rates, to be charged up against me. I am perfectly willing to pay my share, but still I think public documents of that kind should be made available to members who need them in their parliamentary work.


HUDSON BAY RAILWAY
[Stage Direction]
On the Orders of the Day:
Mr. T. W. BIRD (Nelson):: Mr. Speaker, I desire to ask the Minister of Railways if he intends to give the House an early opportunity to discuss the estimate for the completion of the Hudson Bay Railway?
Hon. CHARLES A. DUNNING (Minister of Railways and Canals): Mr. Speaker, I am hoping to be able to deal with the estimate for the construction work on the Hudson Bay railway when the estimates for the Department of Railways and Canals are next before the committee of Supply.
International Conjerence


INTERNATIONAL PARLIAMENTARY CONFERENCE ON COMMERCE
[Stage Direction]
On the Orders of the Day:
Arthur Meighen: Mr. Speaker, I wish to
call the attention of the Prime Minister to a despatch from London which appeared in La Presse of the day before yesterday, and to found a question upon it. The despatch is as follows:
Canadians in London are asking to-day why Canada alone among the dominions, and almost alone among all the countries o>f the world, is not represented at the Parliamentary International Conference on Commerce.
All the great nations are represented there, and even countries like Afghanistan, Portugal, Luxemburg, Turkey, Honduras and San Salvador have their parliamentary or diplomatic representation. Australia has sent three delegates; New Zealand three, of whom Sir Thomas McKenzie, is one; South Africa one; and the Indias ithree. But Canada has no one.
The reason given, in reply to questions put on the subject, is that Canada has nobody here who ds able to represent the country officially. The Hon. E. jST. Rhodes, Premier of Nova Scotia, ought to be the official delegate of Canada, but he sailed yesterday on the steamship Arabic to return home, and apparently there is nobody who .is able ,to take his place.
The first sitting of the conference is being held to-day at Westminster /paiace. It is proposed to discuss all questions relative to international companies, to bankruptcy, to agricultural credits and problems of urgency. The object is to elaborate plans capable of guiding countries which contemplate instituting a code of commerce.
I should like to ask the government if they can give us any information whether Canada is really represented or to be represented; and if not, why not?


William Lyon Mackenzie King: Mr. Speaker, as I listened to the despatch read by my right hon. friend it sounded to me as though it was a well-intentioned bit of publicity for Mr. Rhodes. This I do not take exception to.


Arthur Meighen: It is in La Presse.


William Lyon Mackenzie King: Nevertheless it looks as though it was so intended. However, it is the first intimation I have had of the international conference referred to. I do not know that any invitation has been extended to the government to be represented. I do not know that it is an official conference; I am inclined to think it is not, but I will have this phase of the question looked into.
As to capable representation, there can be
no doubt as to our having very many persons in London well qualified to represent Canada. I cannot think of anyone better qualified than the present high commissioner to

represent our country at any international conference on commerce and I believe had he been invited he would have attended. I am inclined to think that the conference is of a voluntary character, not official and that those who are attending it are representing boards of trade and similar bodies.


BRITISH MARKET FOR CANADIAN CATTLE
[Stage Direction]
On the Orders of the Day:
Mr. H. A. MULLINS (Marquette):: Mr. Speaker, I should like to read a letter for the benefit of the Minister of Agriculture (Mr. Motherwell) and the Minister of Railways (Mr. Dunning)-


Hewitt Bostock: Order. I must ask the hon. member to kindly base his question on the letter, but not to read it.


Henry Alfred Mullins: This is a letter from Lord Bledisloe, Minister of Agriculture in England. He has recently received one hundred steers from this country and is very much pleased with them. Lord Bledisloe was strongly opposed to the admission of Canadian cattle into the British Isles, but I asked him to try a hundred, and he adopted my suggestion. He has now written me a splendid letter of recommendation of Canadian steers, and he has also influenced a number of others to purchase Canadian cattle for grazing purposes in England. There is a wonderful market for Canadian cattle in that country-


Hewitt Bostock: Order. I am sure the
hon. member is coming to his question-he is steering that way.


Henry Alfred Mullins: Mr. Speaker, I wish to
ask the Minister of Agriculture and the Minister of Railways if they are doing anything to secure tonnage for shipping cattle to the British market. There has been so much delay in this regard-


Hewitt Bostock: Order.


Henry Alfred Mullins: I would ask those hon.
gentlemen if there is any probability of putting the government merchant marine into this service.


Hon. W. R. MOTHERWELL (Minister of Agriculture):: Mr. Speaker, I beg to assure
my hon. friend that I have not charge of the merchant marine. Everything is being done that can be done to increase the amount of tonnage available for shipping live cattle to the British market. There are plans on foot that I hope will be completed at no very distant date.

House Protective Service
Hon. CHARLES A. DUNNING (Minister of Railways and Canals):	Mr. Speaker, I
cannot answer offhand in regard to the government merchant marine, but perhaps I may indicate to my hon. friend how information along that line can conveniently be secured. The special committee on Canadian National affairs is to meet to-morrow morning at eleven o'clock for the purpose of dealing with the merchant marine, and I feel sure from discussions which have already taken place in the committee that its members would welcome my hon. friend there, where he will have an opportunity to address detailed questions to the officials of the merchant marine regarding this matter. Possibly such a discussion would be helpful to him and to the Canadian cattle industry.


HOUSE PROTECTIVE SERVICE
[Stage Direction]
On the Orders of the Day:
Mr. J. S. WOODSWORTH (Winnipeg North Centre):: Mr. Speaker, in the Ottawa
Citizen of last Friday, there appeared a sensational article headed, "Secret House sessions debate booze round-up." Since this article has been broadcast throughout the length of Canada, it affects very definitely each member of the House. It strikes me that the present situation is most unsatisfactory to all members, and I think it is even more unsatisfactory to the officials concerned. I should like to ask the government whether we may hope to have a statement with regard to this matter; and, further, whether in the meantime the government will state if what is contained in the final paragraph of the article referred to represents the position of the government :
It is known that parliament hill claims exemption from ordinary supervision in such matters and that local officers charged with enforcement of the Ontario Temperance Act are forbidden admission to the precincts of the federal House in discharge of their duties.


William Lyon Mackenzie King: I should say that this matter is one for His Honour the Speaker of the House to deal with rather than for the government. I understand the House and its precincts are under his Honour's jurisdiction.


James Shaver Woodsworth: I think I am quite right in saying, Mr. Speaker, that a matter of this kind which reflects upon unnamed individuals in this House reflects upon the whole membership of the House of Commons. Some of us know the effects of charges of this character which were made some years ago in the Ontario House, and some of us think it quite right that we should ask for a
public statement when a public charge of this kind is made in one of the leading Ottawa papers.


William Lyon Mackenzie King: I quite agree with my hon. friend that a statement should be made, but I think the statement would come more appropriately from His Honour the Speaker of the House than from a member of the government.


James Shaver Woodsworth: I am quite satisfied, if we get the statement. With regard to the second part, I should also think it would be a good thing to know if this House possesses what might be called extra-territorial rights.


Hewitt Bostock: I had intended, when
the reports from the Sergeant at Arms had been handed to myself, to call a meeting of the Board of Internal Economy, and then bring the question before the House. I may say at once that I do not take much stock, if I may use the expression, in the publication of the article which has been read by the hon. gentleman. I think I oan claim without flattering anyone that this House is composed of gentlemen, and that there has been nothing sinister here since I have had the honour of being Speaker. But, of course, when something is published in the papers with headlines, people are liable to be frightened about the morale of this House, I therefore intended to bring this matter before the Board of Internal Economy and then report fully to the House.
Let me say, however, that it was to prevent petty thefts which had taken place in certain parts of the House that the visit which is usually made by the officers under the Sergeant at Arms was made on that occasion, with perhaps a little more care. I declare once more that from the reports I have received there is nothing reflecting on the honour of any member of this House, but I am bringing the matter before the Board of Internal Economy so that a full report may be published in the press in order to counteract the effect which may have been produced by the publication of the article in question in the Ottawa papers.


GENEVA CONFERENCE ON DISARMAMENT
[Stage Direction]
On the Orders of the Day:
William Lyon Mackenzie King: The hon. member for
Winnipeg North Centre (Mr. Woodsworth) asked me a question yesterday, the answer to which I promised for today. The question is:
Sumas Landowners

Was Canada invited to have a representative at the Geneva Conference on Disarmament ? Was Canada consulted as >to policy, and has the British representative, the Chancellor of .the Duchy of Lancaster, been instructed to speak for Canada ?
In answer I would say that the Conference on Disarmament has not yet been held. In September 1925 the assembly of the League of Nations requested the council to make preliminary studies with a view to holding a conference for the reduction and limitation of armaments. In December the council appointed a preparatory commission consisting of representatives named by each of the ten members of the council and by certain other members of the leauge specially interested by reason of their geographical position, namely, Poland, Jugoslavia, Rumania, Finland, Holland and Bulgaria. Invitations were also extended to three non-members of the League, the United States, Germany and Russia, and accepted by the first two. The meeting which is being held at Geneva in the present week is simply a meeting of this preparatory commission, on which Canada and the great majority of the other members of the league are not directly represented. The Chancellor of the Duchy of Lancaster, who is a member of the preparatory commission, represents the government of Great Britain, and has not received any instructions to speak for Canada. If it is found feasible to hold a disarmament conference in 1927, as is now anticipated, Canada, and all other members of the league, will doubtless be represented and our country will have an opportunity of setting forth its views.


Arthur Meighen: Perhaps the Prime Minister would tell us what Canada has to disarm.


PETITION FROM SUMAS LANDOWNERS
[Stage Direction]
On the Orders of the Day:
Mr. HARRY J. BARBER (Fraser Valley): I would like to draw the attention of the Minister of Justice (Mr. Lapointe) to a question I asked on April 27 concerning a petition from the Sumas landowners, asking that certain provincial legislation be disallowed. At that time I asked the Minister of Justice if such a petition had been received, and if the correspondence might be laid on the table. Since then a considerable time has elapsed, and I might also ask if the governor in council has reached a decision in this matter.
Hon. ERNEST LAPOINTE (Minister of Justice):: I am glad my hon. friend has raised this question. At the time he made the inquiry I hesitated to give an assurance that

the papers would be tabled, because I was not sure that it was proper to do so before I had prepared a recommendation to the Governor in Council in this matter. However, I see no objection to doing so now, and I think my hon. friend and the House are entitled to have these documents tabled, which I now hand to the clerk. With regard to the second part of my hon. friend's question, the matter is under consideration and no decision has been reached.


CANADIAN NATIONAL RAILWAYS
[Stage Direction]
Mr. A. de WITT FOSTER (Hants-Kings):
May I direct the attention of the Minister of Railways (Mr. Dunning) to Hansard of May 18, in which I asked a question regarding the purchase of an electarc line running from about Mloreau street to Bout de File, from the Montreal Tramways Company or one of its affiliated companies. The minister pointed out that it was not in the public interest- to give the price paid, but in view of the fact that in answer to a question asked to-day regarding a similar purchase, although not of a railway, the price is given, may I ask the Minister of Railways if it will be now in order to have the price given as a supplementary answer to that formerly given?
Hon. CHARLES A. DUNNING (Minister of Railways and Canals): I will be very glad to get the information for my hon. friend. I may say by way of explanation that questions which have to be transmitted to the Canadian National must, of course, be perused by myself after they are returned from Montreal. The hon. member for West York (Sir Henry Drayton) raised a question at the same time with regard to capital expenditures which is, I believe, a proper point, but in connection with that particular question I must confess that it came in at the last moment and I did not go into it as thoroughly as I might have done. The question to which my hon. friend refers now was answered in part, and I will undertake to see that a supplementary answer is tabled giving my hon. friend the information he wishes.

[Stage Direction]
INCOME WAR TAX ACT, 1917, AMEiNDMENT
The House in committee of Ways and Means, Mr. Duff in the chair.
Resolved, that it is expedient to amend The Income War Tax Act, 1917, and to provide:-
1. That the amount of income exempted from the tax be increased to three thousand dollars in the case

Income War Tax Act
of a married person or householder, or any other person supporting certain relatives as at present set forth in the act and to fifteen hundred dollars in the case of other persons.
['With reference to the\nobservations made by the minister as to the purposes for which these holding companies were formed, I think it is only fair to him to say that in the smaller provinces these companies were not formed with the express purpose of evading the supertax, but having regard to the lack of reciprocity between the provinces with respect to succession duties, most if not all of them were primarily formed for the purpose of evading the payment of double succession duties to the various provinces on securities such as the stock of companies having their head office in a province other than that in which the company was domiciled.\nResolutions reported, read the second time and concurred in. Mr. Robb thereupon moved for leave to introduce Bill No. 116, to amend The Income War Tax Act, 1917.\nMotion agreed to and bill read the first time.\nOn motion of Mr. Mackenzie King, the House adjourned at 11.55 p.m.\nFriday, May 28, 1926.']
Mr. WHITE (Mount Royal):: I wish to make an appeal to the Minister of Finance in connection with the exemptions for dependent children. I have a letter here from a constituent in Mount Royal in the course of which he says:
I have a daughter who is over twenty years of age, who, unfortunately, cannot earn her own living on account of having the use of only the left hand from birth. I have to look after her, and I am not exempt for the $500 on her account.
It does seem to me that in a case of that kind where a child is incapacitated from birth from earning a living, the age for exemption should not be limited to eighteen years, but should be indefinite. It may be that in cases of that kind, if an appeal is made to the Minister of Finance, the exemption will apply only in the oase of parents whose income is not in excess of, say, six or eight thousand dollars. But there is a germ of a fair case, it seems to me, in the circumstances I have referred to, and I would ask the minister if he would be good enough to give it his consideration.


Hon. J. A. ROBB (Minister of Finance):: As my colleague the Minister of Customs and Excise (Mr. Boivin) has to do with the administration of the act and as he has given much time to the preparation of the measure now before the House, and understands the new regulations very much better than I do, I am going to ask him to answer any questions that are submitted to him by hon. gentlemen.


Georges Henri Boivin: In answer to my hon. friend from Mount Royal, I might say that the question which he has just submitted was very seriously considered, but it has been found practically impossible to give any additional exemptions to a married person on account of dependent children over the age of eighteen years. If an exemption were made for a case like that mentioned by my hon. friend, it would give rise to such a number of false claims which it would be impossible for the Commissioner of Taxation and the inspectors of taxation to investigate and approve that it was felt that in spite of the fact that in occasional cases there must be severe hardship, it would be better to adhere strictly to the rule making the age limit eighteen years. I would point out, however, that in the case of unmarried persons who have dependents who are relatives, to a certain degree, and in the case of widows and widowers having dependent children over
eighteen years of age, the fact that they are obliged to support these dependents is taken into consideration in the act and they are placed in the same class as married persons, that is to say, they have an exemption of $3,000 instead" of $1,500. It has been found impossible, however, to draw the line and define in an absolute way any exemption which could be granted to married persons having dependent children over eighteen years of age.


Mr. EDWARDS (Frontenac):: How does the age limit in this case compare with the age in the case of fixing allowances for widows of soldiers? The amount of pension payable in that case depends to a certain extent upon the number of children under a certain age. Is the age limit in that case eighteen years, the same as in this?


Georges Henri Boivin: I am not familiar with the terms of the Pensions Act. I remember very well when the act was discussed in the House, but I cannot recall the exact age that it provides.


Sir EUGENE FISET:: Eighteen years.


Georges Henri Boivin: Of course, in so far as pensions received under the Pensions Act are concerned, they are exempted entirely from taxation under this act.


Mr. ROSS (Kingston):: May I draw the minister's attention to the fact that the age is not limited to eighteen if the child is attending school continually.


Georges Henri Boivin: My hon. friend is referring, of course, to the Pensions Act. That request was very strongly urged upon the government by the hon. member for Labelle, who pointed out that the age limit of children should be increased owing to the fact that a large number of parents kept their children in schools and colleges long after they had passed the age of eighteen, and that that was the very time in life when they were the greatest expense to their parents. There is a lot to be said in favour of that argument.


Arthur Edward Ross: May I just draw the Minister's attention to the fact that in some of the provinces the parents are forced to keep the child in school up to a certain age, but not after eighteen?


Georges Henri Boivin: Yes, there may be some
provinces where a system of compulsory education exists, but in no case does the age exceed eighteen years.
Mr. EULiER: Has the minister considered the advisability of including amongst the ex-
Income War Tax Act

emptions one that is not there now? I refer to the case of children who are beyond the adult age, have become permanent invalids, and are a charge upon their parents, perhaps a heavier charge than those who are not of adult age. It seems to me there should be an exemption in such cases.


Georges Henri Boivin: The same answer would
apply to my hon. friend's question as to the question asked by my hon. friend from Mount Royal. There are very many meritorious cases where such an exemption should be granted, but it is so terribly difficult to control these cases and prevent fraud that the officers of the department claim it is absolutely impossible to provide for an exemption.


Mr. HANSON:: Would the minister make
a succinct statement in regard to the respective classes dealt with? Then we should be in a position to deal with the matter intelligently.


Thomas Langton Church: I think the time is opportune to urge upon the Minister of Finance that the exemption of $3,000 be raised to $5,000. In the city from which I come there are many w'orking people whose earnings amount to $3,000 and they have to pay a double headed tax. They have to pay a tax on May 1,' in full to the municipality and a tax to the federal authorities on the same date. So the first instalment of the municipal tax falls due on May 1, and the federal tax is payable about the same time. Possibly the payment of the federal tax might be deferred until a later period in the year as the double header tax is a hardship. Then as to the forms. They are so worded that it takes a Philadelphia lawyer to construe them properly and fill them out correctly. In my opinion the taxation forms could be greatly simplified like municipal taxation forms. There is another point to which I wish to draw attention. This tax was originally imposed as a temporary war measure. In the United States the exemption has been raised, I think, up to about $7,500. In Australia it has also been raised. Here it still remains at $3,000. The ability of the people to pay income tax on that amount has been greatly lessened by the decline in the value of the dollar. The Minister of Finance, a year ago said he would have a conference with the provincial and municipal authorities on the subject of taxation, seek to avoid double header methods and secure co-ordination. May I remind him that the municipalities, unlike the federal government, do not have an unlimited source of taxation. And yet there are enormous

responsibilities placed upon them by the federal and provincial governments that do not properly come within their sphere.
In the province of Ontario, for example, the municipalities are required to maintain the registry offices, the gaols, the courthouses, and many other institutions, which should be obligations of the provincial government, more especially in view of the fact that the provinces receive a Dominion subsidy, under the British North America Act, for many of these purposes. In other provinces there are also burdens imposed of a similar nature. Had I been in a position to do so in 1917, I would have carried the question of the right to impose this income tax-which is distinctly a war measure-to the Privy Council. I had at the time the authority of five or six leading counsel in the Toronto district for the statement that this tax, which was levied as a war measure, was disinctly ultra vires of the federal parliament. It affects property and civil rights, a matter entirely within the purview of the provinces. It is too bad that the working classes of Canada should be subjected to this tax the legality of which is doubtful to say the least. This tax properly comes within the category of a "nuisance" tax. It bears with special severity upon those people who, although they earn $3,000, find it hard enough to live at present with everything at such a high cost. The worst feature of the matter is that many people in receipt of large incomes escape the payment of 4 p.m. income tax altogether. They go over to England and are not subject to income there because they say their domicile is in Canada. In Canada they escape because they say they are domiciled in England, with the result that they escape in Canada and England as well. I know of three prominent Canadian citizens who are in receipt of an income of at least a million dollars and yet do not pay a cent of income tax in England or Canada. I should like to see this matter taken up on this side of the House. It should be dealt with by the "board of strategy. I do not know what has become of our board of strategy; I wish it would wake up and do something for the working classes. The Trades and Labour Council of Toronto have protested against this unjust taxation over and over again. I am sorry that more representatives of the working men in this House do not rise and protest against the double header tax. The hon. member for Winnipeg North Centre (Mr. Woodsworth) and his colleague, the hon. member for North Winnipeg (Mr. Heaps) are supposed to represent the working classes here, and why they

Income War Tax Act
do not take a firm stand on this question I do not know. I do not see them here to help the workingman get his just due. What about the so-called independent hon. member for Labelle (Mr. Bourassa)? He is supposed to be an Independent; he has no board of strategy over him to tell him what to do. Where does he stand in regard to this matter?
I want to protest on behalf of the working classes of the city from which I come against this particular tax, the form of tax, the method of collecting it on the very same day as the municipal tax, and the method of sending a bailiff or a federal officer to summon members of the working classes to the police court for non-payment. Many workingmen were summoned before His Honour Judge Cohen in Toronto to compel them to pay $5.47 in taxes. These men are, many of them, returned soldiers with children, and they are out of work. This tax is collected on the 1925 income and many of these men who had work in 1925 have gone to the United States or are out of work in 1926 and have not the means of paying this tax. There are other men in Christie street hospital to-day who in 1925 had jobs and are now taxed though out of work.
The present Minister of Labour (Mir. Elliott) has left the chamber. The former Minister of Labour said that he was a friend of the working classes of Toronto. Where does the Labour Minister stand in this particular matter and where does the government stand? The government was supposed to go after the big interests; they said that we were the party of the big interests. I serve no big interests in this country. I have suffered in the battle against the big interests and I am prepared to suffer again. Yet these same big interests are escaping their share of the taxes to-day. The Mail and Empire and the Toronto Star talk about taxes and the working classes. There are no two greater enemies of the Conservative party and the working classes than the Michigan-controlled Toronto Star and the Montreal-owned Mail and Empire, the biggest load the Liberal-Conservative party are carrying to-day in Ontario.
I am here pleading for $5,000 exemption for the under-dog. There are 30,000 men out of work in our city and I appeal to the Minister of Customs and Excise, who is a young minister, and to the Minister of Finance, who is not unfriendly to the working classes-the under-dog who has to pay this double-header income tax-to raise this exemption to $5,000. They should also restore to the municipalities their former exclusive privilege of collecting income tax which, under the British North
America Act, has been the field of the municipalities from confedration to 1917, when the Union government, which I voted for but never supported and never would support, brought it in only as a war measure. The minister should now restore this tax to the municipalities to whom it belongs, and not invade a field of taxation that does not belong to them. Little or no revenue will come out of the $5,000 men; why not increase the exemption to that extent?


Georges Henri Boivin: The hon. member for York-Sunbury (Mr. Hanson) asked me to point out the dependents provided for in the act giving the taxpayer the additional exemption or the same exemption as married persons. There is no change in that; it is the same as in the present act. The exemption of $3,000, which was formerly $2,000, is given in the case of a married person, in the case of any person who has depending upon him a parent or grandparent, a daughter, or a sister, a son or brother under twenty-one years of age, or a son or brother of any age incapable of self support on account of mental or physical infirmity. Those are the exemptions which enable a person who is not married or who is a widow or widower to get the same exemption as the married man.


Mr. EULER:: Why does the case which I cited not come under the clause which the minister just quoted? It is apparently included there.


Georges Henri Boivin: I understood my hon. friend to make the request that responsibility for a child over eighteen years of age, but owing to physical infirmity dependent upon his parents, should entitle the parent to have the same exemption as if the child was under eighteen years of age.


William Daum Euler: The minister read something that seems to include it.


Richard Burpee Hanson: That is the case to which the hon. member for Mount Royal referred and it is a typical case of which examples have come before many of us. That case appeals very strongly to me and it ought to appeal very strongly to the government. The difficulties to which the minister has referred in dealing with cases and eliminating frauds have perhaps been exaggerated in hi3 mind. I can imagine that people might attempt to put up a fraudulent claim such as the minister suggested, but such cases ought to be capable of demonstration. In the case of a man with a daughter who is an invalid over eighteen years of age, a certificate of a physician of good standing should be prima facie evidence and the taxpayer ought to receive
Income War Tax Act

consideration. I have no doubt regulations could be framed which would meet the situation and do justice. I think at present injustice is done.


John Wesley Edwards: What was the purpose in the first place of fixing an age limit of eighteen? I presume it was assumed that when a child reached eighteen years it had reached an age when it could look after itself and that up to eighteen years it was dependent upon its parents. If that was the assumption and if that is the reason why the age was fixed at eighteen, then the child who is physically defective and who may be twenty-five or twenty-six or thirty years of age is still a child and still dependent notwithstanding the fact that it has passed1 the age of eighteen. If it is reasonable to give the parent exemption for a child up to the age of eighteen years on the assumption that it is not able to take care of itself up to that age, if we want to be logical we should extend that in the case of children who have physical defects or infirmities which prevent them from earning t'heir own living and keep them as a continual charge upon their parents. The minister will 'be well advised to incorporate that in this bill. If there is any case where the parent needs help it is in that of children who are suffering from infirmities which make them a charge perhaps for life upon their parents.
In fixing the age limit we should endeavour to aim at uniformity. There is an age limit in connection with military pensions; a widow receives a certain amount and so much for each child up to a certain age, and when the child reaches that age the pension is correspondingly lessened. I presume the assumption is that up to that age the child is not able to look after itself and must depend upon the parents. It seems hardly reasonable that we should fix in the one case a different age limit from that in the other. 'Let us have something like uniformity in the matter. I understood the minister to say that vdien there were dependents the age limit for exemption was twenty-one years.


Georges Henri Boivin: That applied merely to the son or brother. It marks the difference between the son or brother and the daughter or sister-the daughter or sister at any age and the son or brother under twenty-one, unless he is an invalid unable to support himself.


John Wesley Edwards: I do not see why there should be any difference there. If the age limit for dependents is fixed at eighteen years in one case, why should it not be left at eighteen years all through so that it would

be uniform? I do want to associate myself with hon. gentlemen who have appealed to the minister on behalf of those persons who, because of physical infirmities, remain children regardless of their age. Consideration should be given them.


William Daum Euler: As I heard the minister cite the section of the act it seemed to include all children, irrespective of age, if they were dependent on their parents. I am not clear on that point. There is a very grave injustice worked to a great many people, I know of many instances in which persons of over eighteen, indeed, persons of twenty and twenty-five, are entirely incapacitated and the father finds it a very real hardship to support such dependents without some allowance in respect of his income tax. Such a parent should receive the exemption, for in many cases it costs more to support these grown-ups than it does to keep a young ohild. While I appreciate the difficulty that may be encountered in framing the act in such a way as to obviate any possibility of fraud, I urge the minister at the same time to consider the justice of the case. Would the minister mind explaining in what respect the act does not cover such a case as I suggest?


Georges Henri Boivin: The section of the act to
which I have been referring is not the one providing the exemption of $500 per child. It is that section which places the unmarried person in the same position as the married person by reason of the fact that, although, unmarried, he has dependents to care for. It increases the total exemption in that case from $1,500 to $3,000. The representations of my hon. friend from Frontenac appeal to the human instincts of every hon. member; certainly they appeal to the instincts of the Minister of Finance and of myself. The matter, however, presents serious difficulties from the standpoint of administration. To substantiate this statement I need only observe that when this act was introduced by the government supported by my hon. friend from Frontenac, this eighteen year age limit was incorporated in it without any provision for dependent "children" over that age. This was copied from United States and British legislation and, I am told, it was found by the officers of the department that in various countries where an attempt was made to provide especially for such cases as my hon. friend has in mind, it proved absolutely impossible to draw the line at such physical or mental infirmity as would render a person of greater age a charge upon his parents. In some cases a slight deafness is

Income War Tax Act
considered a physical infirmity; the blindness of one eye or the loss of one arm unfits a person in some circles for any work. Among the poorer classes, means are devised by which such persons are enabled to earn their own livelihood, and as a matter of fact they not infrequently do so quite efficiently. No doubt there are cases in which the exemption should be granted, but it is feared that there would be so much recrimination as between the really deserving case, where exemption would be perfectly justified, and the numerous cases in which the applicants might not be entitled to exemption, that the responsibility placed upon the minister would be entirely too great. My hon. friend from Frontenac, referring to the Pensions Act, points out that a certain age limit is fixed therein, the needs of the widow being considered less after the child has reached that age. I may be mistaken, but I understand that no provision is made even in the Pensions Act for children who have passed a certain age but who nevertheless are still dependent upon the widowed mother because of physical or mental infirmity.


John Wesley Edwards: I think you are right in that.


Mr. JACOBS:: Has the minister considered the question of giving relief to the parents of children who are confined permanently in asylums for the insane, in which case there would be no cause for fear that fraud might be practised upon the government. I have in mind the specific case of a father whose wife and two children are permanently in the Protestant Hospital for the insane at Verdun. In a case of that kind no fraud could be perpetrated on the government as the statistics could be provided by the provincial government. In every case where a person over eighteen is confined in an insane asylum it seems to me that, on the presentation of a certificate from the institution to that effect, some relief ought to be afforded.


Georges Henri Boivin: There is considerable merit
in the claim, but the hon. member will realize that in the case of children confined in an institution of that nature part of the fees are paid to the institution by the provincial government.


An hon. MEMBER:: Not if the parents
can afford to pay the fees.


Samuel William Jacobs: I know of one individual
who pays $60 a month for each of his relatives.


Richard Bedford Bennett: The parent pays in the
west if he can afford it.



Georges Henri Boivin: I was under the impression that if the father was able to afford the fees he was obliged to pay them without any assistance from the provincial authorities, but I thought that there might have been provision for other cases. In such a case as my hon. friend suggests, fraud would appear to be impossible, but the matter will require consideration. It will be discussed with the experts of the department and inasmuch as compliance with the suggestion would mean a reduction rather than an increase in taxation, the amendment could be made in the bill without the necessity of introducing a new resolution.


Arthur Meighen: Who are these illustrious experts?


Georges Henri Boivin: I am quite willing to tell
my hon. friend. One of the experts is in the House at the present time. I refer to Mr. Breadner, who was appointed Commissioner of Taxation by the former government and who is a most excellent official. The other gentleman, who has been consulted concerning questions of this nature, is Mr. Russell. His opinion is sought in connection with all matters relating to tariff and taxation. The legal aspect of the bills has been submitted to the solicitors of the department of Customs working in the Income Tax branch under Mr. Breadner.


Arthur Meighen: I was only anxious to
get the minister's opinion of Mr. Breadner on record.


Samuel William Jacobs: You wanted it in writing.


Mr. MacLAREN:: I do not think that the suggestion of my hon. friend (Mr. Jacobs) is practical, that in the case of people confined in an insane asylum certificates could be produced for the purpose of giving concessions to their relatives. All insane cases do not go to asylums and the hon. member would experience some difficulty in putting his suggestion into practice. It might lead to further difficulty. It is clear to me that the suggestion cannot be carried out in that limited way. The insane are both in and outside asylums. It is perhaps hardly necessary to state that, but at the same time it is not possible to distinguish between disabilities, mental or otherwise,, provided they are disabilities. I think the minister will finally come to the conclusion that the matter must remain as it is.


Eugène Fiset: Mr. Chairman,
during the period of the war we were dealing with separation allowances in the Militia department, we were meeting exactly the


EDITION
[Stage Direction]
3763	COMMONS
Income War Tax Act
same difficulties that the minister has to meet at the present time. The law then was so drastic that there was no way of dealing with special cases. Finally we had to amend the law-by order in council it is true, but under the War Measures Act that had the force of an act of parliament-and we organized in the Separation Allowance branch of the Militia department a special board. If the cases were extraordinary, power was given the minister by order in council to deal with them. I cannot see why there should not be a similar provision in the present law. Otherwise you cannot deal with these exceptions legally. During the war we had hundreds of thousands of cases, and they were all adjusted satisfactorily by means of that special legislation. I would therefore suggest that similar provision should be made in the act to enable the minister to deal with such special cases instead of referring them to the House of Commons.
Robert James Manion: It seems to me that the
suggestion of the hon. member who has just taken his seat (Sir Eugene Fiset) would entail the appointment of another board, which would increase the expense of the collection of these taxes. But why could not such cases be dealt with in this way? The man or the woman responsible to make a sworn declaration as to the facts, and to be subject to severe penalties in case of fraud. It seems to me that would be a simple way of dealing with such cases without increasing the staff, for these are special cases and would not be numerous.


Mr. HAMILTON:: Mr. Chairman, do I
understand that a married man with no family is exempt from income tax up to $3,000?


Georges Henri Boivin: A married man with no
family is exempt up to $3,000 if only one of the married couple makes an income tax return.


Charles James Hamilton: If the combined incomes of the husband and wife do not exceed $3,000 they are exempt?


Georges Henri Boivin: Yes.


Charles James Hamilton: Do you think that is fair? Do you think that any man who is in receipt of an income of $3,000 should not help to pay some of the taxes due to the war?


Georges Henri Boivin: 
Charles James Hamilton: I have only my wife
to take care of, but I do not feel that I should be exempt from income tax on a $3,000 income. I was one of those who gave my family to the war, but in spite of that I do not want to be exempted from payment of income tax on anything like that amount. It is too high.


Charles Hazlitt Cahan: Mr. Chairman, it is difficult to discuss our Dominion income tax law without having a copy of the consolidated act before one, but in the latest edition of Plax-ton and Varcoe, who I think are officials of the income tax department, I find that the allowance for dependent children was introduced first by an amending act in 1918, and was limited to children under 16 years, but was extended by an amendment in 1919 to cover children under 18 years. In the definitions to the act as at present consolidated I find that "dependent child" means:
A child under 21 years of age and dependent on his parents for support, or over 21 years of age and dependent on his parents for support on account of physical or mental incapacity.
It does seem to me that this definition might be applied to cover the suggestions made by hon. members who have preceded me. While I am on my feet I should like to ask a question with respect to another matter. Under clause 1 of the resolution it is provided:
That the amount of income exempted from the tax be increased to $3,000 in the case of a married person or householder.
Is it proposed in the act itself to define "householder"?


Georges Henri Boivin: Yes.


Charles Hazlitt Cahan: So that will come up for further consideration under the bill to be presented?


Georges Henri Boivin: Yes.


John Arthur Clark: Mr. Chairman, what proportion of those now paying income tax does the minister estimate will be exempt altogether as a result of this legislation?


Georges Henri Boivin: The officers of the department inform us that the percentage of persons now paying income tax, and who will not be called upon to pay under this legislation, is about 35 per cent. It is very difficult to estimate exactly owing to the fact, as pointed out by the right hon. leader of the opposition yesterday, that there may be a very few

Income War Tax Act
persons in the country not paying tax at the present time who will pay taxes under the amended act.


John Arthur Clark: That means that approximately 150,000 of our total population will be paying income tax next year. I should like to point out to the minister that our 9,000,000 people to-day are paying very heavy taxes upon the essentials that enter into their daily life. Yesterday the minister stated that as a result of sub paragraph 4 of section 19 BBB, there is nothing entering into a poor man's budget that pays any tax at all. I should like to ask him: Since when does the poor man require no clothing, no kitchen utensils, no furniture?


James Alexander Robb: Mr. Chairman, I submit that my hon. friend will be quite in order in discussing this matter later when the sales tax is before the House in the form of a bill, but if we are ever going to get through the session I would suggest that we keep to the question before the committee.


John Arthur Clark: The minister is justifying these reductions in taxation by stating that the sales tax has been removed from the necessities of the poor man.	.


The CHAIRMAN:: Order. We are dealing with the income tax.


John Arthur Clark: Mr. Chairman, let me speak to the point of order raised by the Minister of Finance. In dealing with the section of the *Income War Tax Act now before the committee it is necessary to deal with taxation generally, because this reduction is being justified by the statement made by the Minister of Customs yesterday that all taxes have been removed from the budget of the poor man. I am now suggesting that there is no justification for the action of the government in relieving that portion of the people of Canada who can pay taxation, before the poor man and the public generally are relieved of the very onerous taxation imposed by this government. That taxation, I suggest, consists of practically everything entering into a poor man's budget; it consists of his clothing; of everything that goes to furnish his house, his kitchen utensils, his furniture and his rugs; everything except his food. Let me tell the minister that there never was a sales tax on food, with some very minor exceptions, consisting chiefly of cereals. I suggest very strongly, Mr. Chairman, that I am in order in discussing this matter and that the government has adopted the wrong principle. They are relieving from taxation a very few people, while still imposing upon the people 14011-239J
generally very onerous war taxes which, in my opinion, should be removed before the government commence to relieve that small section of the people who can afford to pay.


Georges Henri Boivin: I have no doubt that my
hon. friend is quite well satisfied, since in discussing the point of order he has made his argument. Without going into a .discussion of the sales tax I only wish to correct his quotation from yesterday's Hansard. He said I remarked that everything required by a poor man is exempted from taxation. He should have read the full statement, and he would have found that I spoke as follows:
Everything required by a poor man, everything going into a poor man's budget and almost everything really a necessity of life, does not pay any sales tax at all.


John Arthur Clark: That is worse than my statement of what the minister said, and it is not correct.


Georges Henri Boivin: It is not worse. My hon.
friend stated that yesterday I had said in this House that everything required by a poor man was exempt from taxation. I admit that, but I modified the statement by adding that almost everything that was a necessity of life was exempted from sales tax, and I repeat that statement.


Mr. CHAPLIN (Lincoln):: What about
boots and Shoes?


Richard Burpee Hanson: And cotton goods and
clothing?


Georges Henri Boivin: The sales tax on boots and shoes has been cut by 50 per cent.


James Dew Chaplin: It is still 2J
iper cent.


Georges Henri Boivin: Yes, and that is why I
took the trouble to say "almost everything" that was a necessity.


John Arthur Clark: Will the minister enumerate the articles required by the poor man, other than food, upon which he does not pay sales tax?


William Duff: Order. I must ask
both the minister and the hon. member for Vancouver-Burrard (Mr. Clark) to keep to the subject under discussion.


Georges Henri Boivin: I do not want to discuss
the matter further, since it was discussed in the House yesterday, but I think I am still in order when I say that whether or not the sales tax is reduced the poor man is getting the benefit of the reduction in income tax. The people who are exempt from taxation are those poor persons for whom an appeal was
Income War Tax Act

made for exemptions. The persons entirely-exempted from taxation under this act are those people having incomes of $3,000 and less. They are certainly not the opulent class, and not the multimillionaires.


Richard Burpee Hanson: They are not the poor
people, either.


Georges Henri Boivin: I am willing to admit that they are not the poorest people; but they never paid any income tax.


John Arthur Clark: They are in the class paying taxes.


Georges Henri Boivin: Yes, and one of the most important taxes they pay is the customs duty, which my hon. friend has always advocated very Strongly in this House.


John Arthur Clark: They pay it in order to
retain their employment in Canada.


William Duff: We are getting away
from the clause.


Georges Henri Boivin: I certainly admire the way, Mr. Chairman, in which you are endeavouring to keep both the minister and those asking questions to the clause under discussion, and I will not refer again to the tariff or the sales tax. I will merely say that there is a real reduction in income tax in the present legislation. Everyone will admit that, and if there are any hon. members opposite Who claim that the reduction is too great, or who are in favour of having the income tax returned to its former figure, I should be very glad to hear from them. We will take the matter under consideration then, and if we find that a majority of the House is in favour of returning to the old taxation, there will be no objection whatever on my part to doing so.


Richard Burpee Hanson: I invite the minister to
return to the old system of taxation so far as the tax on dividends is concerned. Be has done a great injustice to a certain class in the community by this change.


William Duff: Order. We will come
to that later on; it is another clause.


Richard Burpee Hanson: The minister has issued
an invitation containing a challenge.


William Duff: Shall section 1 carry.


John Arthur Clark: In order that we do not
miss the opportunity, I would like to ask the minister under which section of this resolution dividends received by the taxpayer are made taxable.
*"Mr. Boivin.]


Georges Henri Boivin: That will be under section
4.


Charles Hazlitt Cahan: Before this section passes
I would like to call the attention of the minister to the fact that in chapter 25 of the act of 1918, clause (i) of subsection 2 of section 1 defines a dependent child, and that definition is still the law. Under it a dependent child is a child under twenty-one years of age dependent on his parent for support, or a child over twenty-one years of age dependent on his parent for support on account of physical or mental incapacity. Therefore under the law as it stands at present the income tax department are compelled to accept returns granting exemptions in respect of dependent children who are over twenty-one years of age, dependent upon their parent for support on account of physical or mental incapacity. I believe the minister referred to the law as it existed before the last amendment, and inasmuch as we have this definition on the statute book now I think, by way of suggestion, that the drafting of the bill should be made so as still to retain this definition of a dependent child, and if it is so drawn, it will obviate the objections which have been made by my hon. friend from Mount Royal and some other members of the House.


Georges Henri Boivin: In answer to my hon. friend from St. Lawrcnce-St, George, I would like to point this out: While he is quite right in saying that the old bill carried the definition of the words "dependent child," and that dependent child meant a son under twenty-one years of age, or, if the child was physically or mentally incapacitated, a child of any age -that is not the exact wording of the law, but that is practically the effect of it-it applied only to the dependent child, who gave the unmarried person the same exemption as the married person. If my hon. friend will refer to the old act, he will find that the $500 exemption was not given to the father or mother of a dependent child.


Charles Hazlitt Cahan: Quite so.


Georges Henri Boivin: The $500 exemption was given to the father or mother of any chill under eighteen years of age.


Charles Hazlitt Cahan: Quite so, but I am simply
suggesting to the hon. minister that if he should decide to carry out the suggestions which have been made, then by drafting his act so as to give this exemption in respect of a dependent child as defined in the act, he would carry out the suggestions entirely, in conformity with the plea of certain hon. gentlemen on both sides of this House.

Income War Tax Act


Georges Henri Boivin: I now understand exactly
the idea expressed by my hon. friend from St. Lawrence-St. George. It would be a way of getting over the difficulty if it was decided to adopt the suggestion of hon. members, and that matter will be taken under consideration.
My hon. friend from Fort William suggested a moment ago that it might be possible to obviate most of the difficulty by exacting an affidavit in support of every claim for exemption for the payment of income tax owing to the fact that one was charged with dependent children or a dependent relative as defined by the act. The suggestion is a good one,' but unfortunately our experience both in the Department of Customs and Excise and in the Income Tax branch, where numerous affidavits are received concerning different matters, is, I am sorry to say, that in a large number of cases the affidavits cannot be depended upon. When the affidavits are checked up and the information is secured, it is found that in many cases the affidavits are not true


Richard Burpee Hanson: A few prosecutions might help.


Georges Henri Boivin: It is true that these persons should be prosecuted, and they are prosecuted in a great many cases, but they are only prosecuted when the fraud is discovered and it is sometimes a very difficult matter to discover the fraud. For that reason while the suggestion is one well worthy of consideration, and will be taken into consideration before the bill is brought before the House for its second reading, I do not think it would be a complete cure of the difficulty we have before us.


Sir HENRY DRAYTON:: My hon. friend says that there are prosecutions. I have not been noticing any in the last two years for making false affidavits. I will make it four years-has there been one case in that time?


Georges Henri Boivin: Yes. The prosecution has not always been for perjury. I am not prepared to say that I can state any specific case where action was taken for perjury in connection with making a false affidavit, although there may have been some.


Henry Lumley Drayton: Not one.


Georges Henri Boivin: What is generally done is this: The departments do not want to usurp the functions of the crown prosecutors of the different provinces. The administration of criminal justice is confided to the provinces, and prosecution and punishment for crime should be left to the provinces. I did not say prosecutions had been instituted by us.
The object of this department has always been to secure the collection of revenue. I can, if I will, at the next sitting of the House state to my hon. friend cases where four or five companies in the city of Montreal have been prosecuted quite recently for making false affidavits and false returns in connection with the sales tax. The Commissioner of Taxation tells me that there are several instances in his branch where prosecutions have been entered, not for the purpose of punishing a man for making a false affidavit, but for the purpose of securing the penalties prescribed by our own laws, and for the purpose of securing the payment of moneys which they were trying to evade by making these false affidavits.


Henry Lumley Drayton: I did not rise for the purpose of saying that this ought to be done or ought not to be done, but simply to correct a statement that I knew was incorrect. The minister agrees that those prosecutions have not taken place, and that I was correct.


Georges Henri Boivin: I would not like to go that far, though I will agree that my statement may have been misunderstood by my hon. friend.


Henry Lumley Drayton: The suggestion was that false affidavits were being made and that something should be done. My hon. friend said that it was being done. As a matter of fact, no prosecutions whatever have been taken by his department for the making of false affidavits, so the effect is exactly the contrary of what was stated. However, I do not think that is a matter of very much importance, except that it is a matter of some importance to have some correctness of ministerial statements even to-day.
We have now the estimate from the minister to the extent that people have been exempted up to 35 or 40 per cent. Suppose we put it at 35 per cent. If that is correct, we would now be left with 146,585 taxpayers in the country. Is that about the minister's estimate?


Georges Henri Boivin: According to the returns of last year, I would say yes.


Henry Lumley Drayton: Can the minister go a little further now and tell us just what that means in loss of revenue under that item, that is, the item having regard to the extension of the exemption from $2,000 to $3,000.


Georges Henri Boivin: It would be impossible to give my hon. friend the exact reduction due to the extension of the exemption. I can
Income War Tax Act

give him, however, by classes the actual reduction which will be caused not onlj' by the exemption, but by the exemption and at the same time by the reduction in rate. The reduction on incomes between $1,000 and $6,000 would amount to $5,113,852.19, according to last year's figures.


Henry Lumley Drayton: Will my hon.
friend show how he gets at that?


Georges Henri Boivin: The estimate is prepared by the officers of the department. The tax paid at the present rates on those incomes would be $6,318,319.99. The tax which would be paid on the same income at the rates proposed under the new legislation would be $1,204,467.80, making the reduction that I have just given. It must, of course, be remembered that the tax paid at the present rate applies to incomes over $1,000 on the part of unmarried persons and $2,000 on the part of married persons. Under the amended act the incomes between $1,000 and $1,500 would be exempted in one case, and the incomes between $2,000 and $3,000 would be exempted in the other.


Henry Lumley Drayton: My hon. friend says that on that basis the taxation would be thus and so. What is the basis of assessment on which he strikes that new taxation?


Georges Henri Boivin: The basis of assessment is
the new rate as compared with the old rate on the same incomes.


Henry Lumley Drayton: My hon. friend said he could not tell me how much would be lost by reason of the increase of the exemption. He could give what the total would be, but as to the loss by reason of the exemption he could not tell. I understand that is correct.


Georges Henri Boivin: I informed my hon. friend
that I could not tell him offhand because I did not have those figures before me. I think it would be quite possible to establish in the department from last year's returns exactly what the amount collected would be if the exemption remained at the former figure. That could have been calculated, but unfortunately the calculation was not made and the officers do not happen to have it Jiere.


Henry Lumley Drayton: Then we are
on common ground; at the present moment that cannot be stated. Then my hon. friend said that under the old law we got $6,318,319. Applying the new rate to those figures he says the collections will amount to $1,300,000, if I remember correctly.


Georges Henri Boivin: The amount is $1,204,467.80.


Henry Lumley Drayton: What I want
to get at is the figures my hon. friend used is the basis of his calculation which resulted in the $1,204,000, and we have not got that at all. You will find no basis at all when you get down to it, it is just a guess.


Georges Henri Boivin: I can tell my hon. friend
this: The number of individual and corporate taxpayers paying income under $6,000 is 126,481.


Henry Lumley Drayton: That is right.


James Dew Chaplin: Under the _ income tax proposition the minister brings down we learn that there are about 300,000 people that have paid income tax in this country.


Henry Lumley Drayton: Two hundred
and twenty-five thousand.


James Dew Chaplin: Two hundred
and twenty-five thousand is the approximate number of those who paid taxes last year. Now the minister tells us that nearly one-half of that number, or over 125,000 have been relieved of income tax. Is that corect?


Georges Henri Boivin: No, we have relieved about 35 per cent.


James Dew Chaplin: I want to get the number that have been relieved of taxation by this measure.


Georges Henri Boivin: I am told that between
seventy and seventy-five thousand have been relieved.


Henry Lumley Drayton: Thirty-five per cent will give you 78,000.


James Dew Chaplin: The Minister
of Finance when he presented the income tax proposition said "We are reducing taxation all along the line."


Georges Henri Boivin: That is true.


James Dew Chaplin: When the
minister said that, what kind of "line" did he refer to? There are 9,000,000 people in this country and about 150,000 are going to be taxed. The balance will not pay any income tax at all. What did the minister mean when he said that he had "reduced taxation all along the line''? If 75,000 people out of a population of 9,000,000 have been relieved of income tax, that is not a case of being relieved "all along the line." The other minister who is not now taking charge of this measure at the present time shakes his head, but it is beyond doubt that he said he was

Income War Tax Act
reducing taxation, in so far as income is concerned, "all along the line." When the minister made this statement hon.
5 p.m. gentlemen to my left pounded their desks like the mischief. Now those gentlemen believe in income tax, that is the way they want a revenue collected; and I must point out to my hon. friends that only 75,000 of those who were paying income tax last year are being relieved by this measure. And yet this government says "Look at what we are doing for the poor people of this country."


Georges Henri Boivin: In answer to my hon. friend 1 merely want to say that when my colleague referred to relieving taxation all along the line-


James Dew Chaplin: Which line?


Georges Henri Boivin: -he was referring to the line of citizens in Canada who paid income tax. He might have gone further. He could have said that he had reduced taxation for everyone because that is the case as the result of other changes under the budget. However,
I will refer only to income tax. My hon. friend was kind enough to remain there and I want to follow his example.


Sir GEORGE PERLEY:: That is not quite correct, is it?


Georges Henri Boivin: It is correct except in one
particular and just as soon as we reach that section, I will explain how it is that there are in Canada to-day a few persons-


Henry Lumley Drayton: A few?


Georges Henri Boivin: Yes, and I will prove that
they are very few in numbers. There are in Canada to-day a few persons who will be called upon to pay more taxes under the new law than they were called upon to pay under the old law. I will admit at once that comparing the numbers of those who received exemption under the old law with the numbers of those who do not receive exemption now there are a large number of persons affected but there are very few persons who under the new law will pay more than they paid under the old.


George Halsey Perley: Was the Minister of Finance justified then in making such a sweeping statement w*hidh was broadcast throughout the country?


Georges Henri Boivin: I think the Minister of
Finance was perfectly justified in making that statement because there is no doubt there was a reduction all along the line except in those few particular cases where persons had been exempted by the former government from
taxation upon part of the income received where they were not entitled to receive that exemption. Some may say that that question is a debatable one. Many of these arguments may be brought up; but I maintain in this House and I will maintain it on any platform in the country that a man who works eighteen hours a day in order to earn $10,000 should not pay one cent more in income tax than a man who does not do one tap of work and who receives $10,000 in dividends from the Canadian Pacific or the Bank of Montreal. If any hon. member on the other side desires to say that this principle is wrong and that we should not bring back to the same level of taxation, earned income and income derived from dividends, I am willing to debate the matter with him and leave the decision to the people of Canada.


Henry Lumley Drayton: The minister is getting into the habit of throwing out challenges. He seems to like it and I hope he enjoys it. He is also getting into the habit of raising false issues. That is not the question which my hon. friend should debate; the question to debate is this, and no one knows better than the minister:	What is the
justification for placing a double rate of taxation on capital that is useful to this country? What is the justification for having only one set of taxes on money that is in bonds and that assumes no risk and taxing at a double rate money that is affording employment in this country and doing something to develop it? My hon. friend well knows that is the issue. Why is it that the mortgagee can sit comfortably paying only one rate of taxation on his money while the shareholder who is doing something to build up this country pays two rates on his money? Everybody knows it is the shareholder's money.
My hon. friend knows that no other question has been raised by this opposition, but again there is this false issue to be raised. On the statement of the Minister of Finance out of a total collection of $56,000,000, $31,000,000 is subject to a double rate in every case where a Canadian happens to own the stock. Yet some hon. gentlemen say that there has been no increase. The thing is unthinkable. Do not let my hon. friend suppose that the issue is as to whether the man who works or not is to pay. The issue is whether money that is useful to the country, that is used to develop and to give work in the country, ought to have a double rate of taxation as against one rate on money invested in bonds, mortgages and the like.


[Stage Direction]
Section agreed to.
Income War Tax Act
[Stage Direction]
On section 2.
Mr. BOYS:: I do not know whether I
rightly apprehend the effect of this clause or not. If I do it seems to me there is a somewhat serious discrepancy. I will try to make my point plain by taking the case of a husband with an income of $2,900. As I read the law he is exempted from taxation. His wife has an income of $1,400 and she is also exempt. The combined total of the two incomes is $4,300, all of which is exempt. If you take the case of a husband with an income of $1,600 and the wife also with an income of $1,600 they would get an exemption of $1,500 each or a total of $3,000, and the two together with a combined income of $3,200 would pay income tax upon $200 whereas in the other case the husband and wife with a combined income of $4,300 escape paying income tax altogether.


Georges Henri Boivin: My hon. friend is perfectly right. The law will work out in that way, but I would like to ask him this question. Why should a man and wife each having an income of $1,600 not pay income tax to this country when the man who is married but who is not separate as to property, and who has the same income of $3,200 is obliged to pay taxation upon it.


William Alves Boys: I am merely pointing out inconsistencies which, by the use of the English language, it is easy to rectify. The minister should have his law so that there will not be any such discrimination.


Georges Henri Boivin: If the hon. gentleman will
give me a method of rectifying that inconsistency I will promise at once that I rfiall foe only too glad to make the correction in the bill-.	, i


William Alves Boys: I bow at once to the superior knowledge of the minister in this matter and I think I might even say the superior ability of the minister to draft legislation. It is only necessary to point out to him, a clear-headed man, the discrepancy and he, with his expert officials, can easily devise legislation to rectify it. I have not the slightest doubt I could in half an hour draft a clause which would correct what is certainly a discrimination. I really felt that I was reading the law improperly because I cannot see the slightest justification for it. In the one case a husband and wife with an income of $4,300 are exempt from taxation and in the other case a husband and wife with an income of $3,200 have $200 of that taxed.


Georges Henri Boivin: The absolutely just and equitable method of taxation in the case of 
married persons would be to combine the two incomes and treat them as one. If my hon. friend wants to advocate that system and if the members of the opposition will support it, I for one am willing to embody it in the act.


William Alves Boys: The minister is altogether too
ready to shift responsibility to the group who should be governing the country, while trying to escape it himself.


Mr. BROWN:: I made this very proposition two years ago, but I failed to get a single supporter among hon. gentlemen to my right; nor did I get very much support from hon. gentlemen opposite. I could not secure recognition for the principle that for purposes of taxation the income of husband and wife should be considered jointly. I am glad the government has gone a certain distance in recognizing this principle, although it has not gone as far as I should like.


Mr. KAISER:: Earlier in the session I
heard the hon. member (Mr. Brown) put forward this idea and I must say that I have never heard a more ridiculous proposition on taxation submitted by anyone. It showed an absolute lack of knowledge of the circumstances of ithose who ihave incomes that are taxable. I do not think it is fair for the government to penalize people who are trying to doi the right and decent thing. Let us consider one .or two hypothetical cases. Here is a man with an income of $2,500; he marries, and if his wife has no income he has no tax to pay. Again, a woman has an income of $2,500 of her own, and she marries. If her husband has no income, then no tax is paid-in either of these two cases the state gets absolutely nothing in the way of taxation. Now a man with a small income marries a woman who happens to have a little money of her own and they are both penalized. My hon. friend would have the wife pay taxation on her income although, as happens in nine cases out of ten, that money is a patrimony. Surely such an income should go to her children rather than be taxed by the state. Any decent man will try to support his wife and family on the income which he himself can earn, and what the wife has inherited should not be regarded as a taxable source of revenue. It seems to me that this clause ought to be dropped altogether.


Henry Lumley Drayton: The effect of the section is to temper the wind to the shorn lamb, the shorn lamb being the government. Perhaps the proper simile would be the wolf, but I will let it go at that. The

Income War Tax Act
government are making the claim of having effected trenchant reductions in taxation, but the fact is that the whole idea of this legislation is to put the soft pedal on reductions: in the case of married people who are fortunate enough to have separate incomes the reductions will not be anything like what they appear to be. The bellicose Minister of Customs (Mr. Boivin) shakes his head. Well, suppose we get at the facts.


Mr. CAHILL:: Hear, hear.


Henry Lumley Drayton: My hon. friend says "hear, hear." We ought to get some facts from him but we never do. However, "hear, hear" is better than the wild vituperation, divorced from fact and sense, which we used to get long ago. Take the case of the husband and wife who have a joint income of $5,000. If tihe exemption had been left as it stood before they would be taxed each $70, whereas under the proposed change they will be taxed $90 each. Is that correct?


Georges Henri Boivin: I think so.


Henry Lumley Drayton: The whole idea is to get more money while apparent reductions are made. Can the minister give us the number of people who will be affected by the change? How much more money will be collected as a result of the new proposal?


Georges Henri Boivin: To prove that the main object was not to get a little more revenue I may assure my hon. friend that we never took the trouble to estimate the number of married persons who were enjoying an exemption of $2,000 each, that is to say, married persons who were making separate income tax returns. Let me tell the committee just what we had in view. There are a great many married persons in the country who have no right to make separate income tax returns because they were married under the law of community of property. We felt that it was absolutely unfair to those persons to compel them to make only one return and enjoy but one exemption of $3,000 while others, much better off, made two returns and were exempted to the extent of $6,000. We deemed it only fair that every married couple should receive the same exemption, and if hon. gentlemen are of the opinion that some married persons should be exempted $6,000 and others only $3,000 I am prepared to listen to what they have to say.


William Alves Boys: That is absurd. [DOT]


Henry Lumley Drayton: What I said was -and I thought that the minister agreed with me-that the effect of this change was that
whereas in respect of an income of a stated amount the tax payable by the husband and wife would be $70 each under the law as it stood before, it would now be $90 each. I understood him to say that this was right. That is ail I have said. I pointed out that in view of this fact the reductions which the government claimed to be making would not be fully realized. These are the only two points that I have raised. Does the minister deny them?


Georges Henri Boivin: I resent my hon. friend's statement that this was an effort on the part of the government to reduce taxation on the one hand and on the other to endeavour to get a little more revenue by making an alteration in the act.


Henry Lumley Drayton: Are they getting it?


Georges Henri Boivin: I say the government did not have that intention and did not figure what the increase might be. In any event I would point out to my hon. friend that the decrease in the exemption is only from $2,000 to $1,500. He calculates it from $3,000 to $1,500.


Henry Lumley Drayton: Oh, no.


Georges Henri Boivin: Under the law introduced by the government of which my hon. friend was a member the exemption enjoyed by the husband and wife was $2,000. It is true that in some cases they both got the exemption. To-day the exemption enjoyed by each is $1,500. So the decrease in the most extreme case is only $500.


Henry Lumley Drayton: My hon. friend did not get what I said, and I am quite sure he did not make the mistake advisedly. My hon. friend said I was right before. Here is Mr. Breadner and he can check me if I am wrong. I said nothing as to the amount of the change, I gave the concrete figures which were wanted by an hon. member opposite. The minister said that the exemption of the husband and wife had been decreased $500. I said that under the proposals of the present budget, had the change not been made-that is, this change in exemption for married people-the rate each would have paid was $70, and that under the change the rate they will each pay will be $90. It is very easy for me to be told whether this is wrong. I think I am right.


Georges Henri Boivin: If my hon. friend takes into consideration the exemptions and the rates as provided by the present amendments, he is right.
Income War Tax Act


Henry Lumley Drayton: That is all I am doing.


Georges Henri Boivin: My hon. friend should go just a bit further and figure out what the married man under the law of community of property with an income of $10,000 will be obliged to pay.


Charles Hazlitt Cahan: Mr. Chairman, there is no doubt that in the province of Quebec, where there is community of property in every case in which a marriage contract is not made and registered before the ceremony, there has been a differential rate against those married people living under the community of property law, and, as pointed out by the hon. member for Labelle (Mr. Bourassa) in the early stage of this discussion, that was a grievance that should be remedied. In remedying it the minister has really in effect imposed an additional tax upon married people who are not living under the community of property law.


Georges Henri Boivin: I desire to correct my hon. friend right there. I resent these statements continually made upon the other side of the House that we are increasing taxation. We are not, we are decreasing it. The example pointed out a moment ago by my hon. friend who is now leading the government-


Robert James Manion: Leading what should be the government, you mean.


Georges Henri Boivin: No. I do not mean that; I should have said: "who is leading the opposition "-[DOT]


Charles Hazlitt Cahan: Mr. Chairman, I think I
have the floor.


Georges Henri Boivin: I do not want to interrupt my hon. friend. I do not think he wants to be unfair, for of all the hon. members I know, my hon. friend generally is the fairest, especially to members from the province of Quebec.


Robert James Manion: He has to be; he gets his votes down there.


Georges Henri Boivin: Well, he is much fairer to the people of Quebec than is my hon. friend from Fort William on certain occasions.


Robert James Manion: I absolutely deny that.
My hon. friend never in his life has heard me say anything unfair about the people of the province of Quebec.


Charles Hazlitt Cahan: Mr. Chairman, I feel that I have a right to interpose. I happen to represent a Quebec constituency, and therefore my attention is concerned with its affairs more directly perhaps than that of my hon. friend from Fort William. I am making no
[Mi. Boivin.]
insinuations or suggestions. I am simply saying there is a grievance there that ought to be remedied, and in remedying it it would be wise to adopt a remedy which would not constitute another grievance on the part of those who are married, in the province of Quebec and elsewhere, separate as to property. Therefore I would suggest that there should be given an exemption to those living under the community of property law of, say, $4,000, leaving those who are married and separate as to property the right to claim exemptions as at present without reduction. You would thereby reach a fair basis and remedy what is a real grievance in Quebec.


Georges Henri Boivin: Mr. Chairman, I was diverted from the particular argument which I desired to interject. My hon. friend is apparently right, because we are, it is true, decreasing the exemption to the married person who is separate as to property, but we are not increasing the tax upon those persons. The reduction in taxation which accompanies this reduction in exemption makes the tax they pay to-day less than the tax they paid before.


Henry Lumley Drayton: That is true.


Georges Henri Boivin: In the example given by my hon. friend who is now leading the opposition-I want to make no mistake this time-


Henry Lumley Drayton: Fifty-fifty; you are doing pretty well.


Georges Henri Boivin: -the amount was perfectly right in so far as the difference is concerned between the S90 the man pays with the exemption as it is now and the $70 he would pay if the exemption had remained as it was. But what he did not state, and what I desire to place on record now. is that under the old act with the exemption of $2,000, each one of those two married persons would have paid $126 instead of the $90 they will pay now.


James Shaver Woodsworth: Would the minister give us his objections to adopting the suggestion that the incomes of husband and wife should be united for the purposes of taxation?


Georges Henri Boivin: The principal objection I think would be that a large number of persons who have retired from business, and who have always lived under the regime of separation as to property, which is recognized by every other country in the world, and who are residing in Canada at the present time and paying taxes, would undoubtedly remove to foreign countries in order to evade the enormous difference in taxation that they

Income War Tax Act
would be obliged to pay if their two incomes were combined for purposes of taxation. Where >two persons have always had separate incomes, and where two persons would have that right in any other country, w'e feel that it would be wrong for us to combine the two incomes for purposes of taxation in this country. Not only would it be wrong in principle but it would tend to deprive Canada of a certain amount of revenue instead of increasing that revenue.


John Livingstone Brown: If I remember rightly the
statement was made two years ago that in England the incomes of husband and wife were considered as one for taxation purposes.


Georges Henri Boivin: I have not looked up the
English law. I am not absolutely certain as to the practice in England, but the country with which our taxation must always be compared is certainly the United States, which is alongside of us.


John Livingstone Brown: But in the one case it might foe a question of fairness or justice or principle, and in the other-


Georges Henri Boivin: I said before that I did not
see anything very wrong so far as the principle was concerned in making all married couples <pay the same rate upon their joint income. I think that would be fair but it might not be to the best advantage of the country, and I also think our legislation must be based to a great extent upon similar legislation in the great republic to the south.


James Dew Chaplin: Will the minister use the same argument when we come to the dividend proposition?


Georges Henri Boivin: Yes.


Henry Lumley Drayton: Then you will change the law.


Georges Henri Boivin: Not at all.


[Stage Direction]
Section agreed to.
Section 3 agreed to.
On section 4:
Charles Hazlitt Cahan: I would like to speak to the first part of clause 4. It seems to me fair and just that if these new rates are to apply to incomes as of December 31, 1925, there Should be a further provision that under this scale no one should be compelled to pay a higher tax for 1925 than he would have paid if this legislation had not been passed. Many individuals will pay a higher tax for 1925, under this scale than they would have paid under the law in force prior to April 15, 1926,
when this resolution was brought before the House. Many men, dealing with their incomes for 1925, apportioned their incomes and made their expenditures in accordance with the law as it then stood, and I am not in favour of bringing in a new act which will impose upon any individual by ex post facto legislation a higher tax, in many cases twice as high, as he would have paid under the legislation in force up to December 31, 1925. If the government brought in these resolutions and made a uniform reduction in the tax *applicable to all persons who pay taxes for 1925, thereby making a corresponding reduction in the tax payable by each individual, this proposal might meet with the approval of the House. But as the bill stands I think it unjust; it will be resented by many people, and it should not be passed in its present form.


John Arthur Clark: I heartily support the hon.
member for St. Lawrence-St. George (Mr. Cahan) and I suggest to the government that it is ultra vires of parliament to impose a tax on dividends received during 1925. Section 4 of the. Income War Tax Act states as follows:
There shall be assessed, levied and paid, upon the income during the preceding year of every person residing or ordinarily resident in Canada or carrying on any business in Canada, the following taxes:
That tax is upon income; it is a tax against the property of a person and not a tax in personal and a tax against property cannot be made retroactive. For instance, supposing the proposal was that we tax dividends received in 1890; there would be just as much justification for parliament passing an act of that kind as to tax the dividends received in 1925. These dividends were received last year and have been disposed of, and they therefore no longer exist, therefore there is no way by which a tax can be levied against property which is not in existence. If the tax were against a person it might be different, but since parliament is assessing the tax against property which is no longer in existence I submit, Mr. Chairman, that the proposal is ultra vires of parliament.


Thomas Langton Church: I would like to call the
attention of the minister to the extent to which so-called Canadians go to the Old Country to escape paying taxes. I know one gentleman who lives in Toronto but who has pow gone to the Old Country; I will give his name privately to the minister. He has an income of $1,000,000; he pays no taxes in Toronto, no income tax in Canada, and he escapes the British tax as well.
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They are dodging the tax collector in Canada, and they dodge the tax collector in the Old Country. I would suggest an amendment to clause -1 to the effect that every Canadian be presumed to be a resident of Canada until he proves to the contrary. In other words, put the onus on the said Canadian. The workingman in this country has a tax collected on his real estate, and on his income, and he has to pay his taxes even if he is out of work. We have been told that the party on this side of the House is the creature of the big interests. Strange to say I heard the Prime Minister read a remark of that nature in his Massey Hall speech, and I understand that he made it at several other places during the last campaign. I do not think anybody who is in favour of the big interests would want to amend this clause so as to take care that wealthy Canadians who go over to the Old Country shall not escape both the Canadian and the British tax collector.
I see my young friend from St. Lawrence-St. George here to-day. I might refer to a remark he made the other day about the HydroElectric in relation to taxes applied to corporations or joint stock companies. He is very fond of pleading the case of the joint stock companies and the big interests, but what has he to say for the working classes in the city of Montreal who are paying these heavy income taxes? He said the other day in this House that he did not believe in the hydroelectric movement in Ontario getting off from the payment of taxes. Does he know they do pay huge taxes? The hon. member for Mount Royal and the hon. member for South York, two colleagues who sat together in the old Hamilton school, sit together also in this House of Commons, one a supporter of public ownership and the other a believer in private ownership, and I can say to the hon. member for St. Lawrence-St. George that he did not know what he was talking about when he said that the Hydro-Electric in Ontario does not pay taxes. The Hydro-Electric pays municipal taxes of various kinds. They paid thousands of dollars in taxes to the city of Toronto and four to five millions in customs duties and taxes to the treasury of this country for the Chippawa development. The hydro-electric movement in Ontario is paying taxes just the same as power corporations under private ownership in the city of Montreal are paying taxes to-day. There are no dividends in the hydro; they operate at cost. We are supposed to be the Conservative party in this House, and I was sorry to hear a gentleman on this side, the hon. member for 
St. Lawrenee-St. George, speak as he did of the hydro-electric movement in Ontario which he does not understand. He does not know what he is talking about when he says that the Ontario Hydro-Electric pays no taxes. He has never read the statutes or he would not have made the statement he did.
I think it is pretty nearly time, Mr. Chairman, that the Minister of Finance and the Minister of Customs should devise some method of lightening the load on the working classes who are to-day paying these very heavy taxes. The government used to have an office in Toronto on Lombard street, in the old post office, where this tax was paid by the smaller man, often not by cheque but in cash. Unfortunately many of the working classes have no bank accounts to-day, under the economic laws of this government, and they cannot pay by cheque. Then the government removed the tax collecting branch to Wellington street, where new offices were fixed up, and where the working people would have to line up and pay in their five and ten dollars of taxes. After spending all that money down there, the government never even used the offices on Wellington street, but made a right-about turn, and quick march they went back to the Lombard street post office, after wasting all that money. The government is receiving $56,000,000 from this particular tax, and of that $24,000,000 or $25,000,000 comes from the province of Ontario, which is paying 47 per cent of all the taxes of this country.
My hon. friend from Lisgar talks about the income tax being continued. I should like to know how much income tax he pays, or the farmers of the country-little or nothing. I do not see my friends the Labour members from Winnipeg here when any practical questions for the benefit of the working classes are being discussed in this House, but they are always here when something of an academic nature comes up, as is also the so-called Independent member for Labelle. What are their views on this question of the heavy taxes that are paid to-day by the working classes? Let us be just, fair and equitable to all in our taxation laws, and let us be fair, just and equitable in the enforcement of this law. We allow the millionaires to go and live in the Old Country and escape Canadian and British taxes. They remind me of Sir Henry Thornton, and King Solomon in all his glory never could equal him. These millionaires go over to the Old Country and evade paying their just taxes in this country, and they also escape them in England. Under the Nickle resolution we cannot give them any titles in this coun-

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try, so they go over to England to escape paying their taxes here, and as I say, they avoid them over there as well and get a title thrown in, while the working classes of Canada have to go on paying the taxes. But there is a day coming for the common people of this country, and the quicker our right honourable board of strategy wakes up over here and does something practical for the working classes, the better. Who are the board of strategy? I would like to know what taxes they are paying compared with the taxes that are being paid in the city from which I come. It is unfair. This field of income taxation was invaded by the Minister of Finance in 1917


James Alexander Robb: The then Minister of Finance was a resident of Toronto.


Thomas Langton Church: So was the high commissioner. From confederation down to 1917 income taxation was the exclusive field of the municipalities, until the government of Canada invaded this field in that year and established as a war measure an income tax. This double-header tax is unfair to the working classes. I plead with the Minister of Finance to adopt some amendment to this clause that will prevent wealthy Canadians from going over to the Old Country and escaping the payment of tax while the rank and file have to pay a double-header tax.


Charles Hazlitt Cahan: I should. like to make just
one remark in reply to my hon. friend, if I may be allowed. If he were residing in the province of Quebec and were as anxious to promote the interests of the workingmen of Quebec as he is of the province of Ontario, he certainly would not support a measure or an act under which every industrial town and city in the province of Quebec, through every user of light, contributes hundreds of thousands of dollars of taxes to the federal treasury by way of income tax levied on these corporations-a tax from which every town and village almost in the province of Ontario is exempt, and from which every workingman or other man or woman who is a part of the population of that city or town in Ontario is exempt. There is an injustice there. It cannot remain forever. It is not an injustice for which this government is responsible. Other governments are responsible, but it is a grievance that rankles throughout the province of Quebec, and one that mujt be remedied on some occasion, at some time, and under some amendments to this law. My hon. friend says I am ignorant about conditions in Ontario. I confess it, in many respects. I do not profess to know the details of their
municipal taxation, but this I do know, that the Hydro-Electric Commission of Ontario, which does the work in that province that is done by private utility companies in Quebec, does not pay one cent of federal income tax, and that our utility companies in Quebec do pay-to the extent in one case of $700,000 a year, and lesser amounts in the case of others. There is an injustice there, and on every occasion when income taxes are brought up, either by one government or by the other, I shall take the opportunity of presenting this grievance, because it is a real one.


Henry Lumley Drayton: Before six o'clock is called I ask my hon. friend the minister to seriously consider what has been said in connection with dividends already distributed. I admit at once that so far as the individual is concerned it is no harder on him there than increased taxation is on any of his income, not a bit; it makes no difference one way or the other. But my hon. friend knows that we have companies-and I am not now referring to merely the personal company; to whatever my hon. friend does in that case I say God speed; I refer to legitimate' holding companies-which have already distributed dividends on the basis of the former taxation. Now as to these dividends which have been distributed let me give this case for example:	Company A distributes its
dividends. They are not at all affected because so far as they are concerned there is a reduction from 10i to 9 per cent-they are not hurt. But they pay this dividend to holding company B, and holding company B distributes the whole amount which it has received to its shareholders. That is a case which I really think ought to be covered. I think that what the hon. member for St. Lawrence-St. George has said is absolutely right in that connection, and I would ask my hon. friend to think it over during the recess between six and eight o'clock.


Georges Henri Boivin: I am ready to answer my
hon. friend on that point at once. There is a clause in the bill which is not provided for in the resolution; it is not necessary because it is a reduction and not an increase, as my hon. friend understands. Under that clause there will be no triple nor quadruple taxation on dividends. All dividends will pay that nine per cent and pay it only once; and all dividends transferred from the original company to the holding company, and from the holding company to perhaps a second holding company, and from that to the shareholder, will not be taxed again.
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Henry Lumley Drayton: Only the shareholder in the original company.


Georges Henri Boivin: Only the one dividend. I
want to thank my hon. friend the member for St. Lawrence-St. George (Mr. Cahan) for the able argument he has just made in favour of our contention that dividends should pay the same taxation as other revenue. He has just argued very strongly that the light, heat and power companies of the province of Quebec are obliged to charge higher rates than the hydro-electric commission of Ontario, and he says it is because the comsumers are obliged to pay taxation which they in turn pay over to the Dominion government. He substantiates the contention of the government that all incomes of equal amount should be equally taxed, and that the taxes paid by corporations are considered by most all of them as overhead expense which should be paid by the consumer and not by the shareholder.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.


Charles Hazlitt Cahan: I would like the indulgence of the committee for a moment while I make a few comments upon the remarks of the Minister of Customs and Excise in reference to my position. I conceive that there is a great difference between a public service utility company whose rates are subject to a public commission appointed for that purpose and an ordinary commercial company. Take for instance, a tramway company in Montreal. Its rates are governed by a public service commission and that commission in fixing rates must necessarily take into consideration the fact that a portion of the income of that company is diverted by means of the income tax into the federal treasury. Therefore the rates are fixed so as to allow of a certain dividend upon its shares or the capital stock invested, payment of interest upon its bonds, and also the approximate amount which is collected from the company under the income tax by the federal government. But that company in such a position necessarily takes from its patrons, or in a similar situation a lighting and power company would take from the users of its light and power, a higher rate in order to cover the income tax collected from it. That is the distinction between a public service utility company such as those we have in Quebec, and a public service utility commission such as the Ontario Hydro-Electric Commission. Undter the
IMr. Boivin.J
Ontario system the hydro-electric commission has not to provide in its rates for light and power that extra amount which is taken out of public utility companies in Quebec simply by reason of the fact that they are privately owned. A great injustice is done because every user of light and power in Quebec is necessarily charged a higher rate in order to enable public utility companies to make their contribution under the income tax to the federal treasury.


James Dew Chaplin: I saw in the
Montreal papers the claim made that light and power was being sold there for less than it was in Ontario. How does the hon. gentle-iman explain that?


Charles Hazlitt Cahan: That may be so. In my
experience a privately-owned public utility company is operated and managed on so conservative a basis as compared with those publicly-owned that in many cases it is able to give a lower rate for its service than publicly-owned utility companies can. But my point is, in reply to the Minister of Customs, that a public utility company is in an entirely different position from an ordinary commercial company. The Minister of Customs said that because I made my argument in respect of the public utility company I thereby admitted that the ordinary commercial company raised the extra amount from its clientele and 'that its shareholders had no interest in the extra amount so raised. The ordinary commercial company is in open competition with the world; it is framed on the basis of a partnership; it is a limited liability company. The privately-owned commercial company is simply a partnership of its individual shareholders who have, it is true, [DOT]certain corporate rights and a certain limited liability, but its shareholders are entitled to the profits of the company in the proportion in which they own shares in it. The company is theirs; the profits are their property; they have no public service commission to whom they can go and ask that they be allowed a monopoly on the market and that as a monopoly they should impose higher prices for their commodities than ordinary market prices. Therefore they are in an entirely different position, and when you tax (first by 9 per cent the profits of the company you are taking that 9 per cent, or practically the equivalent of 9 per cent, from the pockets of the individual shareholders. When upon the remainder of the profits you charge the individual shareholders an income tax you are thereby imposing a double taxation upon those shareholders.

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In this country, and I think in almost every other country which imposes an income tax, it is clearly recognized that double taxation should be avoided. It should be avoided (particularly in Canada where we need very large investments of money in corporate enterprises of that kind, privately-owned, in order to provide for the ordinary commercial -and industrial activities of the country. When you impose double taxation of that kind in Canada as against Canadian companies you put a premium upon the investment of Canadian funds in foreign enterprises abroad and you also put an obstacle in the way of securing the investment of foreign capital in commercial and industrial enterprises in this country. I do not think I need labour the point; I am presenting it to the government simply as a material and relevant consideration- that affects our whole commercial and industrial prosperity and that should therefore be carefully considered before such double taxation is imposed under these resolutions.


Thomas Langton Church: I claim the same right to debate this question as the hon. member for St. Lawrence-St. George (Mr. Cahan), namely, the taxation on joint stock companies and the companies of which the hon. member speaks. I can tell the hon. gentleman that the Hydro-Electric pays taxes. There are no dividends to pay under the hydro-electric movement; the dividends go back to the consumer in cheaper rates.
The more the hon. member talks about the Hydro-Electric the less he knows and the less he knows the more he chatters and talks. The Hjnlro-Electric in Ontario is paying taxes mixed up in rates directly and indirectly. The hon. gentleman is talking about $700,000 collected from Quebec companies under clause 4 of this particular resolution. How much in dividends do these companies take out of the consumers there who get service at cost in Ontario? There are no dividends to pay in the hydro. It has saved the people of Toronto $32,000,000 in fifteen years, money which would have gone into dividends under private ownership which the hon. gentleman is so fond of sponsoring in this House. It is the people's own movement for cheap light and power for the people of the province at cost. The people of Ontario have taxed themselves to the extent of $262,000,000 to free the province of Ontario and give them control of their own water-powers which now belong to the people forever. It is their heritage-not that of a few. All the money spent is revenue producing; it pa5rs interest and fixed charges, and the balance goes to reduce the cost of light. The rates for both
domestic and commercial light have been cut in two and three. The hydro pays certain municipal taxes, gives a better service at cost, carries the boon of cheap light and power and improved transportation to the door of the toiler and farmer reciprocally. The hydro rates are the lowest in the world and less than those of Quebec. The publicly-owned companies pay taxes the same as the private ones. The water-powers of the province should be under the control of the province for posterity and not be handed over to a lot of self-made multimillionaires in the United States whose interests the hon. gentleman apparently seems to have sometimes at heart.
What the hon. member for St. Lawrence-St. George has to say about the hydro-electric movement in Ontario reminds me of the time when, in -the province of Nova Scotia under Mr. Fielding -and other premiers, with the hon. gentleman sometimes in the House, the water-powers and other resources of the province were given away like so many presents handc 1 ' it by Santa Glaus at Christmas time:	Fisheries, timber lands and various
other concessions were lavishly given away in that province during -the time the hon. gentleman was himself a member of the provincial legislature. I think he ought to be fair in discussing this question as it affects Ontario. The hon. member stands up in this House in defence of private interest, but he is not so ready to defend the principle of public ownership and the conservation of the public domain for the people. As a matter of fact it has been the invariable practice of gentlemen representing the constituency of St. Lawrence-St. George, whether Liberal or Conservative, to attack public ownership in every respect, and the hydro-electric movement of Ontario has not escaped. Let me inform the hon. gentleman that Ontario is paying a very considerable sum in taxes in one direction or another. As the hon. member for West York (Sir Henry Drayton) knows, for he was an able power controller, the Hydro-Electric people of that province paid some four or five million dollars in customs duties on machinery imported from the United States for the Chippawa, while private ownership was spared in many respects.
The hon. member for St. Lawrence-St. George a month ago attacked the hydro movement in Ontario and said they paid no taxes, without having the slightest information on the subject. He has not studied the hydro-electric or the municipal acts at all, and yet he undertakes to say the hydro pays no taxes. I am afraid that there are very few supporters of the movement in this House on cither side. The hon. member is ap-
37S0
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parently of opinion ithat whatever is wrong with the National Railways is to be attributed to public ownership whereas private ownership is to blame entirely; and he advances the same argument in connection with the hydro-electric enterprise. Fortunately the hydro enterprise is not political in character. There is no politics in that movement such as we find in connection with the National Railways. Public ownership is not responsible for anything wrong so far as the Grand Trunk Railway is concerned. The Grand Trunk Pacific, the Canadian Northern and these other roads were built under private ownership and failed, so that it is altogether beside the point for anyone to criticize public ownership for the condition in which the National Railways may find themselves today on account of these roads. I know very well that a good many hon. gentlemen in this House would destroy the National Railways if they could. He talks of rates and makes comparisons.


William Duff: I must ask the hon.
member to adhere more closely to the subject matter.


Thomas Langton Church: I will. I have great respect for you, Mr. Chairman, and I bow to your ruling, but I do not see why the hon. member for St. Lawrence-St. George should be allowed to make similar comparisons in discussing this question, if I am not to be at liberty to draw any illustration from the Canadian National Railways as I am doing. The hydro-electric movement of Ontario has resulted in cheaper light and power to the people of that province. We find that in Hamilton the rates for commercial purposes are one-third of those charged in Rochester and Buffalo. Who gets the dividends? They go back into the pockets of the working classes in dividends in power at cost. When this movement was first inaugurated in the province, coal oil lamps were in use everywhere; to-day every workingman can afford electric lights. When my hon. friend from St. Lawrence-St. George is attacking the hydro movement I might ask him this question: How much watered stock is there in this concern such as we know exists in the capital of private companies for whose welfare hon. gentlemen in this House show so much concern? I stand for public ownership and I am going to say right now that every time the hon. gentleman gets up and makes a speech attacking the hydro movement of Ontario I am going to make a speech too in its defence. I would observe by the way, that the Conservative party owes a great deal

to the hydro movement in Ontario, for 85 per cent of the representation on this side of the House in the last parliament came from Ontario. The people of that province who are solidly behind the hydro and expect the members whom they return to parliament to protect its interests.


Charles Hazlitt Cahan: As a matter of privilege,
Mr. Chairman-


Thomas Langton Church: I am not through yet.


Charles Hazlitt Cahan: Mr. Chairman, I rise as a
matter of privilege simply to say that the hon. gentleman, as we all know-


Thomas Langton Church: That is not a matter of
privilege.


Charles Hazlitt Cahan: -has somewhat defective
hearing. Consequently he has not understood my remark; otherwise he has entirely misrepresented it, because I have made no attack whatever upon the Hydro-Electric Commission of Ontario, not the slightest. The people of Ontario are at perfect liberty to have any form of public ownership they please.


Thomas Langton Church: Mr. -Chairman, I rise to a point of order.


William Duff: Order.


Charles Hazlitt Cahan: Therefore I hope that tomorrow when the hon. gentleman is in a somewhat saner frame of mind he will read what I have said and will feel that he owes me a public apology for the criticisms he has directed against me. With regard to the province of Nova Scotia, the hon. gentleman's remarks indicate a very grave ignorance of conditions there. They have public ownership of waterpowers in that province to-day, and his remarks certainly have no relevancy whatever to conditions -there.


Thomas Langton Church: That is not a point of
order, it is a private ownership sermonette. The hon. member is breaking the rules of this House himself. I want to say to him that when there are no representatives present in this House from the province of Ontario he may be able to get away with it. I read his remarks in Hansard a month ago-


William Duff: Order.


Thomas Langton Church: Mr. Chairman, I am going to abide by the rules of the House and discuss the resolution. I am perfectly in order. The concluding paragraph of this resolution states:
The rates set fortih in this subsection shall not apply to corporations or joint stock companies.

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Discussion in committee should be relevant to the subject matter engaging our attention, but the hon. member for St. Lawrence-St. George wanders far afield and breaks the rules almost every time he speaks on these matters. I wish to protest against it. I believe we should discuss these matters according to the .rules of the House whether we are on the Conservative side or the other side of the House. I have sat in this House for five years as a humble representative from the province of Ontario, and I say the hydroelectric movement in my province has very few friends in this House. When the hon. gentleman is in a saner mind he himself can leave public ownership and the hydro alone.


Some hon. MEMBERS:: Order.


Thomas Langton Church: I am in order as much
as the hon. gentleman. They criticize the old province of Ontario which pays more taxes than any other member of confederation. Forty-six per cent is paid by Ontario directly and we want fair play. I am willing to discuss this question with the hon. gentleman inside the House or outside at any time. If he will come up to Ontario he will learn, something about the province, especially if he comes to Toronto and the Niagara district. If he sees the work accomplished for the people of the province by the hydro he will learn to admire it.


William Duff: Order.


Thomas Langton Church: Then he will have more
Tespect for the founders of the hydro-electric movement, and its functions and results, and he will become aware of the taxes they are paying, and will realize that in that way they are helping to pay his taxes and the taxes of the people of Quebec and Canada.


Henry Herbert Stevens: Mr. Chairman, in connection with this resolution I am going to offer a very brief criticism of what I deem to be the failure of the government to recognize what has always been regarded as a very sound principle in taxation, namely, that a given source of income should not be taxed a second time. I recognize that in collecting income tax there is naturally a desire to get the maximum. This is a very laudable desire on the part of the tax officials, but I still hold that if on the production of a certain amount of profit a company is taxed, it is unfair and unsound in principle to tax again that profit when it is paid out in the form of dividends. So I suggest to the minister the desirability of amending the resolution to eliminate this duplication of taxation.
I have in my hand a telegram dated April 23 last addressed to the Minister of Finance, and on behalf of those who sent it I want to say to the minister in charge of this resolution that the fact that it was not sent to him personally should not be taken amiss. It was addressed to the Minister of Finance, presumably under the impression that he would direct this legislation through the House. The telegram reads as folows:
1 At a meeting of citizens' committee representative city council, board of trade, Canadian Manufacturers' Association, B.C. division, Retail Merchants of Canada B.C. branch and Associated Property Owners of Vancouver to-day, I was instructed to make strongest opposition to provision in your budget of fifteenth instant for taxation of dividends both in hands of earning companies and again in hands of shareholders as dividends. This provision sufficiently onerous in any part of Canada to deter investment in new enterprises and particularly in new provinces such as British Columbia where introduction of new capital of supreme importance. Committee feel that proposed basis of taxation would be very serious and am instructed to urge upon you necessity of reconsidering proposed action in establishing dual taxation of company earnings if development of this province just beginning to give promise of considerable importance is not to be seriously retarded.
(Signed) A. E. Craddock,
Honorary Secretary.
I want to impress upon the minister the importance of the suggestion made in this telegram. It comes from a very representative group of citizens, and is not offered lightly or in a spirit of criticism, but with a desire to bring to his attention the possible serious effect of this taxation. They feel, and I feel, that if persisted in it will discourage the investment of capital in the development of our natural resources. I will localize this to a degree and speak for my own province. I suppose there is no province more dependent upon the investment of capital for the development of its natural resources, those of the mine, the forest and the sea principally, and in a lesser degree agriculture, and also in manufacturing, which is growing under the stimulus of the development of our resources. All of these activities are seriously affected, and we are therefore suggesting to the minister a reconsideration of this measure.
I have also before me a memorandum submitted to the Minister of Finance by Mr. Norman McLean, president of the Associated Property Owners of Vancouver. It deals with this same question, and I will read only a very brief section. It recommends that:
1.	The provincial income tax where levied be allowed as an exemption.
2.	Double taxation as will apply on dividends should be withhold, as all dividends are in the first instance subject to a tax paid by the company.

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There is another point referred to there which only emphasizes my argument. We have a provincial income tax in British Columbia, as I understand they have in a number of other provinces, and that creates an additional difficulty; many concerns are now paying out a very considerable portion of their earnings in income tax. First there is the provincial income tax now reduced from 9 per cent to 8 per cent; then we have the federal company tax which is now 9 per cent,, formerly ten and one-half per cent, and in addition we have the tax upon the private individual on the same earnings. I am very seriously impressed with what I think will be in many instances the fatal results of this duplication. I will admit that there may perhaps be ways of getting around the tax by the reorganization of some concerns which may manage to escape this taxation, but it is not desirable to have legislation which some may escape but which others must observe. I think the object of all taxation should be to make it as clear and as simple in its operation as possible; in this instance we have multiplied taxation. I do not know whether the minister has so fixed a mind and an opinion upon the subject that we cannot appeal to him; I hope that is not the case.
I am sure there are many on the other side of the House who will quite agree with my view, imperfectly expressed as it is; I am giving it hurriedly and without much preparation. But the simple fact that we are taxing these incomes twice, first in the companies and then as they are distributed in the form of dividends or earnings, is in itself enough, I think, to warrant the government abandoning this particular portion of their budget proposals. I advance this suggestion in a spirit of good faith and with the desire of assisting in the study of this problem.


George Halsey Perley: Before the minster replies I would like to say a word or ,wo on this point. I had a talk with the Minister of Finance on the subject; I did not know the Minister of Customs would have the matter in charge or I would have spoken to him as well. I am not interested in this question from the viewpoint of any individual or any particular company, but I do strongly support what the hon. member for Vancouver Centre (Mr. Stevens) has said. I think it is going to hurt Canada if this resolution goes through in its present shape. In the first place, as has already been pointed out, it seems to me altogether contrary to the spirit of our taxation that the same money should be taxed twice; that is something which will hardly bear inspection. But passing along from that, I beg the minister 
to reconsider this resolution because it seems to me that it will be a hindrance to Canadian industry and Canadian investments.
This afternoon the remark was made that the dividends of a certain well established company should pay as much taxation as earned incomes. I do not think that is the point at all just now. I think there should be some inducement to people to invest their money in Canadian enterprises, and I ask the minister if he does not think that is a good principle to support. It should be made a little more profitable to put money into a Canadian enterprise than to put it into bonds. I know of a company which was started not long ago by ten men; that company may be a failure and the investors may lose their money, but if the company is successful, this resolution will make those men pay nine per cent in the first place as a company, and then each individual will have to pay an additional tax as well. People are going to think twice before investing money under these conditions. They will say, "If this company is a failure I will lose my money; if it is a success the government is going to take the bulk of the money; I had better put it into government bonds rather than risk it in any Canadian enterprise." Therefore I submit that the resolution as it is now framed will deter men with money to invest from putting it into new Canadian enterprises, and surely if there is one thing we need in this country it is to develop our resources. It is true that we are getting in a lot of outside money from the United States; we welcome it, and welcome even more the money coming from the Old Country, but it is much better that our enterprises should be controlled by ourselves so far as possible. So I submit to the minister that he should make some concession in regard to this resolution which will offer a certain amount of inducement to people to invest money in Canadian enterprises and Canadian stocks rather than in Canadian bonds.


Mr. NICHOLSON:: I wish to support what has been said by previous speakers with regard to the principle of double taxation. In so doing I would like to refer briefly to what the minister said this afternoon in drawing a comparison between an earned income and an income drawn from dividends on money Invested in the Canadian Pacific Railway. It is very easy to draw a red herring across the trail by citing as an example a well known, well established public corporation, indicating that if a man has sufficient money in that enterprise to give him an income of $10,000 a year he should pay the same income tax

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as a maa with an earned income. As a matter of fact he does pay the same; and at all events there are very few people in this country who have enough money invested in corporations such as the Canadian Pacific Railway to receive an income of $10,000 a year. They are not the people who are being hit by this legislation. But just at that point let me say that the Canadian Pacific Railway pays $2,000,000 in taxes direct to the federal government, and then the stockholders who put their money into the enterprise are taxed a second time. The great majority of the people who will be affected by this measure are those people in small industrial corporations of different kinds all over Canada. I know forty or fifty of them in my own riding, and the average aggregate income would not be over $10,000 or. perhaps $15,000 in any of these corporations.
When the minister spoke about earned income, he referred to the man who worked eighteen hours a day in order to secure that income. After all it is the man who pust his time and money into Canadian enterprise who works eighteen hours a day, and why should that man, receiving an increment of $10,000, pay $1,190 in taxes while the man who comes into Canada selling on commission goods produced in a foreign country and making an income of $10,000 only has to pay $290? Is there anything fair in that? That is exactly what happens; the man who earns $10,000 by selling goods produced in a foreign country will pay only $290 in taxes. The man who spends his own time and his iown money in the development of Canadian enterprise will pay $1,190; and so all along the line.
Another feature, and perhaps the most vicious feature in connection with this legislation, is the provision by which the increment that may be earned in a private corporation, notwithstanding the fact that it is not distributed or is not distributable-increment in the form of goods on the shelves . of a merchant or material in the plant of a manufacturer to be fabricated at some future time-is going to be subject not'only, in the *first place, to the corporation tax of 9 pel cent, but also to taxation upon dividends just the same as if it had been distributed, *although in all human probability in the majority of these cases the man who has that increment is paying interest to the bank in order to be able to carry his business along. Go through the whole of these provisions, examine just how they affect Canadian enterprise from one end of the country to the other, and, I will repeat what I said on a former 140U-240-i '
occasion, if you secured a group of experts to devise a plan for discouraging Canadian people from, doing anything to develop their own country, they could not devise a more effective plan for that purpose than is set out in these resolutions. You are simply making it so that the Canadian who invests his money outside of this country, or who invests his money in non-prodUctive bonds or debentures or in mortgages in this country, will pay one rate of taxation, while the man who puts his time and his money into the development of Canadian industry and gives employment to Canadians is penalized by being taxed twice and, in some cases, as the resolution now stands, three or four times.
There is another feature to which I should like to refer for a moment, as I do not wish to rise again, and that is the provision by which a loss made in one part of a man's business is not allowed to be set off against gain in another part. I have personal knowledge of a small group of Canadian workingmen who put their money into a business in an endeavour to establish and develop an industry, and who lost $100,000 in the first two years the business was operating. In the following five or six years the business had a small increment each year, .but nothing was allowed on account of the loss they had made jn the first place. They were paying interest jto the bank on account of loans they had made in order to be able to carry the business along, and from that time until this, if they make one or two or ten thousand dollars a year and thus help to pay back what they had borrowed in order to carry them along, whatever they make is being taxed all the time. If a man has an interest in one corporation that loses money, and an interest in .another (corporation that makes an equal amount to that which has been lost, he is taxed twice over, and no allowance is made for what he loses.
All along the line, as you examine the prin-,ciple upon which the income tax is levied against Canadian industry, you simply find this, that it is a plan carefully conceived, or apparently so, to discourage and make it impossible for men to invest their money and put their time into Canadian business and help develop Canadian industry. I appeal to the minister to consider the whole aspect ,of these provisions, not as they affect a few large individual corporations, but as they .affect the great mass of the Canadian people who are endeavouring by their own energy and their own time and money to do something in their own way to help develop their own country. The large corporations can take
3784	COMMONS
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care of themselves. As a matter of fact, the large corporations in the very great majority of cases are made up by the investment of a great number of small amounts of money, in the form of payment for stocks and bonds by a great number of investors, many of them working people, many of them widows and orphans, and why should they be penalized for putting their money at work in Canada any more than those who have invested outside of the country? The whole scheme seems to me to be designed to force people either to tie their money up where it is not working at all, or to invest it outside of their own country altogether. Let me join with those who have preceded me and ask the minister at least to hold this over until he has considered just exactly what it involves.


James Shaver Woodsworth: Reference has been made to the widows and orphans. It is because of the widows and orphans, and some of the workers who are perhaps a little better off than the widows and orphans, that I khould like to say a word on this matter.
Unless we repudiate our debts entirely, it is necessary to raise the revenue somehow. As I tried to point out the other day, it is only, after all, a little less than fifteen per cent of our revenues that is being raised by income tax. The greater part of the revenues are raised through indirect taxation, which bears most heavily upon the ordinary people, including the widows and orphans. So we are dealing practically in this whole income tax matter with less than fifteen per cent of our revenues. Now when we come to that fifteen per cent, I take it that it is a sound principle of taxation generally accepted that we should tax the people who are best able to bear it, and those who have made profits surely are 'best able to bear the taxation. There is the other side of that, which has not been emphasized to-day, and that is that if you lessen the taxation on the ordinary people you increase their buying power, and when you increase their buying power you immediately increase the amount of goods that may be produced, and you increase the prosperity of the country generally. Between increasing the stored up capital in this country in order that you may produce more, or, on the other hand, increasing the buying power of the great masses of the people, we are safe, I think, in choosing the latter alternative and arranging our taxation so as to increase buying power and in that way produce prosperity.


Richard Burpee Hanson: If the hon. gentleman
(Mr. Woodsworth) is of the opinion that this

section of the budget will help those for whom he pretends to speak, and will study very carefully the schedules in this resolution, especially those which apply to the veiy large incomes, then I suggest to him that he cast a false vote on this budget, because this budget, and especially these schedules applying to the very large incomes, have lightened the burden upon the taxpayer against whom the hon. member has steadfastly set his face ever since he came to this House.


James Shaver Woodsworth: May I say in that regard-


Richard Burpee Hanson: I would like to go on
with my remarks, Mr. Chairman. The hon. member occupies about ten times as much of the time of the House as I do.
I would like to reaffirm in a very brief way the conviction that has been expressed by hon. gentlemen who have preceded me witfl respect to this particular resolution. I do not know that I can throw very much new light on this question, but I think I can view it from quite a different angle from thai taken by some of the other gentlemen, and in order to do so I want to give a concrete illustration , of certain Canadian companies which I know about, owned entirely by Canadian taxpayers. I am not going to mention any names, but it so happens that a company engaged in the development of the natural resources of my province, a company' which is 100 per cent Canadian and in which Canadian citizens have risked their whole fortunes, purchased 100 per cent of the stock of another Canadian company. It so happened that this second company which was purchased had no less than three subsidiary companies. Now that is the condition that is confronting these people with respect to this particular tax. What is to be done? I have not heard that there is to be any rectification of what it is clear must be a very grave injustice. In the particular case I have under observation, and in which I have been called upon to advise, I have advised that unless there is a rectification of the injustice no less than 27 per cent of the dividends of the third subsidiary company will go into the public treasury. Now that is confiscation, and I object to the resolution on that ground. I simply recite this to accentuate the injustice of the present resolution. I am bound to say that I do agree in principle that there should be an advantage given to earned income over unearned, but I would not give it in this way, nor would I discriminate to such an extent as is done here. This very question was discussed, I think, last year or the year before. I took

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occasion then to urge very briefly upon the minister to make some such distinction. I must say that I had the surprise of my life when I read the budget speech this year, not being present when it was delivered, and learned that the minister had adopted the method which he did adopt. I hope that before the resolution is passed there will be a rectification of the extreme condition to which I have referred.
Just one other word and I am done. I object to the taxing this year of the 1925 dividends. I do not think it is fair to the Canadian stockholders who have invested their money in good faith in Canadian companies, who have purchased shares, held them, and applied their dividends on the faith of the law as it was at the end of the accounting period of 1925. It is retroactive legislation, and as such is objectionable per se. But the worst feature of it is that you are taxing a man and making him pay for something he has probably not got now. I ask the minister to consider that feature. I am not going to attempt to deal with the legality of the matter. No doubt the government have had some advice on that point, although I have very grave doubt whether it is actually legal to do what the government propose. But it is objectionable on its face because it is retroactive legislation, and it is something that a government should not resort to unless they are absolutely driven to it.
But over and above all these considerations there is the fact that by putting a double tax on Canadian dividends, and by shifting the burden as it has been shifted, you are going to drive capital out of this country or are going to keep it away. I know something about the financing of Canadian industrial concerns; I have had something to do with it. I know just how hard it is to get local capital to invest in Canadian industrial concerns. Not this year but years ago, and from that time on down to the present, it has been necessary to pay investors a higher rate of interest, to absolutely secure them and give them freedom from taxation, or money could not be got for utilization in the development of our natural resources. I have reference to the pulp and paper business, an industry that is expanding this country. But how is it doing it? It is doing it in nine cases out of ten on borrowed capital, either by way of preferred stocks, or by bonds or, if you can, by inducing people with money to buy common shares in Canadian industrial concerns. I venture the assertion that if this resolution goes through
you will not get a dollar for the purchase of common shares in Canadian pulp and paper companies.


James Shaver Woodsworth: May I just correct the impression that may have been left by the last speaker? In discussing the budget I deplored the fact that we were proposing to lessen the taxation on higher incomes. I have taken that stand right along, so that my position on the matter is quite clear.


Mr. RYCKMAN:: I desire to add my voice briefly to those of hon. gentlemen who have spoken in opposition to this resolution. I am convinced that there is a plain business issue here that requires the judgment of business men and in that number, of course, I include the minister and the commissioner of taxation. I feel that this resolution if adopted and made the law of this country would result in irreparable damage. I am reminded of an incident which occurred during the first session I was present as a member of this House. The Hon. Mr. Fielding was Minister of Finance, and there was a question of imposing a duty of a dollar and a half per thousand on cigarettes. I told the minister that I held no brief for the cigarette manufacturers, but if that duty were put into force it would result in the smuggling of cigarettes and in a distinct loss to the revenue-that it would be a totally bad business proposition in fact. The minister was frank enough to say that if that result followed, the legislation would be repealed at the next session of parliament. We came back and after one year it developed, so I was informed, that the revenue of this country had lost about $2,000,000 and -that bootlegging in cigarettes had been set up. If this resolution is made law, if control such as this is placed over Canadian funds, it will mean what? First of all it will mean the transfer of these funds to United States. I am told that already representations have been made to the government that money has gone out of this country because of this very resolution, and I ask -the minister if he will be good enough to tell us, before we are through with this item, if any representations have been made on that score. Therefore, without taking up time unduly, I ask those who are disposed to sit down in the cool of the evening and investigate a business proposition, then arrive at a conclusion, whether this mode of taxation would be in the interest of -Canada. I am satisfied that hon. members have already received circulars from brokers-I know that I have received three or four-pointing out this very fact, and say-
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ing that it will pay Canadians to invest their money in the United States because by so doing they will avoid this taxation. I am one hundred per cent Canadian. All of us want to do the best we can for this Dominion, and I ask the minister whether this method of taxation is going to help us in upbuilding Canada, or whether it is going to mean that for the sake of a little revenue we shall be denying business to this country and estranging funds that should go into Canadian investments.


Robert James Manion: I should like to say a few words on this resolution, although I do not know whether any further arguments can be added to those which have been already advanced. But there is one point that appears to me to have been pressed too severely, and that is the point made in connection with the term "unearned income." There is a little too much tendency on the part of many, it appears to me, to desire to tax very heavily what they call "unearned income," in other words income coming as dividends from some corporation in which investments are carried. May I point out that frequently the so-called unearned income is not unearned at all; it is earned over a period of many years by the thrift of the man who happens to have that income coming to him at that time? Let us take two examples to illustrate the point:	There are two individuals who, we
will say, twenty or thirty years ago were earning an income of $3,000 or $4,000 a year. One spent or wasted everything he made or, perhaps, did not waste it but spent it on good living. The other man wished to provide for his old age, or wished to make provision for his family. Accordingly he laid aside a little money every year and put it into some Canadian corporation. It is only a few years since the income tax was first imposed in this country, and it 9 p.m. was not until the present budget was brought down that the investments which this man had made in Canadian enterprises were taxed. Therefore his thrift would be rewarded by a return of 100 per cent. But to-day the proposition is that this man, who has been thrifty and saved for the old age of himself and his wife and the care and education of his children, shall not only be taxed on that thrift which has made him save his money but that his thrift shall be doubly and in some cases trebly taxed. A point that should be kept in mind is that those so-called unearned incomes, in perhaps 95 per cent of the cases in this and other countries-and probably more in Can-

ada than in older countries-are really earned incomes, earned by the thrift and self-denial of many years gone by. That is another reason why this matter should be given consideration.
The argument which has been advanced in a very moderate tone by many hon. members to-day, most of them, I admit, upon this side of the House, has been advanced with the desire not of embarrassing the government but of pointing out to the minister the need of some further consideration of this item. It is an unfair tax not only because it is a tax and sometimes a double and even a triple tax upon thrift, but as has been so well pointed out, because it is in many cases a double tax on our country, a tax which does not apply to foreign countries where people invest their money. The Canadian investor and Canadian envestment in Canadian corporations are paying a heavier tax through this proposition than is paid by the corporation of a foreign company or the individual who invests his money in corporations of a foreign country.
There is another point that should appeal to the hon. member for Winnipeg North Centre (Mr. Woodswoi'th) who states that he speaks for the labouring classes of the country. He should remember that if you injure the industries of Canada you take away from the working classes the opportunity of earning a living. The first persons who suffer if you injure a Canadian industry are the workingmen themselves. The man who owns an industry, even if it is put out of business, can often go south and while away his time in Florida, the West Indies, or somewhere else, but the workingman has to look for another job. If any of those industries are put out of business-and it has been veiy ably argued that many of them will be hurt and some perhaps will be put out of business by taxation such as this-the workingman will be the first to suffer by such action.
In closing I appeal sincerely to the minister either to make an amendment himself to-night, or to hold this item over until to-morrow, reconsider the question in consultation with his able assistant, Mr. Breadner, and see if he cannot bring in a proposition which will be satisfactory. I do not think the minister would accuse any hon. gentleman who spoke this afternoon on this question- and it has been under discussion for a long time-of taking a captious or, if you will, a political attitude. They have argued it from the standpoint of fairness to the industries of Canada and those who have money invested in them. I would suggest that the

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minister should either hold it over until tomorrow and consider the matter or amend it himself to-night if he should desire to do so.


Mr. BURY:: I do not intend to speak at any length because the arguments against this proposition have been very carefully and fully elaborated. I wish however to say a word for the widows and orphans. I wonder how many hon. members have considered the fact that perhaps in mcye cases than they can imagine the sole resources of many comparatively poor people who are intended to go tax free under the income tax law may be represented by investments in industrial enterprises in this country. The hon. member for Fort William (Mr. Manion) has called attention to the fact that what has been so glibly called unearned income may in point of fact be really earned income. That is to say, it may represent the thrifty accumulations and careful earnings of a man, a comparatively poor man it may be, over a period of many years. This man dies, but before his death, for the purpose of supporting his widow and children, he has invested his money in industrial securities. You tax the revenue coming from those industrial securities and you are taxing the woman; you are taxing the person whom you intended to let go tax free.
Let us take the case of a widow whose income from investments made by her deceased husband in his lifetime amounts to $1,500 a year. She has to pay a tax of 8135 simply because her husband during his lifetime made provision for her by investing money in Canadian industries. Let us take the case of an elderly couple who may have passed the age when they can earn a living. By thrift and industry they -have made investments in Canadian enterprises bringing them in a revenue from dividends of $3,000 a year. You intend that that shall be tax free, but in point of fact by the simple reason that their investments are in Canadian industries they pay an income tax of $270 a year. 1 do not know whether members of the committee have considered that.


Mr. POWER:: Will the hon. gentleman explain how he gets those figures?


Ambrose Upton Gledstanes Bury: Supposing the revenue of a widow is $1,500 a year-


Charles Gavan Power: In that case she pays no tax.
Mr, BURY: -derived from money made in a certain industrial enterprise. You go to the fountain head and impose a -tax of 9 per cent on her $1,500 a year before she draws a cent. Supposing there is an elderly couple
who have, as I said a moment ago, by long, careful industry and thrift set aside for their old age investments which will bring them a bare $3,000 a year. You intend that that income of $3,000 a year shall be tax free, but in point of fact by this proposition you take $270 out of their pockets.


Charles Gavan Power: Did the hon. member's party not take 10 per cent before.


Ambrose Upton Gledstanes Bury: That does not make it any
better.


Charles Gavan Power: It makes it one per cent better.


Ambrose Upton Gledstanes Bury: I am pointing out that you are taking in the one case $135 from a widow whose income is only $1,500 a year and in the ether you are taking $270 from an aged couple whose income is only $3,000 a year, and only because the man had the folly to put his money into a Canadian industry. If he had not been such an infernal fool as to put his money into a Canadian industry-


Charles Gavan Power: Would my hon. friend suggest that we exempt Canadian industries altogether from taxation?


Ambrose Upton Gledstanes Bury: What you are doing with one hand -you are undoing with the other.


Charles Gavan Power: Would the hon. member
suggest that we abolish the tax on industrial corporations?


Henry Lumley Drayton: A double tax.


Charles Gavan Power: At present my hon. friend
is talking of incomes of $1,500 a year which are taxed only once.


Ambrose Upton Gledstanes Bury: I am pointing out that because a man was such an infernal fool that in the days of his thrift and earning capacity he put money into Canadian industry for the sake of supporting his widow when he dies, instead of putting it into bonds or some other securities outside of industry or into industrial enterprises in other countries, his widow has to pay a tax of $135 a year out of her wretched $1,500, while her neighbour who has her money invested in another country gets her $1,500 net without any income tax reduction whatsoever. That is the result of this proposition. Hon. gentlemen may think that is fair, sensible and good business for Canada. If so, I compliment them upon their mentality, but to me it seems to be a gross injustice that a widow on one side of the street shall have to pay $135 a year in income tax while a widow on the other side has to pay no income tax whatever simply because the first widow's good man-

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Mr. GERVAIS:: Why take the widow all the time?	.


Ambrose Upton Gledstanes Bury: I take the widow all the time because it seems to some hon, gentlemen opposite that we here know nothing about widows.


Charles Gavan Power: Tell us some of your experiences.


Ambrose Upton Gledstanes Bury: I am afraid any experience of mine would fade into absolute insignificance in comparison with the experiences of my hon. friend.


Charles Gavan Power: But I am not talking about them; I am more discreet.


Mr. CANTLEY:: I want to emphasize
some of the objections made by hon. gentlemen on this side. In my judgment, and I believe in the judgment of the committee generally, the taxation now proposed will serve to scare away capital from this country. It is difficult at any time to induce capitalists to come to Canada, and this will simply increase that difficulty. The taxation proposed will make it hard for anyone in Canada to obtain foreign capital for investments in this country. Now, if we are to make any progress at all industrially we must have foreign capital, and in large volume; I am not referring at the moment to the United States so much as to capital from the Old Country. I have been a borrower all my life, and I know what it is to try -to induce British capitalists to invest money In 'enterprises in Canada. A few years ago when we were endeavouring in Nova Scotia, to extend the iron and steel industry there, in company with the present Chief Justice of the province of Nova Scotia, who at that time was president of the Nova Scotia Steel and Coal Company, I spent some months in London in the effort to obtain upwards of ten million dollars of capital, and one of the first questions with which we were confronted had reference to the matter, of taxation in this country. If the present proposed taxation is carried into effect, future borrowers will be obliged to reply, to such a question, to the effect that the earnings of industry will be called upon to contribute nine per cent in the form of direct taxation, while in addition thereto the individual dividends will also be taxable. What chance has anyone to secure foreign capital on such terms, when the same capital can be invested elsewhere without this handicap?
This is a practical question. Let me give a concrete illustration of the way in which this taxation will affect Nova Scotia in possibly a very few months. It is within the

knowledge of every hon. member that the largest industry by far which we have in that province is at present in a critical condition, and if it is to be maintained it must have some twenty-five or thirty million dollars in ithe way of added capital. Where shall we secure that money? Is there any possible chance of our getting it in Great Britain under the conditions foreshadowed in these budget proposals? Is there any likelihood of our being able to get ten, fifteen or twenty million dollars of British capital when investors on the other side learn that, apart from the nine per cent collected in direct taxation, the dividends will also be taxable? The situation in Nova Scotia is serious, and while I do not intend to labour the point I am bound to say that it is one that appeals to me with great force in view of this taxation proposal. I do not know that anything I can say will have any weight with the government, but I do appeal to the minister to consider the facts as I have tried to put them before the House. I want to assure the government that in view of the gravity of the situation now existing in Nova Scotia the effect of this taxation, if it goes into operation as now proposed, cannot be otherwise than disastrous.


Thomas William Bird: We all admit that taxation
is one of the most debatable subjects that can come before the House and I am ready to grant that the arguments that have been advanced by hon. gentlemen to the right have been sincerely offered. But these arguments have been made solely from one point of view. They constitute, in effect, ar attack on the standard of living now prevailing in Canada. Now we are suffering undei the heavy burden of war taxation, and someone has to bear that burden. The question therefore is, who will bear it? Our friends to the right say that those Canadians who have a surplus of income should be relieved of taxation.


Some hon. MEMBERS:: No.


Thomas William Bird: I have listened carefully to my hon. friend from East Algoma and to other hon. members during the past few days, and these gentlemen seem to think that some undue burden is being imposed on Canadian capital or on surplus income. If it is the object of hon. gentlemen to relieve surplus income, where will the burden be placed? There is only one thing to do, and that is to place it on the shoulders of the consumers. It follows, therefore, whether hon. gentlemen realize it or not, that they are really attacking the standards of living of the common people. And it is a very dangerous

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political proceeding to do anything of the sort. It has been contended that this tax is an attack on thrift. Of course it is not the rich whom hon. gentlemen seek to relieve, but the ordinary thrifty man who through a long life of toil has saved enough money to buy a few shares in some industrial concern. Well, what do hon. gentlemen want to do as an alternative? They want to make it impossible for all time for any workingman to save any money. If our friends to the right push the logic of their arguments to its extreme they will tax the consumers to such an extent that the poor man will find it hard to save any money at all. Then hon. gentlemen say that the tax will injure industry and, consequently, the workingman. That is an instance of the fallacy of arguing exclusively from one point of view. I agree entirely with my hon. friend from Winnipeg North Centre, that the soundest economic means whereby to benefit industry is to increase the purchasing power of the consumer; and it is tantamount to increasing his purchasing power to prevent any tendency towards decreasing it.


Mr. STEWART (Leeds):: Are we not all consumers? What does the hon. member mean by "consumer?"


Thomas William Bird: We are all consumers; but the capacity of some Canadians to consume is greater than that of others. Unfortunately our economic system is so ordered that the consuming power of a comparatively small number of our people is enormous in comparison with that of the great mass who live from band to mouth all the time. Stimulate industry! The only way to have industry in a flourishing state is to stimulate the purchasing power of the people of this country. All economic thinkers, as well as practical politicians who have any interest in the people, agree that you can increase the purchasing power of the people, and thus stimulate industry, by reducing the burden of taxation. With other hon. members of this House I believe it is a regrettable thing that our country is so burdened with taxation. Surely it does the country harm. Surely the country would spring forward into renewed prosperity if some of this taxation were lifted. But when you propose to lift it, let -the relief be as equitable as possible. I may have misunderstood the speeches of my hon. Mends to the rigfht, but it seems to me they want to lift the burden off the capitalists and put it on the consumers of this country.
We have heard the argument repeated over and over again, which I think on reflection
would not be made on its behalf, that if you tax capital it will flee .the country. Surely it is a stain upon the capitalists that in a time of stress, when the country is suffering from inflated taxation, the possessor of surplus wealth will migrate if any attempt is made to tax him. That is a new kind of .patriotism, that you can pile all this war taxation on the workingman, .the farmer, because he cannot get away, he is ,patriotic-he has to 'be because he is tied hand and foot to the soil; but you must not impose the burden on the .man who possesses capital, Who to-day is a patriotic citizen and boasts of his patriotism, for if you do, to-morrow he will flee and become a citizen of another country. That seems to be the logic of our friends' argument.
Now, Mr. Chairman, I think it would be a very worthy achievement on the part of the Minister of Finance to frame some method of dealing with these ultra-patriots. Surely it is within the scope of human wit to discipline those who in order to escape paying a fair share of the taxation of thiils country are ready at any moment to hurry off to some distant and greener pastures. It surely would be a worthy achievement on his part to so discipline these sup er-patriots that they would be glad to leave their capital and themselves at home in order to help the rest of the .people to bear the burden o'f post war taxation.


John Arthur Clark: Mr. Chairman, I would suggest to .the hon. member for Nelson (Mr. Bird) that if his income happens to be $4,000 a year, under the new law he will pay $2(1; but that if I happen to be a manufacturer and the sole shareholder in a company whose net profits amount to $4,000-Jthe same as the income of my hon. friend-I will be forced to pay $360. But it does not stop there. When I get my dividends I must in addition pay just exactly the amount that my hon. friend has paid. In other words, I must pay $360 plus $20. Yet he rants and raves and suggests I ought to pay more.


Thomas William Bird: The hon. gentleman does not seem to realize that he would be over $1,000 better off than I would.


John Arthur Clark: I do not think .my hon. friend has followed me. The incomes are' the same, only my income, which happens to be $4,000


Thomas William Bird: But the hon. gentleman would have an earned income as well.

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John Arthur Clark: I do not hear my bon.
friend. He says the cost of the war has to be met somehow. I would point out that in past years, under the Special War Revenue Act and the Income War Tax Act, we have been collecting war taxes. In 1922-23 we collected $181,000,000, next year $182,000,000 next year $147,000,000 and last year $154,000,000. During his budget pronouncement the Minister of Finance stated that the principal expenditures of 1925-26 due to the war exceeded the taxes collected under these special war acts. As a matter of fact the figures show quite the contrary. In making up his statement he has charged interest on the whole public debt incurred since 1914. I suggest that that is not fair, that the balance of the national debt so incurred is not due entirely to the war, that during the interval we have advanced $600,000,000 to the National Railways; furthermore, the public accounts show that the total cost of the war amounted to $1,600,000,000. Therefore the interest on the public debt due to the war is not in . excess of $75,000,000, whereas the Minister of . Finance represents it to be $122,000,000. Under this Income War Tax Act and the Special War Revenue Act we 'collected in 1922-23, $51,000,000 in excess of the amount required to meet war expenditures; the following year, 1923-24, $61,000,000, in 1924-25, $26,000,000, and in the last fiscal year we collected $33,000,000.
I suggest that in so far as those collections have exceeded the amounts required to take care of the war expenditures they were illegally collected. I am not suggesting that the acts themselves are ultra vires of parliament, indeed the contrary has been held; but those acts having been passed for that specific purpose, I say the collections in excess are illegal.
This afternoon I pointed out to the minister that in so far as the taxation of divi-iends which were earned in 1925 was eon-3emed it was ultra vires, but perhaps I vrongly used that term. This parliament, of course, can pass such legislation, but I sub- . mit that in so far as this act relates to taxation of dividends earned in 1925, it is equivalent to a tax on property that has ceased to exist; there is nothing to tax, and therefore no taxation can be collected. It is just the same as though the minister to-day were attempting to tax dividends received in 1890; that property has been disposed of or spent. Similarly, dividends which were received in 1925 have ceased to exist, the property is non-existent, and such tax cannot be collected. If the tax were for the next year it would attach to the dividends as and when they were received and would be quite
rVr Bird.]
legal, but I ask the minister to take that into consideration. I further ask him whether he has considered the legal effect of an act instituting a tax upon property which has ceased to exist.


George Brecken Nicholson: I had not intended to say anything further, Mr. Chairman, and would not have done so but for the remarks of the hon. member for Nelson (Mr. Bird) in which he referred specifically to myself and put words in my mouth which I did not utter. In endeavouring to make it appear on the record that those who are opposing the method of double taxation now proposed by the government are endeavouring to relieve Canadian industry or Canadian investors of income tax altogether, the hon. member for Nelson either wholly misunderstands the position we have taken, or misunderstands the proposal before the House, or is misrepresenting the position taken by myself and others who have spoken in this regard. So I would just like to ask the hon. member what justification can be advanced for taxing a man with an income of $5,000 a year $40, and taxing another man with the same income $490. That is an unfair method of taxation, and am I to be charged with endeavouring to evade taxation on behalf of those who have their money invested in industrial enterprises in this country because I oppose it? That is exactly what is proposed in this resolution. As I said before, a man may earn $5,000 a year by selling goods produced in a foreign country, and on that amount he will pay a tax of $40. But if a man has the enterprise and industry to earn $5,000 from his investment in some Canadian company he is taxed $490 a year, and that is what we are objecting to. Those who are investing money in this country and those endeavouring to build up Canadian industry have always been perfectly willing to pay their fair share of our taxes, but when it comes to this system of duplicate taxation many businesses will find it impossible to carry on, and I think we have a perfect right to object. The hon. member for Winnipeg North Centre and the hon. member for Nelson both made statements in regard to earned and unearned income, and the latter gentleman also said that the way to make industry prosperous was to make it possible for the Canadian people to buy more goods. If the plan of my hon. friends were put into effect, they desire to 'have those Canadians who can buy goods buy foreign goods, and they would make it utterly impossible for a Canadian to buy goods made in this country at all.
I would like to give one illustration before closing. If you look at this island in the

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Ottawa river you will see an industry established there. A young man came to this city seventy years ago and spent the whole of his lifetime and his yearly increment as he made it in establishing that industry. In the whole of his .private life and in the way he 'lived he was a hermit in comparison with some of these men who are talking about the plutocratic business man. During those seventy years through that industry he gave employment, furnished homes and supplied the means of livelihood to tens of thousands of people, and that is exactly what the minister is endeavouring to prevent by the introduction of a system of this kind.


Charles Gavan Power: I presume the hon. gentleman is referring to the J. R. Booth industry.


George Brecken Nicholson: Exactly.


Charles Gavan Power: Would taxation such as this have prevented J. R. Booth from becoming as great as 'he eventually did become?


George Brecken Nicholson: He could not have
started.


Charles Gavan Power: Will the hon. gentleman
tell me why?


George Brecken Nicholson: Because you begin
by confiscating the increment which is made from year to year, which would make it impossible for him to get started.


Charles Gavan Power: Is it not a fact that
J. R. Booth was not incorporated until the last five years of his life?


George Brecken Nicholson: My hon. friend can
speak for an hour if he wishes after I have finished. I simply say that by this method you are making it impossible for those men who are endeavouring to establish industries of a similar character to carry on, because you confiscate the increment. I will refer again to that provision by which the increment is taxed a second time, whether or not it is possible to distribute it. That is the most vicious principle in connection with the whole thing. When the hon. member for Nelson or anyone else undertakes to charge those who are objecting to this vicious .principle of double taxation which is applied against Canadian industry but not against incomes derived from any other source whatever, with evading taxation, he is simply making a charge which has absolutely no foundation in fact. No hon. gentleman on this side of the House who has spoken on this provision has argued any such thing as my hon. friend would endeavour to indicate.


Georges Henri Boivin: Let me at once admit, in attempting to answer the criticism levelled at the measure now before the House, that the question at issue is very serious, and that it was not without a great deal of consideration that the government decided to depart from the principle adopted in our income tax law since it ha3 been on our statutes. But let me further say that it is a great deal easier to criticise than to construct; it is a great deal easier for hon. members opposite-and I do not blame them for having done so, because it is their duty-to pick flaws in any piece of legislation introduced by the government than to correct those flaws and make the legislation proof against criticism.
Let me take up the different lines of criticism as they were made by .the different speakers on the other side of the House, and let me deal first with my (good friend from (Sit. Lawrence

St. George, who brought up the point of taxation upon light, heat and power corporations, or in other words public utility corporations. He represented with a good deal of reason that the people of the province of Quebec should not be called upon to pay more for light, heat and power than should the people of Ontario, but that this was the case at present because the public utility corporations of the province of Quebec were obliged to pay income tax. This they passed on to their consumers and considered as an overhead expense, whereas the public utility corporations of Ontario, or in other words the hydroelectric commission, was not obliged to do so. The people of Ontario represent, quite rightly I think, that the hydro-electric commission does not attempt to make profits, and that therefore there are no profits to be taxed. There is only gross revenue, which may be compared with the gross revenue of the public utility corporations of Quebec. The suggestion v as put forward that we might equalize matters by not imposing any tax on the net earnings of the public utility corporations in Quebec, but that we could impose a smaller tax on the gross earnings of both corporations. That would be a way out of the difficulty were it not for the fact that the British North America Act prohibits the taxing of government property and of government corporations. Section 125 of the British North America Act provides that no lands and no property belonging to Canada or to any province of Canada shall be liable to taxation. This aspect of the law has been discussed in the House many times, and that is the reason why income taxation has never been imposed upon the public utility corporations of Ontario.
I did not intend to blame the hon. member for St. Lawrence-St. George for having been
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in contradiction with himself when X spoke just before six o'clock. It was more in a spirit of gratitude that I rose to thank him for having pointed out that in the case of the public utility corporation the tax was really paid by the consumer, and that what existed in the case of the public utility corporation existed in the case of most of the larger corporations of Canada.


Charles Hazlitt Cahan: The latter part is where we differ.


Georges Henri Boivin: We do not differ so much as my hon. friend thinks at the moment, because I was going to say that I am willing at once to concede that in so far as small corporations are concerned, in so far as partnerships formed into joint stock companies are concerned, there is a real hardship in double taxation. Where four or five young men invest their earnings for a certain number of years in one partnership and are confronted by this income tax law, which was placed upon our statute books by our predecessors in office-I am not blaming them for that; it was necessary and must be maintained-when they learn that for the purpose of settling estates and paying succession duty taxes without trouble and inconvenience it ^ is easier for them to incorporate as a joint stock company, they proceed to take out a charter. It is the same capital, it is the same effort, it is the same people interested in the concern, and there is double taxation. The government proposes to remedy that by placing in the bill a clause -it is not necessary that this should have been mentioned in the resolution, because it is a diminution and not an increase in taxation-giving to these corporations the opportunity of making their own option of paying their taxation as joint stock companies or as individual partnerships, as they may desire.


Charles Hazlitt Cahan: That will really meet my objection to a very great extent.


Georges Henri Boivin: I am very glad to have that admission. I know that my hon. friend will contend this, that it is going to be very difficult to draw the line between the family corporation, between the partnership which has developed into a joint stock company, and the larger corporation. Let me say right now that in spite of all the criticism levelled against our bill, I am still of the firm opinion that most of these small corporations will take^ advantage of the law as it stands and continue to pay their taxes as corporations, and not as partnerships. I know that my hon. friends readily understand the difference. 
If they pay their taxes as corporations, they will pay 9 per cent on their entire earnings, it is true, but the individual partners will pay taxes only on what they withdraw from the company. The surplus that remains in the company is not taxed overhand above the 9 per cent.


Henry Lumley Drayton: They would be keeping back the income if it was more than that.


Georges Henri Boivin: Nine per cent would be the only amount they would have to pay as corporations.


Henry Lumley Drayton: On a net income of $9,000 they would pay only 9 per cent, and that really means an income of $12,000 in the case of a married man.


Georges Henri Boivin: In the case of corporations where the profits are large they would prefer, I suppose, to leave them in the corporation. In all corporations, and I know it is the small corporation that hon. gentlemen opposite desire to protect, they would have to pay a tax on their profits at the same rate that they would pay if they were individual partners in a partnership.


Robert James Manion: But would not the corporation have to pay the same tax when it ultimately makes a distribution of its profits?


Georges Henri Boivin: If the corporation is sufficiently large ,to make it more advantageous for the corporation to pay 9 per cent on its total earnings and to leave in reserve the amounts that could be distributed amongs its shareholders, of course, when the dividends were ultimately distributed, it would be considered as a profit or income and become taxable.


Robert James Manion: That is the point I make.


Georges Henri Boivin: It must be remembered however, that a great many of these corporations invest their profits in brick and mortar.


Robert James Manion: It would really only be delaying the double taxation.


Georges Henri Boivin: It would be delaying the double taxation if the dividends were ever withdrawn from the company in the form of direct profits. But, I wanted to add, there is another corporation that we are trying to reach, and that is the personal corporation, or the corporation sole, which was formed in many cases for the express purpose of evading taxation.


James Dew Chaplin: Nobody on this side has objected to that.

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Georges Henri Boivin: I am very glad that in all
the remarks made by hon. members on the other side of the House no objection was taken to the efforts (that are being made in this legislation to reach back and tax the man who should have paid taxes before but who has evaded taxation, not the man who has invested his money in industry, not the man who has attempted to develop (Canada, not the man who has attempted to give employment to his fellow men or to keep the wheels of industry going, but the man who has incorporated himself as an investment corporation and who has evaded taxation by withdrawing from the corporation only what he required to meet his living expenses, paying 9 per cent on the balance, and leaving the entire amount of his surplus to accumulate from year to year in the corporation. I am glad that we are at one in this House in the effort the government ds attempting to make to reach back and oblige these people to pay their fair share of taxation.


Charles Hazlitt Cahan: I think we are all in accord as to that, but I think my hon. friend would have to consult his legal advisers on that point, because under the form which the legislation takes here, any counsel for a fee of $100 to $500 could advise a wealthy man how he could escape the tax entirely.


Georges Henri Boivin: My hon. friend must not
forget that he is looking merely at the resolution which, after it has been adopted by parliament, confers upon the government the power to introduce the bill based upon it. The bill, of course, will be much more precise than the resolution itself, and will, I think, meet any objections that could be raised by my hon. friend.
I do not think there is very much criticism as to the rates charged. The whole argument, I think, goes back to the double taxation. We have protected the small industrial investor by placing in the bill a clause to the effect that partners going into business or people entering what may be called a family industrial corporation shall have the Option of paying either as a partnership or as a company, as they may desire.


George Halsey Perley: Is there any limit to the number of shareholders there may be in a company of that kind?


Georges Henri Boivin: No, there is no limit to the number, but they have to be either members of the same family or individual partners who are engaged in the same business and have become incorporated as a joint stock company.


Charles Hazlitt Cahan: I would suggest to the hon. gentleman that such a provision does not go quite far enough. He desires, as I do, to protect the industrial life of our towns and villages. One great difficulty in the province of Quebec :s to maintain in the towns and villages small industries which give employment to people, who otherwise would find refuge in the great cities of the United States or possibly in Montreal or Quebec. Now, this resolution would apply to all these companies no matter whether they are of members of the same family or not. Half a dozen neighbours will get up a small company. They will contribute the necessary capital, enter into a partnership, and become incorporated as a limited company. They certainly should be exempt. The whole body of private companies, incorporated under the Companies Act, should be exempt in the same way. All private companies who are incorporated under the Companies Act as partners should be exempt, because it is absolutely impossible to maintain the small industries of our towns and villages if they are to be taxed twice, once as a company and secondly on the income which they receive in the way of dividends.


George Halsey Perley: I should like to support what my hon. friend the member for St. Lawrence-St. George has said in this respect. My sole idea in discussing this matter is to try to find some means whereby there will be an inducement to our own people to invest money in the industries of our own country rather than put it into bonds. And I am not comparing their position with the. position of people who invest in foreign countries at all. At the present time I am considering the position of a man who has some money that he might invest in Canadian enterprises and thus give employment to our own people and help to develop our own resources, or that he might put into bonds without incurring any risk in regard to it. I have instanced a case that I happen to know of where ten men lately started a new business. I submit that if this legislation goes through as I understand it to be now, it will do a lot to prevent people of that kind from making investments of the character I have indicated. That should apply to the ten men to whom I have referred, although they are not related to each other at all. I am sure that if the minister considers the matter he will agree with me-and I am not speaking from a political point of view at all but from a business standpoint and in the interest of the good of our common country-that if ten men go into an investment of that kind where
Income War Tax Act

they may lose their money it is very unfair to tax them twice. It will do a lot to prevent men from putting their money into Canadian companies designed to develop our own industries and provide work for our own people.


Georges Henri Boivin: 
Henry Lumley Drayton: That helped the small taxpayer.


Georges Henri Boivin: It helped the small taxpayer.


Henry Lumley Drayton: To the full extent.


Georges Henri Boivin: To the extent of the normal tax.


Henry Lumley Drayton: That is all the
small taxpayer is interested in.


Georges Henri Boivin: The tax of 4 per cent was
of course what he was interested in.


Henry Lumley Drayton: Four per cent or under.


Georges Henri Boivin: No one paid under 4 per
cent under the old act.


Henry Lumley Drayton: That is quite
true.


Georges Henri Boivin: The change is made to meet in part the request of a large number of people in this country who claim that earned income should not pay the same rate as unearned income. Now what is the difference between unearned income and earned income? My good friend the member for Fort William said a few moments ago that practically all income was earned income because it had been earned at some previous time.


Robert James Manion: Yes, I said largely in this country-95 per cent, probably.


Georges Henri Boivin: I agree almost entirely with everything my hon. friend has said, and if he would refer to the capital as being income previously earned, I would agree with him entirely.


Robert James Manion: That is what I meant, of course.


Georges Henri Boivin: But when he states that the [DOT]income derived from that capital is the same as earned income, I am obliged to disagree .with my hon. friend because there is a difference between the cases of the two men that he cited. One man has saved no money and therefore has no capital. The other man has the capital invested from which he derives his income.


Robert James Manion: That is because of one man's thrift and the other man's improvidence.


Georges Henri Boivin: Absolutely, but the capital
*is the result of the thrift, and we are taxing the capital. We are taxing the income (derived from that capital.


Robert James Manion: That is very specious
reasoning.


Georges Henri Boivin: It may be specious reasoning but it is nevertheless absolutely true that the accumulated capital is not taxed by this

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igovernment. It was not taxed by the former .government. Under the income tax act, capital has always been respected. What was taxed was the earning power of that capital or the income derived from it. In this particular case, the man who has the capital invested still has the same means of earning his livelihood as the man who has no capital. That is if both men are of the same age and living under like conditions.


Mr. McGIBBON:: Axe government annuities and life insurance annuities taxable under this resolution?


Georges Henri Boivin: Government annuities and
annuities from life insurance companies are exempt under the old act, and there is no change in that provision.


Charles Hazlitt Cahan: I can understand the hon. gentleman making a distinction between earned and unearned income, using the terms " earned income " and " unearned income " in the sense in which he has used them. But why not distinguish as well between earned income, which I understand to be salary or money derived from service, professional or otherwise, and income derived from bonds, debentures or mortgages, which is unearned income? One cause of dissatisfaction is that the government singles out simply one item of unearned income, namely, dividends, and places them in a prejudicial or inferior position, while it does not make a clear distinction between earned income and unearned income in dealing with income derived from bonds, debentures, mortgages and money lent in all sorts of ways.


Georges Henri Boivin: I would like to be able to devise an equitable way of making a difference between revenue derived from bonds and mortgages and revenue derived from salaries, and if I could I would certainly recommend it to council.


Henry Lumley Drayton: It has been
tried in England.


Georges Henri Boivin: 
Henry Lumley Drayton: Which helps the small man whom it is intended to help.


Charles Hazlitt Cahan: And in the United States as well.


Georges Henri Boivin: But being unable to do that, being unable satisfactorily to reach that solution and embody it in the legislation, we thought we would be going at least a step in the right direction if we placed earned and unearned income of all kinds on the
same basis. I have tried to make provision for the small corporation, but I know my hon. friends are going to argue as they did before that in connection with the large corporation the income is being taxed twice. In framing an income tax act and in determining rates and exemptions it appears to me that ability to pay should be the first consideration. If we bear that in mind it is hard to justify taxing a person who has a certain amount of unearned income at a lower rate than that imposed upon an earned income of the same amount. Ability to pay of a person in receipt of 810,090 a year in the form of dividends is certainly just as great if not greater than that of a person receiving $10,000 a year as wages or salary. The fact that the corporation from which the dividends come has paid a tax does not in any way lessen the ability to pay of the person who receives the dividends. He has. the $10,000 net, exactly as the other man has the $10,000 net. Furthermore I think everyone will admit that he has a capital fund already invested and available against his old age, while the man who earns his money may still have to save a considerable -portion of it in order to provide against his old age.
If objection is taken to what has by some been called " double taxation " resulting from the proposed amendments, such objection must be based upon the view that the shareholder and the company, while distinct in law, are virtually one in fact. Accepting such a view for the moment, we must admit that taking the corporation and the shareholder together and regarding them as one, this bill provides a reduction of \\ per cent in favour of the corporation, which reduction must be taken as accruing to the benefit of the shareholder. It is pointed out in passing, to those who may claim that the effect of the bill is that the government is dipping its hand twice into the same pocket, that the justification for the removal of the exemption is that ability of the shareholder to pay must be regarded in the light of the amount actually coming to him as net income.
It has been pointed out that we are going to hurt Canadian industry; that we are going to force capital to invest in the United States or in some other country. I ask hon. gentlemen: Why should a Canadian investor who can place his money in a Canadian corporation upon which the tax is only 9 per cent, go to the United States and pilaioe his money in a corporation there where he will be obliged to pay 13 per cent as a company tax upon his investment? It is said that by taxing
Income War Tax Act

dividends of corporations without making allowance for the normal tax we are discouraging investment in Canadian companies. It would be just as welll for hon. gentlemen to contend that we would be discouraging investment in Canadian companies if we removed the income tax entirely because then everyone would be placed in exactly the same position-I claim that it is not necessary to be exceedingly patriotic-and we have patriotic Canadians who will invest their money at home-to see that there is a great advantage in investing money in Canada where. it pays a tax of only 9 per cent as compared with investing it in the United States where it will have to pay a tax of 13 per cent.


Edmond Baird Ryckman: When the 13 per cent is paid, that is the end of it. The government taxes the money twice and the two taxations may mean a great deal more than the 13 per cent.


Georges Henri Boivin: My hon. friend is not correct, because he knows that is not the end of it. When the man receives his dividend from the United States, if he is honest he will report those dividends to the Canadian government and pay the tax upon them just' as if he had paid only 9 per cent in this country. In addition to that, if his revenue is large, the United States have a provision that we do not have, and they will tax the dividends there before they are received in Canada by the Canadian who has invested his money there.
The change in the law has enabled us to reduce the company tax. We have reduced it from 10i per 'cent to 9 per cent for the purpose of encouraging capital to come and invest in Canada. The hon. member for Pictou (IMr. Canitley) argued a little while ago that a great industrial corporation in Nova Scotia required money to" develop it and to enable that corporation to 'carry 'on and give employment to Canadians and that it was difficult for him, to invite English capital to come and invest in that corporation because the revenue derived from it would be taxed 9 per cent. It is much less difficult than it would have been last year because if the law had not been amended the earnings of the company would have been taxed 19J per cent. We have reduced the tax by 1J per cent.


Charles Hazlitt Cahan: Would it aolt be far better to tax the income of the corporation 13 per cent as is done in the United States and to allow the dividend to be exempt from a certain part of the tax as previously? For instance, every United States citizen who in-
vests in this country-and the United States people have invested in the capital stock of these companies to the extent of say $300,-000,000

escapes Canadian taxation entirely under the system proposed by my hon. friend.


Georges Henri Boivin: Who escapes it?


Charles Hazlitt Cahan: The American. The company is here in Canada, enjoying the privileges afforded in this country, earning its profits in Canada, and if you make the corporation pay the tax, then the American shareholder has to pay his share of it. It would therefore be far better for the country to make the tax on the company's income 13 per cent, if you will, to be paid by foreigners who own shares in the capital stock of Canadian companies as well by Canadians who hold such shares.


Georges Henri Boivin: My hon. friend should at least agree with his associate from Pictou.
'Mr. CAHAN: Not necessarily.


Georges Henri Boivin: Such agreement would be necessary for the sake of peace -and harmony on the other side. My hon. friend from Pictou has just argued that we cannot get British capital to invest in Nova Scotia for a specific purpose owing to the fact that the tax is already too high at 9 per cent, and now the hon. member wants to make it 13 per cent.


Charles Hazlitt Cahan: I am not discussing the question with the hon. member for Pictou. I am discussing it as a fair proposition for the consideration of the minister, and I suggest that if his technical advisers will look into it they will find that, for the great majority of the Canadian people, to impose a -tax of 13 percent on the income -of the company, with exemption in respect of dividends, as we have it at present, would be better than the proposition which is now submitted to us whereby the larger tax is placed upon Canadian dividends. And that applies to dividends running from $3,000 up. I have in my office a letter from a respected Methodist clergyman, now advanced in years, who out of the paltry income received by men of his calling has saved a certain amount. He is now retiring, and as it happens he has certain persons dependent upon him. All that he has saved in a lifetime he has invested, and as he points out his taxation is now increased three times.


Georges Henri Boivin: I am at a loss to know how to answer hon, gentlement opposite in view of the divergence in their opinions. One of the anomalies which the government attempted to correct in introducing the law now proposed was the eno/mous difference in income paid as between those who worked for salaries, those who derived their revenues from mortgages

Income War Tax Act
and bonds, and those whose incomes came from dividends obtained from joint, stock companies and corporations. Let me tell the Canadian people-what the majority of them do not know-that under the old law, the man who received an income of $10,000 which he earned as the executive of a great corporation or as an employee of the government, devoting sixteen hours a day to his duties-


Henry Lumley Drayton: It could not be the government.
Mr. BOIVT'N: Yes, there are veiy maDy efficient employees in the civil service. They work sixteen and eighteen hours a day and render valuable service to the country. Under the old law such a public servant who earned $10,000 per annum, was obliged to pay $619.50 in income tax, while some other man who had enough capital to be able to purchase stock in the Bank of Montreal, or in the Canadian Pacific Railway Company, or in any other Canadian company, and who derived an income of $10,000 yearly without doing a stroke of work, paid only $115.50. That was the former law. Was it a fair one?


Charles Hazlitt Cahan: That is not a fair statement of the old law.


Georges Henri Boivin: It is an absolutely fair statement.


Charles Hazlitt Cahan: No.


Georges Henri Boivin: It is an absolutely true statement and one which no hon. member can deny.


Charles Hazlitt Cahan: It is unfair and untrue and it is unworthy of the hon. member who makes it.


Some hon. MEMBERS:: Hear, hear.


Georges Henri Boivin: 
Charles Hazlitt Cahan: Certainly it is unworthy.


Georges Henri Boivin: It is based upon figures that are absolutely true.


Charles Hazlitt Cahan: Not in their implication.


Georges Henri Boivin: The man who derived $10,000 in dividends from a Canadian corporation paid formerly only $115.50 in taxation, whereas the man who earned the same amount in salary paid $619.50.


Charles Hazlitt Cahan: I will explain why I say that the statement is unworthy of the minister, who is usually fair. He is not fair in this instance because he unconsciously conceals 14011-241
the fact that the man receiving that dividend which he has mentioned has already paid 9i per cent on his share of the capital.


Georges Henri Boivin: Will the hon. gentleman tell me right now whether the Bank of Montreal and the Canadian Pacific Railway have not paid just as much in dividends since they have paid income tax as they did before?


Charles Hazlitt Cahan: If I were to characterize that statement by the common American expression, I should say that it was clear, sheer bluff, deceiving, though not intentionally-


Some hon. MEMBERS:: Order.


Some hon. MEMBERS:: Take it back.


Charles Hazlitt Cahan: I do not take that back.


Some hon. MEMBERS:: Withdraw.


William Duff: The hon. gentleman said that the minister was deceiving-


Charles Hazlitt Cahan: No; I said that the statement was deceptive in tendency although the minister did not intend to deceive.


William Duff: Order. The hon. member made the statement that the minister was trying to deceive the committee.


Charles Hazlitt Cahan: No, I did not.


William Duff: I must ask him to withdraw that statement.


Charles Hazlitt Cahan: I did not say that.


Robert James Manion: Mr. Chairman,-


Some hon. MEMBERS:: Order.


Robert James Manion: I am rising to a point of order.


William Duff: There is no point of order. The hon. member for St. LawrenoedSt. George can take care of himself.


Robert James Manion: I was going to submit respectfully, Mr. Chairman, t^h&t you had misunderstood the hon. member. With all deference to the Chair, I heard the member for St. Lawrence-S.t. George say distinctly that the minister did not intend to deceive.


William Duff: He said that afterwards.


Robert James Manion: No.


William Duff: Order. There is no
need of these interruptions at all. The hon. member for St. Lawrenee-St. George is well able to take care of himself, and if there is any difference of opinion between the Chairman and him I shall be quite willing to adjust it.

Income War Tax Act


Charles Hazlitt Cahan: Mr. Chairman, if I had said what you understood me to say I would certainly take it back and apologize.


William Duff: Then I apologize to the hon. member for misunderstanding him.


Charles Hazlitt Cahan: I would be the last one in
the world to make any such statement with regard to the hon. Minister of Customs, and he knows it well. I was simply endeavouring to say that although there was no intention on his part to deceive, the statement, I thought, had certain deceptive tendencies by reason of its implications. I think that is true. I say to him again that if the Bank of Montreal or the Canadian Pacific Railway were relieved of the 9J per cent tax which they pay as companies, certainly their dividends to their shareholders woulld be correspondingly increased.


Georges Henri Boivin: I am veiy glad to hear the hon. member make that statement. It may go to hon. members and1 to the people for what it is worth. He says that the Canadian Pacific Railway and the Bank of Montreal, if they were relieved of the 9^ per cent taxation, would immediately pass that taxation on to their shareholders in the form of dividends. My hon. friend knows too well that that would not be the case.


Charles Hazlitt Cahan: I believe it to be so.


Georges Henri Boivin: He knows the companies
would give some benefit to those who are dealing with them, he knows they would give some benefit, to their employees, he knows that everybody would benefit to a certain extent if the companies were not obliged to pay that taxation; but he knows that it wouid not go direct to the shareholders. I was trying to point out that the dividends paid by these corporations now and formerly are the same. It is quite true that the amouut carried to reserve may be a little bit less, and that what they charge to the consuming public may be a little bit more, but everyone will admit that the shareholder does not lose any part of the capital that he invested in the company. It is not impaired in any way. He gets $10,000 upon that capital as revenue, and I say he should pay as much upon that revenue as the man who goes out and earns the same amount of $10,000.


Charles Hazlitt Cahan: It is a difference of opinion as to whether it is fair or unfair, but you cannot convince me that the payment by the company of 9i per cent of its income to the federal treasury does not deprive its share-
[The Chairman.]
holders of the corresponding benefit; whether it goes into dividends directly declared or whether a part of it goes into reserve, it is for the benefit of the shareholders; and always, or almost always, unless there is something prejudicial to the standing of the company, the increased reserve shows in the market a corresponding increase in the value of the shares. Certainly the benefit goes directly or indirectly to the shareholders for every dollar of taxation of which the company is relieved.


Georges Henri Boivin: Why did my hon. friend
argue immediately after eight o'clock that public utility corporations could not pay income tax to the government without passing it on to their consumers?


Charles Hazlitt Cahan: Because they are in an entirely different position.


Georges Henri Boivin: Will my hon. friend show
me exactly where to draw the line between the company that passes on its income taxation to its consumers and the company that does not?


Charles Hazlitt Cahan: Yes, I think I can fairly
well define it, and I thought I had defined it early in the evening when I was so grossly misunderstood by one of the members for Toronto. I was not then dealing with public service corporations as such in Toronto or in Ontario-that province may do as it pleases -but with the public service corporation, whose entire income is subject to the rulings of a public service commission, the public sendee commission allows such a company certain rates in order that it may pay its operating expenses and interest upon its bonds and debentures outstanding, plus a certain reasonable dividend to its shareholders. If that corporation is compelled to pay a tax on its income to the federal government,in Canada, the public sendee commission in every case allows an extra charge per lamp or per horsepower, which is paid by the consumer. Therefore the two companies are on an entirely different basis. The income of the ordinary commercial company is due to its earning power and the activity of its management ; but the income of the public service corporation which is under the control of a public service commission is due to the decision of that commission to take into consideration the entire outlay of the company.


Henry Lumley Drayton: I would point
out that the hon. minister might have saved us a great deal of discussion if he had told us that he recognized, in part at least, the injustice which we have been complaining of.

Income War Tax Act


Georges Henri Boivin: But I did as soon as I was given an opportunity to speak.


Henry Lumley Drayton: Oh no, my hon. friend is not quite disingenuous there. I think he is going to work up a Machiavellian reputation if he continues along those lines. He may think it is going to pay him to do so, but it is not always a good reputation.


Georges Henri Boivin: It is a very poor reputation.


Henry Lumley Drayton: If he had told
us at the commencement that he recognized double taxation to be wrong, and was going to try to get rid of it where he could, I think we migfht very well look after the consideration of that factor when the bill is before us.
' But I would point out to my hon. friend that he again is approaching Signor Machiavelli when he says that this amendment is drawn for the purpose of meeting what is said by some to be the necessity of making a difference between earned incomes and incomes from investment, because it is not so. My hon. friend will not find-if I am wrong I will be very much obliged if he will point it out to me-a single resolution doing it. My hon. friend is simply saying:	Well, here
is a man with his interest on his bond; he is not working for it, but he will be taxed no more than the man who is working for his income; and there is the other man with his mortgage interest, he is not to be taxed any more; but the other man who has a little factory down the street, which he has incorporated and is employing a hundred men, is going to pay more unless it can be shown by my bill that it is a family concern, and then we will allow him to elect to be taxed as a shareholder. There is no real honest attempt made here to get rid of what my hon. friend has said is the real reason for what is being done, namely, that the man who is working from day to day cannot always go on doing so; he has no capital behind him to fall back upon. If that had been the attempt, the government Should have adopted the English experiment which was tried out and which is, I believe, still maintained in the lower registers. They do not think it is necessary when you get to the very large incomes, but they do think it the proper thing to do with the smaller incomes, and they do think there is no real reason why English money invested in industry should be penalized as against English money invested in bonds or in anything else. They look after the case; my hon. friend is not looking after it. He does so to a certain extent in connection with these investments but, I think, with rather unfortunate implications.


HOI 1-2414
[Stage Direction]
I hope my hon. friend is going to give just a little more thought to that point which has been impressed upon him more particularly by the hon. member for Argen-teuil (Sir George Perley). After all, what we want here is investment in enterprise; I think my hon. friend will agree with that statement at once, and he will agree that enterprise is risky enough at all times. We all know that there is no good argument why in any particular period of Canadian industry enterprise has been most hazardous; it is still too hazardous, and we have lots of failures. It is easy to talk about the large, successful companies, with their big earnings, but that is not what we are interested in. My hon. friend is not doing much harm to these large public service corporations. The real danger is that the commencement of Canadian enterprise is going to have a further check placed upon it. I do not know whether my hon. friend has ever tried it, but it is very difficult to-day to get capital for any new enterprise. In this connection, I would like to point out that while my hon. friend has very cleverly held the hon. member for St. Lawrence-St. George to the text of his argument upon one particular point, my hon. friend has departed from his own text. In the first instance my hon. friend's idea was that it did not matter a bit to the shareholders what the company tax was. His income was the same; everything was the same and there was not the slightest difference.
Georges Henri Boivin: In connection with the
large corporations I still maintain that.


Henry Lumley Drayton: But what did
my hon. friend say a short time ago? He made an eloquent argument to the effect that he had immeasurably helped the shareholders, new investors and so on, because the company tax-which, of course, did not hurt the shareholders at all-was nine per cent in Canada as against thirteen per cent in the United States. The truth is that the shareholder is interested in the tax; my hon. friend's second position was right but his first was wrong. The shareholders are interested, and I think it is a good thing to have the tax lower than the American tax, because we want capital here.
Then I want my hon. friend to give us some information, so that we may have it before us when the bill comes up. We have collected from these corporations $31,000,000; the whole of those dividends will not be subject to the double tax, but only that part which is distributed. I would like my hon. friend to tell me first what the dividends of Canadian companies are. I made a rough

Income War Tax Act
estimate myself; it could not perhaps be called an estimate but it is more or less of a guess, because I did not have the material before me. But I think it would be fair to say that the total would be about $250,000,000 a year.


Georges Henri Boivin: I should say it would be
about $295,000,000.


Henry Lumley Drayton: I am glad to
know that my estimate was within the mark. Then I would like to know how much of these dividends was paid to Canadian citizens, because as I understand it the double tax only applies in the case of Canadian citizens. There is no attempt made to tax dividends paid to foreigners, so while we are considering this double tax it is necessary for us to know just what the calculation is as to how much is paid the Canadian shareholder. My calculation there was again a very rough and ready one; it was more a hope than anything else that notwithstanding what has been going on in this country for the last two years, Canadians still owned enough of their own to have perhaps half of their own dividends. Therefore I put that figure at $125,000,000. Perhaps my hon. friend would be kind enough to check that figure also.


Georges Henri Boivin: I will have that looked
into; it is impossible to give the exact amount, of course, without going through the income tax returns of all Canadian citizens. But I want to point out to my hon. friend that his statement was correct in every respect but one. He said that the dividends paid to foreigners were not taxed and paid no income tax in this country; that is quite right. On the other hand he said that we are penalizing our own people in collecting taxes from the Canadian shareholder and not from the outsider. If he will add a proviso that all Canadians who recevie dividends from Canadian companies and whose total revenue is less than $3,000 a year- and their number is legion-pay no tax, I will admit that he is right.


Henry Lumley Drayton: Does my hon. friend think that the bulk of the dividends go to the lower registers?


Georges Henri Boivin: I would not say that, but I think a large proportion does.


George Halsey Perley: I wonder if the ^minister would not leave this item over for further consideration. I submit that in his argument with regard to the dividends from companies such as the Canadian Pacific Railway and the Bank of Montreal there is a very

distinct weakness. If all companies were as strong as the two he has mentioned our position would be a great deal better, but many of us have had the experience of losing money invested in different companies, and the risk of investment has to be taken into consideration. We must take the good with the bad, and the minister must not argue only from companies which have been successful. I am afraid that this resolution in its present form will drive Canadian capital into bonds and mortgages, and it will be difficult or impossible to keep up the supply of money to support new industries in this country.


Georges Henri Boivin: My hon. friend is right, and the only serious objection to the present measure is that it may change the means of financing in Canada, and may cause companies to endeavour to obtain more money from bonds and less through the sale of preferred stock. I do not think that is a good thing, and if it could be avoided I would certainly do so. I do not want to resist the request that this particular clause be allowed to stand, but I would undertake that the bill will not be presented to parliament for its second reading until at least Tuesday of next week. We will give that time for consideration of the matter, and I hope hon. members on the other side of the House will let us pass the resolutions and get the bill printed and brought before parliament.


Henry Lumley Drayton: We should have a copy of the bill.


Georges Henri Boivin: We will endeavour to have it distributed to-morrow.


George Halsey Perley: I am content with that if the minister will really try to find a way out of this difficulty.


Georges Henri Boivin: I have already expressed a desire to meet my hon. friend from Argenteuil, but whether I have that privilege and pleasure or not, I shall take the matter up with the Minister of Finance, with whom he has already communicated, and with the officials of the department, and see if some way cannot be found to meet what I consider to be the one objection to the resolution as it stands.


[Stage Direction]
Section agreed to.
Sections 5 and 6 agreed to.
On section 7.
Charles Hazlitt Cahan: I conceive that this applies simply to a company which has investments in securities, but it might be an investment

Income War Tax Act
in a great number of things, and I think that the term "investments" should be defined in the bill so as to restrict it to securities.


Georges Henri Boivin: The word "investment" will be defined in the bill.


Charles Hazlitt Cahan: That is quite satisfactory.


[Stage Direction]
Section agreed to.
On section 8.
Henry Lumley Drayton: I think this
should be explained pretty fully.


Georges Henri Boivin: The idea of this clause is this: It relates especially to real estate. There are a large number of persons throughout Canada who are in the habit of investing their surplus profits in real estate, which they buy in a certain section of a city for the purpose of reaping a handsome profit by selling it later on. My hon. friend knows that with the exception of the real estate agent, and for him, of course, it is his principal business, the profit made on the sale of real estate is not taxable under the act. We feel that if the profit to be made on real estate is not to be taxed, then the carrying charges on that real estate should not be deducted.


Henry Lumley Drayton: Could not that be made a little clearer? I would not object to that provision in the slightest. As a matter of fact I thought that was the law now. I know I was foolish enough some fifteen years ago to buy a piece of property that I have been trying to sell and on which I have been paying taxes ever since, and I never made any claim for deduction.


Georges Henri Boivin: Under the existing practice the person who has purchased real estate which does not produce any revenue at all, for example, a vacant lot, or stocks even upon whidh no dividends are paid, has been permitted to deduct the carrying charges from his income derived from other sources. When the vacant lot or unproductive stock was sold at a profit, he was not taxed upon the profit he made, unless, of course, he was a real estate agent dealing in property.


Charles Hazlitt Cahan: What does the term "carrying charges" include?


Georges Henri Boivin: It includes the interest upon a mortgage to carry the property, taxes, and in the case of buildings, the insurance.


Charles Hazlitt Cahan: Might I suggest just a word there? If it includes interest, it seems to me unfair. Supposing I have a $.5,000 Dominion government bond upon which I am receiving
interest. It is not a tax free bond. Supposing I bought a piece of land on which I owed a $5,000 mortgage. I do not think you should compel me to dispose of the $5,000 Dominion government bond to pay off that mortgage, but I think the interest on the mortgage is a fair offset as against the interest on the bond which I receive.


Robert James Manion: Might I ask the minister this? I know that in the past taxes would be allowed on vacant property. Supposing at the present time, under this new act, a man has some rent coming in upon which he would have to pay income tax with the rest of his income, and suppose that in addition he has some vacant property in the same city. Would not the taxes on that vacant real estate be permitted as a deduction from the occupied real estate?


Georges Henri Boivin: If that real estate was purchased for the purpose of renting and was accidentally unrented, it would; but if the real estate is vacant real estate which was purchased and is being held for speculation only-


Robert James Manion: I am afraid the minister
has not understood my question. Supposing a man owns a building from which he is getting rentals of $5,000 a year. That income goes in with the rest of his income and is taxed. Supposing that, in addition, in the same city he has a number of pieces of vacant property on which he is paying taxes of say $1,000 a year. In the past that $1,000, taxes on the vacant property, as well as the taxes on the rented property, would be offset as against the rent coming in from his property. Under this new provision would the taxes on vacant property be offset in the same way as in the past? If not, I think that would be absolutely unfair, and I will tell you why. All through the western country, right from the lakes to the coast, more than in the east, there are many people who before an income tax ever existed in this country went into real estate, and in many cases plunged over their heads. Many of them to-day have, we will say, five or six blocks of property; they are property poor. Some have let their land go, but we will say that a man has tried to hang on, and is hanging on to five pieces of property, one bringing him in an income, clear of taxes, we will say, of $1,000 a year. His taxes on the other vacant pieces of property are $1,000 a year. He has been carrying all these properties. Certainly he is not coming out even anyhow, because he is losing the interest on his investment, and the
Income War Tax Act

value of the property must have dropped if he bought it at the peak of the boom. It would appear to me that the taxes on the vacant property should be offset against the income from the property which is giving him some return.
Mr. BOYS.: Have the carrying charges or expenses of unproductive property been allowed in the past as deductions? If so, I was going to ask if it is now too late for me to make a claim in that connection, because I am out considerable change if that is so. I can quite understand that perhaps it should not be so. So far as taxes are concerned, I would suggest to the minister that they should be deducted. If a person has land and is paying taxes upon it, it. seems reasonable that he should be allowed to deduct same; otherwise you have another case of double taxation. I would like an answer to my first question, however, because I certainly have not been making these deductions, and if they are allowed I am out a very considerable sum of money in the last four or five years.


An hon. MEMBER:: Me too.


William Alves Boys: There are others, I have no
doubt, and I wish them well.


Georges Henri Boivin: The practice up to tjie
present time, so I am informed, has been to allow the carrying charges except in the case where they were charged against the revenue derived from the chief business, trade, profession or occupation of the taxpayer; in other words, the carrying charges on vacant property would not be deducted from the chief revenue of the taxpayer, that is, from the revenue derived from his chief line of business. But if he had what is called secondary revenue, those carrying charges would be deducted.


Henry Lumley Drayton: That seems fair.


Georges Henri Boivin: It is felt that in the case of an investment in vacant lots for investment purposes, if no tax is to be paid upon the profit made when the property is sold no deduction should be made for carrying charges.


Robert James Manion: Or the loss.


Georges Henri Boivin: It cuts both ways.


Ambrose Upton Gledstanes Bury: Does the minister draw a
distinction between a vacant lot and a block of buildings? Both may be bought for investment purposes and with the idea that in process of time the lots and the block will go up in value. How can the minister draw a distinction?


Georges Henri Boivin: As a rule the rentals derived from the buildings in the block form part of the revenue of the owner. He pays income tax upon the rentals so derived and therefore is entitled to deduct the taxation which he pays.


Henry Lumley Drayton: That would not be an unproductive asset.


Georges Henri Boivin: No.


William Alves Boys: Do the interest charges include interest upon the investment, or only where there is an outstanding mortgage?


Georges Henri Boivin: Only where there is an
outstanding obligation.


William Alves Boys: I would ask the minister to
consider the question of the taxes the owner has to pay. Why make him pay this tax and also an income tax upon his rental?


Georges Henri Boivin: The reason is that in a great many cases the tax is not paid by the owner 'but by the tenant. If we carry out my hon. friend's suggestion we would be obliged to deduct from the tenant's income the amount that he pays as rental for the house in which he lives, and that would cause, perhaps, a great many difficulties in the way of administration. If you are going to exempt the householder and deduct the amount he is taxed for the property which he occupies, you certainly must deduct the amount paid by the tenant of a neighbouring property from which the property owner pays his taxes. It really would be a difficult matter to control.


William Alves Boys: I really cannot see that the
matter is involved at all. Surely no man is going to say he is paying taxes when he is not actually doing so. If I make a return and say that I paid $55 in taxes, I actually pay that money myself, it is not somebody else who pays.


Georges Henri Boivin: Does my hon. friend refer
to unproductive property or to the property where the individual taxpayer would reside?


William Alves Boys: I was referring to wnat the
piinister suggested; he himself "raised the point.


Georges Henri Boivin: If my hon. friend is referring only to the tax paid on unproductive property-


William Alves Boys: That is what I am referring
to.


Georges Henri Boivin: I claim these taxes should not be allowed. The longer the property is held, the more it increases in value.


Some hon. MEMBERS:: Oh, no.

Income War Tax Act


Georges Henri Boivin: I will not say always.


William Alves Boys: I am glad that is your experience; it is not mine.


Henry Lumley Drayton: It is very much [DOT]the reverse with me.


Ambrose Upton Gledstanes Bury: If that is the principle upon
which the minister bases his position the same
is true whether the property is a vacant lot of block.


Robert James Manion: There are thousands of
cases through the western country-I doubt whether any professional or business men who fvere there fifteen years ago and are still there to-day are not more or less in the position that I am pointing out-where those who had a little money invested it in real estate and lost almost all their capital investment. In many cases they still hold on to two pieces of property, perhaps drawing rent from one and paying taxes upon the other, but it is really all one investmenat in real estate. Surely the minister will consider such a case as that-and there are many-and allow the taxes paid on the vacant property to offset the rent the owner is drawing from the other property.


Georges Henri Boivin: Apart from the general reduction made under the law the idea of the government in carrying out the wishes expressed by the officials of the department was to tighten up the act and prevent abuse as much as possible. We felt that everyone who has a revenue upon which he should pay taxation Should be obliged to pay. I think we all agree upon that point.


Robert James Manion: But if he is getting $1,000 from one piece of property and paying a tax of a like amount on the other piece he has no revenue.


Georges Henri Boivin: I was not referring to the special case mentioned by my hon. friend, but the general purpose of the resolutions we are now considering is to tighten up the legislation and oblige everybody to pay taxes who should pay them. It is true there are certain cases like the one pointed out by my hon. friend from Fort William where hardship may be caused. That matter is well worth considering and it will be considered before the bill is read a second time.


Robert James Manion: That is all I ask.


Georges Henri Boivin: We are endeavouring to prevent people from evading the payment of taxes. I do not refer to old time investments but to investments made to-day in growing -communities, in sections where, for example,
one knows there will be industrial development. We want to cover the case of those who may invest their money there for two or three years and claim deduction for the carrying charges.


Richard Burpee Hanson: Would the minister point out some of these communities? I should like to know where they are.


Georges Henri Boivin: Yes, in the lake St. John
district, in the province of Quebec, I understand there is a community to be opened where the population will be at least 30,000, and where over 6,000 people will be employed in electrical development.


Henry Lumley Drayton: Apparently so far as the main income of a taxpayer is concerned, no deductions of any kind can be made.


Georges Henri Boivin: Except the deduction of the necessary expenditure incurred in that particular business.


Henry Lumley Drayton: In connection
with the main activity, or the main income of the taxpayer, there will be no deductions whatever. But he may have a floating speculative income outside of his main business. In that case why should not his obligations in respect of that come out of the income which is not his regular income?


Georges Henri Boivin: If my hon. friend is willing, the bill to be introduced can be so amended that when the property is sold the entire profit shall be taxable. If a man has a revenue, apart from his main occupation, sufficiently large to enable him to speculate in real estate, surely he ought to pay taxation on that real estate without asking for a reduction.


Charles Hazlitt Cahan: I should like to bring this point to the attention of the minister: Supposing I myself have a piece of
11 p.m. unproductive property. There was a time when it was productive but values have declined. It is unproductive now and I am holding on to it. It is not an investment for the sake of escaping taxation. I have a mortgage on it, and I have been paying 6 per cent interest for years to the holder of the mortgage. On the other hand, outside of my business or profession altogether, I hold a mortgage of $6,000 upon another piece of unproductive property. I understand that prior to the present time if both those transactions were outside my ordinary profession or business I could set off the interest which I paid on the mortgage I owed against the interest which I re-
Income War Tax Act

ceived on the mortgage I held. I think that should be continued. Let me put it in another way. I own $10,000 worth of Dominion government bonds and I have a mortgage outstanding of 110,000 on a piece of property I own which is not bringing in any income. I can sell the bonds and wipe out the mortgage and then income and expenditure are wiped out at the same time. But if I hold the bonds which are outside of my business I should be entitled to offset the income which I receive on the $10,000 six per cent bonds against the interest I am paying on the mortgage outstanding on my property. That has been the custom of the department and I do not think it should be changed.


Georges Henri Boivin: I admit it seems quite
reasonable to allow any man to offset interest which he pays on a mortgage against interest which he receives on a mortgage.


Eugène Fiset: Surely the same
thing should apply to taxes paid on vacant land.


Georges Henri Boivin: I am inclined to also agree with my hon. friend from Rimouski, but I say this: when land is purchased for the purpose of speculation the tax must be paid and should only be deducted if that land is held by a real estate speculator or by some person who is liable to pay income taxation on the profit realized from the sale of that land.


Eugène Fiset: I am talking about the individual who owns a piece of land upon which he has been paying municipal taxation for a number of years and who is holding the land, I will not say for his benefit or profit, but because he cannot help it.


Georges Henri Boivin: I realize that many cases might be brought up in connection with this particular clause which could be termed as cases of hardship. I am informed that the clause had to be inserted in the resolution in order to prevent the many abuses which had grown up under the law whereby people were taking their capital and investing it in real estate, claiming exemption for taxes paid on that real estate, and then selling the real estate and pocketing the profits.


William Alves Boys: They take their chance. Sometimes they win and sometimes they lose.


Richard Burpee Hanson: This goes a great deal further than that. This is any non-productive property such as non-dividend paying stock. Sometimes a man has some loose change and he buys a few shares of stock on margin. It may be a non-dividend paying stock. Heretofore he has been allowed tc charge up in-
terest he has to pay the bank or the broker for carrying that stock. After this he will not be able to do so.


Henry Lumley Drayton: Not from regular income.


Georges Henri Boivin: He has not been allowed in the past to deduct that interest from his regular income.


Richard Burpee Hanson: No, but he has been able to do it out of other extraneous income.


Georges Henri Boivin: Yes.


Richard Burpee Hanson: This will wipe that out.


Henry Lumley Drayton: What about
the last question? Could this not be confined to the real evil the minister is aiming at, namely, new investments in real estate for the purpose of withdrawing money from taxation? I am quite content to say "carried" if it is so confined and I think everybody will be content.


Georges Henri Boivin: I can assure my hon. friend that the matter will be taken up, and if it is possible to draft a clause which will do away with the difficulty and the abuse without imposing any hardship, it will certainly be done.


Henry Lumley Drayton: And confined to the real estate trouble.


Georges Henri Boivin: Yes.


[Stage Direction]
Section agreed to.
On section 9.
Henry Lumley Drayton: We should have a little explanation about this.


Georges Henri Boivin: In the case of a corporation whose stock is substantially held by one man or by a family or by a small group of persons, it is a common practice, although I think it is contrary to the Companies Act, for the shareholders to take out what money they require for their personal wants-


Henry Lumley Drayton: If my hon.
friend limits it to private companies that is all right, but this is not so limited.


Georges Henri Boivin: That is the intention and
it will be so limited in the bill.


[Stage Direction]
Section agreed to.
On section 10.
Charles Hazlitt Cahan: I think there is something
wrong about this section. Let us take the case of stock which is purchased at a premium on the market. It is the stock of a Canadian company; it has undistributed

Income War Tax Act
assets over and above the capital, and I buy it in the public marke't at, say 150. Section 10 provides:
That where a corporation having undistributed income on hand reduces its capital stock, then to the extent that such corporation has on hand undistributed income the amount received by the shareholder by virtue of the reduction of the capital shall be deemed to be a dividend and to be income received by the shareholder.
Therefore, if I buy stock at a premium
and subsequently there is a reduction in the capital stock so that the premium which I have paid for in full comes back to me, 1 have to pay income tax upon it as if it were annual income received. If I may be allowed to refer to section 11

because they might well be discussed together-it reads:
That where a corporation having undistributed income on hand redeems its shares at a premium the premium shall be deemed to be a dividend and to be income received by the shareholder.
I have bought the shares in the market at 150. I have not gone beyond 150 because the shares are redeemable by the company at 150. After I have paid the full price of 150 in the market for the stock the company redeems the shares at 150 and the $50 which I receive is taxed as being ordinary income.


Henry Lumley Drayton: Your own
money back?


Charles Hazlitt Cahan: Yes. I think that should
be considered or it will absolutely prevent the buying of stock selling at a premium which is redeemable by the company.


Richard Burpee Hanson: The objection taken by
the hon. member is absolutely sound, but his illustration is perhaps a little extreme. It might be illustrated by taking the case of seven per cent redeemable preferred shares in an industrial company. Those shares are practically bonds, the only difference being that they do not -have a mortgage as security. They are really a second charge on the assets of the company. The practice now is almost invariably to permit a company to redeem those shares on the promise of a premium of seven or eight per cent, whatever the interest rate may be. They are a form of second mortgage bonds and it is always the intention of an industrial company that issues that class of security to redeem those shares out of undivided profits. It is another form of boi-rowing. They have to make this provision in the by-laws creating those shares in order to make them marketable, saleable, to get a decent capital sum to invest in the company when they-issue the shares. In addition they have to pay the
carrying charges while the shares are outstanding. I buy a seven per cent redeemable preferred share at a premium. The company redeems the stock at a premium after a period of years, and yet I have to pay not only on the income I have received in the interim but, as well, on the premium I received from the company when it redeemed the stock. That is not fair.


Georges Henri Boivin: It was not intended that
this clause should apply to stock which was made redeemable and preferred at the time of its issue.


Richard Burpee Hanson: Then I suggest that the
point should be made clear.


Georges Henri Boivin: We want to obviate the
practice, followed by certain corporations, of escaping the payment of taxation by allowing their profits to remain as reserve for a year or two and then distributing those profits in other ways than in the form of dividends to shareholders, as for instance, by the purchase of stock at a premium, or by redeeming capital stock for more than its value at the time it was sold.


Richard Burpee Hanson: I can understand1 that
there might be a very grave abuse in connection with private companies, and if that is what the minister has in mind I suggest that the language of the resolution is not sufficiently clear to cover the case I tried to outline to him. I would ask him to give consideration to that phase of the question, be-, cause if he does not, and if this resolution is crystallized into legislation, he will be doing a real injustice.


Georges Henri Boivin: The commissioner of taxation has made a note of my hon. friend's remarks and he will endeavour to make the clause sufficiently clear to cover the point raised.


Henry Lumley Drayton: Perhaps it would save time if the minister would tell us just what evil is aimed at. Sometimes, in the effort to avoid a slight difficulty here and some little trouble there, we pass legislation which in the long run turns out to be more mischievous than the evil we sought to get nid of. I can quite understand that there might be a perfectly fair and proper return of capital which ought not to be taxed, even though there might be a surplus on hand. Take the case of a company which has a dual activity. Let us say that such a company has half a million invested in one enterprise and half a million in another. It is all the same stock in the same company. There is
Income War Tax Act

also a reserve of $200,000. Owing to trade developments the company decides to retire from one of these activities, and is fortunate enough to realize on its assets which it had devoted to that branch of the business. It gets that half million. Under this proposed legislation "the whole of that sum will be taxed as profits.


Georges Henri Boivin: Only the surplus.


Henry Lumley Drayton: It is not so stated. It may be that the surplus is left in; they want the whole of that $200,000 of reserve to stand behind the remaining business which they are carrying on. But the $500,000 which they have withdrawn is taxable under this legislation.


Georges Henri Boivin: Why should they not leave the capital in and withdraw the surplus rather than leave the surplus in and withdraw the capital?


Henry Lumley Drayton: I do not think the minister quite followed me. I cited the case of a company engaged in two activities, one of which was not remunerative. They wanted to withdraw from it and were fortunate enough to realize their assets without loss, although they thought it advisable to hang on to the whole of the reserve. Under this legislation the entire $500,000 of capital which they have withdrawn is taxable as profit. Let us take another case. Suppose you have a company with a capital of $500,000 and a reserve of $100,000, the company thinks it can get along with a capitalization of $400,000 and accordingly it contracts its activities. That $100,000 which it returns is all taxable as profits. The next year the same thing happens, and again, and again. At the end of that time they have $100,000 of a reserve with only $100,000 of stock, while $400,000 has been taxable as profits. Surely that cannot be the intention of the resolution; yet that is what it contemplates as at present drafted.


Georges Henri Boivin: That was not the intention.


Henry Lumley Drayton: The resolution has that effect and it is clearly ridiculous.


William Alves Boys: Surely where the distribution reduces the assets it should not be taxed.


Georges Henri Boivin: No.


William Alves Boys: But that is what happens in the case suggested by my -hon. friend.


Georges Henri Boivin: In the case suggested by the hon. member (Sir Henry Drayton) the capital is withdrawn, but the surplus remains and is not taxable. Is that fair?


Henry Lumley Drayton: It is taxable as soon as it is withdrawn.


Georges Henri Boivin: But it will always remain as capital and will not be withdrawn. If it were not for the Income War Tax Act the surplus would have been taken out and distributed and the capital would have been retained; to evade the act the company draws out the capital and leaves the surplus in.


Henry Lumley Drayton: Not of necessity.


Georges Henri Boivin: It is desirable to guard against such a practice.


Henry Lumley Drayton: I understand
that my hon. friend has a real grievance which he wants to put an end to, and we could better grapple with it if we knew just what it was. I suggest, therefore, that it will be far better to have the section clearly worded rather than to pass an omnibus provision of this kind which will not work out fairly under such circumstances as I suggest. If the provision were to apply only to profits I would not offer so much objection to the clause.	.


Georges Henri Boivin: We shall have to reconsider it before the bill is adopted.


William Duff: Shall sections 10 and 11 carry?


Henry Lumley Drayton: Yes, subject to that understanding.
Sections 10 and 11 agreed to.
On section 12.


George Halsey Perley: Has this also to do with private corporations?


Georges Henri Boivin: In its present form it would apply to every corporation.


Richard Burpee Hanson: Will the minister give us
some explanation as to why -this legislation is demanded? I am interested in it.


Georges Henri Boivin: There is a very easy method by which shareholders of closely held corporations can avoid payment of the old supertaxes and of the proposed income tax. Suppose that one company has a capital of $100,000 and undistributed profits amounting to $75,000 and the sole shareholder desires to get that $75,000 into his pocket free of supertax or any other taxation. He promotes another company, which we will call company B, and he sells his stock in the original company, which we will call company A, to company B for $175,000 for $75,000 cash and the stock of company B. As soon as the stock

Income War Tax Act
of company A stands in the name of company B, the first company declares a dividend of , 375,000, and the second company gets it and hands it over to the shareholder in liquidation of its liability to him. He then puts that $75,000 in his pocket and all the stock of company B, through which he still controls company A just as he did before. There are many other ways in which this device can be used. The purpose of the proposed amendment is to tax dividends in the hands of a shareholder, even although they are received by his dummy company and come to him as capital in a technical sense. Paragraphs (a), <b) and (c) of this proposed amendment deal with three different cases in which the device referred to may be used. Paragraph (a) deals with a straight case of an agreement between the shareholder and the dummy company, where the dummy company on receipt of the dividend hands it over directly to the shareholder in settlement of its liability. Paragraph (b) deals with the case where the dummy company, in order to be in a position to say that it does not apply the dividend directly in payment of the purchase price of the shares, has altered the form of its original liability for the purchase price to some new form of liability. Paragraph (c) deals with the case where the dummy company, in order to be able to say that it has not applied the dividend in payment of the shares, has at the time of the purchase of the shares' borrowed money from the bank or from some other source and uses the dividend when received to extinguish that liability.
Mr. GEARY':	Mr. Chairman, perhaps I
do not understand at the moment what the hon. minister said any better than he himself does. I would suggest that having his statement on Hansard would enable us to study it, and in the meantime the clause might very well stand. It is a bit involved, as the minister will no doubt admit.


Mr. BO  IVIN@: Yes, it is involved.


Richard Burpee Hanson: Is this practice which the
minister seeks to discourage of recent growth?
I understand that such companies have existed since 1917 with the full knowledge-I was almost going to say the approval-of the department. I think I am correct in saying that this condition has been well known to the commissioner and his staff for many years, almost since the inception of the act itself, but they have never raised any objection until now. What is the particular abuse at this moment that necessitates this legislation?


Georges Henri Boivin: I think my hon. friend will admit it is an evil which it is worth while attempting to cure.


Richard Burpee Hanson: You have one income tax ca the profits of the company now.


Georges Henri Boivin: If we were sure of getting the proper income tax it would not be so bad, but while it is true that a few of these personal corporations were established several years ago, I can assure my hon. friend there is no greater pastime for many able lawyers in Canada than to devise ways and means for their clients to evade payment of income tax.


Richard Burpee Hanson: Will not that always be so?


Georges Henri Boivin: Yes, and for that reason as cracks are found in the walls of the structure, they must be continually repaired. That is why not only this year but in years to come, no matter what government may Joe in power, there will have to be amendments to the Income Tax Act to close the fissures that are being opened every year by the lawyers who devise new methods by which their clients may evade taxation.


Samuel William Jacobs: Why does the hon. minister refer to their work as a "pastime"? Does he suggest that it is a recreation on the part of the lawyers?


Georges Henri Boivin: It is a recreation for which the lawyer, however, never refuses to charge a fee.


Richard Burpee Hanson: The minister has stated that income of this character has been excaping taxation altogether. From what limited knowledge I have of this business, I submit to him that that is not quite correct, and that invariably one tax has been paid. The objection of course has been to pyramiding that taxation. Am I not right that invariably one tax of 10 per cent has been paid on income?


Henry Lumley Drayton: That is right.


Georges Henri Boivin: My hon. friend is right to this extent, the company tax of 10 per cent, plus 5 per cent super tax or ten and one half per cent in all, has been collected from the company upon the profits declared by the company.


Richard Burpee Hanson: Earned by the company.


Georges Henri Boivin: I mean declared by the company in its income tax return. That is the only tax which so far has been paid. In this particular instance we are dealing with shareholders whose revenue is very great. In the
Income War Tax Act

past they have been entitled to exemption only from payment of the normal tax, but they have been escaping payment of the surtax, that they should have paid to the Dominion government.


George Halsey Perley: Mr. Chairman, may I be allowed in this connection to ask a question about section 4, which I overlooked at the time it was under discussion? It will save my bringing it up when the bill is before the House. Has the minister considered the fact that men with very large incomes are going to pay a great deal less under this legislation than they did before, even if the money is all in Canadian stocks? I have some figures from the department which perhaps I might read to him. In the case of a married man without children, if his income is $50,000, all from Canadian stocks, under the old system he paid $5,785.50; under the new he pays $8,380. True, he pays quite a little more. But if his income is $250,000-I am free to admit there are not many Canadians in receipt of such a large income-he ought to be able to pay a very substantial tax. His income is all from Canadian stocks. Under the old system he paid $112,885.50; under this resolution, which the government has brought in for the purpose of helping poor people, he pays only $86,340. In other words the very rich man with an income of $250,000 pays $26,500 les3 than he paid under the old law. I would ask if the minister is aware of that fact and if he considers it a reasonable arrangement.


Georges Henri Boivin: Yes, we are aware that in every case the taxation has been reduced.


George Halsey Perley: I have just cited a case where the man with $50,000 income pays more.


Georges Henri Boivin: I mean in every case where the revenue exceeds $50,000.


George Halsey Perley: I think it is
nearly $80,000.
.Mr. BOIVIN: For the purposes of agreement and argument we will say $80,000. In all cases where the revenue exceeds $80,000 there is a reduction. It was necessary to establish a sliding scale in order to reach a fair basis of payment for the small income, the moderate income, the larger income and the very large income, and we thought the limit of that scale should be 50 per cent. Under the old law, as my hon. friend knows, some people were called upon to pay as much as 66 per cent and more of their revenue to the government. We felt that any man who invests his money in Canada and pays at least half of what he makes to the Dom-

inion government is contributing fairly generously his share of taxation, and we thought it should no longer be necessary to take away from any man more than half of his income. At present we do not happen to have in Canada anyone with an income of $1,000,000, and the income would have to reach that amount before the taxation would be the full 50 per cent.


[Stage Direction]
Section agreed to.
On section 13.
Georges Henri Boivin: This amendment ensures
that the shareholders of corporations will pay income tax upon the profits of the corporation as and when they get control of such profits. Under the provisions of the Income War Tax Act shareholders of a corporation, in contrast with members of a partnership, are not taxed upon the profits of the business at the time the profits are earned. Taxation is deferred until the profits become the property of the shareholders or until something is done'that renders the profits not available for distribution to the shareholders. The policy under our Canadian act is to defer taxation of corporation profits so long as they remain available for dsitribution, which is to say so long as there is prospect of a tax being imposed upon the shareholder at some future time. As soon as the profits are capitalized they cease to be available for distribution, and it seems only right and proper that the profits should be taxed when placed beyond the possibility of distribution.


Richard Burpee Hanson: But in that case you have already collected 10^ per cent from the corporation, and you are simply imposing a second tax on the same profits.


Georges Henri Boivin: We are simply endeavouring there to obtain the surtax and supertax which the shareholder would have paid had he received the dividend in another form. We do not desire to tax the dividend again; we are quite willing to give the exemption from the normal tax to which the shareholder is entitled, but we do claim that when the profits are taken out in enormous slices the shareholders should be called upon to pay at least the surtax and supertax which they would have paid had they withdrawn their dividends in the ordinary way.


Richard Burpee Hanson: That is all very well, but you take your supertax in the form of an increased normal tax at the beginning. That is why the tax is increased to 10 per cent instead of 4 per cent, and that is why you had no supertax on the profits of a corpora-

Income War Tax Act
tion. Now you want to take the supertax in the 10 per cent and another supertax on the distribution of the profits as well. That is simply double taxation.


Georges Henri Boivin: This question of double
taxation, as my hon. friend knows, was thoroughly discussed in connection with clause 4 and we came very close to an agreement then. There are certain classes of corporations which we hope to be able to deal with in a manner satisfactory to everyone. In small corporations this clause would never apply, because the corporation has always the right of exercising its option to be treated as a partnership and not as a corporation.


Mr. GEARY:: This is retroactive?


Georges Henri Boivin: Yes, retroactive as to profits earned.


George Reginald Geary: Is that usual?


Georges Henri Boivin: That is one of the reasons why I referred in my remarks a moment ago to the surtax and supertax; this is a retroactive clause.	,


[Stage Direction]
Section agreed to.
On section 14.
Henry Lumley Drayton: In connection with this resolution there was one thing which a great many hon. gentlemen opposite were in favour of when I was Minister of Finance, that is, the question of members of parliament having their election expenses deducted from their returns. I wonder what the present ideas of hon. gentlemen opposite are. I know they were almost unanimously in favour of it at that time, and I think my friend the minister favoured it also. What does he think now?


Georges Henri Boivin: We thought it would be better to follow the line of conduct laid down by our predecessors.


Henry Lumley Drayton: If you would only stick to that more often you would do better.


Georges Henri Boivin: I think our predecessors made a mistake, however, when they did not allow members of parliament to deduct from their indemnity a reasonable amount to pay for living expenses while in Ottawa. I would say that the same rule would apply to electoral expenses-


Charles Gavan Power: That is a capital investment.


Georges Henri Boivin: -although I am inclined to agree with the hon. member for Quebec South (Mr. Power) that that is a capital investment.
If each member paid the same amount to be elected, or if each member only paid the amount absolutely necessary for him to be elected, or if we could average that amount, it might be possible and advisable to make some allowance when it comes to the payment of income tax. I will repeat that I think it would be absolutely fair to allow members of parliament to deduct from their indemnity a just and reasonable amount for board and living expenses while they are in the capital attending to their parliamentary duties. It is an expense which they are absolutely obliged to make, but my good friends opposite were generous enough to make a gift of this to the Canadian people. They wanted to be magnanimous, and we want to follow their example and be just as generous as they are.


[Stage Direction]
Section agreed to.
On section 15.
Georges Henri Boivin: This is a clause concerning which there has been some discussion; some claim it is not necessary at all while others say it clarifies the act. It merely adds that the provisions of paragraph (d) concerning taxes and supertaxes will not apply.


Henry Lumley Drayton: I just want to ask the minister one further question. What has been done in connection with that debatable question where you have a man employed at a stated salary whose tax is paid by his employer? There has been more or less soreness over that. I understand the department in the past have come to the conclusion that that money belonged to the employee and should be added to his gross income for the purposes of taxation. On the other hand it is urged very strongly that where any employer voluntarily pays to the Receiver General the whole or any part of the income tax on the salary or wages of the employee, that amount shall not be treated as part of the income of the employee for the purpose of income tax.


Georges Henri Boivin: My impression is that it would be absolutely unfair to consider that the tax paid for an employee should not form part of his income. Two corporations side by side, paying absolutely the same salary to their employees, make out their returns to the Dominion government showing, for instance, that they each have a superintendent drawing 14,000 or $5,000 a year. One company would pay the tax while the other would not, so one man would have his $4,000 net while the other would be obliged to pay his $20
Income War Tax Act

to the government. That would be unfair and unjust, because in reality one man would have $4,000 a year while the net salary of the other would only be $3,980.


George Reginald Geary: Will the language be sufficiently clear to show that this will be made retroactive?


Georges Henri Boivin: 
James Dew Chaplin: How far would you go back?


Georges Henri Boivin: I would go back to the inception of the Income War Tax Act. I would tax all those dividends. There is no desire on the part of the government to take these accumulative profits and consider them to be profits of this year. That would be absolutely unfair and unjust. The tax upon them would be almost 50 per cent.


Henry Lumley Drayton: It would be more-


Georges Henri Boivin: Applying the present law the tax upon them would be almost 50 per cent, whereas if they had been distributed normally year by year the tax might have been very much less. There is no intention of being too severe, but it would be possible to allow those who have accumulated these profits during the last five years-the first companies were formed five years ago-a term of five years within which to distribute those profits. They could be distributed as they like in that period of five years, but if they were not distributed at the end of five years, then they could be taxed as the profits of that year.


George Reginald Geary: My point was simply as to the language being express enough.


Georges Henri Boivin: It will be made express enough in the bill.


Edmond Baird Ryckman: I rise merely to ask a question. I know the Income Tax branch has two, if not more, very shrewd and competent solicitors, but in view of the question

that has been raised previously, has the minister thb opinion of the Justice department that these retroactive provisions are not ultra vires? Just in that connection let me point out this the point was raised by the hen. member for Vancouver-Burrard-if you could tax income past and gone for the year 1925, you could pass a law to tax it for the year 1825. I am merely asking whether an opinion has been obtained.


Georges Henri Boivin: The opinion of the solicitors in our own department and the opinion of the Department of Justice was obtained in the matter. I am not sure whether the final opinion from the Department of Justice, has been received, but at least one memorandum from that department has reached us. I want to say to my bon. friend that he is not quite fair. I know that he does -not want to be unfair to the government or to the legislation, but I think he is unfair when he says that we are indiscriminately reaching back and taxing income, and that because we do it for the past five years we might as well do it for the last hundred years. That is not the intention of the government. The proper thing for the government to do is to reach back and tax that income which would have paid taxes to the Dominion government but did ndt do so. The object of the amendment is to try to reach that income, to bring the tax into the public treasury, and ward against such evasions of payment in the future. When I say evasions of payment, I want to be fair to those persons who formed these corporations sole. I do not want to say they are tax dodgers; I do not want to apply any damaging epithet to them.


James Dew Chaplin: You referred
to them as fake companies the other day.


Georges Henri Boivin: Oh no, I did not. The
other day I referred to fake companies in connection with the customs tariff-to those companies which were importing automobiles and getting excessive discounts for importing them. I never referred to these corporations as fake companies. They were formed legally under the Companies Act, and it was up to the government so to frame its legislation as to be able to collect the tax. They were within the law, and when a man is within the law he cannot be blamed. On the other hand, a man can remain within the law and evade the tax that a former government intended to impose upon him. We want to reach back and collect those taxes; that is all.

Income War Tax Act


Edmond Baird Ryckman: I cannot let go unchallenged the minister's statement that I was not fair. I was asking purely an academic question as to the legality of this legislation- nothing else. It did not enter my mind to criticize the action of the government if they were warranted in law in taking the action which they propose to take. I certainly had no idea other than merely to obtain an answer to the question whether an opinion had been obtained, because frankly I do not think this is within the competency of this parliament to enact.


Georges Henri Boivin: We are so advised. If I
misunderstood my hon. friend or one of his references, and said anything which I should not have said, I hasten to apologize.


Richard Burpee Hanson: With reference to the
observations made by the minister as to the purposes for which these holding companies were formed, I think it is only fair to him to say that in the smaller provinces these companies were not formed with the express purpose of evading the supertax, but having regard to the lack of reciprocity between the provinces with respect to succession duties, most if not all of them were primarily formed for the purpose of evading the payment of double succession duties to the various provinces on securities such as the stock of companies having their head office in a province other than that in which the company was domiciled.
Resolutions reported, read the second time and concurred in. Mr. Robb thereupon moved for leave to introduce Bill No. 116, to amend The Income War Tax Act, 1917.
Motion agreed to and bill read the first time.
On motion of Mr. Mackenzie King, the House adjourned at 11.55 p.m.
Friday, May 28, 1926.