1926-06-10

[Stage Direction]
Mr. GEORGE PARENT (Quebec West) presented the sixth report of the select standing committee on Miscellaneous Private Bills.

[Stage Direction]
Mr. W. G. McQUARRIE (New Westminster) presented a petition from the allied Indian tribes of British Columbia.

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

Mr. SPENCER:: 1.	Was there an attempt to fight forest fire near Cold lake, Alberta, in Ootober, 1925?
2.	Were persons of the names of Martin and Shaw supposed to have taken part in fighting fire?
3.	Did they send in a bill for the work they were supposed to have done; if so, to what amount?
4.	Who is the fire marshal for the district around Cold lake?
5.	Did he make an investigation with regard to supposed fire? If so, how many witnesses did he call?
6.	What was the cost of calling said witnesses, and has a report been received by the government?


Hon. Mr. MOTHERWELL:: 1.	A forest fire started on the north side
of Cold lake in the latter part of July and was effectively cut off and brought under control by August 8th. This fire apparently continued to smoulder inside the fire guards, and some time during September and October, two persons named Martin Nyhus and Lester Shaw, considered it advisable to make some extra fire guards. This was done without securing the authorization of the forest authorities.	,
2.	Answered by No. 1.
3.	Yes. Approximately $460.00 is claimed. Department is paying $88.00.
4.	The local Dominion fire ranger for the district around Cold lake is Mr. J. W. Allen.
5.	Yes. Four men who worked in the original fire. An investigation was also made by the district fire ranger at Edmonton.
6.	No expenditure was incurred in connection with witnesses, either by the local fire ranger or the district fire ranger. A report by the district fire ranger is on file.


EXCISE ACT AMENDMENT
[Stage Direction]
Hon. GEORGE H. BOIVIN (Minister of Customs and Excise) moved that the House go into committee to consider Bill No. 188 to amend the Excise Act.
An hon. MEMBER:: Is it printed?


Mr. BOIVIN:: I am informed, Mr. Speaker, that the bill was printed and sent to the distribution office this morning. It was explained yesterday.
Motion agreed to and the House went into committee, Mr. Duff in the chair.
On section 1-Removal of tobacco, etc.


Sir HENRY DRAYTON:: Mr. Chairman, I think the object sought by my hon. friend is perfectly proper. As I understand it, the purpose of the bill is to enable trade to be carried on at ports where we have a customs warehouse, but no excise warehouse; that is, to enable Canadian goods to be sold in competition with American. This is quite right. It is a little dangerous, though; does my hon. friend think he has got everything safeguarded? I would have thought the easiest way would have been to make any customs bonded warehouse an excise bonded warehouse.


Georges Henri Boivin: If every customs bonded
warehouse were made an excise bonded warehouse I am afraid the abuse would be still greater. It is understood that even* excise
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bonded warehouse in the country is subject to continual surveillance by an excise officer, and to the payment of a fee. It is pointed out that American cigarettes are brought in to these customs bonded warehouses and sold as ships stores to the fishermen going to the Grand Banks and elsewhere, without the payment of any duty and without the payment of any American excise. It is absolutely impossible for the Canadian manufacturers to compete with them, and the acting deputy minister of the department, who was also head of the excise branch, advises that the safest way would be to permit them to remove Canadian cigarettes of domestic manufacture from the excise bonded warehouse and place them in the customs bonded warehouse, where they would have no excise duty to pay. Section agreed to.
Section 2 agreed to.
Bill reported, read the third time and passed.
INCOME WAR TAX ACT AMENDMENT Hon. George H. BOIVIN (Minister of Customs and Excise) moved the second reading of Bill No. 116, to amend the Income War Tax Act, 1917.


[Stage Direction]
Motion agreed to, bill read the second time, and the House went into committee thereon, Mr. Duff in the chair.
On section 1-Gross revenue.
Mr. STEVENS:: Paragraph (m) of this
section defines the gross revenue where a personal corporation has revenue from more than one source, in which case the gross revenue means the sum of the net profits from each source. Does this affect in any way what I think we will come to somewhere later in the bill, the subject matter of previous discussion, namely double taxation or taxation from two sources? I have not had time to consider this paragraph very carefully, and I was just wondering whether this definition will in any sense establish the principle of double taxation.


Georges Henri Boivin: No, indeed. The definition just referred to is inserted for the express purpose of avoiding the possibility of double taxation. There is a clause further on in the bill which provides that all dividends upon which taxes have once been paid at their source, shall not again be taxable. My hon. friend will also see later on in the bill that a personal corporation is assimilated to a person, and therefore the dividends which may go through one, two or three holding companies will come to the final holding company or the personal corporation absolutely free from any except the original tax.
(Mr Hoivin]


Henry Lumley Drayton: What is the idea of confining that particular definition to personal corporations? It is rather badly drawn, but I take it that the intent of that paragraph is to confine it merely to personal corporations.


Georges Henri Boivin: The gross revenue means the sum of the net profits from each source.


Henry Lumley Drayton: Is not that the
effect of the definition? The paragraph reads:
"Gross [DOT]revenue" (where a personal corporation has revenue from more than one source) means the sum of the net profits from each source.
I admit that the drafting is not what one would desire, but it seems to me the effect is that in the case of personal corporations having revenue from more than one source gross revenue shall mean the sum of the net profits from each source. Am I wrong?"


Georges Henri Boivin: The sum of the' net profits from each source is right. The definition of gross revenue is required in the act and was not there before,, because that phrase is now used, in the section of the bill dealing with personal corporations; it will be found nowhere else. One of the requisites of a personal corporation is that its gross revenue must be, to the extent of one quarter or more, derived from the ownership of investments or from trading in investments. In all other cases the revenue taxed is the net revenue after exemption, but in order to determine whether or not the corporation is a personal corporation the gross revenue has to be considered. This is the only part in the 'bill where the words "gross revenue" are used.


Henry Lumley Drayton: I take it, then, that this refers only to personal corporations?


Georges Henri Boivin: Yes.


Mr. CHURCH:: When this resolution was in committee I suggested an amendment which would come properly under section 1. My suggestion was that a definition of the word "resident" be added. As I pointed out, certain gentlemen who live in Canada, possessing large incomes, go to Europe and England and say, "We do not live in Canada", and they pay no income tax here at all. When they go to England and France they say the same thing; they do not live there, but live in Canada. It seems that now there is one law for the rich and one law for the poor, and I ask the minister if he will not accept Bill No. 147, introduced by myself, and incorporate it in this present bill. It is too late now to advance my bill beyond the first reading, but I think the bill is a fair one. It is the law of

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the United States and of Australia. I do protest against the lopsided enforcement of the present act. I think the minister should look at Bill No. 147, and I am sure if he does, he will see that it is a perfectly fair bill. What are you going to say to the poor man who has to pay a tax of $40 or $60? I have heard of cases where men were summoned to the police court because they did not pay their income tax for smaller amounts than that, and the judge imposed a heavy fine on them for violating t'he act. I submit to the minister that this is the place to incorporate my amendment in the definition. I do not want to move an amendment and delay the committee, but I hope the minister will attend to this matter. A large number of wealthy people are evading payment of the income tax by saying that they do not live in Canada, although they are domiciled here, their business is here, they draw dividends from business carried on in Canada. I venture to say that the minister knows many of these cases himself, and I would like a statement of policy from him in that regard.


Georges Henri Boivin: I have looked at Bill No. 147, which was introduced by my hon. friend a few days ago. The object of his bill is to prevent anyone from evading taxation, but while the persons he refers to may at the present time evade municipal taxation, owing to the fact that they are not in Canada at the time the municipal taxes are levied, I think I can pretty truthfully assure him that they do not evade federal taxation. The Income War Tax Act provides that:
There shall be assessed, levied and ipaid upon the income during the preceding year of every person,-
(i)	residing or ordinarily resident in Canada, or
(ii)	who remains in Canada during any calendar year for a period or periods equal to one hundred and eighty-three days, or
(iii)	who is employed in Canada, or
(iv)	who, not being a resident of Canada, is carrying on business in Canada, or
(v)	who, not being a resident of Canada, derives income for services rendered in Canada, to any person resident or carrying on business in Canada but only upon that portion of the income so earned by such non-resident.
We feel that this cannot be very well strengthened without causing hardship and without causing recrimination on the part of foreign countries. When it is provided that everyone who is ordinarily resident in Canada, everyone who resides in Canada, and everyone who remains in Canada during any calendar year for a period equal to 183 days, is obliged to pay income tax to the federal treasury, I really do not think it would be advisable to add the still more drastic terms of bill No. 147. In any event, if it was the
desire of the government to incorporate Bill No. 147 as part of this bill or as an amendment to it, it would be necessary for us to begin by introducing a new resolution, because it might entail a slight increase in taxation, and the government could only provide for that in the usual way by introducing a resolution in the committee of Ways and Means, having it adopted there, and a bill then submitted for the consideration of the House.
Mr. CHURiCH: I still think that something should be done in this connection, and I would like to have the minister say whether he will adopt my suggestion, yes or no. The minister knows that there are evasions of the income tax by wealth}^ people, and with all Tespect I do say that little or no effort, so far as I know, is being made to collect the tax from these people. We have had these people before the court of revision in Toronto, where they have claimed that they live in England, and have millions of dollars invested there. They claim the same thing in connection with the federal taxes. I would like the minister to say yes or no whether he will accept this amendment as set out in Bill No. 147.


Georges Henri Boivin: As I pointed out before to
my hon. friend, the persons to whom he refers who evade the tax in Toronto pay their federal taxes to the federal government. They are unable to evade the federal tax with the excuse which was mentioned by my hon. friend, and the commissioner assures me that they are obliged to pay their federal taxes to the federal treasury, that they are reached by the present bill. As I pointed out to my hon. friend a moment ago, the adoption of his bill would necessitate a new resolution, and a long routine of procedure which would delay the adoption of the measure for several days.
Section 1 agreed to.
On section 2-Dividends to individuals to be liable to tax.


Henry Lumley Drayton: During the main discussion of the principle which is covered here, my hon. friend was asked whether he would not look after the case of people who are now being taxed on dividends for the first time this year in regard to their income of 1925. The income is pretty well spent by this time; they had no idea that they would be taxed, and I should like to know whether my hon. friend has come to the opinion that it is impossible to postpone that tax and make it applicable only to the income of 1926. My hon. friend will recollect that this point was stressed at some length, and I thought he was going to agree to the suggestion.
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Georges Henri Boivin: Yes, I remember very well that the point was argued at some length, in two connections: first, the retroactive effect which it was proposed to give in the case of personal corporations going away back to the period of the inception of the corporation, and secondly, the taxing of the dividends earned by joint stock companies and distributed during the year 1925. Both matters were taken up and carefully discussed together, and submitted to the legal department of the Income Tax branch, and also to the Justice department. It was pointed out that the taxation of the dividends drawn in the year 1925 was perfectly within the rights of the Dominion government; in fact, it was pointed out that the retroactive effect in general would be legal and could be enforced. But I am leading up to the statement that it was deemed not to be advisable to give a general retroactive effect to the provisions of the present bill, but that in so far as the revenue earned during the year 1925 was concerned, it should not create any great hardship to the holders of these dividends to have to pay the taxes upon them, for the reason that in practically 90 per cent of the cases of taxpayers in the Dominion of Canada the taxes paid, even considering the taxes on the dividends, will be smaller this year than last year. That has been figured out and has been ascertained. There are a few individual cases where persons deriving almost their entire income from dividends will have to pay slightly more taxation this year than they did the year before, but it was pointed out that the changes in the income tax law are always made at the time of the budget, that in so far as last year is concerned these people should have made provision for any possible change in the income tax so brought down, that it has been customary to make these changes when the budget is introduced and to make them apply to the previous year, and that no serious hardship would be felt, providing, however, that the retroactive effect would not extend further than one year, and that is the year upon which the taxes are being paid. In deference to the wish expressed by the hon. member for West York, the former Minister of Finance I propose later on to introduce a clause removing the drastic retroactive effect from the personal corporation dividends.


Mr. CLARK:: In the amendment which the minister proposes to introduce will the 1925 dividends of corporations be taxed on the same basis as they were last year?


Georges Henri Boivin: No, the dividends from
corporations will be taxed upon the new basis-that is to say the earnings of corporations will be taxed at 9 per cent instead of 10J. The dividends derived from corporations and taxed as income to the shareholders will be taxed, of course, under the new schedule of rates. In other words the entire bill, with its advantages and disadvantages, will be applicable to the revenue earned during the year 1925.


John Arthur Clark: -Will the minister state
whether he considers it would be within the powers of parliament not only to enact legislation for the purpose but to collect taxes on income earned, say ten years ago?


Georges Henri Boivin: There is nothing which
would prevent the government, if it so desired and parliament approved, from reaching back for ten years and collecting taxes on income earned at that time. But we do not propose to do that. We propose only to collect the new tax on the dividends earned last year, on the dividends for which return was not made at the time the new bill was in-, troduced, on the dividends earned during the year which was dealt with by the Minister of Finance when the budget was introduced into the House. We propose to follow the custom which has always been followed in the administration of the Income Tax Act, that it be made applicable to the returns filed during the year in which the income tax changes were made.


John Arthur Clark: In other words the minister states that income from dividends earned ten years ago would be on the same. basis as incomes from dividends paid in 1925 in so far as the legal powers of enacting legislation and collecting taxes thereon are concerned.


Georges Henri Boivin: If my hon. friend will look at the book, the very excellent book written by Mr. Lefroy on The Canadian Federal System, he will find that Mr. Lefroy states:
There is nothing whatever to prevent the parliament of Canada, or even the provincial legislatures, from legislating retrospectively in relatioai to all matters within their respective jurisdictions.
I do not mean to say that to go back ten years would be a good principle. As I have just stated to the hon. member for West York we have considered the representations made, and we have decided that there will be no retroactive effect to our legislation previous to the year which is now being budgeted

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upon and for which the returns were made after the changes were introduced in this House.


John Arthur Clark: Is the quotation which my
hon. friend has just read the basis of the opinion given by the Department of Justice and the legal officers in the Income Tax branch?


Georges Henri Boivin: I did not ask all the officers of both departments what books they had read before giving their opinion.


John Arthur Clark: I am asking is that the
basis of the opinion?


Georges Henri Boivin: It would form a very good
basis for the conclusion I would arrive at, that our legislation is legal , but I understand there are many other authorities, that in fact the Income War Tax Act itself was amended in the same way by a previous government some time ago. Originally, if the tax was not collected within three years it became prescribed. It was found that a great many abuses occurred under this provision, and very rightly my hon. friends now sitting opposite introduced an amendment giving the tax retroactive effect, claiming that all income taxation not paid to the Dominion government should be paid and should be collected. Under that retroactive effect many amounts were made payable which had become prescribed under the former law. The matter has been tested in the courts and my hon. friends were found to be absolutely right. It was decided that the parliament of Canada had the power in. question.


John Arthur Clark: I think my hon. friend has missed the point. I argued the point at some length the last day this matter was before us, and I enunciated the principle my hon. friend has quoted from Lefroy, namely, that it is within the competence of parliament to enact such legislation-there is no argument about that. But this is a tax against the income of the individual; it is a tax against property and being a tax against property, it must attach to the property. My point is, however, that if the property has ceased to exist there is nothing for the tax to attach to; and as the Minister of Customs admits, the property is just in the same position, whether it was earned ten years ago or last year, insofar as the collection of taxes is concerned. The income earned ten years ago forms, perhaps, a better basis for a picture. The income which was earned ten years ago is indisputably out of existence, and so is the income that was earned last year. That property has ceased to exist. Therefore, though parliament may
pass an enactment taxing the income that was earned in any year, the power of collection does not exist because there is nothing for the tax to attach to. It must attach against something, but it being a tax against property there is nothing for it to attach to because the property does not exist. That is where I submit the minister is wrong and where; if he has quoted the whole opinion of the Department of Justice and the legal advisers of the Income Tax branch, they are wrong. I suggest that the full details of their opinions be given to parliament because if they base them upon the quotation from Lefroy undoubtedly their position is sound- that is that parliament has the power to pass the legislation. But I say there is no power to collect a tax against property because there is nothing for the tax to attach to, the property having ceased to exist.


Georges Henri Boivin: Well, if my hon. friend was right, there would be hundreds of people in Canada who would pay no income tax, and I for one would have paid none during three years, because at the time I came to make up my income tax returns I found the money upon which I was paying my income tax had ceased to exist-


John Arthur Clark: That is not the point.
Mr. BOIVlN: -and I was obliged to borrow in order to pay it. That would apply absolutely to the argument of my hon. friend who says that the dividends earned during 1925 have ceased to exist. Is that the argument he makes?


John Arthur Clark: May I put the matter in this way: Take last year when there was no amendment before the House. The Minister of Customs knew the year previous-the year that he was earning his income-exactly what taxes he had to pay. As he earned income the tax attached to it,' and he was bound by law to set aside a sufficient portion to meet that tax. And so in regard to the ordinary income earned last year: In so far as our taxation was not increased and made retroactive we all knew what tax was going to attach to it and we were bound to make the necessary provision to meet it. If the minister was foolish enough to spend the money, to make no provision for taxation, and to be under the necessity of borrowing, that was a matter of business and he' was a poor business man. He was bound to set aside something to meet the tax. The taxpayer did not know last year, when he was earning his income, and setting aside something, that the government would this year increase the tax to be paid upon last year's income. If he had known
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that legislation was to be passed, it might have been different. He did not know, did not make provision and thought he was entitled to spend every cent of his income, except that portion necessary to provide for the taxes which were then applicable to his income. The situation to-day is therefore quite different from that which my hon. friend has described as the one which influenced him in his decision to spend all his income.


Mr. BOURASSA (Labelle):: I am surprised the hon. gentlemen is getting so scrupulous about the retroactive effect of this measure. Under the old act, as I pointed out recently before doming to this House, the people who were married, having a community of property, were taxed as having one single income; in fact, they had only one margin of exemption, but people who had not a community of property had two margins. But in 19X6 there was a dpubt. People married under the regime of community of property-and I was one of them-made their return under two separate forms, one-half of the income being attributed to the husband and one-half to the wife. The department refused to accept these returns. Tftey claimed the taxation should be levied on one income, and therefore there would be only one margin of exemption. I got an opinion from one of the most eminent civil lawyers' in Montreal and sent it to the department. The Minister of Justice had the law amended and made retroactive, so as to force us to pay for the year 1916 and the year 1917 with one margin of exemption, while other people were allowed two margins of exemption. That was a clear case of injustice, as pointed out by the hon. member who has resumed his seat, but I do not see that there were any scruples of conscience on the part of any Tory members, because that principle was applied for six years against all married people having community of property. In my case, I had only one margin of exemption while married people having separate property had two margins.


John Arthur Clark: Did any one contest it?


Joseph Henri Napoléon Bourassa: I protested it.


John Arthur Clark: But the hon. member did
not contest it in court?


Joseph Henri Napoléon Bourassa: No, I was not going to
spend any more money, but I was in the same position as my hon. friend, relying upon the law, upon the principle of justice, and upon the legal opinion which I had obtained with reference to taxation based upon equity and common sense, and upon what I under-

stood was the law. But the Justice department interpreted it otherwise, got parliament to sanction that interpretation and enacted it into law.


John Arthur Clark: That is the point the Minister of Customs referred to-that parliament had passed the law. Undoubtedly parliament has passed lots of legislation which, if certain aspects of it had been contested in the courts, might have been found to be ineffective. If my hon. friend had contested the case in the courts, it might have been found that he was not liable to pay the retroactive tax, especially if it were on property which ceased to exist.


Mr. CAHAN:: When the resolution preliminary to the bill was introduced, I urged somewhat strenuously that the dividend income of the tax-payer for the year 1925 should not be increased by ex post facto legislation. The hon. member for Labelle has pointed out a case of ex post facto legislation which certainly did cause a very great deal of irritation in the province of Quebec, to which it alone applied. But the fact that the department insisted upon clearing up the doubt in regard to the meaning of the act by subsequent legislation which became retroactive, is no reason in my opinion why this parliament should now create similar grievances. I quite understand that nn the majority lof cases, as the Minister of 'Customs has suggested, this provision will decrease the tax payable by individual holders of stock in Canadian companies. But there is a great number of cases where they will suffer grievances. I have to accept what the minister says, that the increased tax will apply to only ten per cent of the tax-payers, but I know a number of people who have suffered grievances. I know of cases where, if this provision applies to 1925, they will pay two or three times as much and they are not people with large incomes either. I pointed out to the hon. member the other day a case which came under my notice-I have the correspondence in my desk-of a clergyman who is retiring, and whose entire savings of a lifetime are invested in stock of Canadian companies. Under this act he will be compelled to pay nearly three times the amount he would have paid upon his income in 1924. The number of such cases may be ten per cent. That would mean that nearly two thousand people will undoubtedly pay more for 1925 under this legislation than they would have paid under the legislation existing up till April. That will cause -very serious grievances, and I think these people are justified in complaining. It is imposing upon them a burden which they should not

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have to bear, and I take issue with the government on that point. Any man having a small investment in Canadian companies up to December 1925 could not foresee that parliament was going to increase his taxation two or three times by legislation introduced in April 1926. That is a grievance which should not be allowed to exist. It will cause great irritation and dissatisfaction, and therefore I suggest that the best way to proceed is this: In so far as the income tax payable for 1925 is concerned, no tax-payer should be compelled to pay more than he would have paid under the legislation existing up to April 1926. That would be fair. If you wish to make a reduction to others, well and good, but do not increase the tax on one or two thousand people who, to my mind, are largely people whose incomes depend upon estates which are being administered by trust companies and trustees. I am not referring to the widow and orphan class. Do not make those people pay two or three times as much as they would otherwise have paid in order to make .up the deficiency in income due to the reduction of the taxation of other people with respect to 1925. With regard to 1926 they can get rid of their stock, sell it for what it is worth, and invest it in other things. I am suggesting to the minister that a fair way is to have a proviso that by reason of this legislation people should not be compelled to paj' now with regard to 1925 incomes more than they would have paid under legislation existing during 1925.
Mr. 'BENNETT:	I should like to add a
few arguments to those advanced by my hon. friend with respect to the desirability of removing this difficulty if possible. In a recent issue of the Free Press there was an editorial on double taxation pointing out that the minister had been making a very earnest effort to meet the difficulties of the situation as they were apparent to him and also expressing the hope that he might meet them. This is a real, not an imaginary grievance; it is double taxation in the very worst sense. The effect of it is to induce Canadian holders of securities of their own country to sell them and to invest the money in United States securities. Prior to the enactment of this legislation it is perfectly clear that there was a direct inducement to a man having money to invest it in Canadian enterprises because the dividends he received from it were free from normal tax. As the legislation now stands there is no freedom from normal tax on the part of those dividends and dividends which he receives from a United States investment stand on exactly the same basis as
dividends which he receives from a Canadian investment. I think the minister admitted that the other evening. The discrimination is therefore only against Canadian investments.
I suggest in addition to what the hon. member for St. Lawrence-St. George (Mr. Cahan) has suggested, that in respect to dividends of 1925 the law is obviously unfair for this reason. Brokers and bond sellers, have been disposing of securities and advertising in the public press during 1925 that income from preferred shares, for instance, of their companies would be free from normal tax, and stating what the normal tax was. It is clear that as the legislation now stands there is no freedom from normal tax, but the income from those dividends on Canadian securities is to be taxed just as incomes from dividends on Canadian securities were taxed before this law came into operation.
I will give an illustration from my own experience. I have some preferred shares, we will say for the sake of argument, in a Canadian company and last year let us say that I received $5,000 in dividends. That $5,000 in dividends having in the hands of the company paid tax once to the government, came into my hands free from normal lax. When my tax return was made out I received the benefit of the tax paid by the corporation on that money. There was therefore freedom from normal tax. Let me say also for the sake of argument that I had some shares in the American Telephone and Telegraph Company from which I received $1,000. That $1,000 in dividends in my hands paid income tax upon the whole amount because, as this was a foreign corporation, there was no freedom from normal tax. That is, this country's exchequer had received no money from the corporate income of that company. The effect of this legislation is to place my Canadian securities upon exactly the same basis as my United States securities. I can see no answer to that as regards the tax returns. I observe it has been suggested that such is not the case, but the evidence is that the dividends of $5b000 which I received from the Canadian company in 1925 are going to be taxed at exactly the same rate as the money which I received from the United States company. I have to put them into my tax returns as moneys received from that Canadian company, upon which money I pay that rate. It is true that the United States corporate tax is a higher tax than the Canadian corporate tax, but the money as it comes into my hands pays the same form of taxation in both instances.
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When for instance people of small means whom I know bought some preferred shares last year it was said in the literature on the subject that those shares were free from normal tax and these people bought on the strength of the legislation then existing with reference to 1925. It appears to me that the suggestion made by the hon. member for St. Lawrence-St. George is only fair when he asks that parliament should declare in a section attached to this legislation that nothing therein contained should be taken as compelling payment by the taxpayer of a higher tax in 1926 than he would have paid under the act that was in force in 1925 on the income derived by him from the very sources that paid it.
The minister should go a step further. I think the other evening he admitted the difficulty of double taxation. It is not only double but treble taxation in some instances and I will give an illustration that has come under my observation. The directors of a Canadian company gave dividends to a trust company that was appointed executor of a man's estate. In the hands of the trust company the department insisted upon payment of income tax upon that money as income derived from the estate of the testator.
3 p.m. Then the trust company distributed that money to the several persons named and in their hands the department also sought income tax on that money. I know that a. protest was made at the time the tax was paid but I know that the given sum of money, say "X", paid taxes three times before it reached the ultimate beneficiary. That is a fact. Whether it is right or wrong I do not know. The protest which was made at the time was unavailing and the tax was paid, "X" money paid tax, first, as owing by the corporation that earned it; second, in the hands of the trust company that received it for distribution and, third, in the hands of the ultimate beneficiaries to whom it was paid by the trust company. I can give the names and the amounts if necessary. Those are facts. In every instance, however, there was a freedom from normal tax on money in the hands of trust companies that received dividends in the manner I have indicated and in the hands of the ultimate beneficiaries. The minister realizes the difficulty and if he is not able to make what is suggested of universal application, he should make it of limited application at any rate for the smaller taxpayer. It seems to me that is desirable.

The minister said the other evening that they were considering the matter. The journal to which I referred in its editorial hoped that he might be able to find some solution. I suggest as a solution that we should add to the bill a section declaring that with respect to Canadian dividends there should be a reduction of say 4 per cent from the tax; that is that all Canadian dividends should be free from a normal tax of say 4 per cent. That would give an incentive to Canadians to invest their money in Canadian enterprises rather than send it to the United States. I know whereof I speak when I say that since this budget came down, there has been a realization to no inconsiderable extent of Canadian securities and the money has been invested in United States securities, first, because their market ability is greater than ours and, second, because the return is larger than ours. I know a gentleman who tells me that he always invests his money in United States securities because he gets larger returns. "Now," he said, "it is settled, I would not care to put them in Canadian securities at all because I get no allowance for my normal tax. I pay my corporation tax, and then I pay the full tax, the same as I would in the United States; and I can realize upon my securities much more quickly and get a better return in the United States than here." If anything can be done to meet this situation of double taxation, however slight it might be, I am sure it would serve as an incentive to people to invest their money in enterprises in this country. As it now stands, any man with 810,000 to invest will not feel disposed to put that money into enterprises in Canada, knowing that by so doing he will have to pay 9 per cent on any money that is earned in the hands of a corporation, and then the full tax, without any allowance for normal tax, on the income as it is paid to him by way of dividends. If the minister can effect that purpose I think he will be doing Canadian industry some service, and he will be giving some slight inducement to Canadians to invest their money in Canadian enterprises rather than in those of a foreign country. Those are the suggestions I desire to make to the minister.


Sir GEORGE PERLEY:: Before the minister answers, may I say how pleased I am that my hon. friend from West Calgary (Mr. Bennett) has put forward this parti-'eular phase of the matter in his usual forcible way. I desire to support what has been said by him and by the hon. member for St. Lawrence-St. George (Mr. Cahan). The

Income War Tax Act
other evening when we were discussing the resolution I took occasion to speak about this same subject, and I now want to add slightly to what my hon. friend from West Calgary has said. My idea is that not only will the bill as brought down result in investors being more likely to put their money into American stocks, but I feel very strongly indeed that it will have the effect of preventing the starting of new enterprises in this' country. It seems to me this will be more harmful than the question whether the bill will tend to divert Canadian money into foreign investments. The other day the minister agreed with our position and said he would try to provide a remedy in this bill. I had not intended to speak on the subject until we got to the particular clause, but as the new proposal he has made with respect to family companies hardly meets the case, I want to urge as strongly as I can that he should carry out some such suggestion as that made by the hon. member for West Calgary; that is, there should be some substantial allowance off the regular tax for income derived from Canadian companies. To my mind that is the simplest way to put this matter right and still leave an inducement to Canadian investors to place their money in Canadian enterprises, and so provide work for our own people.


Mr. GEARY:: Mr. Chairman, may I ask the minister a question with regard to the same clause? It is subject to two perfectly fair criticisms. First, it is retroactive, and I am sure this government does not want to pass retroactive legislation if it can possibly be avoided. Such legislation is not looked on with favour, least of all I think in connection with taxation. Secondly, this is undoubtedly double taxation. I should like to point out to the minister something that has not yet been brought to his attention. There is a definite ruling by the department that, the taxation on corporation income should not be taken into account in the statement of the company in arriving at its net return; that, on the other hand, the taxation is directly against the shareholders' profit. That has come up on several occasions and the ruling of the department is definitely to that effect. You cannot get behind it. When the shareholders' profit is divided possibly the percentage of return is lower because of the taxation. Now the government proposes to impose an additional tax on that residue.
As to investment, it takes two courses. The first is the ordinary course of trading. I agree thoroughly with my
friends who have preceded me that one prefers putting one's money into a Canadian company rather than into an American or even a British company. All the more was this the case because of the advantage that has accrued to him when he came to pay his income tax. But a more important side is that in raising money for new enterprises one of the baits-I do not speak disparagingly of the prospectuses issued by the promoters of Canadian companies-presented to the people of this country has been that on the preferred or common stock you might be assured that the normal dividends would be exempt from tax.


Mr. POWER:: If the hon. gentleman will permit me-to his knowledge, since this budget was brought down two months ago, has there been a considerable falling off in the sale of Canadian stocks and a diminution in their value on the stock market?


George Reginald Geary: I do not know definitely, and if I did I would say to the hon. gentleman it would mean nothing to me. I do not think you can get any gauge of the prosperity of the country or the real value of stocks by the prices quoted on the stock market; those prices fluctuate from a variety of causes.


Charles Gavan Power: I merely put the question because from the observations of my hon. friends from Toronto and from West Calgary and other hon. gentlemen it might be gathered that this legislation would have the effect of preventing investment in Canadian industrial enterprises. But if my information is correct -it may not be because I do not follow the Btock market-I am led to believe that stocks have risen in value during the last few months and that there has been a large volume of transactions on the stock exchange.


George Reginald Geary: Mr. Chairman, I am quite ready to admit that, but I do not think you can tie it up to the situation we have in hand. I have suggested there are two branches to be considered in the investment of money. One is the ordinary day by day trading of people who are investing in the stocks of companies which are already under way. Without knowing the result of this legislation, I think I am safe in saying that as a matter of ordinary common sense it is not an advantage to ibuy a stock upon which your income is less. But I think a more important phase to consider is that of putting money into new enterprises. Take an enterprise well known to my hon. friend, the St. Maurice Company. My recollection is that the prospectus in regard to a recent flotation contained this inducement to investors to put their money
*Income War Tax Act

into the preferred or common stock: The stock will escape the normal tax. I would suggest to the hon. minister and his colleague that it is quite plain that by reason of this tax immunity many hundreds of thousands of dollars of Canadian money have gone into Canadian enterprises which require new capital, that money having been diverted from other channels. It has been a decided inducement to the Canadian people to support Canadian enterprises, and it has been a corresponding advantage to the latter in getting the capital required for carrying on their business.


Mr. LADNER:: Mr. Chairman, I have
come across a number of cases where double taxation would work a hardship, certainly under the first proposed legislation, although I think the modification perhaps removes that hardship. Perhaps the best illustration I can give, and it will be of interest to the minister and the House, is with respect to the British Columbia Electric Railway Company, which with its subsidiary companies represents a capital investment of $60,000,000 or $70,000,000. In a letter from the president he sets out the effect upon his company of the amendments originally proposed, but he also mentions other points, for instance:
With regard to the taxation of dividends, I of course find it difficult to see any justification for the course proposed :by the government, and in particular so far as my company is concerned, I strongly protest against the proposals on the following grounds:
In the first place, this company, like many others, has in the course of its growth during the past thirty years, acquired many smaller companies, until to-day it consists of an aggregation of some twenty companies, of which the British Columbia Electric Railway Company is the parent and owns all the stock. To take an instance, the Vancouver Gas Company was formed many years ago and was purchased by this company about the year 1906. The Vancouver Gas Company received a charter from the city of Vancouver to do a gas business within the limits of the city of Vancouver.
Consequently it was necessary to keep this company alive in order to preserve its charter. When the city of Vancouver grew, it was found necessary to extend our gas business into the outlying suburbs of South Vancouver, Point Grey and Burnaby, and it became necessary to form another company to do this 'business, as the charter for the Vancouver Gas Company was limited to the boundaries of the old city of Vancouver. Here we have an illustration of two companies.
I mention this, Mr. Chairman, because these companies were not formed to evade taxation, but rather as the necessities of the business gtew.
The shares of the British Columbia Gas Company, which was formed to do business in the subunbs, are owned by the Vancouver Gas Company, and the shares of the Vancouver Gas Company are in turn owned by the British Columbia Electric Railway Company. As 
I understand the proposals of the government, the profits made by the British Columbia Gas Company will first of all be liable to taxation. Those profits, when realized and transferred in the shape of dividend to the Vancouver Gas Company, will become again liable to taxation, and the profits of the Vancouver Gas Company, when they in turn are transferred by means of dividend to the coffers of the British Columbia Electric Railway Company, will be subject to a third tax. Can this wholly unjustifiable and inequitable suggestion be a serious proposal of the government ?
Just at that point I would like to ask .the minister if the amendments now contained in the bill cover that question, and limit the taxation to the original company producing the dividend, and then to the shareholder when he receives it.


Georges Henri Boivin: My impression wlas that, as my hon. friend could not find very much criticism against the bill itself, he was reviving a dead horse for the purpose of killing it all over again. If he would look at subsection (12) of section 3 of the bill-


Leon Johnson Ladner: That is not the case at ail. I wish to make sure of this point, which involves a great deal of money.


Georges Henri Boivin: Subsection (12) of section 3 of the bill reads:
An incorporated company shall not be subject to a tax in respect of dividends paid to it by a company incorporated in Canada the profits of which have been taxed under this act.
The next paragraph also touches this .point.
An incorporated company shall be exempt from taxation in respect of dividends received from a company incorporated outside of Canada to the extent that the latter corporation has earned income within Canada and actually paid a tax in respect of such income under this act.
So I think it is quite clear that all those complaints, which I will admit werei made legitimately by this electric oompany when they had nothing before them but the resolution, are covered. The resolution gave us the power to tax in the way set forth in thlat letter, so the protest was certainly legitimate at that time, but it is very clear now that no double tax can be collected under the bill.


Leon Johnson Ladner: There was just one other point.
The second serious complaint X have is that, as you know, my company made a local issue-
That is, in Vancouver.
-which called in the first instance for $2,250,000, but as the public subscribed for $7,000,000 of this stock we ultimately issued $5,000,000. In our prospectus we stated that the dividend on these shares would not be liable to taxation, a statement which was of course perfectly true at the time it was made, and no doubt assisted materially in selling the shares. Now we are told that these dividends are liable to tax.

Income War Tax Act
I want to ask the minister another question in this connection. Under the terms of the bill as it now reads, I understand that notwithstanding the conditions under which these shares were sold, the tax will be levied against the Shareholder in any event, and that he will have no redress against the company.


Georges Henri Boivin: My hon. friend is quite right there. In all cases where the revenue of the unmarried shareholder exceeds $1,500, and the revenue of the married shareholder exceeds $3,000 the dividend he would receive from the stock of this company would be liable to taxation. It may be that the prospectus issued two or three years ago by the company stated that the shares were not liable to taxation.


Leon Johnson Ladner: They were issued this spring.


Georges Henri Boivin: At the time the prospectus was issued that statement was absolutely correct, because at that time the moment the corporation paid 10j per cent as a company tax on its earnings the balance, when distributed to the shareholders, was liable to taxation but exempt from the normal tax. In many cases there was at least a 2 per cent tax and in some cases more, according to the revenue derived by the shareholders, but these dividends were exempt from the normal tax of 4 per cent or 8 per cent as the case might be. In that respect the statement was quite true. But I do not think it will be embarrassing to the company. No one can expect a company to guarantee in advance what the Canadian government will do in years to come, and parliament certainly cannot be limited in its taxation powers by any statement which may be placed in the prospectus of any individual company.


Charles Hazlitt Cahan: In order that I may bring the point I had in mind before the committee I beg to move the following amendment, seconded by the hon. member for Lanark (Mr. Preston):
Provided, however, that no taxpayer shall be liable by virtue of this section to pay in respect of dividend income for, the year 1925 a greater tax than would have been paid by such taxpayer in case this section had not been enacted.
I am simply putting it in this form in order to place my position on record, and I am very anxious that the minister should take this point under his favourable consideration.
Mr. BOURAS'SA:	I think it would meet
the wishes of the hon. member if the paragraph were amended by applying it to the year 1926 instead of 1925.


Charles Hazlitt Cahan: That would suit me quite
as well.


Joseph Henri Napoléon Bourassa: That would be quite
simple, and would be quite proper, I think, because I am not in favour of retroactive legislation in any form unless it is absolutely imperative. The question of double taxation was dealt with during the budget debate, and I think it is applied more or less in every country; taxation is levied upon company profits and upon individual income. I think this is so in the United States, and I do not see how the Canadian investor would gain by placing his money in that country which, according to the statement of the hon. member for West Calgary (Mr. Bennett) is more heavily taxed than is Canada. A person receiving his income from the United States would have to declare it in the same way he declares his income derived from Canadian investments. I think it is wrong to create the impression that this legislation is discriminating against Canadian investment; it is simply putting the individual taxpayers of Canada on the same footing whether the income is derived from foreign or from Canadian investments, and whether from real estate or industrial pursuits.
Then there is another feature which has to be considered. What proportion of these dividends has accrued on real invested capital, and what proportion on watered stock? We hear very much about the pitiful position of the poor widow and orphan deriving a small income from money invested in Canadian industrial enterprise. I think the number of widows and orphans in Canada who have invested their money in industrial enterprise is very small compared with the number of financial sharks who have issued stock for twice and three and ten times the real amount of legitimate capital invested in their industry; and now because they are going to be taxed not only on their legitimate individual incomes but also upon the incomes they derive from their investments in watered Stocks, we hear all sorts of wailings about the fate of the widows and orphans. I think it is high time that parliament should make a readjustment so that all taxpayers are put on the same footing. We Should cease considering the individual through the company. The company 's profits are one source of revenue that is taxable, and rightly taxable, giving returns to the state. The individual income of each taxpayer is another thing to be considered, and when you treat the dividend owner in the same manner that you treat the farmer or the real estate owner, who is not taxed upon his

Income War Tax Act

revenue below a certain figure, and above that is taxed according to one single scale of taxation on his individual income, whatever the source of it may be, I think you are coming nearer to social justice than you have previously.
With regard to the retroactive feature, I entirely agree with the hon. member for St. Lawrence-St. 'George and the hon. member for West Calgary. No doubt calculations were made on the individual incomes of 1925 without anticipation of this legislation. I do not think we should make it retroactive, and therefore I would be prepared to vote for an amendment that would make this section cover incomes accruing only in 1926 and in the following years.


Mr. HANSON:: I have given a good deal of consideration to this question of double taxation. I believe that the situation created by the new legislation has given rise to a very great deal of anxiety on the part of Canadian investors. The chief objection which I had to the provision of the bill relating to taxation of companies has been done away . with by the insertion of the amendment which is provided for in subsection 12 of section 3, which provides:
An incorporated company shall not be subject to a tax in respect of dividends paid to it by a company incorporated in Canada the profits of which have been taxed under this act.
The only objection I have to that clause is that it does not go quite, far enough, because there are cases of Canadian companies owning American subsidiary companies which have paid taxation, or will have to pay taxation, to the American government, and under this they would be taxed twice. I think they ought to be in the same category as the Canadian subsidiary, and I would ask the minister to give consideration to that point. If he does not provide for that case, there will be double taxation such as he is attempting to avoid, I think, in this connection.
There still remains, however, the objection to the retroactive features of this legislation, and the best solution that I have been able to devise is the one that has occurred to the hon. member for West Calgary, and to which he has given expression, that some arbitrary provision might be set up by the department which would relieve to a limited extent this hardship of double taxation. It is important, notwithstanding anything that might be said with respect to the sale of shares upon the stock market, because I tell the minister that this feature of double taxation is going to make it extremely difficult

to get people to buy stock in new Canadian enterprises. I have had just a little bit of experience in that matter, and I know that to induce the ordinary hard-headed investor to buy preferred stock in a Canadian industrial concern, you have to give him a very handsome 'bonus of some sort before he will put his money into it at all. You have got to go further than that. You have to pay the underwriters who take the stock and put it on the market a very handsome commission, which has to be absorbed by the company before it can begin to pay any returns. I do want to impress upon the minister the desirability from the standpoint of pure business, and that is the only point of view from which I want to discuss this thing, of giving consideration to the suggestions that have been made in this respect by the hon. member for West Calgary. Like other hon. members I have not had very much opportunity to study the proposed amendment of the hon. member for St. Lawrence-St. George, but I imagine that that amendment is brought forward to meet another situation in respect to the province of Quebec with which we in the common law provinces are not very familiar.
I want to urge upon the minister that before he forces this legislation through, further consideration be given to the representations which have been made with respect to taxation of dividends from Canadian companies. It is hard enough now to get people to invein them, and what will happen is this: People will not invest in Canadian companies, but they will put their money into bonds where they can get a fairly good return with less liability to taxation. That is the point I would impress upon the minister. I do not wish to take up any more time, but I still think that the act is unfair in that regard. I know that people who are in the money market or who are liable to come into it very soon, for funds from the public, view with a very considerable degree of alarm the enactment of this legislation, and they take the view that having made dividends taxable- the minister used the word "earned;" I think what he meant was dividends earned, declared and paid in the year 1925-having made those taxable, I think the minister is not doing himself or the country justice when he elaborates that feature in the bill. That is another matter against which I protest.
Mr. O'NEILL:	Apropos of the suggestion
of the hon. member for West Calgary in the matter of taxing dividends, I understand that there is a 50 per cent depletion allowance on

Income TFar Tax Act
dividends paid on gold and silver stocks, 25 per cent on copper stocks, and nothing on nickel. Is there any rational basis for that arrangement?


Georges Henri Boivin: I am informed that the
reason why no depreciation so far has been allowed in the case of nickel is that the matter has not been brought to the attention of the department; no formal request for a regulation covering nickel has been made. I am informed that under the act the minister has the right and power to determine the amount of the reduction which will be allowed upon the taxable portion of the dividend to compensate for the depreciation in the value of the mine from which the mineral is taken. That explains why the depreciation is greater in the case of gold, and the commissioner tells me that if an application is made in respect of nickel tit will be taken into consideration and a regulation framed which will be fair to the miners of nickel, the same as to the miners of other metals.
Air. O'NEILL: The same would not apply in the case of pulp and paper, which is a wasting asset?


Georges Henri Boivin: It does apply to the depletion of timberlands.


Richard Burpee Hanson: What is the depletion allowed for pulp and timber limits?


Georges Henri Boivin: I am informed by the commissioner that it depends entirely upon the value of the timber before it is removed, and that it depends also upon the locality in which the limits which are depleted are situated.


Mr. BENNETT:: And the purpose for
which it was used. *


Georges Henri Boivin: It depends entirely upon
the nature and value of the timber, the quantity depleted, and the value of the property from which the timber has been removed.


Richard Burpee Hanson: It is a floating affair, so
to speak.


Georges Henri Boivin: It is an affair which must
be settled by regulation. If any specific, definite rule were adopted, what would be fair for one would be very unfair for another, as with regard to the rule we are trying to adopt now, that everybody pay the same tax upon the same amount of income. It appears to my hon. friends opposite to be very unfair in certain cases. Well, I am willing to admit that in certain particular cases there is unfairness. It is absolutely impossible 14911-2741
to draft any.income tax law where there will be absolutely no unfairness. However, if hon. gentlemen opposite who have spoken to the amendment moved by the hon. member for St. Lawrence-St. George have concluded their remarks, and as it is desirable that we should reach a vote upon it at the earliest possible opportunity, I should like to say to my hon. friend that his amendment cannot be accepted by the government. According to the wording of the amendment he would immediately take eight per cent from the income taxation of every person whose income was derived from dividends during the past year.


Charles Hazlitt Cahan: No, the minister has not
understood me correctly.


Georges Henri Boivin: Well that would be the
result according to the wording of the amendment.


Charles Hazlitt Cahan: If the minister will allow
me, all the amendment says is practically this:
Providing, however, that no taxpayer shall be haoie by virtue of this section to pay in respect of dividend income for the year 1925-


Georges Henri Boivin: That is it.


Charles Hazlitt Cahan: Only for dividends for taio 1925 period.


Georges Henri Boivin: That is it.


Charles Hazlitt Cahan: -
-a greater tax than would have been payable by such taxpayer in case this section had not been enacted.
Under this the tax could not be raised on any individual for the year 1925, but if there was any reduction he would get the benefit of it. In regard to that 10 per cent of the taxpayers to which the minister made reference, the persons making up that 10 per cent would not be compelled to pay a higher tax in respect of their dividend income for 1925 than they would have paid if this had not been passed. You should not by ex post facto legislation compel the taxpayer to pay a higher tax than he would otherwise have paid in respect of his dividend income for 1925.


Georges Henri Boivin: I do not like ex post facto legislation, neither do I like the tu quoque argument. But I can say to my hon. friend that while his friends were in power they passed ex post facto legislation every time they amended the Income Tax Act, and they increased the amount that had to be paid by the taxpayer for the year preceding the one during which the income tax was introduced. May I cite for example-
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Richard Burpee Hanson: It is no answer to the
argument to say that because we did something you are justified in doing the same thing.


Georges Henri Boivin: I am very glad to hear the hon. member for York-Sunbury say that because his party did wrong it is no argument whatever for us to say that we are doing the same thing. I am going to try and argue that what may be wrong in some cases is not always wrong. I am going to try and argue that it is not a hardship, that it is not illegal, that it is not even ex post facto legislation, to determine and decide at the present time, with the approval of parliament, that some persons who made their in-ocme tax returns after this legislation was introduced into the House shall pay upon their dividends more than they paid last year. It is proposed, if I understand the intention of the hon. member for St. Lawrence-St. George correctly, to see that no one's income tax is increased this year.


Charles Hazlitt Cahan: In respect of dividend
income.


Georges Henri Boivin: In respect of the amount received from dividends, but according to the amendment as worded it is quite clear that the revenue from all dividends should not be taxed more this year than it was taxed last.
M. CAHAN: No, no.


Georges Henri Boivin: That would mean a reduction of 8 per cent. Of course the wording of the amendment may be slightly altered. Let us suppose the wording is slightly altered to convey the exact meaning of the hon. member for St. Lawrence-St. George beyond all possible doubt. I say that even then it would be impossible to accept the amendment for the reason that this legislation is correcting what we consider to have been a wrong. I am not prepared to admit that the patriotism of the people of Canada is so weak and so futile that it must be bolstered up with the promise of exemption from taxation in order to get them to invest in Canadian companies. If that is the argument hon. gentlemen oposite want to advance, and if they say we are going to kill Canadian industry because we are asking the industrialists of Canada to pay as much taxation upon the return they will derive from their home dividends as upon the dividends they derive under greater difficulties from foreign investments then this government is willing to take the onus and the blame.


George Halsey Perley: Surely my hon. friend does not want to be unfair. All we are objecting to is that Canadian enterprises should be required to pay double taxation.


Georges Henri Boivin: If my hon. friend puts the matter in that way I say it is just as fair for a man to pay the company his share of taxation on his dividend and then pay the government his share of taxation on the income from dividends as it is for him to go to the L'nited States and pay 13i per cent there and the same tax in the case of dividends received here. When hon. gentlemen opposite say that investors are going to be driven to the United States do they realize that when they go there they have to pay 13J per cent if the shareholder really pays the dividend? It may be argued, perhaps, that the shareholder does not pay the dividend. If that is so the whole argument falls to the ground. But if it is true that the shareholder pays the dividend his taxation is 13A per cent in the United States whereas it is only 9 per cent here.


Mr. BRISTOL:: Is that a coiTect statement? I think perhaps it might be true in the case of New York state but not in the case of New Jersey.


Georges Henri Boivin: The 13iJ per cent is the
federal income tax. I am very glad that my hon. friend has reminded me that in certain states of the American union there is an additional tax to be paid by the company to the state. I had forgotten that, and I thank my hon. friend for his reminder. In any event the federal income tax is 13-2 per cent. But hon. gentlemen opposite say " Oh well, why don't you do as the United States do; why don't you exempt as they exempt from normal ttax?" Do my hon. friends stop to consider what the exemption from normal tax is in the United States? Do my hon. friends stop to consider that upon the first $4,000 of net revenue in excess of credits, the normal tax in the United States is only 1J per cent? The only exemption that the American investor gets from the 13J per cent that he is obliged to pay, or will pay next year, unless his revenue exceeds $4,000, is l\ per cent, and he is therefore obliged to pay a net 12 per cent to the government, because the corporation tax exceeds the normal tax by 12 per cent. If you want to go a step further, upon the second $4,000, or upon $8,000 revenue in excess of credits, the normal tax is only 3 per cent; therefore the total tax they are obliged to pay over

Income War Tax Act
there, even with the exemptions, is 10J per cent, whereas the tax payable here is only 9 per cent. I cannot understand how my hon. friends can argue for a moment that this is going to drive capital from Canada into the United States. It is true, as my hon. friend from York-Sunbury pointed out, that this expression in the prospectus that the dividends derived from Canadian companies would be exempt from taxation, may have been an additional lure to people, perhaps to the widows and orphans referred to by my hon. friend from St. Lawrence-St. George, to invest their capital in these corporations, but I claim it is not a safe and sound investment for people with very small capital, and that lure should not be held out to the widows and orphans to place their money in corporations where the revenue is not absolutely sure and safe, and where the investment is not the kind that is recognized as a safe investment for trust funds. I want to go a step further. My hon. friend referred very feelingly

and I always admire such an expression of sentiment-to the cases of clergymen who have retired from the church, and of widows and orphans who are deserving perhaps of more generous consideration on the part of parliament than other people. But my hon. friend is not making an appeal on behalf of people who are very poor, or on behalf of the indigent widows and orphans who require government assistance, because any person who is obliged to pay one single cent upon revenue derived from corporation dividends must have at least an invested capital of $60,000 before he draws an amount in excess of the $3,000 that is exempt from taxation. Is my hon. friend going to tell me that anybody who has not at least $60,000 invested is going to draw more than $3,000 in dividends? It is absolutely impossible, because the dividends paid by our corporations, while they may be a little bit higher than 5 or 6 per cent, generally, if you consider the price at which the security is sold, average 5 and 6 per cent. If the dividends derived are 5 per cent, it would take $60,000, and if they are 6 per cent, it would mean $50,000 of invested capital before that poor widow or poor orphan, or poor minister, would have to pay one single cent in Dominion taxation.


Charles Hazlitt Cahan: I cannot follow the declamation of the hon. minister. Nor will I attempt to match my wits with his in dialectics of the kind he has attempted. I am dealing simply with this point in the proposed amendment; that with regard to last year, 1925, you
should not impose, in this month of June, a higher tax than would have been paid if this legislation had not been passed. I am not dealing with the' question of widows and orphans, but simply stating that a great number of people who derive their income from estates or investments in Canadian companies will pay two and sometimes three times as high a tax, under the legislation we are now enacting in 1926, as they would have paid under the 1925 legislation. I suggested to the hon. minister that he give it favourable consideration. He wishes to make it a vote of want of confidence in the government. If it is the wish of hon. members that in discussing these bills any suggestion made on this side of the House shall be regarded as a vote of want of confidence in the government, they are establishing a precedent that has never been established in this House before. The minister asks us to discuss the question on its merits. When introducing his bill, he asked that we should make suggestions, and stated, if I remember correctly, that the government were prepared to receive fair suggestions for their consideration. That was the proper spirit. The hon. member suggests that those sitting on this side of the House have enacted similar legislation in years past. If so, as a new member, I assume no responsibility for it. I am here to act according to my intelligence and judgment, and. I do not regard my-* self as responsible for the wrongs which have been created in the Canadian parliament for the last fifty years by either party. Therefore I ask hon. members to consider the very point and the only point raised by this amendment. Such legislation as he has suggested could not be passed under the constitution of the United States. Hon. members laugh, but they simply show their entire ignorance of the subject by laughing. Ex post facto legislation of this kind could not be passed under the constitution of the United States, and you will look in vain, through the taxation proposals of the British government if you endeavor to find a proposal in any year to impose a higher tax on incomes earned the previous year than was in force in that year. Therefore let us deal' with it squarely. I say that it is unjust, no matter who does it, in the case of a man who has derived his income from dividends only-and I am limiting it to dividend income-that he should be compelled to pay a higher tax on a legislation passed in June 1926, on his income for the year ending December 31st, 1925. The hon. member should not make it a vote of want of confidence in
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the government. I had hoped that it might have been considered fairly, apart from the partisan aspect, which unfortunately the hon. member has injected in the. discussion.


Georges Henri Boivin: I hope my hon. friend will not misunderstand me. In my remarks, I was not answering merely the argument advanced by my hon. friend, but I was endeavoring to answer the criticisms which have been levelled since the discussion commenced against this particular clause of the bill.


Charles Hazlitt Cahan: Why not limit the discussion to the amendment for the present?


Georges Henri Boivin: I do not propose to limit myself to the amendment, owing to the well-known rule of parliament, that when a member is discussing an amendment to a bill or to a clause of a bill, he also has the right to discuss the bill or the clause itself. That is one reason, and the other reason is that I hope, when we reach the vote on the amendment, and when all our hon. friends happen to be in the House, that we may possibly dispose of the clause itself at the same time.


Charles Hazlitt Cahan: I can say that until I told
the hon. member to my left (Mr. Preston) no member had the slightest idea that I was going to move an amendment, and I had not discussed it with anyone.


Georges Henri Boivin: I do not mean that at
all; but since the amendment has been moved by my hon. friend a large number of members on both sides have come in for the purpose of listening to the discussion and taking part in the vote, and I thought it would be a good idea if we could dispose of the amendment and the clause at the same time. My hon. friend need not assure us in the loud tone which he has used that he has no responsibility for the legislation enacted by his hon. friends in the years prior to 1925. Any hon. member who read his speeches during the campaign in his constituency well knows that he accepted no responsibility for any acts of the Conservative party prior to then.


Joseph Henri Napoléon Bourassa: That is why the hon.
gentleman was elected.


Georges Henri Boivin: For once the hon. member
for Labelle and myself entirely agree. But let me come to the subject matter of the amendment itself, which I am willing to say has a great deal of merit. At first I misunderstood the amendment. That misunderstanding I

corrected. I pointed out that under the intent of the amendment we would be obliged to remit 8 per cent upon all income derived from dividends which we would collect this year. I said that that was impossible owing to the fact that when the budget was drafted and the reductions were made, the additional revenue to be derived from dividend income was taken into consideration and a remission of the entire revenue from dividend income would throw the whole fabric-


Charles Hazlitt Cahan: I know the hon. gentleman
is sincere, but this does not remit.


Georges Henri Boivin: I am just coming to that.
I say that that would be the argument if we remitted 8 per cent on all dividends, but my hon. friend pointed out that that was not his intention. His intention is merely to prevent an increase in the amount paid by any dividend earner during this year over what he would have paid under the old law. That, I understand, is the exact purpose of my hon. friend's amendment. There are in Canada some people who receive this entire income from dividends and of course they would be favoured by my hon. friend's amendment because they would pay less than they would pay under the new law. But there are many other people who derive one-half or three-quarters of their income from other sources and the balance from dividends. They could very well come to the government and say: You were unfair to me; you reduced the taxation which you should have collected on dividends received by my neighbour, but you did not reduce it on mine. Where is the answer?


Charles Hazlitt Cahan: I will give the answer. The answer would be that you have not reduced it at all. The answer is that this payment with reference to the year 1925 would be exactly what would have been payable under 1925 legislation, but for the future the tax payable by the man who receives income from dividends is increased. You are simply making it impossible to take more from one class on income derived in 1925 for the purpose of reducing the amount taken from another class on income derived in 1925.


Georges Henri Boivin: It is impossible to make the taxation of all persons who derive income from dividends the same this year as last year. To do so would destroy the effect of the budget.


Charles Hazlitt Cahan: That is not what I said.

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Georges Henri Boivin: That is merely to give the
comparison and to lead up to the other argument. If we do not do that we are removing
the retroactive effect as regards some dividend receivers and leaving the retroactive feature as regards others.


Charles Hazlitt Cahan: We are taking away to a certain extent the retroactive effect with regard to one class but with regard to all others we are reducing their taxation. The retroactive effect with regard to every other class is to reduce for 1925 what they would otherwise pay. Be fair.


Georges Henri Boivin: I want to be exceedingly fair and I am going to ask my hon. friend again: Does he by his amendment propose that income tax payable on all revenue derived from dividends shall not be greater this year than it was last year?


Charles Hazlitt Cahan: Not at all.


Georges Henri Boivin: If that is not his proposal,' what revenue derived from dividends does he desire to exempt?


Charles Hazlitt Cahan: Under the legislation now proposed in clause 2, 90 per cent, according to the statement of the minister, of income tax payers of Canada will pay less in respect of dividend income received for 1925.


Georges Henri Boivin: I did not say "in respect of dividend income received." I said "90 per cent of all the income taxpayers of Canada, no matter from what source their revenue was derived, would pay less income tax than last year."


Charles Hazlitt Cahan: I understood the hon. gentleman differently. I understood that we were dealing with those who derive their income from dividends. I retract the implication but there was a misunderstanding. My point is this. We in 1926 are removing the normal tax provision and decreasing the taxation upon a great body of income taxpayers. I understood that this would merely mean that the proposed legislation would give taxpayers who were paying tax for 1925 a reduction in their net income tax payable. But I understood the hon. gentleman to say in answer to me that he agreed that it would increase the tax on 10 per cent of the taxpayers. Whether the percentage is 10 or 20 per cent, it is unfair now to reduce the income tax
4 p.m. payable for 1925 in respect of 90 per cent of the taxpayers and to increase the tax payable in 1925 on the remaining 10 per cent if those are. the proportions. Whether they are the correct proportions or not, this illustrates my point. Therefore I ask the minister, not with regard
to income generally, but with regard to income received from dividends on Canadian stocks, that the income tax payable for 1925 under this legislation shall not be increased beyond what would have been payable under the legislation existing in 1925. The tax on income received from dividends should not be greater than it was so as to avoid increasing the tax on those individuals by ex post facto legislation. In that connection I suggested certain reasons why I regard ex post facto legislation of this kind as immoral; further than that, it increases dissatisfaction and discontent, and creates grievances from one end of the country to the other. Let us deal fairly with those people and say: We will increase your income taxes from this day forth, for 1926 and every subsequent year, but we will not now by retroactive legislation increase your taxes on income derived from dividends for the year 1925.


Henry Lumley Drayton: Mr. Chairman,
I do not know what has happened. When I went out of the House for a few minutes we were getting along in a calm, business-like spirit, but I come back to [DOT] find the hon. minister standing on both hind legs and with both hands extended to high heaven hurling all kinds of challenges at this unfortunate opposition. I wonder if it is the time for us to indulge in this kind of gymnastics. We have any amount of material for it, and if it is the wish of the government we certainly will indulge in this diversion. But I prefer . to think this is a matter of business and that we are trying to get the right thing done for the greatest number of our people. I ask the minister at this stage of the session to consider our harrowed feelings and no longer to harrow them unnecessarily. Let us see if we can approach this subject now in the frame of mind that will enable us to ascertain if two and two make four. Now, Mr. Chairman, there seems to be a little bit of misunderstanding between the minister and the hon. member for St. Lawrence-St. George as to what is meant by the resolution.


Georges Henri Boivin: My hon. friend says he was out of the House. We are not discussing the resolution, we are discussing the amendment.


Henry Lumley Drayton: I have gathered that. I should say the effect of the amendment is to make paragraph 2 apply for the year 1926 instead of 1925.


Charles Hazlitt Cahan: I offered even a greater advantage to the government than that.


Georges Henri Boivin: My hon. friend understands it still less than I do myself-although I admit I do not.

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Charles Hazlitt Cahan: Would my hon. friend kindly procure the amendment from the Clerk just to see the point?


An hon. MEMBER:: Read it aloud.


Henry Lumley Drayton: Some hon. gentleman says, "Read it aloud." Here it is:
Provided however that no taxpayer shall be liable by virtue of this section to spay in respect of dividend income for the year 1925 a greater tax than- would have been payable by such taxpayer in case this section had not been enacted.


Mr. CAHILL:: Now, what does it mean?


Henry Lumley Drayton: I would suppose, Mr. Chairman, it means that the section refers only to income taxpayers. I think that is clear.


Georges Henri Boivin: It refers only to dividend income taxpayers.


Henry Lumley Drayton: That is what I mean. It refers to them solely, and I would take it that the object of the amendment is this: The tax payable in respect to these dividends is to be calculated upon the law in effect before this act was passed.


Georges Henri Boivin: That is as I understand it.


Henry Lumley Drayton: Well, that is
something which we can discuss quietly. My hon. friend is to some extent-and I give him credit for it-recognizing the evils of double taxation, and he is seeing to it that at least double taxation should occur only once as a result of what he is doing with respect to companies; he is making profits only once paid subject to double taxation. My hon. friend admits that. Well then, he agrees with us that double taxation in itself is bad. I wonder if he could not help a little bit in this connection. It is perfectly true that the number of people affected is small compared with the whole, but my hon. friend will find some taxpayers have to pay twice as much as they were paying before, others more than twice as much. Their accounts are closed for the year. I think in some instances my hon. friend will find he is putting those people in his class and my class- they will have to borrow money to pay those taxes. That is really what is being done. My hon. friend of course wants revenue. Well, has he considered this? I made a calculation as to how much additional revenue could be raised, but in that calculation I had to assume certain figures, and it may be that I assumed figures too high in connection with the class of income that the dividends would fall under, and I think my hon. friend is of that opinion. But instead of having this change in the law, as the minister wants revenue, has he considered putting up instead 
of reducing the corporation tax? If we want revenue, and if we do not want simply to bother people because they are owners of industrial shares, why should he not put a little more tax on companies?


Georges Henri Boivin: The reason it was considered advisable to reduce the company tax instead of increasing it was that Canada is a young, undeveloped country requiring a certain amount of foreign capital to assist its development, and we thought the lower the company tax the easier it would be to attract foreign capital to develop our natural re sources.


Henry Lumley Drayton: I am quite frank in telling my hon. friend there is no doubt it is a help to some extent. But does he not think he is perhaps doing more harm than good? From what I caught of my hon. friend's peroration he wanted to debate the question of the loyalty of the Canadian investor, and he contended that the Canadian investor would invest in the enterprises of his own country never mind what happened, or words something to that effe'et. I do not think there is any question of driving Canadian capital out of the country. I am frank in telling my hon. friend that.


Georges Henri Boivin: Hear, hear.


Henry Lumley Drayton: Because when
Canadian investors go outside with their capital they are still liable to income tax on their income from foreign investments. But this is what will happen. My hon. friend now is putting down the yield on these dividends to 5 and 6 per cent. He knows that bonds can be bought on the basis of this percentage where there is a first charge and practically no risk, he knows also that mortgages can be obtained to return this rate of interest, and I submit to him that the effect of the amendment therefore is to put a premium on bond and mortgage investments. To the extent that you remove the incentive for taking a chance you put a premium upon investments in safe things. Does my hon. friend think that is a good thing? I know he will agree that it is not, but he had to look for revenue somewhere and this is the result.
I also want to point out to my hon. friend that companies and shareholders can evade this double taxation; all they have to do is change the form of the security, and my hon. friend is going to receive less money than he is now getting. It is as well to recognize these things clearly; in order to get rid of this double taxation to a very large degree it is only necessary to increase the number of bonds and deferred stocks,

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and limit the number of shares. Payments for moneys legitimately invested in business on the creditor basis are certainly deductions which have to be made, and if that be done -and there is no reason why it should not be done-serious inroads may be made on the $31,000,000 now received from corporations. I ask my hon. friend to consider this himself, without appealing here and there for advice. Is it not possible for him to make such a provision as well give some incentive, never mind how slight, to the financing of industrial corporations? I do not want it for all corporations; some, such as banks and mortgage loan companies, do not require this sort of thing at all and I am not asking it for them. But when we come to industrial corporations, which my hon. friend will agree we need and which are difficult to finance, is it not possible for this government to continue some sort of incentive to investment in that class of security by the Canadian taxpayer? I would ask my hon. friend to think it over carefully.


Mr. WOODSWORTH:: I think some of us are still rather at a loss to know how to vote on this amendment. Several explanations have been made, but they are rather involved, bringing in as they do the principle of double taxation and also the particular point before us in the amendment, namely retroactive legislation. I confess that the statement of the hon. member for St. Lawrence-St. George (Mr. Cahan) rather appeals to me; I do not like the idea of retroactive legislation. If his statement is correct I am almost inclined to think I will have to vote for the amendment notwithstanding its source. But if there is any real objection I would like to have it from the minister, as it seems to me the minister has not definitely and satisfactorily answered the argument of the hon. member for St. Lawrence-St. George.


Georges Henri Boivin: I have attempted to answer it, but I have been interrupted so often that my answer has not been completed.


Richard Burpee Hanson: You interrupted yourself to make a campaign speech.


Georges Henri Boivin: I do not very often follow the example of the hon. member for York-Sunlbury (Mr. Hanson); if I did so once he should forgive me. I endeavoured to point out that while there was a great deal of merit in the amendment proposed by the hon. member for St. Lawrence-St. George it was unacceptable to the government because the amendment itself created an inequality and a hardship. The hon. member
has in mind, I think, the idea of exempting those taxpayers who are called upon this year to pay income tax on dividends derived from corporations, who are paying a greater tax this year under the new law than they would have paid under the old law. The desire is to make their taxation as small this year as it would have been last year under the old law. That is not the exact wording of the amendment, but the wording is immaterial.


James Shaver Woodsworth: I did not quite so understand it. I wanted to make sure of that.


Charles Hazlitt Cahan: There is one error I might point out. The hon. gentleman uses the word "this year;" this is now the year 1926.


Georges Henri Boivin: I mean the tax payable
this year on the income earned in 1925.


Charles Hazlitt Cahan: I am saying that we should not by legislation now, in June, 1926, increase the tax payable on income dividend received in 1925. but for this year in which we are now living, 1926, the increased taxation shall apply as in the bill brought down.


Georges Henri Boivin: There is something to be
said in favour of the argument of my hon. friend. I tried to point out, however, that we could not reduce the income tax as we have reduced it for the taxpayers in general if we did not impose what is called by some double taxation on company dividends. You cannot both eat your cake and have it.


Charles Hazlitt Cahan: May I ask a question, just
to make it clear?


Georges Henri Boivin: Certainly.	[DOT]


Some hon. MEMBERS:: Order.


Charles Hazlitt Cahan: The hon. gentleman does
not object. Does the minister mean that we cannot, in respect of the 1925 income, reduce the tax for a large class of people without increasing the tax on the other classes?


Georges Henri Boivin: I say that if you reduce
the tax on the dividends derived by one individual in Canada from joint stock companies you must do the same on all dividends derived by all individuals from Canadian joint stock companies, and if you do that you are obliged to reduce the only tax which you are now imposing by about eight per cent, which was the normal tax exemption given under the old law. If that is done it will cause a loss to the Dominion treasury of over $2000,000, and if you lose that $2,000,000 in order to buckle your budget, as we sometimes say in French, it will be absolutely necessary to increase the income
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tax upon the others. If my hon. friend wants to submit as an amendment that the income tax in force last year be applicable to everyone for the income to be collected in April, 1926, we will then get more revenue and I would have no objection to consider his amendment. But it is absolutely impossible for this government to make both ends meet if we reduce the tax to everyone entitled to a reduction under the new law without collecting the taxation upon incomes derived from corporations.' We will lose that $2,000,000 if we adopt the amendment proposed by my hon. friend, and this government cannot afford to do that without changing the whole structure of the income tax act.


Joseph Henri Napoléon Bourassa: Will the minister permit a question? Let us confine ourselves to the taxation of corporations and their shareholders. Supposing you tax for the year 1925 all corporations according to the rate existing previously, that is 10J per cent; then supposing you tax the individual shareholders according to the rate of taxation in existence last year, you will then make both ends meet. Do not make it retroactive, and I think you will get a figure which will perhaps be sufficient. Of course, if you decrease the rate from 10^ per cent to 9 per cent on the profits of the companies, and you accept the amendment of the hon. member for St. Lawrence-St. George, I admit that you have a decrease. But if you treat both corporations and individuals alike for the year 1925, and apply the new legislation to the year 1926, both as to corporation profits and individual dividends, I think you will reach your object, and be far safer so far as the principle of the legislation is concerned.


Georges Henri Boivin: I know that the intention of avoiding even the semblance of retroactive legislation is a good thing, and if it were possible always to avoid retroactive legislation I would be in hearty accord. But I say once more that to adopt precisely the principle put forward by my hon. friend from Labelle would cause a loss to the Dominion treasury, upon the estimate made by the Minister of Finance, of $2,000,000. We cannot afford to make that loss without increasing the income tax upon the individual. It would be absolutely necessary to adopt either the entire law of last year or the entire law of this year. By adopting the entire law of last year we would collect about $12,000,000 more than if we adopted the law of this year.


Henry Lumley Drayton: We have a loss of $2,000,000, the minister says, if the amendment be adopted. Is that loss of $2,000,000 over and above the receipts from the com-

panies on the basis of last year's taxation, which would be 10-V per cent? Then what does my hon. friend say the real loss would be, because the suggestion of the hon. member for Labelle seems to me to be absolutely reasonable, that if you delay the taxation of the individual shareholder you must also delay in the case of the corporation.


Joseph Henri Napoléon Bourassa: Quite so. Apply the
same thing under section 5.


Henry Lumley Drayton: Would there be anything like that loss then?


Georges Henri Boivin: Yes, the loss was calculated by making a comparison as regards corporations under the present law and under the old law. If we were to adopt the amendment of my hon. friend from St. Lawrence-St. George without reverting to the original tax on corporations, I think the loss would be about $4,500,000.


George Halsey Perley: Is that $4,500,000 the amount the 10 per cent of the taxpayers who are going to pay more would have to pay under the present law as compared with the old?


Georges Henri Boivin: I think my hon. friend
misunderstood me entirely. I did not for a moment wish to convey the idea that 10 per cent of the taxpayers were going to pay this difference in taxation. The idea I wanted to convey was this, that of all the taxpayers in Canada there were 10 per cent whose revenue was entirely derived from the distribution of dividends, and that that 10 per cent would pay more taxation than they had paid previously, but the other 90 per cent would pay less. I am quite willing to admit that among the other 90 per cent, there may be 40 per cent or more who may pay on their dividends more taxation than they paid before, but that amount will be offset by the reduction on the balance of their revenue to such an extent that their total tax will be reduced. But it is absolutely impossible to give an estimate as to the exact amount that will be paid by the 10 per cent who will pay more taxes. There are in a very, very few cases some persons who may pay taxation now who never paid taxation before. Take the 'case of a person with no revenue except a revenue of $5,000 from a $100,000 investment in some Canadian company. That person previously received exemption from normal tax and paid no taxation whatever. At the -present time he- will be obliged to pay 2 per cent on $2,000, or a tax of $40. So it is absolutely impossible to answer direct the question of my hon. friend.

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George Halsey Perley: I thought that the officers of the department, in making a comparison as between the two systems of taxation, would have arrived at some calculation of the extra amount which this 10 per cent would have to pay who are going to pay more under the present law.


Georges Henri Boivin: I am sorry that was not
done.


Henry Lumley Drayton: I want to get
1 his clear. My hon. friend's point, as I understand it now, is that there would foe a loss, if we adopted this amendment, of $2,000,000 even if we reverted to the taxation of 104 per cent.


Georges Henri Boivin: Yes.


Henry Lumley Drayton: Therefore the
calculation of the department as to what will be recovered for the treasury under the new law taxing the shareholder will approximate $5,500,000.


Georges Henri Boivin: No, $4,500,000.


Henry Lumley Drayton: No, $5,500,000.
I understand from the debate that there is a reduction of $3,100,000 or $3,500,000 in the taxation on the companies by reducing the rate from 104 to 9 per cent. Am I not right?


Georges Henri Boivin: I am informed that the
entire tax derived from the companies during the last fiscal year reported was about $31,000,000, and 14 per cent on that would be a little over $4,500,000.


Henry Lumley Drayton: The minister is quite right. My hon. friend gets 'the figure of a little over $4,500,000 as the reduction in company taxation, and he says in reply to the hon. member for Labelle that if we go back to the old form of taxation having regard to the companies, on the one hand, putting them back on the 104 per cent rate, and having regard to the shareholders, on the other hand, there will be a loss of $2,000,000. If that be correct, it is perfectly plain that my hon. friend's estimate of new money to be found by the new tax is $6,500,000.


Georges Henri Boivin: I think my hon. friend is
right.


Henry Lumley Drayton: Then on my
hon. friend's basis we are raising new taxes to the extent of $6,500,000.


Charles Hazlitt Cahan: In view of the fact, according to the explanation of the Minister of Customs, that $3,500,000 or thereabouts is to be taken off the taxation of companies and imposed largely upon a certain class of shareholder only, and as the government have treated this as a want of confidence motion, which I did not intend at all-I moved it simply to serve as a protest against that kind of legislation-with the permission of the seconder, I withdraw the amendment.
Amendment withdrawn.


[Stage Direction]
Section agreed to.
On section 3-Personal corporations.
Richard Burpee Hanson: Is any amendment proposed in connection with this section?


Georges Henri Boivin: Before section 3 carries I
should like to make an amendment to which I am sure we shall all agree. That is in paragraph (g) of subsection 10-personal corporation dividends. It will be found at the top of page 3. In the clause we are now considering it is stipulated that it shall have a retroactive effect and that dividends earned prior to 1925 shall be taxable When distributed. If they are not distributed year by year for the next five years they will be taxable at the end of the five years. The government is bound to admit that while the personal corporation was perhaps a method of evading taxation, it was nevertheless a legal method. The company was legally formed and carried on its operations legally. We have therefore decided to amend that clause by striking out paragraph (g) and inserting in lieu thereof the following:
Dividends actually declared by a personal corporation after the 31st day of December, 1924, shall be deemed to be paid out of income earned after the said 31st December, 1924, so far as the same is available, and to that extent shall not be liable to further taxation in the hands of the shareholders.


Henry Lumley Drayton: It is retroactive for one year.


Georges Henri Boivin: The same as in the other
case we have just been discussing. That is to say for the income tax returns made this year they shall pay but there shall be no further retroactive effect.


Henry Lumley Drayton: What about
distribution?


Georges Henri Boivin: It is provided that all
dividends which are actually declared by the corporation after the 31st December, 1924, shall be deemed to be paid out of income earned after that date, and to that extent shall not be liable to taxation. I think that makes it quite clear that in so far as there is any surplus available, when dividends are declared from it, these dividends shall not be taxable again if they have been taxed once.
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If, however, the company decides to take the surplus that it now has on hand and later distribute it as dividend, and if that surplus is in excess of the entire earnings of the company on and after the month of December, 1924, then of course that would become taxable as a dividend distributed to the shareholders.


Henry Lumley Drayton: The original
idea, as I remember it, was this:	We started
out with the tax running back and covering the whole period. My hon. friend stops that and now brings the period down to a year. That still leaves available undistributed profits. My hon. friend had a certain length of time within which profits were to be distributed. What does he do with that?


Georges Henri Boivin: That is wiped out entirely.
There is no obligation on personal corporations now to distribute profits. They are going to be treated as individuals and going to pay taxation on their earnings in the future. After that they can distribute their profits as they please without taxation.


Henry Lumley Drayton: If I follow my hon. friend the effect of that would be to draw the teeth of the whole of this legislation.


Georges Henri Boivin: No.


Henry Lumley Drayton: Oh, yes, if you just make profits taxable as against the company. What we want to do is to make them taxable as against an individual.


Georges Henri Boivin: Certainly we want to make them taxable as against the individual. The original intention was to try and make these corporations pay a corporation tax and then oblige them to distribute their dividends and pay personal taxation upon the dividends. That was deemed to be unfair; I think my hon. friend will admit it is unfair. The object is to prevent an evasion of the law. A personal corporation may very well have been formed for some other purpose than to evade the law. There is no desire on our part to destroy a personal corporation; we do not want to force the personal corporation out of existence. If for purposes of succession duties, for instance, and if for purposes of administration, people prefer to operate as a corporation all right, we have no objection, but we do say that they must pay the same amount of federal taxation as if they had continued as individuals. That is the object of our law, that is the case we want to get at. If my hon. friend considers that we have made any mistake in trying to attain that end I am willing to correct it. We do not want to } j , ,
make the law retroactive. We do not want to go back and force them to distribute their surplus because many of these personal cor-* porations have invested that surplus in nonliquid assets, and we feel that it will be harsh to make them borrow money to pay income taxation as my hon. friend and myself were obliged to do. Therefore we make the law effective this year for the profits earned by the operations of the personal corporation last year. In future, no matter what the surplus may be the entire earnings of the corporation will be taxed as personal income every year.


Henry Lumley Drayton: The main shareholders?


Georges Henri Boivin: All shareholders.


Richard Burpee Hanson: The company.


Georges Henri Boivin: Not the company, the shareholders of the company.


Henry Lumley Drayton: That is what I thought.


Georges Henri Boivin: In that case the profits are deemed to be distributed for the purposes of taxation and they are taxed accordingly. That will be the case for last year and for all future years. Surplus accumulated in the past upon which taxation has not been paid will not be taxed until it is distributed as profits. They can distribute these profits when they like subject to whatever income tax may be in effect at that time.


Henry Lumley Drayton: What section will deal with the question of election in the case of these companies?


Georges Henri Boivin: For the personal corporation there is no election. A personal corporation will be treated as an individual and will pay-no company tax. There is a section with respect to election in the case of a family corporation namely section 8. In section 8, subsection (b) provides:
The shareholders of a family corporation may elect that, in lieu of the corporation being assessed as a corporation, the income of the corporation be dealt with under this act as if such corporation were a partnership.


Henry Lumley Drayton: I was just
wondering whether you distinguished between family corporations and these personal corporations.


Georges Henri Boivin: Both are defined under the act. The personal corporation is defined in section 3, and the family corporation in section 8.


Henry Lumley Drayton: Very good.

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Georges Henri Boivin: My hon. friend will readily
see the difference between the two. We can discuss the subject of family corporations when we reach section 8.


John Arthur Clark: Did I understand the
minister to say that in future the profits of a -personal corporation will be tax-ed whether distributed or not?


Georges Henri Boivin: The profits of a personal
corporation will not be subject to the company tax at all. They will be taxed as if they were the earnings of an individual. Once taxed, it makes no difference whether they are distributed or not, they will -be taxed as the earnings of the individual, -but they will not be subject to further taxation.


Richard Burpee Hanson: Take the case of a personal corporation which was formed for the purpose of reducing the income tax paid -by the owner of the corporation, who transfers a million dollars' worth of securities from which the personal corporation receives the coupon or dividend. Assume that amounts to $100,000 per annum. That $100,000 has already been subjected to a tax in -the principal company from which it is derived. That is one tax. .Now $100,000 in the hands of a personal corporation is to be treated as the income of that' personal corporation, and taxed to it, whether it is distributed or not. That is the proposition now. Even though they do not declare a single dividend, that $100,000 will be included in that tax. Will the corporation pay a third tax at the hands of the owner of the personal corporation?


Georges Henri Boivin: No.


Richard Burpee Hanson: It may be cured by subsection 12.


Georges Henri Boivin: The definition of "personal
corporation" is as follows:
(10 (a) For tihe purposes of this act a "personal corporation" means a corporation or jodnt stock company (no matter when or where created) controlled directly or indirectly by one person, who resides in Canada, or by one such person and his wife or any member of his family, or by any combination of them, or by any other .person or corporation on his or their behalf, whether through holding a majority of the stock of such corporation, or in any other manner whatsoever, the gross revenue of which is to the extent of one quarter or more derived from one or more of the following sources, namely:-
from the ownership of or the trading or dealing in bonds, stocks or shares, debentures, mortgages, hypothecs, bills, notes or other similar property, or from the lending of money with or without security, or by way of rent, annuity, royalty, interest or dividend, or from or by virtue of any right, title or interest in or to any estate or trust.
Paragraph (b) of sub-section 10 reads:
The income of a personal corporation, in lieu of being assessed the tax prescribed by subsection two of section four of this act, shall on the last day of each year be deemed to be distributed as a dividend to the shareholders thereof and shall in their hands constitute taxable income for each year in the proportion hereinafter mentioned, whether actually distributed by way of dividend or not.
It should be quite clear, first, that in order to be a personal corporation that corporation must be an investment corporation and not and industrial concern. I think it further makes it quite clear that there is no double taxation whatever. Of course if the person is the owner of shares in an industrial corporation which has once paid a 9 per cent income tax, and derives dividends from those Shares, those dividends form part of his personal income and are taxable as his personal income. If those shares, instead of being owned by the person, are owned by the personal corporation, they will be taxable in the same way. But I want to make clear to my hon. friend, as treble taxation has been mentioned, that a third tax will not be paid, and that there will be no company tax whatever paid by the personal corporation under the provisions of this bill.


Richard Burpee Hanson: I am relieved to know that. Then this will be the situation:	A
tax-payer owning $5,000,000 of stock in 'an industrial corporation, which is the active earning corporation, and which will pay the tax, transfers this stock to a holding company, a company which will come within the definition of this sub-section, and be a personal corporation with $5,000,000 of stock, upon which dividends are declared; that dividend will first be paid into the hands of the holding company -in which the stock is registered, and will be deemed under this act, as far as I can see, to have been paid directly to the shareholders themselves, without going through the hands of intermediaries.


Georges Henri Boivin: Yes.


Richard Burpee Hanson: Then there is no treble taxation. There is that feature of the double taxation and I am relieved to find that there is no treble taxation.


The CHAIRMAN:: Shall the section be adopted? *


Some hon. MEMBERS:: Carried.


Richard Burpee Hanson: I understood we were going to deal with the subsections.


Georges Henri Boivin: I have no objection to having them discussed.
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Richard Burpee Hanson: They are important.


Georges Henri Boivin: Yes. The Chairman called section 3. I proposed a most important amendment to paragraph (g), subsection 10 and that was carried, as I thought.


William Duff: Shall the amendment to paragraph (g) carry?


Richard Burpee Hanson: W-e have not reached that yet.


William Duff: Yes, hon. members have been discusing it.


Georges Henri Boivin: While paragraph (g) has been amended, I do not think we Should preclude any hon. member from discussing any other paragraph if he desires to do so.


William Duff: Shall paragraph (a) carry?


Charles Hazlitt Cahan: I would like to speak to paragraph (d).
Paragraphs (a), (b) and (c) agreed to.
On paragraph (d)-Valuation of property transferred.


Charles Hazlitt Cahan: I wish to make a few observations, but not to provoke an acrimonious discussion. In ascertaining values, under this section, regard shall be had to all the facts and circumstances and the decision of the minister in that respect shall be final and conclusive. Those are the words of the paragraph. I think it is most unfair to place in the judgment of a political head a decision affecting very large values. It should be open to appeal, like any other matter of assessment. To place in the hands of a political head power to adjust matters of this kind is in my opinion to prolong that same condition of affairs which we found in another department now being investigated.


Georges Henri Boivin: In answer to my hon. friend I say, first, that I do not consider that the minister will be called upon very often to pass an opinion, because the very nature of this legislation will perhaps discourage the formation of personal corporations and the passing on of property to them. Paragraph (d) reads:	.
The value of the property transferred by each shareholder or his predecessor in title shall be the fair value as at the date of the transfer of such property to the corporation.	.
That must be determined by someone. If it is not to be determined by the minister, by whom shall it be determined?


Charles Hazlitt Cahan: If it is to be determined by the minister, I am suggesting there should be an appeal, as in other matters, to the board. I do not think the arbitrary decision of the minister should be final and conclusive.


Georges Henri Boivin: If my hon. friend looks up
the Business Profits War Tax Act, he will find two similar sections in that act which was administered by the present commissioner of Taxation and which gave rise to no trouble whatever. I think my hon. friend will admit with me that it is always well whenever possible to avoid litigation and law costs. When he uses the phrase "placing power in the political head of the department", perhaps technically according to the letter of the act he is right. But my hon. friend knows that neither the present minister nor any of his predecessors belonging to either political party ever sat down to examine into the details of any individual tax return in the office of the Commissioner of Taxation. The word "minister" is used in the act merely as a term to represent the official to whom the minister delegates his powers and who has charge of the administration of the act. The act has been administered with fairness since its inception; there has never been any complaint. This is carrying out the terms or provisions of other sections of the act as enacted by the previous government. If there was anything good that the previous government did it was the inclusion in the Income Tax Act of certain sections which prevented litigation and the payment of costs. It is true that speaking as an attorney I may be advocating a law which will be inimical to the interests of members of my own fraternity who might like to make law costs out of this litigation, but I am sure it will be for the advantage of the taxpayers in general.


Charles Hazlitt Cahan: The suggestion does not
apply to me as one who makes law costs out of his clients. I repudiate that. *


Georges Henri Boivin: In making these remarks I absolutely forgot that my hon. friend is like myself a member of the bar. I was thinking of myself alone and not of him. If he imagines there was any thought of an insinuation in my mind that he was proposing this amendment for any such purpose, I hasten to retract. I am not going to offer him an apology because I never intended nor thought that the expression could refer to 'him.


Charles Hazlitt Cahan: In respect of decisions of the minister, if I remember correctly-I have not the act before me-I understand that "the minister" is defined as "the minister or his

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deputy." I have brought up before the Commissioner of Taxation for his decision a great number of matters on behalf of clients of mine when I have time after time placed the legal aspects of those questions before him. While I do not always agree with his legal decisions I certainly have never found on his part any disposition to be unfair pr unjust; on the contrary I have found every disposition on his part to give an adequate hearing to the presentation of such points of law as I have had to present on behalf of my clients. But in respect of his decisions so far there is an appeal. This clause as I understand it takes entirely away the appeal in these matters and I see no reason why there should not be an appeal from the deputy minister to the board in the ordinary course. This involves large questions of values, land, if my memory is correct, this is not the only clause in the bill in which the decision of the minister is final and conclusive.


Georges Henri Boivin: There is no board before
which the appeal could be lodged. The appeal would have to be lodged with the Exchequer Court. There is already in the act a provision by which any shareholder complaining of the amount assesed against him has the right to appeal from the decision of the commissioner to the Exchequer Court of Canada.


Charles Hazlitt Cahan: Is the old appeal board abolished?	.


Georges Henri Boivin: The board which was originally created for the purpose of administering the Income Tax Act was abolished some three years ago.


[Stage Direction]
Paragraph agreed to.
On paragraph (e)-One personal corporation succeeding another.
Richard Burpee Hanson: Will the minister state
shortly the object of this paragraph?


Georges Henri Boivin: The object as I understand it is to place the Commissioner of Taxation in a position where he can always bring back the earnings to the individual instead of to the company. In other words, where one personal corporation is succeeded by or transfers its property to another personal corporation, the shareholders of the first shall be deemed to have transferred to the second the property which they transferred to the corporation first mentioned, that is to say the original corporation:
When any person ha,s acquired or acquires the con-..rol of a personal corporation he shall be deemed to nave transferred to such corporation the property transferred thereto by his vendor.
That means this. Let us suppose that two personal corporations are 'brought together and' that is the case which it is sought to cover. All the property placed in one corporation by one individual will still be considered to be his property, and all the property placed in the corporation by the other individual will still be deemed to 5 p.m. be bis property when the two are welded together as one corporation and when the profits are divided between them. In taxing the profits of personal 'corporations it is of course absolutely necessary to retain the percentage of shares or percentage of interest held by each individual shareholder. This provision is inserted in the law merely for the purpose of making it possible for the Commissioner of Taxation to determine what the proportionate share of the profits of each individual partner will be.


Henry Lumley Drayton: If that is the
idea, has the minister considered the effect of the limiting section as defining "personal corporations"? In that section the minister will see that we have a combination. We shall have more than one person coming in. We shall have a series of families doing that. My hon. friend is right in stopping it.


Georges Henri Boivin: This is what I wanted to point out. If it were possible-a thing which is practically impossible-for two personal corporations to be brought together owned by two persons who are not members of the same family, then it ceases to be a personal corporation.


Henry Lumley Drayton: That is just what the minister does not want to have cease. The easiest way of evading the act would be to put the two of them together.


Georges Henri Boivin: It is pointed out to me that if that was done the past surpluses of the corporations at the time of reorganization would under another clause of It.he act, as it exists at present, be taxable.


Henry Lumley Drayton: Which section is that?


Georges Henri Boivin: Section 5 of the Income War Tax Act amendment which was assented to on the 19th July, 1924, chapter 46, 14-15 George V. The seation reads:
On the winding up, discontinuance or reorganization of the business of any incorporated company the distribution in any form of the property of the company shah be deemed to be the payment of a dividend to the extent that the company has on hand undistributed income.
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Henry Lumley Drayton: Is amalgamation covered by those words?


Georges Henri Boivin: It is certainly a reorganization; when two companies amalgamate one, in a way, has to be purchased ,by the other.


Henry Lumley Drayton: I think that is
right; it must be a reorganization.
Paragraph (e) agreed to.
Paragraph (f) agreed to.
On paragraph (g)-Personal corporation dividends.


Georges Henri Boivin: That is amended.


Henry Lumley Drayton: It is limited to the one year?


Georges Henri Boivin: Yes.


Richard Burpee Hanson: Has the minister any
estimate of the additional revenue the government will get under this new section 3?


Georges Henri Boivin: A certain number Of personal corporations were formed during the last fiscal year, and it would be absolutely impossible to state the amount of revenue we will derive from those particular corporations until the income tax returns reach the head office. In most instances those returns are not yet available. As to corporations organized prior to that time it is also impossible to state what their earnings for the last year were and consequently what the tax will amount to. I would hesitate to estimate the amount of gain at the present time.


Richard Burpee Hanson: Does the minister mean that he has not the amount, or that he does not want to give an estimate?


Henry Lumley Drayton: Both.


Georges Henri Boivin: If my hon. friend desires, I will endeavour to have an estimate made and give him the information personally or in answer to a question which he may place on the order paper if he so desires.


Richard Burpee Hanson: That is good enough.


Mr. MacLAREN:: Mr. Chairman, it is most desirable that no difficulty should be placed in the way of these personal- or family corporations. So far as I am aware they are largely for the purpose of avoiding difficulties with respect to succession duties which at the present time may be imposed even on small estates by many of the provinces and also by the United States. I think the minister appreciates the usefulness of these corpora-

tions, which are conducted for perfectly good sound reasons. So far as I can come to a conclusion on this matter, the amendment will allow incorporations to be effected without undue difficulty as to taxes, and at the same time will prevent the evasion of income tax by the individual.


[Stage Direction]
Amendment agreed to.
Paragraph (g) as amended agreed to.
On section 3, subsection (11)-Carrying charges.
Joseph Henri Napoléon Bourassa: In what degree does this differ from the corresponding paragraph of the resolution, No. 8 I believe? Under this paragraph people holding property, some parts productive and other parts unproductive, heretofore were allowed, quite properly, to deduct from the income of their productive property the taxes paid or losses incurred upon their unproductive property. The member for Port William (Mr. Manion) and several other hon. gentlemen raised the point, and the minister made it quite clear, I think, that it was his intention to cover it. He said he wanted to reach the speculator who was investing some of his surplus income in real estate for speculative purposes and thus evading taxation. The other point is this. I know many instances, for example, of a family holding a couple of houses or tenements which are returning an income, and holding besides two or three vacant lots as part of the estate. Very often the latter class of property cannot be readily sold for what it is worth. It is not held for speculative purposes, but municipal taxes are levied upon it every year. Surely it is as equitable that the owners should be allowed to deduct the losses upon the unproductive property from the income returned by their productive property as it is for a company before distributing dividends to deduct losses incurred and taxation paid upon unproductive property. I understand that companies are covered. It is said that:
The carrying charges or expenses of unproductive property or assets not acquired for the purposes of a trade, business or calling, or of a liability not incurred in connection with a trade, business or calling, dhall not be allowed as a deduction in determining income for the year 1925 and each year thereafter.
The result is that the speculator who trades in real estate will under this clause be able to deduct the taxes he pays on unproductive property from the income he receives on productive property; but the small property-owner, one of the most useful type of ratepayers and citizens, will be unjustly treated.

Income War Tax Act
I think it is unsound legislation. It could be covered without much change in the tax law, provided of' course it was interpreted in the proper spirit.


Georges Henri Boivin: This subsection is nothing more than an amplification of subsection 8 of section 3 of the act, which reads as follows:
In computing the amount of the profits or gains to be assessed ,a deduction shall not be allowed in respect of disbursements or expenses no-t wholly, exclusively and necessarily laid out or expended for the purpose of earning the income.
As to income from the taxpayer's chief occupation, the subsection proposed is to render certain what has been deemed to be the law heretofore, namely, that the profits of a person derived from a trade, business or calling, if invested in unproductive property not required for the carrying on of the business, precludes the carrying charges of that property from being allowed as a deduction from the annual revenue of the particular business or calling. Such expenses are not necessarily laid out or expended for the purpose of earning the income, but rather for the carrying of a capital non-productive asset.
As to income from sources other than the chief trade, business or calling, that has generally been termed a secondary income. It may be said by way of example that taxes and interest in respect of unproductive real estate would not be allowed as against say, income from royalties. However, the interest payable in respect of the money borrowed, of which the unproductive property represents the security, may be set against the interest received on money loaned by the taxpayer but taxes, local improvements, assessments and like carrying charges of unproductive real estate are not proper deductions against income derived from salary or from interest. Such charges naturally should be capitalized; they should be added to the cost of the property in order to determine whether or not a profit is made at the time the property is sold, which profit, of course, is now exempt from taxation. The main point is that the expenditure is not made in the earning of income; it is an expenditure on capital account, and expenditures in connection with capital do not come within the purview of the income tax act. Notwithstanding what may be said to the contrary, the clause in its present form appears to me absolutely fair and logical, because all that a taxpayer is entitled to deduct in computing his income should be expenditures made to earn the income or in the hope of earning it. The carry-14011-275	.
ing charges of unproductive property acquired by a taxpayer, which acquisition he is not prepared to admit would constitute a piece of business, are certainly not business expenses. If they are not business expenses they must be personal expenses, so the taxpayer is no mere entitled to deduct the carrying charges of a vacant lot or of unproductive stock than he would be entitled to deduct the taxes paid in respect of his own garden or the property on which he resides.
The income tax act is not and cannot always be in every respect strictly logical; in some cases it may not always be absolutely fair, but so far as this clause is concerned, if fairness and logic are to be appealed to, all I have to say is that it is pretty difficult to find words in which to enact a clause which might be fairer. The hon. member for Labelle (Mr. Bourassa) is perfectly right when he says it might create a hardship on the person who has inherited unproductive property, who is obliged to hold that property and who will not be allowed to charge against his revenue from other sources the taxes and insurance which he must pay on the property which he is obliged to carry. In the first place, if the man were a dealer in real estate he would of course have a right to charge the taxes and insurance as a part of his business. If he is not ,a dealer in real estate, or if he is an investor and has a certain number of tenements or houses which he rents, the carrying charges of all his real estate will certainly be liable as a charge against the revenue derived from part of the real estate. But I do not see how a clause could be worded to get over the difficulty presented by the hon. member for Labelle if at the same time we do not exempt all real estate which is unproductive and which is being held as an investment. After all, no matter what may be the value of a property, it is undoubtedly held in the hope of a future sale and profit. "Hope springs eternal in the human breast.'' I am willing to admit that in a great many cases the hopes are never realized, and that in a great many cases the property is eventually sold at a loss. But perhaps it would have been better if the property had been sold years previously; perhaps the loss might not have been so great, and the carrying charges would have been saved. There is no doubt that when property is held it is held in the hope of an eventual profit, and that profit must include the taxes paid on the property. The income tax act does not touch that profit; it is left clear in the hands

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of the man who makes it, and for that reason I think it is fair to say that the carrying charges should be assessed against the property.


Henry Lumley Drayton: My hon. friend referred to the different kinds of income, primary and secondary. In view of what my hon. friend has said am I right in saying that this inhibition merely applies to the income derived from the chief occupation or business? If that is so I entirely agree with it, but if it is being pressed as against secondary income I think it would be wrong.


Georges Henri Boivin: It will be up to the Commissioner of Taxation, of course, to decide whether or not exemption should be granted for the carrying charges on real estate, for instance, if a man is the owner of a certain quantity of real estate, part of which is rented, but of which a building which should have been rented is left vacant for a year or so owing to the condition of the building or because of the fact that the demand is not equal to the supply in that particular locality, that man is not going to be penalized. He will be allowed, of course, to deduct the carrying charges of that vacant building from the revenue derived from the other buildings on which he derives a profit. I am not prepared to say that all cases of secondary revenue should be grouped together, but I will say that I think in effect and in principle my hon. friend is quite right when he says that the revenue derived from the principal occupation should not be offset by these carrying charges on unproductive property, but that where there is an additional revenue which does not come from the chief occupation it should be considered, and I am sure the commissioner will act accordingly.


Henry Lumley Drayton: That is my
whole point.


Joseph Henri Napoléon Bourassa: Do I understand the
minister to say that, if the owner of real estate derives a certain amount of revenue from that property while holding some other real estate with charges upon it, these charges will be deducted from the revenue derived from other real estate?


Georges Henri Boivin: Yes, I think I can make
that statement now and I think the commissioner will so interpret the act. Any person holding real estate part of which is rented and part vacant may deduct the carrying charges of one part from the profits on the other providing the property is not held for speculation.


Joseph Henri Napoléon Bourassa: That is the way it was done under the old act.


Georges Henri Boivin: It will contiue to be so
done.


Richard Burpee Hanson: The minister will agree
that on a strict interpretation of this section that would not be the case.


Georges Henri Boivin: The object of the clause,
as I think my hon. friend will realize, is to prevent abuse. These abuses have crept in through people who have gone out deliberately and bought property which for the time being is unproductive, but upon which the rate of increase of value is so large that in three or four years the property becomes very productive indeed. They sell it at a large profit within three or four years. They play the game of speculation where property values are going to increase rapidly, and in that way evade the income tax. The purpose of this particular clause is to reach those people and to oblige them at least to pay taxes upon that property without deducting those taxes from the revenue on which they can claim exemption. There is no intention of imposing any hardship.


Richard Burpee Hanson: If that is the purpose of
the section, it is all right.


Georges Henri Boivin: That is the purpose.
Section 3 agreed to.
On section 4-Rates of tax.


Joseph Henri Napoléon Bourassa: With reference to section 4 (1A), I must again appeal to the minister to consider the question of the exemption of children. We have heard on many occasions during the budget debate, and again in this debate, of the interests of corporations and the advantage of inducing people to invest in industrial pursuits; but I repeat now what I stated on a previous occasion, that the great defect of the fiscal legislation of almost all countries is to forget the state of the family, is to forget that the primary advantage of a country is the establishment of a family, and that the duty of the state is to alleviate as much as possible the burdens of fathers and mothers. Why adopt the age of eighteen instead of twenty-one? Twenty-one is the legal age. Until a child has reached the age of twenty-one he is under the legal and social responsibility of his father and mother. Even in the English provinces, and under some legislation of our province which is not in harmony with our church legislation, marriages between two minor children, both of marriageable age, are declared null if not ac-

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companied by the consent of their parents. Therefore, until they have reached the age of twenty-one, boys and girls are not full-fledged citizens and ratepayers; they have not complete liberty of action. Besides, under the previous law, as under this law, there is ample margin for the government to do away with the exemption in case of children earning their own living. The section itself says:
For each child under eighteen years of age who is dependent upon the taxpayer for support.
Why should you tax the parents who have in their charge boys and girls of nineteen, twenty, and twenty-one years of age? That is the very time of life when their maintenance and education is the most expensive to the parents. It seems to me it is precisely at that period of family life that the parents should be helped and considered by the state. Therefore I again appeal to the government -we shall have to do it one day or another, because public opinion will force it upon us-why not be agreeable to it now and raise the margin of exemption from eighteen to twenty-one years of age? If it is said that a large number of children between eighteen and twenty-one years of age are earning their living, then I repeat you have under this clause, as well as under the preceding law, power to prevent parents claiming exemption on account of children who are earning their livelihood. Even at the present time there are children of sixteen and seventeen years of age whose parents cannot claim exemption for them under the present law. Therefore this only applies, I repeat, to those parents who have the will and the courage to impose upon themselves the necessary sacrifices to give further education to their children, who endeavour to make of their children more useful citizens, and try to arm them for the battle of life as well as for the responsibilities of citizenship. I think they should be encouraged. We read much about the advantages of education, but when the father and mother impose upon themselves sacrifices to give a better education to their children, the state steps in and says: You shall pay the penalty of your devotion to your child, to the state, and to society. It is all wrong; it is inspired by a false conception of the duty of the state towards the family. Means could easily be found to recoup the state for the little difference this would mean in the taxation raised.
I think this matter should be considered right now, when we are speaking of reducing the burdens of the people of this country, when we are speaking of inducing people to be more hopeful of the future of this country.
If there is a class of people that demand the sympathy of the state and of parliament, it is those men and women who have the courage to establish a family and to impose upon themselves sacrifices in order to make of their children as useful and as cultured citizens as they can possibly become. It seems to me there should be no hesitation, Mr. Chairman, in making the age of exemption coincident with what has been adopted in all our civil laws as the age of full maturity, of full emancipation for the children. Up to the age of twenty-one they are socially, morally and legally a charge upon their parents to a greater or to a lesser degree; the principle is there, and I think the principle should carry here. Until the civil codes of the various provinces are amended so as to say that children are fully emancipated at eighteen years of age, I do not see why you should tax parents for the maintenance and education of their children between the age of eighteen and the full age of civil emancipation, which is twenty-one. If I can find a seconder I would move that the words "twenty-one" be substituted for the word "eighteen."


George Halsey Perley: I would like to
say a few words in support of my hon. friend from Labelle. I quite agree with the argument he has put forward. Everyone in this country believes in giving the children a good education. I have not had the experience myself, but I quite realize how difficult it must be for the father of a large family to see that his children are properly brought up and educated as they should be. It is for the good of the state in every way that that should be done, and if the children are given a proper education, it means that the father has to keep on supporting them until they are twenty-one years of age or thereabouts. As a matter of fact, the burden on the family grows heavier as the years go on. To my mind the suggestion of the hon. member is well worthy of consideration by the minister.


Charles Hazlitt Cahan: When this was before the
committee before, I supported the suggestion of the hon. member for Labelle, and I went further and suggested that there should be added after the word "child" in paragraph (c) the words "under twenty-one years of age or incapable of self-support on account of mental or physical infirmity."


Charles Gavan Power: There would be an exemption, under the amendment suggested by my hon. friend in the case of children say of 19 or 20 years of age who were self-supporting.
Income War Tax Act


Charles Hazlitt Cahan: Who were self-supporting?


Charles Gavan Power: Yes.


Charles Hazlitt Cahan: My bon. friend is quite
right, I am putting the amendment in the wrong place. My suggestion is there should be exemption for every dependent child under 21, and for every other child over 21 who is incapable of self-support on account of mental or physical infirmity.


Charles Gavan Power: Would it not meet a greater number of pases if you inserted in the interpretation clause the word "child"? That would cover every case in which the child was incapable of supporting himself.


Charles Hazlitt Cahan: Perhaps so. We all know
that in the province of Quebec, by statutory law, children, even over 21 years of age, who are incapable of self-support on account of mental or physical infirmity must be supported by their parents.


Charles Gavan Power: That is not very much of
an argument, because the parents must be supported 'by the children too in some cases.


Charles Hazlitt Cahan: Yes, in certain cases. We have, in other words under the code in the province of Quebec a system of law which provides for support by the family of those who are otherwise incapable of supporting themselves. But inasmuch as this applies to the whole country, may I point this out? I have a case in mind of a parent having two blind children, who are being educated, and who will at a certain age be quite capable of earning their own living by reason of the education they are receiving at a modem educational institution for the blind. But there are cases of a different character. I remember the case off a. young man, under 21 years of age, who was earning his own living by working in a machine shop. A spark from one of the machines destroyed his eyesight, and he is entirely dependent upon his parents until by education he can learn to support himself by some other means, weaving wickerwork and that sort of thing. For every child under 21 years, and for every child over 21 years who is dependent upon his parents for support-in other words, to use the term in the statute who is incapable of self-support on account of mental or physical infirmity-there should be a deduction of $500.


Mr. FORKE:: What is meant by the expression, a child under 21 years of age dependent upon its parents? How is that interpreted? I know many instances of young people of 19 and 20 years of age, teaching school and drawing salary, who are dependent
FMr. Power.]
on their parents. There is an instance, very close to myself, where a girl of 19 or 20 is teaching school and earning a salary. Would she be regarded as dependent upon her parents for a livelihood?


Henry Lumley Drayton: No.


Robert Forke: There is likely to be some
injustice unless the interpretation is clear and unmistakable. I should like to have some explanation from the hon. member for St. Lawrence-St. George in regard to the matter. Does my hon. friend understand what I mean?


Charles Hazlitt Cahan: The point to which my hon. friend refers was not the point I was raising.


Robert Forke: I quite appreciate the point my hon. friend raised. It had' reference to children of any age who by reason of mental or physical disability, were not self-supporting.


Charles Hazlitt Cahan: My hon. friend might put his question to the minister who is in charge of the bill.


Robert Forke: I thought the hon. gentleman was advocating a change with respect to this particular section of the act.


Mr. DUNNING:: Will my hon. friend be good enough to inform us what the informal friendly conversation he is conducting is about, because we cannot hear it at this end of the chamber.


Robert Forke: I am very glad my hon. friend is getting a taste of the experience we at this end of the chamber have had day after day, week after week. I am afraid that if the Minister of Railways had had the same experience he would have lost his temper after a while. Nevertheless that is the experience we are continually encountering here. Its effect is baneful, because if you are not able to hear what is going on you lose interest and begin to talk with your neighbour, which only aggravates the condition. In the last parliament I had a seat in the central part of the chamber, and my interest was much keener in everything that went on. This session I do not feel the same interest simply because I am not able to hear what is said.


Charles Hazlitt Cahan: The hon. member is more happily situated this session, because he knows beforehand what is going to take place.


Robert Forke: I am very glad to confess that sitting so close to the hon. member for St. Lawrence-St. George, as I do, I am able to hear no inconsiderable part of what is said in this chamber.

Income War Tax Act


William Duff: It has been moved by Mr. Bourassa, seconded by Mr. Woodsworth, to amend paragraph (c), subsection 1A of section 4 by striking out the word "eighteen" and replacing it by the word "twenty-one."


Georges Henri Boivin: Before the amendment is voted upon I have only one word to say. I do not intend to disagree at all with the hon. member for Labelle. We have discussed this matter together at least on one occasion, and we are in hearty accord with the idea that the parent who has a child under twenty-one years of age in a college or convent, and who is endeavouring to give to that child all possible education and fit it for the struggles of life, should receive an exemption of income tax, at least upon the amount expended1 for that education. I think we are agreed on that. But there is this to be remembered: The government is handing out exemptions this year in every direction under the Income Tax Act. It must be remembered that, previous to the present year the only exemption the father of a child got was an exemption from the normal tax. In other words it was an exemption of 4 per cent of $500 if he was a poor man; if he was a rich man it was 8 per cent of $500. That is all. But under the act as it now stands the father is getting a straight exemption of $500 no matter what rate of income tax he.pays. In other words, if a father has a net income of $25,000, he is getting an exemption of 25 per cent on $500. We are practically multiplying by three the exemption given to fathers and mothers under the old act, and we are making progress in another direction. We have given an exemption this year of $1,000 more to the parents themselves. Last year the exemption to married persons was $2,000; this year it is $3,000.


Charles Hazlitt Cahan: But the minister increased it in other cases.


Georges Henri Boivin: We are increasing the exemption.


Charles Hazlitt Cahan: No, decreasing it.


Georges Henri Boivin: Well, we are in certain cases.


Charles Hazlitt Cahan: You increase the exemption by $1,000 in some cases.


Georges Henri Boivin: I shall be glad to discuss that with my hon. friend when we reach that clause. The fact is that under the old act married persons got $2,000 exemption.


Georges Henri Boivin: Yes, when they were not married in community of property; when they were wealthy enough to have separate incomes.


Charles Hazlitt Cahan: When they did have separate incomes.


Georges Henri Boivin: Yes, but it they happened to be in the moderate class or in the poor class, which class my hon. friend has been defending, under certain circumstances they had no double exemption, because they had no double income.


Charles Hazlitt Cahan: Does the minister mean that when they have $3,000 exemption they are in the poor class, and that when they hav e $4,000 income and are subject to $4,000 exemption they are in, the rich class?


Georges Henri Boivin: No, that is not what his
hon. friend has said. If that point is to be discussed now, let us discuss it. In the case of a man and wife living in a certain village, there is no reason why the man, simply because he happens to hold real estate and property, should be obliged to pay taxation to the government on a revenue of $4,000, while the man and woman living on the other side of the street, receiving the same income, should be exempt because they happen to have made a marriage contract. That was unfair and unjust, and we have endeavoured as far as we can-we cannot do it perfectly-to adjust that inequality by making the exemption the same for all married couples. But let me answer my hon. friend from Labelle. In the year 1918, when the first amendments were made to the Income War Tax Act, the exemption for a child in the case of the normal tax was only $200, and the age limit was 16 years. In 1919 the age limit was raised to 18. In 1922 the exemption of the normal tax was increased to $300 and the age limit was 18 years. In 1924-and this was due largely to public opinion created by the paper published -by my hon. friend from Labelle-the exemption was raised to $500 for all children under 18 jmars. This year we have increased the exemption to married people, the fathers and mothers of these children. I would request my hon. friend from Labelle, in view of the fact that we have been following him along the way- perhaps from afar, but following him as well as we could-to consider withdrawing his amendment for the present session, with the assurance that when we see what revenue is derived from the tax as it will be when these proposals are adopted, if it is at all possible to do so the exemption will be proposed by the government. It would be impossible to


Charles Hazlitt Cahan: Each.
Income. War Tax Act


Georges Henri Boivin: One of the reasons why we have endeavoured to keep the age of children in respect of whom exemption is granted at eighteen years is to prevent children who are not going to school and who refuse to work from getting the benefit of the exemption.


Joseph Henri Napoléon Bourassa: There are very few children who are what are called "sports" and who do nothing except enjoy life. I do not know whether there are in Ontario or not. Perhaps the hon. member is referring to the class of family, which is rapidly growing- described as the new American family-which consists of a man, a woman and a pet dog. But I am not referring to them at all. I am referring to the families with a large number of children. There are some in all provinces.
I would not have any objection to withdrawing the motion in view of the opinion the minister has expressed, but what I am afraid of is the spirit of his department. The department is imbued with the idea of getting money, which is quite proper; but very often when officials of the department become imbued with that idea they lose sight . of other aspects, the human aspect and the
fMr. Boivin.]
social aspect. They become so imbued with the idea of getting dollars and cents that they have a dollar mark imprinted on their brain, and they have a fifty cent piece in place of a heart. The minister says that to increase the margin will enhance the difficulty of finding out what children are actually dependent upon their parents. There are difficulties in finding out what moneys are to be paid by any taxpayer. The minister is finding out that there is some difficulty in ascertaining what amount of duty should be paid at the boundary for customs duties. All ministers of Finance, Customs, and the old Department of Inland Revenue knew of the difficulty of collecting taxes. There are always people trying to deprive the state of its due. There are plenty of capitalists who have made false returns of income tax to this government. There are plenty of debenture holders who collect their coupons through banks without paying tax upon them because they do not declare them. I would suggest that the government impose a stamp tax upon those coupons as a safe means of taxing them. The answer is:	Oh, no, we do
not want a stamp tax; the business community does not want to be disturbed. But the poor individual who has eight or ten children to raise, who is not allowed the amount of rental he pays on his house if he owns none, who is not allowed the taxes he may pay on a small piece of property he is keeping as a legacy for some of his children, is looked after very carefully and keenly by the officials of the department. He is easily reached, first, because he is honest and, second, because the value of his property and goods is readily determined by the taxing bodies of the government, whereas the large capitalist or investor, about whom so many hon. gentlemen have spoken with such tenderness, is the one who finds the greatest ease in evading taxation.
The minister cannot devise any form of taxation to cover all forms of fraud perpetrated oit the treasury. No minister, no department, will ever be able to do that, but that should not distract us from the social aspect of a fiscal system, of taxation and of government. I repeat, in a country like ours where we are crying out for population, where we are spending millions to attract foreigners to build up Canada, can we not make a little sacrifice to help the people born and brought up in this country who are trying to increase our population by the most natural law, by the law that has been made and blessed by God, but which unfortunately is being evaded by an increasing number of taxpayers?

Income War Tax Act
I will not withdraw this amendment unless I have a declaration that no other change will be made to the income tax and no reduction granted to any other class of ratepayer until the case of the father of a family has first been considered.
With regard to dependents it is said that it will be a difficult thing for the officials to find out what children are at school, what children are helping their parents or not. Undoubtedly a few cases of that nature will escape just as other -cases of fraud or injustice occur under other articles of the law. The minister has admitted very candidly that he cannot frame a law that will apply in all cases and prevent all fraud. I repeat, just because a few parents might claim undue exemption for children who are not a charge upon them, are we not first and above all to consider the case of numerous fathers of families who have dependent upon them as a family charge children between eighteen and twenty-one and who are certainly much more interesting than any other class of ratepayers we have considered? If the minister is prepared to make the declaration that the first reduction in income tax will be along that line and that the officials will not prevail over him to the contrary, I am prepared to withdraw my amendment now; otherwise I will maintain it.


Mr. ROBB:: I am very much in sympathy with the views advocated by my hon. friend, but I think I -can give him some additional reasons Why he should not press his amendment at this time. We have had presented to us from many sources applications for exemptions, and as my hon. friend knows we have conceded some of them. There is the case of dependent children who are invalids, unable to earn. They may be thirty, forty or fifty years of age.


Joseph Henri Napoléon Bourassa: But only upon brothers and sisters, not upon parents.


James Alexander Robb: They may be. They are dependents. Then there is the case of hospitals, which has been very strongly brought to our attention. I think my hon. friend, in view of our record of the past few years, might very well trust us as to what we shall do in another year.


Joseph Henri Napoléon Bourassa: I want something clearer than that.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.


William Duff: When the committee
rose at six o'clock we were considering subsection (1A) of section 4 of Bill No. 116.


Georges Henri Boivin: An amendment, Mr. Chairman, had been proposed by the hon. member for Labelle (Mr. Bourassa). If I understood him correctly, just before adjournment he said he would withdraw his amendment upon condition that the government would give him an assurance that this amendment would be first considered before any further amendments were made to the Income Tax Act. While we have not had a meeting of the cabinet, and therefore I am not in a position to speak for the entire government, I give my hon. friend my assurance that before any other amendment is made to the Income Tax Act at a future session; if I am still a member of the government, the amendment proposed by him this afternoon will receive first consideration.


Joseph Henri Napoléon Bourassa: This is a rather guarded statement, Mr. Chairman, but I suppose the hon. minister can hardly express it any other way. Anyhow, while I remain a member of this chamber, or even out of it, I shall have some means of reminding the government next session, even if the hon. minister should not then be one of its members, of the promise now given by -him. Consequently in view of the late stage of the session and of what the government has already done to come nearer to what I consider a better spirit in the Income Tax Act, I consent, upon the promise, to withdraw the amendment.
Amendment withdrawn.
Subsection (1A) agreed to.
Subsection (IB) agreed to.
On subsection 2.


Henry Lumley Drayton: What is that
section?


Georges Henri Boivin: In the old act there was a
definition of the term, "dependent child", which is replaced by the new subsection (1A).
Subsection 2 agreed to.
Sections 4, 6 and 6 agreed to.
On section 7-Transfer of property.


Henry Lumley Drayton: What is the real change there? I thought that was the law.


Georges Henri Boivin: This takes the place of the provision which is now in the act, and which is expressed in such a manner as to permit the minister to ratify a transfer to a wife or child.
Income War Tax Act

if he is satisfied that such transfer is not made for the purpose of evading the income tax. In practice, the minister has consistently refused to ratify any transfer to a wife, but has ratified transfers to children where the same have been reasonable, irrevocable and made in good faith. The amendment distinguishes between a transfer to a wife and a transfer to a child. As to the latter, the law remains the same; as to the former, the minister is relieved of all responsibility. It will be noted that there is nothing to prevent the transfer of property by a husband to a wife, but when it is for the purpose of evading income tax it will be ignored. That is to prevent the evasion of the law which very often takes place when the husband has a very large and his wife a small income, or vice versa; in order to evade payment of income tax they even up their respective incomes by means of a transfer. We do not attempt to prevent this; we merely say that the income tax will be the same as if the transfer had not been made.


Henry Lumley Drayton: But was not that properly looked after before? It could not be done without the minister's consent. But suppose now you have a husband and wife separating, are you going to drive them to divorce before any proper rearrangement of their property can be effected?


Georges Henri Boivin: No. Under the old act
the minister was never called upon to give consent, but had he been so requested he could have consented I think under such a provision as we are now incorporating. If a married couple separate, and the husband desires to transfer to his wife a certain amount of property, there is nothing in the act to prevent it.


Henry Lumley Drayton: Yes, he must pay income tax on property he no longer owns.


Georges Henri Boivin: He must pay the same income tax as if he had retained the property.


Henry Lumley Drayton: That is what I say; in order to get rid of taxation on property you have not got, you must get a divorce.
I think my hon. friend should let the old section stand.


Georges Henri Boivin: I am willing to admit in
connection with this law that ttny friend is right part of the time, but I hope he will not even insinuate that I have framed this clause to encourage divorce.


Henry Lumley Drayton: That is where we are getting to, though.


[Stage Direction]
Section agreed to.
TMr. Boivin.]
On section 8-Family corporations.
Charles Hazlitt Cahan: Mr. Chairman, I do not think the provision that 75 per cent of the stock must be owned by the members of one family is quite comprehensive enough to cover the conditions which I pointed out when the original resolutions were under discussion. The other alternative is 80 per cent of the stockwhich is owned by persons actively employed in tJhe 'business of the corporation or by such persons-
That is, those actively employed in the business of the corporation.
-and their families.
We have in the various provinces, particularly in Quebec, a number of corporations which are private companies within the meaning of the Companies Act. The definition of "private company" under that act is:
A company which by its letters patent or supplementary letters patent,-
(a)	restricts the right to transfer its shares; and,
(b)	limits the number of its members (exclusive of persons who are in the employment of the company and of persons who having been formerly in the employment of the company were, while in such employment, and have continued after the termination of such employment, to be members of the company), to fifty; and,
(c)	prohibits any invitation to the public to subscribe for any shares or debentures of the company.
A very considerable number of partnerships have been -organized as private companies under that act. They do not consist of companies of which 75 per cent of the stock is held by the members of one family; you, would hardly find one private company of that kind, and on the other hand 80 per cent of the stock may not be held by persons actively employed in the business of the corporation, or by suc-h persons and their families. I could tell the committee of a very considerable number of companies in which the partners, attaining age and wishing to be relieved of active participation, have formed their employees together with themselves into what is known as a private company. A few of the neighbours in the little country town are brought in and they really operate as a partnership although incorporated as a private company. The transfer of their shares is restricted; they cannot go out and appeal to the public to subscribe for new shares; they cannot sell their bonds and debentures to the public. I think if we are to maintain our small local industries in the towns and villages of those provinces which I know, east of the Ottawa river, the restrictions of this definition will not enable us to do so; the profitable operation of these companies will be im-

Income War Tax Act
possible. They are operating on a small margin, they give industrial life to our towns and villages and should be encouraged in every possible way. One encouragement I should like them to have is relief from the double taxation involved in this act, by allowing the shareholders of such companies, as are defined to be private companies under the Companies Act, to be treated as partners in respect of the income tax which would otherwise be levied upon the company.


Henry Lumley Drayton: In support of
what my hon. friend has said I would point out that in Ontario I know of trading concerns which, for the purpose of ease in carrying on business, have been incorporated. The members of the firm are not always members of the same family, and sometimes where there were three or four or five members actively engaged in the business, two or three have died and the business is carried on by those remaining, who certainly could not hold 80 per cent of the stock.' Yet at the same time this would be an essentially private corporation. I have in mind an insurance corporation which I think is incorporated for half a million dollars. They are agents, carrying on the underwriting business; they are not an insurance company themselves. Although the stock is distributed the payments out of profits are not distributed on a stock basis. They meet together and apportion the profits in accordance with the activities of the different members during the year; sometimes one will get more and sometimes the other, although the holdings are exactly the same. We have a number of companies of that kind, and I really think they should have this option, if the minister can see his way clear to adopt it.


Georges Henri Boivin: I agree with what has been
6aid by both hon. gentlemen; I think these companies should not be treated as a corporation if they desire to be considered a partnership. It was our idea that we had pretty well covered every possible case. I may be wrong, but I think the case mentioned by the hon. member for St. Lawrence-St. George would come under the second part of the definition, which says:
-a corporation. . . . eighty per centum of the stock of which is owned by persons actively employed in the business of the corporation or by such persons and their families.
Take a case where the owner of a store or any trading corporation, desiring to interest his employees in the business, gives them a certain number of shares which are not transferable and which cannot be sold to the public on the stock market. He brings these people into the business; he wants their continued interest, support and assistance. It is not necessary that they should be relatives, nor is it necessary that they should be members of the same family so long as they have an interest and are actively engaged in the business. That company would come under the terms of this act as a family corporation.


Charles Hazlitt Cahan: Would the minister allo-w
me an interjection? I am dealing now with the class where 80 per cent of the stock must be held by persons actively employed in the business or by such persons and their families. If I were in my own office I could give a list of at least a dozen companies each carrying on a small manufacturing business in a country town. There will be two or three employees who have been the clerks and officers employed in that business, and the real owner of the business may have made provision in his will giving 20 per cent or even 25 per cent of the stock to his employees 'by way of remembrance and providing that the employees, while they remain in the business, shall have the option of buying the remaining shares at a certain rate from the estate. Many companies of that kind have been formed during the last few years, and if the second part of this clause were made to read 50 per cent it would cover quite a number of the cases I have in mind, but 80 per cent is a very large proportion. I know of some companies doing business in small towns in Quebec where the owner of the business has died and the employees have gone to one or two local people of importance and secured from them the financial assistance necessary to buy out the concern. Some change such as I suggest would assist very much in promoting the small industrial undertakings of our smaller towns and villages.	,


Georges Henri Boivin: I can assure my hon. friend that I see the force of his argument. I think most cases where the original owner of the company had died and his business was transferred, as I think my hon. friend suggested, in a major portion to his heirs, but in a certain portion to his employees, who might not have sijrty per cent of the stock, would be covered by the proviso that 75 per cent of the stock would be held by members of one family.


Charles Hazlitt Cahan: It is usually put in trust.


Georges Henri Boivin: I understand that. What
I am prepared to say to my hon. friend is this: We do not want to create any hard-
Income War Tax Act

ship. We do not want any concern which in reality is a partnership, which has been formed into a corporation for legitimate reasons, to suffer under the terms of this act and if any such case as that suggested at this moment as an example by my hon. friend, is brought to our attention during the course of the present fiscal year, instructions will be given to the Commissioner of Taxation to withhold the levy, and at the next session of parliament this clause will be amended in a way which will meet that particular case. But you must give us a chance to gain some experience in the nature of the cases that will be presented to us. Also you must not get away from the idea that in all joint stock companies where the stock is not all held by the members of one family, or by former partners in the partnerships, then there enters into the administration of the company at least a different mode of accounting. Then salaries are paid to the directors of the company. Then the manager of the company is operating and administering property which belongs to somebody else. The director's are working both in their own interest as shareholders, and also to earn their salaries as directors of the company.


Charles Hazlitt Cahan: Why not make it 60 per
cent, instead of 80 per cent? That would make it perfectly clear that those who are actively employed in the business of the company own a clear voting majority of the stock. That would overcome that objection. If you make it 60 per cent for the present year, at the end of this year the Oommissioner of Taxation will have before him a complete list of all such companies, and will be able to suggest such amendments as would deal fairly with thefn so as to prevent any imposition by persons who were not in good faith carrying out the provisions of the act.


Georges Henri Boivin: I would be disposed to
accept the suggestion made by my hon. friend were it not for the fact that this afternoon he protested very strongly against retroactive legislation which would make the tax more instead of less. I would prefer to have our retroactive legislation next year reduce the tax instead of increase it.


Charles Hazlitt Cahan: It would only increase it
for the future.


Georges Henri Boivin: But for the present year
it would increase it. What I want to say to my hon. friend is this, and the only objection there is to accepting his suggestion at once is that if you make it 60 per cent, you would place two or three employees in the

position of forming a partnership and then going to the general public and selling 40 per cent of their stock. When that 40 per cent of the ktock was sold to the general public, they would still be, in so far as ithe Income Tax Act is concerned, in a position where they could optate to have their profits taxed as a partnership, and I am sure my hon. friend does not want that to happen. He does not contend that the men who go to the public and sell 40 per cent of their stock should be placed in a different position from any other industrial corporation.


Charles Hazlitt Cahan: I would obviate that by
taking the definition of private company, which prevents the sale of the stock except under very grave restrictions. I do not think that allowing three or four old employees to go to their neighbours and secure assistance from them, they purchasing a minority share of the stock, would create any difficulty which could not be overcome very readily. If you wish to limit it, limit it as to the amount of capital. But as to these smaller companies, where you have men who are really in a partnership and some other person coming in with a limited partnership, it would apply in exactly the same way. They come in for the purpose of assisting local industry, and for the purpose of assisting temporarily those who are actively engaged in the business locally. I am sure if that were reduced, even if you reduce it to 60 per cent, it would give relief to such cases as I have in view because in all these cases the employees would own at least 60 per cent of the stock within a year or two.


Georges Henri Boivin: 
Charles Hazlitt Cahan: I cannot follow that quite.


Georges Henri Boivin: I think my hon. friend will admit that the company tax is 9 per cent, no matter what the profits may be.


Charles Hazlitt Cahan: Yes.

Special War Revenue Act


Georges Henri Boivin: Next there is a $2,000 exemption. for companies, and the tax is payable on all profits over $2,000, so that the profit must be $12,000. The profit is $10,000 plus $2,000 before the company tax becomes less than the normal tax. For the smaller companies, the company tax is a hardship, and they would be better off if they paid the ordinary individual tax. For large companies the company tax is a benefit. I think my hon. friend will find that all these companies to which he refers, where they are making more than $12,000 a year, would be very pleased to keep on paying the company tax of 9 per cent. They will place their surplus aside and pay no tax whatever on it; they are not obliged to pay one cent on their dividends until they are distributed. If there is that intimate personal interest in the company that my hon. friend referred to a moment ago, if these are partnerships where the partners are striving to get the shares of the deceased owner, I think they are really family corporations in the real sense of the word.


Charles Hazlitt Cahan: No-


Georges Henri Boivin: "Family corporations" as
defined under the act. Petrhaps we might have found a better term. But I think my hon. friend will admit that there are very few of these corporations that are going to optate to pay as partnerships. Most of them are going to pay as corporations. I repeat to my hon. friend again, if there are any corporations which are in reality family corporations who come to the Commissioner of Taxation, and who make the option of paying as partnerships and who cannot be allowed so to pay under the act, their case will be held in abeyance. It will not be decided by the minister, but will be held in abeyance and brought to parliament next year, and an amendment will be made which will cover every individual case which has merit. I hesitate to accept the amendment of my hon. friend making it 60 per cent for the reason I gave a moment ago. It will enable people to go out and sell 40 per cent to the public if you limit them to the definition in the Companies Act that my hon. friend read. There will also be additional hardship in administration because companies which are not family corporations at all, and companies which are not composed of individuals who were formerly partners could come in and take advantage of the act. We do not want them to do that.


Charles Hazlitt Cahan: Would the minister make it 75 per cent in both cases?


Georges Henri Boivin: I am informed by the officers of the department who have reviewed all the income tax returns for the past few years, that all cases are covered by the 80 per cent, and that it is a fair proportion. However, as I promised my hon. friend, if it is found that there is unfairness in the clause as it stands, it will be corrected next year even before the tax is paid.


Mr. EULER:: Will there be any discrimination, for example, in the case of shareholders of companies affected who are not all resident in Canada?


Georges Henri Boivin: No, there is nothin? in the bill which says that shareholders of a company must be all resident in Canada. They must be all members of one family or persons actively employed in the business, one or the other.


William Daum Euler: Is there a definition of what constitutes the members of a family?


Henry Lumley Drayton: I take it the wording in the bill really means they must be relative?


Georges Henri Boivin: Yes, I would say relatives. Subsection 7 of section 8 of the act provides that the decision of the minister upon any question arising under the subsection, including any question as to the application of the term " family corporation ", shall be final and conclusive. I can assure my hon. friend that the clause will be very liberally interpreted so far as relatives are concerned.


[Stage Direction]
Section agreed to.
Sections 9, 10, 11, and 12 agreed to.
Bill reported, read the third time and passed.

[Stage Direction]
The House resumed from June 7, consideration in committee of Bill No. 115, to amend the Special War Revenue Act, 1915.-Hon. Mr. Robb-Mr. Duff in the chair.
Charles Hazlitt Cahan: Before proceeding may I
ask, just for information, whether Bill No. 147, to amend the Income War Tax Act, 1917, has passed the committee?


Georges Henri Boivin: That is a private member's bill, which appears on the order paper as a public bill. It was introduced by the hon. member for Toronto Northwest (Mr. Church) and stands for second reading.


Mr. MACKENZIE KING:: It is not likely to be reached this session.
Special War Revenue Act


William Duff: When Bill No. 115 was last before the committee we were considering an amendment moved by Mr. Robb to section 9.


Henry Herbert Stevens: Mr. Chairman, if you
would announce to the cominittee that the amendment you are reading is not in the printed bill we shall have a better understanding of what we are doing.


William Duff: I may say that all the clauses in Bill 115 were passed either at the last sitting of the committee or at a previous sitting. The Minister of Finance at the sitting of June 7 proposed an amendment to section 9, and that is what we are now considering.


Charles Gavan Power: Is it the same amendment
that was proposed two or three days ago?


William Duff: Yes. It is in Hansard
of June 7.


Mr. MEIGIIEN:: The time seems to be
opportune to ask the government again what further amendments they propose to the budget of the year, and when they will be announced?


James Alexander Robb: I have no Others in contemplation.


Arthur Meighen: I need only add that
the answer of the government to any queries of this sort is useful only as indicating that the opposite to what the government informs the House is likely to take place. I cannot say I am surprised at what the government has done in proposing this amendment, nor is my state of mind affected one way or the other by the several assurances which came from various members of the government many times: first that amendments were not contemplated at all or intended, next that there would be none, and lastly, and in the most solemn possible form from the Minister of Finance, that there would be none that * would be substantial, and that if there were any they would just be a change in wording so as to make clear something about parts. All these assurances have gone the way of all assurances this government ever gave. They have proven to be wholly without any purpose, at least without any effect save to mislead the House, and to be wholly falsified by events. In a word they have been in every way worthy of the administration. Nor am I surprised at the character of the amendment itself. It is just about the kind that of retreat which one would expect this government to choose. One would never expect it to come out of the front door and admit it is wrong, but if there is any chance of escape 
out of the back door, under cover of an umbrella, that is the course the government will always pursue.
I am not at all out of sympathy with the object of the amendment; in fact its object is in line wholly with the central policy of the Conservative party, its historic policy. The government's course is merely a camouflage surrender to the principles which they have for many years denounced and to the men whom politically they have for many years derided. The way this should be done, as everybody knows, would be to restore the duty, pending investigation, to where it is placed by this amendment, at 26 per cent or slightly over, on lower priced automobiles, . and then remove the excise tax. Then, if anything be needed to further ensure a larger proportion of manufacture in Canada, it should be done in a straightforward way by the duties being further adjusted against importation of parts. This would be the frank and correct way, and the people would understand it, but it is just because the people would understand it that the government does not choose such a course-no other reason in the world. The excise tax is to be removed. All right, remove it in a straightforward way, and make what is left the duty. When you remove the excise tax on goods made in Canada and leave it on goods imported from the United States, then it is an excise no more; it is a duty. But the government want it called an excise in order that under such miserable camouflage they can can escape. That is the whole idea of this amendment. I would be delighted to support it if the government would reach the object in a frank, open way: put the duty at 26 per cent and remove the excise tax on automobiles under $1,200. Why is it not so done? Does any hon. gentleman suggest any other reason, save that they want to confuse the people of Canada? They want to secure by subterfuge and indirection what they have not the courage to secure by the open straight-forward way. What is to be thought of an administration which boasts of its hostility to protection-that is, boasts of it where they feel the cause is not strong and not popular, but is ready to secure all the protection possible as long as it is called "safeguarding;" an administration which is opposed to duties as such, but is ready to get duties as long as you call them "excise"? Such is the position of this government. And when they bring the amendment in they stand up and say: "Now we are ready to put this through, but if by any chance our precious political lives are imperilled we are ready to repeal or to withdraw it." If the

Special War Revenue Act
supine and spineless could go further than that, I have never witnessed it in my life.
Is there anything but the jelly-fish in the whole conduct of the administration on tariff matters? If this is essential, if this be the true mind of the government, why do they not come forward and declare it to be government policy and stand or fall by it, instead of holding it as a sword over the committee, saying, "If anybody opposes it we will drop it. It is right; we ought to do it, but it is not half as right as that we should be in power. It is valuable, but not half as valuable as our precious political lives." This is the attitude of the administration, and hon. members will not be deceived, and I hope the country will not be deceived, although certainly the government will endeavour to deceive it. This is merely the restoration of the duty to 26 per cent and the removal of the excise tax. That is all. The excise tax was not there for the purpose of raising the duty on automobiles. It was there to get revenue for Canada out of automobiles instead of having to get it out of what were considered more acute necessaries of life. If the government feel they can do without the revenue, well and good; let them do without the revenue; let them remove the excise. If they feel that the duty has to be reimposed in order to retain the industry in this Dominion, they will be supported by every member on this side of the House. They tell us that this is going to secure the manufacture of these goods in Canada. It is the duty that secures- the manufacture in Canada. If the manufacture consists more than it should of importation and assembly, then the frank, open way to remedy that situation is by a duty on the parts, thereby providing for manufacture of the parts in Canada.
The hon. member for North Waterloo (Mr. Euler), who is following me closely, knows this just as well as I; he knows that this is a camouflage; that it is intended to mislead and confuse the people of this country; that it is put in this form in order that ministers of the crown may go out and say: We reduced the tariff on automobiles to 20 per cent, when they did not do so. It is done in order that they may go out and say: We have cheapened them, and in order that they may pretend that they have cheapened them at the expense of the manufacturers when really they have cheapened them at the expense of the treasury of Canada, or in other words at the expense of the taxpayers of this Dominion.
All I rose to say was this:	When we have
a government taking a course and asking the
House to follow it, let that course be taken in the straightforward way, in the way the people will understand1. Do mot let it be t.aken in a circuitous way, by the subterfuge such as this, which leaves the law in such shape that we have a duty of 26 per cent, 6 per cent of it being called an excise tax when it is not an excise tax at all. In a word the government is calling a duty "excise" in order that, the people may not understand what is being done, the government thereby being relieved, so they hope, of the ignominy into which they have brought themselves.


William Lyon Mackenzie King: I take direct
exception to my right hon. friend when he says that the government in this measure is proceeding in any indirect or circuitous way to attain an object which it has had in view with respect to all tariff changes which have been made during this sesion. The one object underlying the changes in the tariff this session has been to make commodities cheaper to the consumers of this country. The automobile is a necessity to practically all branches of industry and trade and to consumers in a large way; we have been endeavouring to make that particular commodity available at a lower rate to the consumer. We have Sought to do that first of all by a reduction in duty. We are seeking to take a step further in the same direction by the removal of a war tax hitherto imposed upon automobiles of $1,200 and under when manufactured in Canada. My hon. friend admits that that will be the effect of removing the excise at the present time. If that is the effect it is attaining the objedt this government has had in view ,in the tariff changes which have been introduced.
The customs duty on automobiles of $1,200 and under has been! cut 15 per cent. That cut remains 15 per cent and imy right hon. friend by no argument of any kind can refute that - statement. The tariff is there; it is printed so that everyone can read and make comparisons for himself, and the fiscal statement as it will appear after this budget has been adopted will disclose two facts, first, that the tariff on automobiles of $1,200 and under has been reduced 15 per cent, and that in addition on cars manufactured in Canada a 5 per cent war tax has been removed, which benefit the manufacturers of automobiles have undertaken to see is passed on to the consumers by way of an equivalent reduction in the price.
It has been stated that possibly the manufacturers will not keep their word in that particular. I for one am prepared to accept their word at the present time. But if it
Special War Revenue Act

is found that they do not keep their word in that particular, the government has at hand1 a remedy that can compel them to keep their word in a manner that will still further help the consumers of this country, and that is by removing the war tax on all cars of $1,200 and under, wherever manufactured. The government has power to do that by order in council without legislation because in this particular we can lower although we cannot raise taxation by order in council. If automobile manufacturers do not give to the consumers of this country the full benefit of the reduction in excise which we are making at the present time, this government by order in council will remove the 5 per cent excise on all oars of $1,200 and under. Having said that much, may I add this? My right hon. friend, I believe, desires to help the manufacturers of this country, but we on this side of the House are just as anxious as my hon. friend to help the manufacturers of this country. Hon. gentlemen opposite think the only way in which to help the manufacturing industry is by increasing tariffs, putting on more protection.


Arthur Meighen: That is what this is
doing.


William Lyon Mackenzie King: To-night we
are showing by this method that we can help the manufacturers by taking off taxation. There is a great difference between imposing a tax to protect an industry and removing a tax in order by so doing to help consumers and incidentally to help manufacturers as well, as I believe and hope this will do in the case of the manufacturers of automobiles in Canada. If the removal of this excise tax tends to create a large demand for automobiles because of their selling at a lower rate it will certainly help that industry and ought to be beneficial to the automobile manufacturers. We believe it will have that effect. Just as we discovered that owing to the lower cost of agricultural implements the demand increased, so we believe with a lower cost of cars, the demand will increase.
My right hon. friend says a great deal at different times about manufacturing in Canada, about encouraging manufacture in this country. This is the removal of a tax affecting the product of Canadian industry. We are allowing the tax to remain on the product of United States industry; we are helping our own industry in this Dominion in a way which assists the consumer and the manufacturer at the same time. If an object 
of that kind is not laudable and worthy, I should like to know what object could be laudable and worthy. Again I repeat 9 p.m. that the change which the government is making at the present time is in the direction of the budget as introduced which aimed at removing taxation. The tariff has been reduced 15 per cent on automobiles of $1,200 and under. That reduction remains as it is, and now we are proposing this further removal on oars manufactured in Canada, of a 5 per cent tax which was imposed in time of war. May I add that to enjoy this immunity from taxation the cars manufactured must represent manufacture to the extent of at least 40 per cent for a year and 50 per cent thereafter in Canada, which means additional employment to and of labour in this country. That is another very important item. These are the objects which the government has had in view, and they are objects which should commend themselves to this House irrespective of party.


Arthur Meighen: If anything was necessary to improve on the presentation which I made of the actual effect of what has been done and also its character, if anything was necessary' to supplement what I said, the Prime Minister has supplied it. I stated that this was being done in this form with the effect of leaving a duty of 28 per cent on automobiles of $1,200 and under and at the same time enabling members of the government who do not want the people to understand that effect to say that those same automobiles had a duty of only 20 per cent. That is exactly what the Prime Minister has said to-day. On an automobile under $1,200 coming into Canada a duty of 20 per cent has to be paid and as well-


An hon. MEMBER:: Hear, hear.


Arthur Meighen: Yes; wait for the next "hear, hear." In addition 5 per cent has to be paid on the imported value for customs purposes plus the duty. This means 6 per cent more on the imported value for customs purposes. This 6 per cent is called an excise tax although it is not because it is not levied on the home-made article and it cannot be called an excise tax unless it is levied on the home-made article. Because it is called an excise tax when it is not, the Prime Minister stands in his place and says, " Only 20 per cent has to be paid." I ask hon. members opposite of open mind, could anything be a more miserable subterfuge than that? Exactly the same dollars and the same cents are paid on every imported automobile under $1,200-exactly the same as if the duty was 20 per cent.

Special War Revenue Act


William Lyon Mackenzie King: Certainly, on every imported automobile; but we are speaking of the cars manufactured in Canada.


Arthur Meighen: What can the duty be
on except on the imported automobile? Every imported automobile pays a duty of 26 per cent, and the Prime Minister now says, "Certainly." Never let him say anything else. That is precisely what has to be paid. Therefore there is protection of 26 per cent, and the government has retreated to that extent. But what I am objecting to is not its retreat, I am objecting to the covering of that retreat, to the deception of the Canadian people.
"Now," says the Prime Minister, "this excise is going to be reflected in the lower price;" and he adds that I admit the fact. Certainly I admit it. I have not the least doubt the manufacturers will carry out their undertaking. But I suggest to the government: if it put the duty to 40 per cent, the manufacturers will give the same undertaking exactly that the taking off of the excise will be reflected in lower price. Then we would have far more automobiles made in this country, almost half as many again, and we will have a still lower price.
Now il ask the government, as it is ready ' to take the word of the manufacturers that they will reduce the price by the excise in the present case, why will it not take their word in the other, and so secure the making of all the goods in this country? This though is another phase of the discussion which, while it is valuable to enter upon, takes the attention of hon. members from the character of this amendment, from the cover under which the government seeks to beat this retreat in order that the people of Canada will not observe the shame into which it 'has brought itself. Let me repeat, what should have been done and what would reach precisely the same end would be frankly to say: We have a duty now of 26 per cent on imported automobiles; that is quite right and proper. We have no more excise tax on any automobiles. Very good, if you want that we have no objection. It reaches precisely the same end, and that is the way the government should word its amendment. And wording its amendment in that form, I believe it would secure the overwhelming support of this House. The only reason the government does not do it is in order that unscrupulous speakers on the other side may stand before the electors of this Dominion and boast
falsely that this government has reduced the tariff on automobiles to 20 per cent when it has done nothing of the sort.


William Lyon Mackenzie King: There is just
one circumstance of my right hon. friend's reasoning that I should like to draw to his attention and to the attention of the House. If it be correct to say that by taking off 'this tax of 5 per cent we are increasing protection to that extent, by the same process of reasoning my right hon. friend should have spoken of the previous tariff rate not as 35 per cent but as really 40 or 41 per cent.


Arthur Meighen: No.


William Lyon Mackenzie King: Exactly. According to my right hon. friend's reasoning we have been paying all along 41 per cent; we are now reducing it to 26 per cent.


Arthur Meighen: I am almost ashamed
to rise to answer a contention of that sort.


Mr. LAPOINTE:: No wonder.


Arthur Meighen: Protection is a charge
against the imported article which is not charged against the home article. The charge now against imported automobiles is 26 per cent, which is not against the home article at all; so the duty is 26 per cent. Before the charge against imported automibiles was 35 per cent, which was not against the home article; so the duty was 35 per cent.


An hon. MEMBER:: Plus.


Arthur Meighen: Plus nothing. Again I
apologize to the committee for explaining thax two and three are five.
Mr. iOAHA'N :	Mr. Chairman, I congratulate the government upon its adoption of the protective policy. I would suggest that they can place the industries of this country in a strong and stable position if they will proceed further with their present policy and remove the excise tax from all products of Canadian industry, retaining the tax on importations of similar products.


William Lyon Mackenzie King: Will my hon. friend agree that the government is adopting a protective policy if it now proceeds to remove from American cars the tax that we, have just removed from those of Canadian manufacture?


Arthur Meighen: No.


William Lyon Mackenzie King: That is what we are doing.


William Duff: Carried.


Thomas Langton Church: Mr. Chairman-
Special War Revenue Act


William Duff: Order.


Thomas Langton Church: I think I am in order, Mr. Chairman. At the present time the automobile industry of Canada simply consists of assembling plants, the various component parts being brought in from the United States. It is no use for the Prime Minister to blow hot and cold on this question. There is such a thing as protection not only for automobile parts, but for the whole car. I contend that what we need to make this a key industry is the imposition of such tariff protection as will result in the manufacture of every part of the automobile in this country. I contend that this is practically a second budget and the government has not played fair with the automobile industry. By their unstable tariff policy they are driving our motor mechanics across to the United States. I am quite in order in speaking to this matter. This resolution was in committee and you cannot consider the resolution without considering the amendment as well; they are all interlocked and related to the automobile industry, which has been ruined and destroyed by the 'present .government.


[Stage Direction]
Amendment agreed to.
Mr. BURY:: Would the Minister of Finance (Mr. Robb) say whether he has considered, as he promised to consider when this question was up before, the matter of excepting building materials from the sales tax? The Minister promised to give that suggestion consideration, in the interests of settlers.


James Alexander Robb: As my hon. friend knows, that is a pretty wide question. I recall now that my hon. friend referred particularly to lumber, but lumber is not the only building material. [DOT] The officers of the department are studying the subject now; we have power to do that by order in council, should we so decide.


Mr. ARTHURS:: Some time ago I called the attention of the Minister of Finance to the fact that settlers having their own logs sawn had to pay sales tax.


James Alexander Robb: I do not think so.
, Mr. ARTHURS: It is being collected.


James Alexander Robb: I will direct this matter to the attention of the minister administering the act. I recall that when Sir Thomas White introduced the act he thought that should not apply.


James Arthurs: This tax has been collected continuously in my county. During the budget debate I drew the minister's at-

tention to the fact, and I suggest now that it would be just as sensible to charge a tax on the threshing of grain as to charge sales tax on the logs a settler has sawn up for his own use.
Bill reported.


William Lyon Mackenzie King: Mr. Speaker, I move that we proceed now to order No. 25 of public bills and orders.


[Stage Direction]
Motion agreed to.

[Stage Direction]
The House in Committee on Bill No. 8 to amend the Canada Grain Act (warehouse receipts)-Mr. Campbell-Mr. Duff in the Chair.
On section 1

Contents of warehouse receipts.
Mr. KENNEDY (Winnipeg):: The bill now before the House is to my mind of such importance, particularly to western Canada, that I feel I owe no apology to members of the House, coming as I do from the city of AVinnipeg, for taking the time necessary to discuss it and to explain its import.
Both sides of this House and all parties are one in their pride in respect to the position held by Canada to-day in the grain trade of the world. Canada stands in the very vanguard as an exporter of wheat, and to appreciate the importance of her position in that regard it is but necessary to state it. To-day the world wheat crop amounts to approximately three billion bushels. Much of the wheat is consumed by the countries producing it, and the number of wheat exporting countries is comparatively few. The amount of wheat required by importing countries over and above what they themselves produce is roughly seven hundred million bushels. Of this huge total Canada alone supplies about three hundred million bushels, or approximately half. Other countries together supply the balance; Argentina two hundred million bushels; United States one hundred million bushels; Australia ninety million bushels, with the remainder coming from the Danubian states, India and other small exporters.
It must be at once apparent to the House that in the building up of such a tremendous wheat export Canada must have developed machinery and handling equipment for that trade which represents a very considerable investment. In round figures the amount of private capital invested in plant and equipment for the handling of that export trade is

Canada Grain Act
186,000,000. This represents the investment by private companies in country elevators, terminal elevators and incidental equipment. Until at least three years ago the whole of this export trade was handled by what I may call private grain companies in close competition. The heart of the trade is Winnipeg, and its ramifications extend throughout the prairie provinces, their purpose being to gather the wheat crop of the prairie provinces and to convey it to terminal ports in order that thereby it may reach the markets of the world. Never has it been a monopoly. This trade has been carried on by companies entering into the keenest sort of competition.
Within recent years the movement in the west toward the co-operative marketing of grain has materialized and within the last three years there has appeared above the horizon in western Canada a new competitor. That new competitor is known in common parlance as the wheat pool. Let me remark here that so far as the wheat pool is concerned I as a western Canadian, I as a Canadian, cannot, nor do I, take any exception to the object it has set out to achieve. In so far as the purpose of the wheat pool is to gather and carry the produce of the western farmers to the markets of the world at as cheap a cost as possible, I am in entire accord therewith. The only question at issue, so far as this bill is concerned, is by what means shall it secure the object which it has set out to attain. It is this association known as the wheat pool that sponsors this bill No. 8. I shall refer to the grain trade, apart from the pool, in general terms as the grain trade. The grain trade oppose this bill because they see the effect of it is to imperil their investment by a means not available to the ordinary competitor, but by means of legislative enactment. When I say the grain trade takes exception, I am referring not to a trade that has been a discredit to this country, but to a trade that has been developed in this country throughout the many years that wheat has been produced and is generally recognized as being conducted in a very efficient manner.
The pool and the grain trade take issue on this amendment. This House is asked to decide between the two, and for that purpose I here and now wish to state the facts as I understand them after some investigation of the situation, and I hope I speak with some knowledge of it. I wish to state the facts merely as they are and leave to this House the matter of judgment. Before proceeding further it might be well to look for a moment at just what is the existing relationship between the producer of grain and the grain trade to which I am referring. Is the producer 14011-276
of grain to-day, without this amendment, at the mercy of the grain trade? Their relationship is regulated by the Canada Grain Act, administered by a Board of Grain Commissioners, a public body appointed by the government. Now comes the pool and asks that the Canada Grain Act be amended as set out in Bill No. 8. In order to appreciate the purpose of this amendment, as well as its effect generally on the grain trade in the west, it is necessary, chiefly for the benefit, if I may say so, of those members of the House who come from the east, to make just a brief survey of the method by Which the grain is collected on the western prairies and transmitted to the terminal ports whether they be at the head of the Great Lakes, Vancouver, Prince Rupert, or Duluth.
With a crop the size of the Canadian wheat crop, which last year was approximately 430,000,000 bushels, every member will at once appreciate the fact that it is necessary to establish warehouses where this grain may be stored, in two places: first, throughout the country, secondly, at the terminal points. If any member of this House desires to enter into the business of handling grain effectively, he must do this: he must establish terminal elevators at some terminal port, and he must also establish lines of elevators throughout the country to gather the grain in order that that grain may be fed into his terminal elevator. If any man entering the grain business invests his money in a terminal elevator without investing also in feeders throughout the country, there is only one end, and that is his terminal elevator will fail to get the grain from the country, and he must go out of business. Therefore he builds as feeders the country elevators, which collect the grain in competition with the elevators of competing companies, and having so collected the grain, their purpose is to carry that grain where? To the terminal elevator of his particular line. It is axiomatic, therefore, that if by any process of legislation or otherwise you commandeer the capacity of his country elevators, and having so commandeered it, take the grain that is stored in his country elevators and divert it from his terminal to the terminal of a competing company, you are thereby forcefully taking away business from his company, with what result? At first, loss of profit on his investment, and eventually, if carried to its logical conclusion, bankruptcy of his concern. If hon. members have followed that, I would like to say here, that just such 'an outcome is the tendency of this amendment. If I have money invested in a terminal elevator at Fort William, we will say, a ter-

Canada Grain Act

minall elevator of 1,000,000 bushels capacity, that will cost me approximately $1,000,000, and if I have a like amount or double or half the amount invested in country elevators acting as feeders to that terminal, then if by legislation you force my country elevators to feed, not my own terminal, but the terminal of a competitor you thereby do me injury. If that effect is brought about by oipen competition I can have no complaint. The grain trade in the west acknowledge that. They say that if their competitor, the pool, by virtue of ereteting terminal elevators at the points of export and by virtue of erecting or acquiring country elevators, secure a share of the grain trade and take it to their own terminal elevators, they accept that as being fair competition. But they do take exception to this House putting through the present bill which says in effect "you the private grain trade, with money invested in terminal facilities and in country elevator facilities, must accept into storage in your country elevators the grain of members of the wheat pool and not only that but at their direction, having so stored the grain in your country elevators, you must divert it from your terminals to their terminal which is the terminal of a 'competitor." I appeal to the fairness of this House, altogether 'apart from political expediency, I appeal to the business judgment of hon. members, to say if that is a sound business proposal?
Now, what reasons do the pool advance for the passing of legislation such as this? They state a principle and one which meets with popular approval; they state a principle to which I can take no exception. The wheat pool in western Canada is an association of producers of grain controlling to-day at least 50 per cent of the wheat of the west. Having so associated themselves for the purpose of marketing their own grain they say: We the growers of grain have the right to associate ourselves as a co-operative institution for the purpose of gathering our grain into warehouses or elevators in the country and storing it there until such time as we are ready to ship it, and having so stored it to maintain control over that identical grain and ship it from any elevator in which it may be in the west direct to the pool terminal. I accede at once to the soundness generally of the proposition that they have the right, as an association of wheat producers, to gather their grain, store it in country elevators, maintain the identity of that grain, maintain custody over it throughout, and ship it to their pool terminal. But the question arises at once how they are to effect

that purpose. Supposing the Minister of Agriculture, if I may take him as an example, decides that he will go into the business of handling, exporting and selling grain in the markets of the world, how would he proceed? I take it that he would have to proceed without any special legislation from this parliament. He would have to proceed in the way that every other private grain company in the west built up its trade. He would establish a plant of elevators both terminal and country, terminal elevators to store the grain which his country elevators would collect throughout the prairie provinces. How far would the Minister of Agriculture or any other private individual get if he or they acquired terminal elevator capacity at the head of the lakes, or at Vancouver, or at Duluth, and then said to me as a competing company or to any other private line company "I have capacity for the storage of grain at the head of the lakes, or at Duluth, or at Vancouver, or at Prince Rupert. Now I want grain to feed to my terminal elevator"? If he did that how far would he get? Would I, through my country elevators ship the grain I have collected to his terminal elevator? Would any other private operating company do so? No, not a bushel would he get. He would be bound, therefore, to enter into competition by a system of gathering elevators throughout the country, collecting the grain from the farmer, and then feeding his terminal. The grain trade say that the pool should proceed by the same method. But is it proceeding that way? Having first sold the idea of the pool to a considerable portion of the western farmers it binds them upon contract to do what? To deliver their grain to the pool. The question then arises: How shall this grain that is contracted by farmers to be delivered to the pool reach the pool terminals? The solution is along the lines of ordinary competition, and this would be the procedure: The pool, having decided to go into the grain handling' business, and having acquired terminal space at points of export, would then proceed to erect gathering elevators throughout the country, known as country elevators, and it would be through such elevators that it would feed its terminals. But so rapidly has the idea of the pool grown that it finds itself with more grain under contract than it has country elevator capacity .to handle. Therefore instead of at once proceeding to build sufficient country elevators to collect the grain from all pool farmers, it now seeks to take a short cut which is not the .line that can be taken by an ordinary competitor. And so it conceived, the idea

Canada Grain Act
that it would get legislation, passed so that it could say to the private line companies, "You must not only accept pool grain .for Storage at country points as you have to do at present under the act, but you must send it to such terminals as the pool farmer directs you to send it, not to your terminals at the ihead of the lakes, or at Vancouver, or at other points." Where will the pool farmer, under these circumstances, direct the private line companies to send the grain? The answer is obvious-to the pool terminal. Pool members will tell you frankly that is the purpose of this legislation. If you read it you will see that it gives the owner of grain the right to demand delivery in two places-either at the country point, where Stored, or on track in cars at the terminal .elevator which it sees fit to name, which is in fact the pool terminal elevator. I want hon. gentlemen to note this fact- because it is a matter of considerable importance, and I appeal to the fairminded-ness of those who have invested money in private enterprises-that if this bill goes through, a pool farmer can come to me, if I am the owner of a line of country elevators and terminals, bring in 1,500 bushels of wheat and say to me: "Store my wheat." I have to take it, as I do now under the law. He can come back in ten or fifteen days or two months, if the grain is still there, and say to me: "I want you to ship that grain to the pool terminal at Fort William." I would do that as the act now stands, provided he accepted delivery at that country point and took the chance of leakage and other hazards en route. But if this bill goes through, he can say to me: "I want you to deliver that grain not at your terminal but to the pool terminal, and you have to guarantee my weight and grain at the pool terminal." That is the situation. Under the existing act he can drive to my elevator in the country and say to me: "What grade will you give me for this grain?" I say: "No. 2 northern, a certain per cent dockage." If he in his experience and judgment considers that that is the proper grade and proper dockage, he will say: "Agreed; take it in store." I have got to take it in store. As the law now stands I am responsible for the safe keeping of that grain. I give him a warehouse receipt which certifies that I have received into store at that country point 1,500 bushels of No. 2 northern wheat, with a certain dockage. I must keep that in store; but if I need extra space in my elevator I have the right, upon giving him forty-eight hours' notice, to ship that wheat to some 14011-2761
terminal point; or he himself can come in at any time the grain is in storage and, having ordered a car, order it loaded. According to the practice of the grain trade at present, when I ship it from my country point to my own terminal elevator I guarantee to him at the terminal point grade and weight. That is as the law now stands. Having received into store at the country point 1,500 bushels of No. 2 northern, I must deliver to him at my terminal elevator at any terminal point he may name a warehouse receipt calling for the same weight and grade of grain. But mark you, under the existing law I can afford to do that. I can afford to guarantee him weight and grade at the terminal point, because not only have I got the handling charges of that grain at the country point, which are fixed by law, but having transmitted it to my terminal I have there the benefit of the additional charges for handling and storage. There is no member of the pool but will acknowledge that the profitable end of the grain business is at the terminal elevator. That is the most lucrative part of the business.


Some hon. MEMBERS:: Hear, hear.


Donald MacBeth Kennedy: I observe
that hon. members agree. Now if by legislation you divert the grain from my country elevators to the terminal of the pool, which is a competitor of mine, what do you do? I handle the grain only at the country point, which is the least paying portion of the handling. How will that affect the grain trade in the west?


Mr. SPENCE (Maple Creek):: Why?


Donald MacBeth Kennedy: The hon.
member asks me why. I am prepared to discuss it, but frankly I do not want to labour the question before the House. I appreciate the courteous hearing which has been accorded me. I am a new member and diffident about taking up too much time, but this question is of such vital importance to the west that I press it. Without any intention of being discourteous, I would ask hon. gentlemen to make a note of their questions, and when I have finished my argument, to submit them to me, when I will answer them frankly and candidly, so far as I am able.
I want hon. members to follow this and understand it. Those in favour of this legislation will endeavour to impress you-and perhaps they will succeed-with the argument that there is justification for that diversion of the grain from my country elevator and my terminal to their terminal. They feel confident, I have no doubt, that they can
Canada Grain Act

advance reasons for that diversion. As to that I will speak a little later, but at this point I want to bring home to hon. members of this House the fact that my grain handling plant is an economic entity, consisting of terminal capacity and country elevator capacity. My money has been invested in a system of grain handling whereby, in effect, the practice has been for me to gather grain in the country and transmit it to my terminal. That is why I built the terminal and the country elevators. They now ask that a change in the manner of handling that grain be brought about by legislation, with this effect: that every poo! farmer or other farmer who stores grain in my country house can come to me any say: "Kennedy, I want you to send that grain which you have in storage in your country plant, not to your terminal elevator but to the pool terminal." What is the effect? It must be obvious. If hon. members agree-and I know by then . attitude that they have agreed-that the profitable part of my plant is the terminal plant, then every carload of grain which, under ordinary circumstances would be fed to my terminal plant by my country elevator, is diverted from my country elevator to their pool terminal elevators, is a loss of business to my terminal and a gain of business to theirs. I want hon. members to observe that in the handling' of grain the pool is a competitor and a real competitor. Is that proceeding along sound business lines of legislation?
If the private grain trade of the west had a legislative monopoly on the gathering of grain there, well might an organization of farmers such as the pool come to this House and say: You by legislation have given a monopoly of gathering grain in the west to private grain companies. We now demand legislation whereby we can get to our terminal elevators at least that portion of grain which belongs to the farmers who have entered our pool. If that were the situation I would not have the temerity to stand here for one moment to-night to oppose it, but that is not the situation. The grain trade of the west is not controlled by any legislative mono-' poly; it is being handled, as I say, by men who have risked their millions by way of investment in building up the business. They say to you to-night and they say to the pool: We take no issue with your objective to transmit wheat to your pool terminals and keep it in your own hands throughout the whole process of gathering and feeding it to the world markets as you like. But we do take strenuous objection to your asking for legislative powers that will compel us to use

our country plants, not only to gather and store your grain, but having so gathered it, to transmit it, divert it from our terminals to the pool terminals, our competitor, thereby resulting in loss of business to our terminal plants and, by the same token, in gain of business to the terminal plants of our great competitor.	[DOT]
Moreover the effect of this legislation is to compel me as a private grain dealer, not only to divert the grain from my terminal elevator to the pool terminal, but, having parted with the custody of the grain at the country point thousands of miles, it may 'be, from the terminal elevator, to assume absolute responsibility for its safe delivery at the pool terminal on track guaranteeing grade and weight. If there foe leakage en route who suffers the loss? If there be accident en route who suffers the loss? It is up to the private grain dealer to stand that loss without any remuneration. That is the situation. They urge witfi much show of reason this principle. For instance a pool farmer says: "I have Cultivated the soil; I have grown this carload of wheat on my farm; I have gathered it, threshed it, brought it in and stored it in a warehouse belonging to a private company. Why should I not have the right to go to that warehouse and say: Deliver to me my identical property, my grain, in a car here?" They have that power; they can get that identical grain by virtue of provision in the Grain Act with respect to special binning. Of course in the rush season there are not special bins available for all who want them, but at present they have the right to come to my elevator and say: "I want to 'special bin' this," and if there is a bin available, under the law' I must allocate that bin upon request, giving him a warehouse receipt for the weight of grain stored. When he orders his car I put the wheat in his car and I am done with it.
On the other hand if there is not special binning capacity and a Sfarmer comtes to me with a carload of wheat, since no special bin is available the grain must be mixed with other wheat because you cannot keep a separate bin for every farmer. As the wheat must be mixed with other wheat we must first decide what grade that grain is. I examine the grain and say: "I will give you No. 2 northern." Hon. members will remember that I am dealing with men experienced in grading grain. If the farmer is satisfied with that, he says: "All right." I tell him how much the dockage will be and he agrees to that. The only thing that remains to be done is to weigh the grain. I put the grain in a bin with other grain which I have graded

Canada Grain Act
No. 2 northern. Another farmer comes along and the same thing happens, so that very soon in the one bin I may have the grain mixed of half a dozen or a dozen farmers. I shall have No. 1 northern in one bin, No. 2 northern in another, No. 3 northern in another and so on. At once hon. members will see that the identity of that grain is lost. Unlike furniture, the identity of which can be retained in storage, the identity of grain is lost as soon as it is mixed with other grain. But the farmer has a warehouse receipt that shows that I have taken into storage 1,500 bushels of No. 2 northern with a certain dockage. There is the right on which he stands. There is the document on which I must settle.
He has two rights. If he wants to take charge of that grain at the country elevator he orders a car. He comes to me and he says:	"Kennedy, load my grain into car so
and so." I do it. If he takes charge of that car, at once you will observe the practical difficulty arises that is urged by the western grain growers, and I accede to it. I load the farmer's grain in that way and I tell him I have weighed 1,500 bushels of No. 2 northern into that car. He may have a doubt as to the weight in that car; he may have some doubt as to the grade. That car is shipped and it arrives at the terminal fifty or a hundred bushels short. He comes back to me and he says: "Kennedy, my car is fifty or a hundred bushels short," as the case may be. I ask my operator and he says: "I weighed in the full weight." The question arises: Why is it short? Did it leak in transit? That is the question to be decided between the farmer, the railway company and the elevator company and it presents a practical difficulty. So in the trade the practice has developed that instead of the farmer taking delivery at the country point, with the exception of at the outside about five per cent, he takes delivery at the terminal elevator of the company that has his grain in storage at the country points, and the company guarantees his weight and grade, taking all chance of loss in transit by leakage and otherwise. By this legislation he wants the right to take delivery not at my terminal but at the country point and yet have the company guarantee weight and grade at the distant terminal. Why? The reason is obvious; it is because he has en-10 p.m. tered into the grain handling business and he wants to get the grain to feed his terminals. So he says: Give us a law that will make the private company not only deliver the grain at a country point but guarantee the weight and
grade not at the country point of delivery but at the pool terminal at Fort William or wherever it may be.
Now, it may be urged: You took into store 1,500 bushels of his grain, No. 2 Northern; if you load it into his car on the track at the country point he is not there perhaps when it is loaded, and if he is he cannot tell by looking at it its weight nor its grade; therefore why should you not guarantee it at the other end? He has his remedy. Why should I be asked to give up possession of the goods in my storage, turn them over to his custody and let him take them a thousand miles or more on a car that he has ordered from the railway, not I-it may be full of leaks so far as I know-why should I be bound to run all the risk without the custody and guarantee-to him weight and grade at the other end? Suppose he puts this question: Well, if you do not guarantee weight and grade at the other end, how do I know I will get there the weight and grade my certificate admits? This is the way the law now stands, as I have already stated: If the grade remains in my custody and is shipped through my terminal, I give him a terminal warehouse receipt that he can go on the market with and demand delivery from my terminal of the exact quantity of grain that his certificate calls for in weight and grade and dockage. But he says: I do not want to do that, I want this legislation to get around that very thing; I want my grain to go to the pool terminal, not to yours. Well, this is my answer-the same answer that I would give to any other competitor: If you want the grain to go to your terminal, then you do what every other dealer in grain does, you provide the facilities in the country for gathering that grain; and if you build or acquire or lease your own country elevators and gather that grain, you can ship it to Timbuctoo if you wish, or to any other point. That is the answer.
Is that a solution beyond their power? If this law goes through-and a man does not need to be in the trade to know what will	happen-instead	of the terminal
elevators of the private line companies working to capacity, they will be working on part time. I wonder if eastern members realize what the investment in a terminal elevator means? Approximately the cost of a terminal elevator is $1 per bushel of capacity; thus, a terminal of 1,000,000 bushels capacity means $1,000,000 of investment; of 2,000.000 bushels capacity an investment of $2,000,000. Now, I direct this situation to the attention of any hon. mem-
Canada Grain Act

ber or any group of hon. members: Suppose you have $1,000,000 tied up in terminal elevators, just as soon as you begin to divert the grain that feeds those elevators and keeps them busy, so soon you begin to out down on your profit-if you have a profit- until you come to the point where you investment no longer pays a profit, and eventually. you get down to where it is a losing investment. You all know what that comes to. And so the grain trade say to the pool: We recognize you as a big competitor, as a growing competitor, as a serious competitor, but we stake our judgment on this-that it is efficiency which in the long run will get the business, and we are willing to pit our experience, our investment of capital and our method of handling grain against the pool method; we challenge you-if I may use that term-to proceed along the ordinary lines of competition, and we await the result with confidence.
Suppose pool members say, as hon. members who are urging this bill say:	Well, if
this legislation does not pass, eventually we will eliminate you anyway; if we do not get this facility through your country elevators we will build others and put you out of business. Well, what do we reply? Let me remark, Mr. Chairman, that when I say "we" I am not in the grain trade, I have not a dollar invested in it, and I am not acting for grain clients. I practise law in the city of Winnipeg, but so far as I know to-night, I have not one single grain company among my clientele. But I know something of the immense investment in the business, and it is because of that and because I come from the city of Winnipeg where this investment is centred that I discuss the question at such length. Well, what does the grain trade say in reply to that threat? They say: Proceed to collect your grain by building or acquiring country elevators, and having so collected the grain, ship it to your own terminals in competition with us; if you eliminate us by that method of competition, well and good, the best system wins. They say further: We are content to submit to elimination by competition; but we are not content, and we protest against being eliminated by legislation. For that is what the sponsors of this bill are seeking to do.
Now, I have pointed to the remedy open to the pool-to build its country elevators, collect its grain and ship that grain to its terminals. Is that impossible? How far have they proceeded with the solution? This far. I will divide the space so far as the 
storage of grain is concerned into terminal space-by that I mean space at any port of export at the head of the lakes, and at Duluth, Prince Rupert and Vancouver-and country elevator space. The total space in terminal elevators of all companies, including the pool, at the head of the lakes is,
64.700.000	bushels. Of this the pool ^owns or controls at the present time 17,450,000 bushels space. The United Grain Growers, which is also an association of farmers, controls at the lake head terminal space amounting to 3,100,000 bushels. The grain trade, as distinct 'from the pool and United Grain Growers controls 44,150,000 bushels space at the lake head.
That is only at the head of the lakes. Apart from that, the trade has terminal elevators at Vancouver and Calgary and at certain milling centres. Also, the pool has acquired from the Saskatchewan Oo-operative Elevator Company its terminal elevator at Buffalo with its present capacity of 1,100,000 bushels, together ' with an addition now in course of completion, which will be ready for this year's crop, of another 900,000 bushels capacity, making the total terminal elevator capacity controlled and owned by it at Buffalo 2,000,000 bushels. In addition to this the pool has leased the government elevator at Prince Rupert with a capacity of
1.250.000	bushels. This gives the pool terminal elevator space as follows:
Bushels
Lake ports	 17.450.000
Buffalo	 2,000,000
Prince Rupert	 1,250,000
Total	 20,700,000
In addition they have the right to terminal space in the government elevators at Vancouver of which there are two run by the Vancouver Harbour Commission. So much for the terminal space. For the handling of this season's grain the pool will control from one quarter to one third of the terminal space of all the elevators in the west.
Now we come to the country elevators. The total number of licensed country elevators is 4,292 according to a recent report, with a total capacity of 141,250,000 bushels. The pool now owns or controls, including the current year's building programme, the following: In Alberta it, will have built 33 and controls under contract from the United Grain Growers 186, making a total of 219; in Saskatchewan it has built and acquired recently through the Saskatchewan Co-operative a total of 571; in Manitoba for handling this year's crop it will have forty, making a total of 830 country elevators under its control for the purpose of gather-

Canada Grain Act
ing grain. In addition the western farmers, through the United Grain Growers, own considerable additional country space, and with that held by other private farmers' companies of a smaller nature it may be conservatively stated that the producers themselves own or control from a quarter to a third of the country elevator space for the handling of this year's crop. Out of approximately 4,300 country elevators the pool and its associated companies will have approximately 1,000 with which to take care of this year's crop. Therefore, so far as all space is concerned, it will own or control from a quarter to a third of the total space. You must remember, too, that the pool has only been in operation for a short time, and in a period of three years the three principal pools have gone thus far towards solving this economic problem. But where the shoe pinches is that they have signed up about 50 per cent of the grain and want all that grain in their terminal elevators. That is the rub, and we say to them, "Get it there the way any other company would get it".
Now I am going to appeal to the champions of the pool to forget for a moment, if they can, the political expediency of this legislation, and to view it as business men. If they had the money invested, as have the private grain trade how would they view this legislation? Is it to be supported by self-interest alone? Self-interest will dictate that any member of this House who is also a member of the pool will vote for this amendment, which is demanded by the pool. And if they recognize the necessity of catering to the wave of enthusiasm in the west in favour of the pool system of marketing, to which system I take no objection, they cannot help but support the amendment. But I ask them, perhaps without avail, to divorce themselves from immediate self-interest and from political expediency. I say to you that already, under your system of co-operative marketing, you have proceeded far; under propitious circumstances you have met with a large measure of success, from which I have no desire to detract. I congratulate the farmers of western Canada on the success which has attended their efforts through the pool, but having succeeded that far by. the usual means of competition and your own intelligently directed energ3r, I urge upon you to seek not unfair advantage by legislation, in order to bring about a- little faster what you yourselves claim you will do in any event by competition. Pass the word along to your men, if you like; tell the rank and file of the pool that the battle cry is to be, "No quarter to the grain trade
of western Canada". Men of British traditions have heard and given the slogan of "No quarter" before, and they have always accepted it. The grain trade can take no exception to such an ultimatum, but I ask you to pause and consider. Suppose the effect of your legislation should be to eliminate entirely private investment in the grain trade of the west; you will then eliminate, although you may not take it very seriously, a factor from the handling of grain which to my mind goes to the root of the handling of all commodities; I refer to strong competition. If you drive out private competition from the handling of grain in the west and place it in the hands of a monopoly, however ideal it may be in theory, I warn you that you are courting a danger from which you may some day be glad to flee. I say to you then, do not ask this House to legislate your competitors out of business; do not seek to crucify on the cross of political expediency an investment of $85,000,000; do not let us stamp Canada as a country which lightly deals with the rights of invested capital. Hon. members may say to you as they have said to me, "Where did they get the money? If we did wipe it out they would not lose very much, even though $85,000,000 is invested." Some have had the temerity to say, "They got it from us, and if we take it away from them they are not entitled to much sympathy". That is a vicious principle on which to proceed with legislation. The money is there invested in plant and equipment; do not lightly pass legislation that will tend to confiscate it.
In closing I say to this House that Canada needs private capital for its development, not only for the grain trade but for our resources generally. This money that stands to-night invested in the grain trade in the west to the amount of $85,000,000 was invested certainly not with any idea that legislation would be passed that would tend to confiscate it. I urge upon the House therefore to remember that the future of Canada demands this, that private capital shall not have any special privilege, but that it shall have at least such a measure of protection as will not only reasonably safeguard its investment, but will tend to attract to this country capital for its development.


Mr. CAMPBELL:: Mr. Chairman, I have no desire to take up much time debating this question because it has been fairly well threshed out in the committee on Agriculture and aroupd the corridors. I believe most members are fairly familiar with the case for both sides. However, in view of the statements put before the House to-night, I feel that there is an obligation on me to present
Canada Grain Act

the case from our side, and in opening perhaps I might give a brief history of the pool, what it is, and what it stands for.
The first pool operating in western Canada was that organized in the province of Alberta, which began its operations in 1923 and handled the crop for that year. The pools organized in Saskatchewan and Manitoba operated first in 1924. The three pools last year handled 81,500,000 bushels of wheat, besides a considerable quantity of other grains. This year it is estimated that the joint pools will handle at least 200,000,000 bushels of wheat, besides a very considerable quantity of coarse grains.
Some estimate of the importance of the pool and of the volume of its business may be gathered from the fact that next year's business will probably more than double the annual gross earnings of the Canadian Pacific Railway. In one interim payment made by the pool in March last, the amount of S37,000,000 was paid out in one day to the farmers. That was one of four payments. The pool now has offices at Vancouver, Calgary, Regina, Winnipeg, Fort William, Toronto, New York and Paris, and has made connections with agencies in every important country in the world. The pool will have in Alberta this fall for the handling of grain 33 of its own elevators, and will also have a joint control in the operation of 1S6 others, or a total of 219 elevators. In Saskatchewan they will have 571 elevators, and in Manitoba by next fall they will be operating 40. This makes a total of 830 elevators, which is 20 per cent of the total of 4,300 elevators in western Canada. The total terminal capacity at the head of the lakes is
64,700,000	bushels. Of this the pool at the present time controls 17,450,000 bushels, or 27 per cent of the total. The total capacity of the 4,300 country elevators in the prairie provinces is 143,351,000 bushels.
All this controversy arose, I may say, over section 159, which was the original section in the 1912 Canada Grain Act. As we understood that section, it did give to the farmer the right to determine the destination of his grain, and I do not know of a single instance in the last twenty-five years where a farmer putting his grain in a special bin in a country elevator was ever refused the right to ship that grain to any terminal of his choice. There are many farmers in this House to-night on both sides who have exercised this privilege for the last twenty or twenty-five -years, and to whom it has never been denied.
We have two farmer elevator companies operating in western Canada-the Saskatchewan Co-operative, and the United Crain

Growers. In my own district many a shareholder in one of those companies has found that his own elevator was plugged, and that he could not take his grain in there, but he was able to secure a bin in one of the line elevators, and was always permitted to have his grain shipped from that elevator direct to the terminal elevator of his own company. I do not know of a single instance in which he was ever denied that right. The elevator companies naturally must have assumed that the law compelled them to do that, or they would not have carried it out.
The particular clause which deals with this phase of the situation was, however, rather ambiguous because it says, as anyone may see who will look at section 159, "if either party so desires." That is in reference to shipping grain to the terminal of his choice. That being somewhat ambiguous, Chief Justice Turgeon, with the consent and approval of the Board of Grain Commissioners in drafting the new clause introduced in the bill of last year made it read, "if he so desires." He put it beyond all doubt that the right was in the hands of the farmer, and the farmer only, to determine the destination of his grain. That, I may say, was the clause in bill No. 113 of last year, the bill which had its first reading in this House on May 11, 1925. In the Agriculture committee last year, however, the grain interests were able to secure the passage of an amendment which took away from the farmer that right by altering the wording of this clause, and in addition, not being satisfied with that, they added another clause, which distinctly and specifically relieved the country elevator from all responsibility for weight and grade in case the farmer exercised this right.
The argument is used-I think it was used by the hon. member for Winnipeg South Centre to-night-that the farmer still has the right to determine the destination of his grain under the present act. Technically that is so; in reality it is not so, because under this disability, with the country elevator relieved of responsibility for the weight and grade, the farmer cannot possibly exercise that right. I do not suppose there was a single instance in western Canada last year where the farmer would take that chance.
In dealing with the situation as regards the country elevator, I may say that the transportation is part of the system. The country elevator is not a private institution. It is a semi-public institution. It has a public duty to perform. It is licensed1 by a public body, and recognized by law, and given certain rights and privileges, and placed under cer-

Canada Grain Act
tain restrictions. Being given those rights, it has certain public duties to perform, and part of those duties in the handling of special bin grain is to guarantee the weight and grade at the other end; that is, when a farmer secures a special bin in a country elevator and has a carload of grain put in there, when it is loaded out on the car on the track the responsibility of the elevator has not ceased. The system and the law has always recognized that the farmer, not being in a position to check the weight and the grade in the car, must be guaranteed that weight and that grade when it is delivered at the terminal elevator. I might add that the handling charges are based on that. The elevator companies have staffs of men at Winnipeg who examine these cars las soon as they arrive there. They are notified by the railway company, and they examine the cars to see that there is no leakage or damage to the car itself, and they check the grade and the weight. They have a similar staff at the terminal points, at Port Arthur and Fort William, and at other points to which the grain may be shipped. This, I may say, is included in the handling charges. That is the elevator company are supposed to be paid a sufficient sum to reimburse them for the cost of examining these cars.


Donald MacBeth Kennedy: What is the charge?


Milton Neil Campbell: The regular charge for special bin grain is 1J cents per bushel, but they are permitted by the Board of Grain Commissioners to charge 2i cents per bushel. I may say that except in very rare instances they do not exercise that right. They prefer to handle it at If cents a bushel which is the prevailing rate charg<?d in western Canada.


Donald MacBeth Kennedy: What do the country elevators get now, under the law, for handling grain?


Milton Neil Campbell: Under the law the elevators are permitted to charge 2J cents per bushel.


Donald MacBeth Kennedy: That is for special bin grain?


Milton Neil Campbell: Yes.


Donald MacBeth Kennedy: And for grain other than special bin grain lj cents?


Milton Neil Campbell: Yes.'


Donald MacBeth Kennedy: If this bill passes you will be allowed to have the grain diverted from the country elevator direct to
your pool terminal. With the private company guaranteeing wheat to the pool terminal, is there not an additional charge provided for under the proposed amendment?


Milton Neil Campbell: The present regulations provide for a charge of 2| cents a bushel, as I said, but the elevator companies do not exercise that right.


Donald MacBeth Kennedy: I am not
talking about special bin grain but grain stored in country elevators. If this bill passes will they not be entitled to charge lj cents for handling grain at country points?


Milton Neil Campbell: In the first place, there being no extra responsibility, it is not necessary for them to make any extra charge. The Canada Grain Act, I may explain for the benefit of the hon. gentleman, does not set the charges; it authorizes the Board of Grain Commissioners to set charges that in their estimation will be fair. The Board of Grain Commissioners meet every year for the purpose of discussing this question with the grain trade and setting what they consider a maximum charge. If they find, after a few years, that the elevators cannot be made to pay we have authority to say-and I say here tonight on the authority of the board- there is no question whatever but that the board will raise the rate in order to permit the operations of the elevators to pay.


Donald MacBeth Kennedy: Another
question-


Milton Neil Campbell: I think the hon. member should be fair. He asked me not to interrupt him while he was speaking.


Donald MacBeth Kennedy: As you gave me a most attentive hearing I was going to ask you whether you would prefer that I should ask you these questions as the points arise, or reserve them until you are through. If it is your wish that I should reserve the questions until you are through, I shall gladly do so.


Milton Neil Campbell: I think I would prefer to take the hon. gentleman at his own word. He appealed to myself and others not to interrupt him while he was speaking. I am quite ready to accord to him the same courtesy he accorded to us; I am quite ready to answer any of his questions at the close of my speech.
I may say there are two classes of grain. These are subdivided into other classes but for the sake of argument I will say there are simply two. The first class is street grain and the second is special bin grain. Street grain
Canada Grain Act

is the grain that comes in by wagon load; that is where the farmer cannot make up a car and he simply sells his grain by the wagon load direct to the elevator company. Special bin grain is grain that the farmer does not want to sell at that particular time. He simply uses the elevator company for warehousing purposes. He secures a special bin, has his grain placed in that bin, and has it shipped out to his order to whatever elevator he chooses.
Dealing now with the question of weights and grades out of the country elevator, I may say that the farmer authorizes the elevator man to order the car when he wants that grain shipped out. The farmer is out on his farm five, ten, perhaps fifteen or twenty miles from town in a good many cases. He may be in a place where -there is no telephone, and he has no idea when the car will arrive. Sometimes the farmers have to wait months, actually months, before they can secure the necessary cars. As occasionally happens a trainload of cars will arrive late in the evening in a small town and the grain will be lo-aded in-to them by the elevator. In the busy season the elevator man will go to work at night to load that grain out; the farmer has no means of knowing when that is done. The first thing he knows about it, perhaps, is when these cars are hundreds of miles away on the road to the Great -Lakes. Therefore the argument that the farmer can be on hand to see his grain loaded into -the car is absolutely absurd. Any practical farmer in the House knows that it cannot be done except in very rare instances-in fact I will go further and say that I -think in the majority of cases the grain is not weighed at all. When his grain is put into special bins the elevator -man gives him a ticket for so many bushels. In many cases when that grain is loaded i-t is shot direct from the bin into the car; it is not put through the scales -at all. The elevator .man will -report to his company not the exact weight but what the storage tickets call for. We do not assume that these elevator men are all dishonest, although in many cases they are. The police court records of western Canada will show a great many cases where these elevator men have been dishonest. However, that is not our reason for objecting to their weight. It is very easy for the most honest man to -make a mistake. The farmers bring their wheat to the elevator in wagons. I have seen ten, fifteen, and twenty teams lined up behind each other waiting to unload into the elevator. Farmer No. 1 has a certain bin. He asks that

his grain be loaded in that bin. The elevator man starts his engine and the grain is elevated into tha-t particular bin. T-he very moment the first farmer's team pulls out another man comes in who has another bin. The elevator man then switches his spout to another position and it is very easy sometimes for him to get grain mixed. Any elevator man will tell you that one hundred or three hundred bushels of one man's grain may very easily get into another -bin. When a particular car is loaded it is sealed up and shipped out. WTe will say in this particular case the farmer exercises the technical right which the act gives him of shipping to the pool terminal. But when the car gets there it is found that it is 100 bushels short. The a-ct distinctly states that the elevator company shall not be responsible for that weight. Who does the weighing? The weighing in to the terminal elevator is done by government weighmasters who have no monetary interest in the grain there and whose scales are checked up repeatedly. Their scales are inspected and representatives of the elevator company stand by the scales and see every pound of their own grain weighed. Therefore I say the farmer has a perfect right to refuse to accept the weights set -by the country elevator. But what does the elevator company do? They refuse to accept the government weights. In effect they state that they have not confidence in the government weighmaster, and -they tell you that they have no right to examine these cars or to check weights and grades. That is another argument that cannot be backed up. When a farmer exercises his right to have a car of grain shipped to a pool- terminal the elevator company cannot -govern that but it can endorse on the bill of lading we will say for instance, "Advise the Pioneer Grain -Company, Winnipeg". When a car of grain so billed arrives at Winnipeg, notwithstanding the fact that it is pool grain and that it was shipped by a farmer through a -line elevator, that elevator company is immediately notified by the railway company. They have a staff for that purpose and they can go and examine the car. If there should be a broken seal, if there should be any sign of leakage, they immediately report it to the railway company and -they have a claim for damages against the company if it does not weigh out at the terminal elevator. When it -arrives at the terminal they have the same opportunity to check it. They are in identically the same position as they would be if the grain were going to their own elevator, and I defy the hon. member from Winnipeg South Centre, or

Canada Grain Act
anyone speaking from the viewpoint of the grain exchange to-day, to show me any material difference between the case of a car shipped direct to their own terminal, and the case of a car billed as I have suggested, going to the pool terminal, where they have a terminal of their own.


Donald MacBeth Kennedy: I accept
that challenge.


Milton Neil Campbell: All right. The question arises, why does the farmer want to determine the destination of his grain? There are various reasons, and I will not give them in detail. I will give a specific instance to illustrate one of the reasons why the farmer wants his grain to go to his own terminal. I am speaking now of course from the standpoint of the pool, but before I am through I propose to speak from the standpoint of the non-pool farmer, because we are fighting the battle of the non-pool farmer just as much as the battle of the pool farmer. A farmer residing in a part of my constituency last year had two fields of wheat, one grown on summer fallow and the other on spring plowing. When he sent his samples to Winnipeg they were each graded No. 2. Under our grading system they graded exactly the same, but the grain grown on the summer fallow had a much higher protein content, which made it more valuable for milling purposes than the car of grain grown on spring plowing, although the grade was identically the same as the other. The farmer sent samples to a grain company in Minneapolis. One of them they passed on as a straight grade, and they would not pay more than the market price for it. On the other they offered a premium of 26 cents a bushel, because it was very much more valuable for milling ' purposes; the higher-priced would have netted the farmer nearly $400 per car. That is one of the reasons-I do not say the only one-why we want our grain to go to our own terminals, or why the farmer wants to determine the terminals to which his grain shall be sent, and also the reason why the grain companies want to have all the grain sent to their own terminals, whether the farmer wants it or not. We are not denying to the grain companies the right to send their own grain to their own terminals. They have a perfect right to do it and to get all the premiums they can on their own grain. But we object to giving them the privilege -it is not a right-of sending grain that does not belong to them to their own terminals, selling some of it as premium grain, securing the premium price for it, and delivering to the pool terminals grain of a similar grade,
but of a quality that does not command the premium. That is one of the reasons why we want our grain to go to our own terminal and one of the reasons why they want to ship it direct to their terminals.
The argument has been frequently used that the country elevator system and the terminal elevator are a unit, and that if you separate them you destroy the system. The hon. member for Winnipeg South Centre stated that first a company builds a line of country elevators; that then they must of necessity build a terminal to handle the grain at the other end, and that if we use country elevators and ship the grain to whatever elevator we like, we are simply destroying the system. On the face of it I will admit that it looks plausible, but when you examine into it you will find there is nothing in it at all. I ask the member for Winnipeg South Centre, if that be so, how do the government terminals exist at all? Because the government own a tremendous amount of terminal space and have not one single country elevator, and it is only in so far as we depart from the present law that the government elevators are able to get any grain at all. The law to-day actually prevents grain going to government elevators. It is a direct discrimination against them, and I may say for the benefit of the hon. member and those who agree with him that a considerable number of grain companies operating elevators in the prairies to-day do not own terminals a tall. One such company is operating in my constituency, and so far as I know they make good profits and earn good dividends. One of the largest companies in western Canada, the one that showed the highest profits, was the Alberta Pacific Company. They have shown substantial profits, although they never owned any terminal elevator.
The question is asked, if the pool grain is passed through the country elevator and then all of it is permitted to go to the pool terminals, what are they going to do with the other terminal elevators? What is going to be done with them? I may say at the outset that there is not a bushel of terminal storage at the head of the lakes more than we need in a year when there is a good crop. That is proved by the fact that last year the pool in the 'busy season had to divert 5,000 cars of its own grain which it was not able to take care of itself, to outside elevators. Take an extreme case: suppose that all the local elevators of a certain company were used for pool grain, and not one bushel of grain was permitted to go to their own terminals- of course such condition is impossible but
Canada Grain Act

we will take it as an hypothetical case-it would simply mean that the other terminal elevators could not accommodate that grain, and that particular terminal elevator would have to be used, either purchased or leased in some way. We all realize that in such a case we are up against economic laws. The men operating the pool are sensiblte business men, and they know that if they go to the terminal elevator and offer either to buy or lease, they must pay the value. If they buy it, they must pay the replacement value, and if they lease it they must pay sufficient to provide a good dividend on the money invested and all operating charges. They would have to do it if they built it themselves. There is no desire on their part to confiscate anything, nor could they do it.
The.hon. member for Winnipeg South Centre tried to make a strong point of vested rights. He told us that there was invested in the . grain handling facilities in western Canada about 185,000,000, and that this investment was going to be seriously jeopardized if the amendment went through. A good deal of this investment is government money. They have a very large proportion of it. In addition to that, the pool itself has about a third of the investment. Well, perhaps I am not correct in saying a third. The poo! has about a third of the terminal storage and a smaller proportion of the country elevators, but at any rate, deducting the government investment, deducting the pool's investment, deducting the investment of another farmer's company, the United Grain Growers, I think I am safe in saying that the interests that are fighting this amendment to-day have an investment of not more than 145,000,000. On the other hand, what has the farmer got? According to last Canada Year Book the farmers of Western Canada have an investment of $3,350,000,000, or eighty times as much as the grain trade. My hon. friend will raise his hands in holy horror at the idea of jeopardizing an investment of $45,000,000, but if the amendment does not go through we are injuring vested rights eighty times as great. The secretary of the Grain Exchange, addressing the Agriculture committee, stated quite frankly that the pool could put the grain men out of business in two years. His exact words were that they could put them out of business in two years anyway. Supposing that to be so, supposing that in two years' time most of these grain companies go out of business, what will be the position of the non-pool farmers? because there will always be non-pool farmers. I am a strong supporter of the pool myself; my grain goes [Mr. Campbell. 1
through it; I believe in supporting it, and I do not think I shall have any reason to change my mind. But I am not so optimistic as to believe that the day will ever come when every bushel of grain in western Canada will go through the pool, I think there will always be a grain exchange and always non-pool farmers. I ask hon. gentlemen then to consider seriously the position of these companies operating on the grain exchange and the position of nonpool farmers if this amendment does not go through. I am really arguing from the standpoint of my hon. friend, only I am looking ahead a couple of years. I am quite prepared to make the prediction now that if this amendment does not go through, within two years you will find officials of the grain exchange and these lawyers who are representing them here to-day coming to Ottawa and pleading with tears in their eyes to put through, in the interest of the grain companies and the non-pool farmers, the very amendment they are asking you to reject to-day. There is no question about that.
In my constituency there are a number of sidings where this year there will be none but pool elevators. That means that nonpool farmers at those particular points will have no other means of shipping their grain except over the platform, and it is only practicable to use that at certain times. The law as it stands to-day would at these points give the pool elevator a distinct advantage. Suppose a farmer thinks he has premium grain. He wants to take advantage of that fact. He puts it into a special bin in the pool elevator; he instructs the pool to ship it; but the pool exercises its right under this act- there is no reason why it should not-and ships it to its own terminal. If it is premium grain the pool will secure the premium and it will go into the pool for the benefit of the pool farmers. The farmer, the owner of the grain, will have delivered to some grain company to whom he wishes to sell his grain, grain of a similar grade, but the stuff is not premium grain. There is no question about that. The men who are operating the pool elevators are shrewd business men; they will not let an opportunity like that pass, and since the grain companies take advantage of the present law, most assuredly the pool elevators will take advantage of it themselves. What is then the position of the non-pool farmer? What is the position of the independent grain company operating on the grain exchange? There may be some of them who want to buy grain at points where there are none but pool elevators. They may buy grain through the country merchant or dealers

Canada Grain Act
working on commission, but the law distinctly prevents them from procuring it-a distinct discrimination. I think I am safe in predicting, as I said before, that if this amendment does not pass now, within two years you will see this same host of gentlemen who are in the corridors to-day, pleading with tears in their eyes for us to pass this very amendment in the interest of the grain exchange and the non-pool farmers.
I	want to make it distinctly understood that while we may be primarily representing the pool, we are pleading for a cause that is really in the interest of all the farmers and will eventually be in the interest of the grain trade itself. How does it happen to-day that we find the grain trade lined up on one side and the pool on the other? It is simply a coincidence, because it happens that the pool have about 50 or 60 per cent of the grain, but only a small proportion, about 20 per cent, of the country elevators. So the injustice in the aggregate is done to the pool. But in two years, according to Dr. Magill's prediction, the situation will be reversed and there is no doubt that the pool will have 80 per cent of the elevators and 80 per cent or more of the grain. Then what will be the position of the farmers who own the other 20 per cent of the grain, and what opportunity will the man operating on the grain exchange have-because I think there will still be a grain exchange-to secure that grain in its purity directly from the farmer?
The question of rates, of course, has figured very largely in this debate. The grain men tell us that if the country elevators are taken away from them; that is, if we are allowed to use the country elevators for storage purposes only, they will lose a great deal of money because the country elevators do not pay. I am not certain whether that is true
or not, but I am not going to
II p.m. argue the point. To me it is
immaterial whether they pay or not. But if they do not pay the fault is with the elevator companies themselves because they are permitted for " special bin " grain to charge 2% cents per bushel, but they charge only 1J cents. It is true that on the other stored grain they are permitted to charge only 1| cents, but we have it on the word of the Board of Grain Commisisoners that if necessary they will be permitted to charge higher rates and we know they must be so permitted if they cannot be operated at a profit at present rates. The question arises why they do not exercise the right they have to-day to charge higher rates than they are now charging. The whole situation is this,
that if the local elevator paid very well many country merchants, many groups of farmers, would go in and build elevators themselves. That is a condition the grain trade do not want; so by operating their country elevators at a loss they are able to secure a complete monopoly of the receiving end, and they can easily make up at the terminal what they lose at the country point. That is the situation. They are not frank and honest with us to-day in stating the situation as it is.
They also use the argument that if they charge higher rate the farmers will load their grain over the loading plaform. There may be in western Canada points where the farmers have gone fairly extensively into mixed farming, where grain is only a portion of the total products, where perhaps they could, with facility, handle there a little bit of grain over the platform. But that is not so in the great majority of cases in western Canada. In my town we have five elevators and the car loading platform has accommodation for only two cars. It will take the average farmer from two to four days to load a car. With the quantity of grain shipped out of that point, even if they started loading on the first January and continued loading until the end of December of the same year, they could not load the total crop over the platform, and the amount the farmer would pay in demurrage charges would often be more than he would pay in elevator charges. Therefore that argument does not hold good, and if the elevator companies want to make the local elevators pay all they have to do is to ask for higher rates and be prepared to deal with competition at the country end.
There is one argument that our friends of the grain exchange have used around1 the corridors and in some of the committee rooms, but they have not used it before the Agricultural committee, nor publicly. It is this: They say that the pool to-day has an elevator at Buffalo and that if this amendment goes through and permits the pool to ship to their own terminal, it will assist in the diversion of Canadian grain to United States ports. What are the facts? In the first place the pool, I may say, did not build a terminal at Buffalo; they took over the Saskatchewan Co-operative Company's elevators and1 this terminal was included. But as the situation stands to-day at the Canadian ports of Quebec, St. John, Halifax and other points like that there are no elevators except government elevators, and as the law now stands it puts an impediment in the way of grain movement through those ports. Indeed it is only through the operations of the pool and of the law as
Canada Grain Act

we expect to have it after this amendment passes that grain can go forward to those ports. The figures prove that every bushel shipped to the port of Quebec last year was pool grain. It would not be company grain because they send their grain to their own terminals and they have no elevators at Quebec, St. John or Halifax. If hon. mem-ers will look up the prices, they will find that prices of grain futures on the grain exchange are for delivery at the head of the lakes only. A miller in England buys a certain quantity of grain for delivery in May, July, October and so on. The price on futures on the Winnipeg Exchange is quoted to him f.oJb. head of the lakes, and the head of the lakes only. He cannot secure a future price on St. John, Halifax or Quebec. Why? Because through the operations of the grain exchange these Canadian ports are discriminated against. There is no question about it. Let me ask you: Who all these years has been fighting for the retention of our grain by our own ports; who in this House for the last four years has been fighting for it? The farmer group in this section of the House, joined recently by another farmer group in another part of the House. One of the reasons why we want to retain the grain in our own ports is because we wish it to go to the old country in its purity. We know that in transit through the United States it has been debased in grade; we know that while it has borne the Canadian grade certificate the Americans have been taking off some of our better grain and substituting their poorer grain therefor, using our better grain for milling purposes and debasing the grade of our grain on the European market. Therefore the pool that we are representing will find it to its interest entirely to divert every bushel of grain it possibly can to Canadian ports.
And what about the elevator at Buffalo? Will all the grain received there go down through American ports? Not at all. The pool has that listed as a transfer house. Through the operation of the Canadian coastal laws, it is often more profitable to ship grain to Buffalo and then tranship it to Montreal than to send it direct to Montreal from the head of the lakes. That is the situation, because American ships can handle the grain on that route but are prevented from doing so on the direct route, and so they cut the rates under all Canadian routes. Consequently a great deal of our grain goes to Buffalo for transhipment to Montreal and it does not go to the ocean through American ports aJt all. That is why the pool lists this elevator as a transfer

house, and as far as I know it will not under ordinary circumstances send one bushel out through United States ports that can possibly be avoided.


Donald MacBeth Kennedy: Mr. Chairman


William Duff: Let me say to the
committee before there is any further discussion that we are on section 1 of Bill No. 8-contents of warehouse receipts. Of course, I understand I have to allow some latitude on the discussion of this clause, but I would ask hon. members to keep as close to the clause as they possibly can.


Donald MacBeth Kennedy: I think, Mr. Chairman, the matters that have been discussed by both the hon. member for Mackenzie (Mr. Campbell) and myself are all very definitely related to just that clause. Now, the hon. member has suggested two or three points and asked two or three questions to which I wish to refer. He states that the country elevators are semi-public institutions, and arguing therefrom he contends that therefore they should be available for whatever purpose the producer of grain desires. The hon. member also says that the country elevators are licensed and regulated by the government. That is true. So is a drug store, so is practically every institution in this country that does business with the public. But because they are so licensed and regulated, does it follow that they are public institutions, to be used by the public for whatever purpose they wish?


Milton Neil Campbell: May I be permitted
to correct the hon. gentleman?


Donald MacBeth Kennedy: They represent private investment of capital that is regulated under the terms of the (Grain Act. The hon. gentleman also says he is not sure whether the amount these country elevators are now by law entitled to charge for the handling of grain is remunerative. Now, generally he was very fair, but I think he overstepped the mark a little there. He tells us that our country elevators are entitled to charge 2-1 cents for specially binned grain. That is true. I ask him what percentage of the grain handled in the west is specially binned; is it 10 per cent, taking the whole of the west?


Milton Neil Campbell: Yes, considerably more.


Donald MacBeth Kennedy: Would the
hon. member say 15 per cent?


Milton Neil Campbell: Yes.

Canada Grain Act


Donald MacBeth Kennedy: Well, he is
misinformed.


Mr. EVANS:: It is 50 per cent sometimes


Donald MacBeth Kennedy: At a given
point perhaps. The hon. member for Rose-town (Mr. Evans) knows very well that 50 per cent of the grain throughout the west is not specially binned-not even 15 per cent.


John Evans: It depends on the season.


Milton Neil Campbell: 'In some years it is 50 per cent, at some points more.


Donald MacBeth Kennedy: That is
begging the question. I say, averaging the wheat crop year in and year out, not 15 per cent is specially binned.


John Evans: You are wrong.


Donald MacBeth Kennedy: Then it is
an honest mistake. That is my definite information. So much for the amount of grain on which they can charge that 2\ cents a bushel for handling. On all the other grain the rate fixed by the Canada grain commissioners is 1J cents a bushel. The hon. member for Mackenzie suggests to this House that he does not know whether or not this rate pays the country elevators. Well, if he does not know, he is the only member of the pool who is in that position. If he refers to the report of the Turgeon Commission, a commission that made a most exhaustive examination of the grain trade generally, he will there find it stated, and it is well known throughout the west by farmers and men in the grain trade, that the 11 cents per bushel handling charge does not pay for the money invested in those country elevators.


Mr. MILLAR:: The time was when they did pay. They do not pay now because their number has been unduly multiplied by the grain trade.


Donald MacBeth Kennedy: The hon. member admits that that rate does not pay at the present time?


An hon. MEMBER:: No.


Donald MacBeth Kennedy: I am speaking to the hon. member for Qu'Appelle (Mr. Millar). He has just interpolated that the time was when they did pay, but now they do not.


John Millar: I admit frankly they do not pay now. They did pay. The reason they do not pay now is that they have been unduly multiplied by the grain trade.


Donald MacBeth Kennedy: I thank the hon. member for that frank answer-which I could not get from the hon. member who represents Mackenzie-because the hon. member for Qu'Appelle has sat on several grain commissions and knows what he is talking about in that regard. Now the hon. member for Mackenzie says: Well, I have the word of the chairman of the grain commission that if this grain is diverted from the country elevators to our terminals, and if the rate of 11 cents does not pay, then he will regulate it so it will pay. Is that evidence upon which this House should act in view of the admission of the hon. member for Qu'Appelle that 11 cents a bushel handling charge does not pay those private companies? There is no provision in this amendment for increases in rates. The hon. member for Mackenzie suggests that if after 'three or four years' trial we find it does not pay, we have the word of the grain commission that they will raise the rate.


John Evans: Does not the hon. member know that only a few years ago they offered to handle the grain for nothing? How did they make their money then?


Donald MacBeth Kennedy: I do not know that as a matter of fact.


Milton Neil Campbell: Mr. Chairman, I rise to
a question of privilege. The hon. member is misquoting me. He stated that I said if after three or four years we find it does not pay we will raise the rate. I made no such statement whatever.


Donald MacBeth Kennedy: I accept that; I did not intentionally misquote the hon. member. Cut out the three or four years; what guarantee has this House that if this amendment is passed and it is found that these rates do not pay, they will be raised? I submit that this is not a sufficient ground on which to pass this legislation. The hon. member for Rosetown (Mr. Evans) suggests that the elevator companies are willing to accept a lower rate, or to handle it for nothing. I am so accustomed to extreme statements from the hon. member for Rosetown on any subject he discusses that I attach no importance to that remark. The hon. member for Mackenzie says assuming that the private elevator companies do go to the grain commission and say, "One and three-quarters cents handling charge in the country does not pay; we want to raise it to three cents," they will raise it. Suppose it is raised to three cents. In theory that is all right, but what will happen? Take a country point where there is a pool elevator and a private elevator; the private elevator raises its rates to three cents and the pool elevator stores grain for two or two and a
Canada Grain Act

half cents. How much grain will the private elevator get? You may ask how the pool can store it for two or two and a half cents while the other elevator charges three cents. The pool does not need to care; if it loses on storage charges at the country point under the co-operative system those losses will be made up at the other end. So far as the operation of its business goes the pool need not charge a cent at a country point; they could store the grain free. But they would have to make up the loss at the other end, and in the final result it would make no difference to the farmer. Therefore, as a matter of practical competition, the line elevators cannot raise their rates as against the pool elevators.


Some hon. MEMBERS:: Carried.


Donald MacBeth Kennedy: It is not
carried, I may say that since I have been in this House many hours and even days have been spent wrangling over matters of far less importance than this amendment. The hon. member for Mackenzie suggested that it is impossible for the farmer to be present at the country point when his grain is loaded. It is not physically impossible, but I will grant that as a fracti'cal proposition it certainly is not convenient, and if he wishes to term it impossible I will not quarrel with him. But as the law exists the farmer does not need to be present to see his grain weighed, because he has a warehouse receipt which calls for delivery of weight and] grade at the terminal of the company which accepted his grain for storage. The hon. member suggests to this House that if this amendment goes through, private line companies will still have custody of the grain from the time it leaves their country elevator; by some regulation which he suggests but which is not in the act, they are able to keep control' of and examine the grain at any point, and he challenges anyone to deny it. Any man familiar with the shipping of commodities knows that to be impractical and impossible. As soon as the farmer goes to the country elevator and says, "Load out my car of grain and ship it to the pool", what happens? The elevator operator must load that car of grain and bill it, not to his company at the pool but to that farmer at the pool, and at no point in transit has he the right of inspection or examination. I grant you that the hon, member might be able to work out some provision, to go along with this amendment, which would give him that right, but there is nothing of that kind contained in the act and we must take the act as it is.

The hon. member also suggests that they want their own identical grain delivered to the pool in order that they may get the benefit of any additional protein content of any particular wheat. I submit that that is an argument in favour of their objective. I do not dispute it, but let them build their own country elevators, gather the grain afid ship it, and in that way they will get the additional protein content. In querying the position I take as to the economic entity of a company's plant for handling grain, the hon. member suggested that terminal elevators and country elevators were not bound up as an economic entity. He said, "Will the hon. member for Winnipeg South Centre tell me how it is that the government's terminal elevators get on without country elevators?" Well, government institutions have a way of getting on without paying their expenses which does not apply to private institutions, and I tell him that the government terminals do not pay as such.


Mr. COOTE:: Does the hon. member know that the total earnings of the government elevator at Port Arthur over a period of ten years have been $4024,000 with an expenditure of $'1,474,000, leaving a net operating surplus of $3,450,000?


Donald MacBeth Kennedy: Let me ask the hon. member a question. Did they make that profit without handling grain?


George Gibson Coote: They made the profit without having any feeder.


Donald MacBeth Kennedy: Will you
tell me where the private line companies will get their grain, without country feeders?


George Gibson Coote: I suppose they will get it where the government elevators get their grain.


Donald MacBeth Kennedy: Not if the pool carries out the intention which is suggested as a reason for this amendment. They say they want to get the wheat into their own terminals, and certainly the private line . companies want the same thing. Where the government elevators will get their wheat it is difficult to say unless it is the surplus in busy seasons, and elevators cannot be made to pay on that basis.
Issue has been taken with my statement of the amount of money invested by the private grain trade in elevators, terminals and equipment. My figure of $85,000,000 did not include the pool investment, nor that of the private farmers' companies. This figure was

Canada Grain Act
.4359
given me from a reliable source as the actual present day value of the investment of the private grain trade; it is not $45,000,000, as suggested by my hon. friend, but $85,000,000.


Some hon. MEMBERS:: Carried.


Donald MacBeth Kennedy: It will probably be carried in just a moment. I do thank hon. members for their patience in listening to me. I am probably just as tired as they are. The history of this bill a year ago may be of interest to some of the members of the government who are in a hurry to get it through, and to this point I would particularly direct the attention of the Minister of Agriculture (Mr. Motherwell). I am sure he will correct me if I am misinformed, but I understand that in the committee on Agriculture last year the minister spoke in favour of the amendment, but when the matter came up for discussion in the House he voted against it.


Mr. MOTHERWELL:: That is not right.


Donald MacBeth Kennedy: I am_ glad to know that the minister is more consistent than my information led me to believe. I was wondering whether he was going to support or oppose this bill.


William Richard Motherwell: I have supported this legislation from its inception, and I am going to do so to-night.
Mr. KENNEDY (Winnipeg); ,And you have never spoken against it either in the House or in committee?


William Richard Motherwell: Never.


Donald MacBeth Kennedy: I wonder
how about the hon. member for Brandon, the leader of the Progressive party? I think I have the records to show that a year ago he not only spoke against this same amendment, but voted against it. Am I right?


Robert Forke: Even the best of men make mistakes.


Donald MacBeth Kennedy: I find myself wondering by what process of reasoning he has changed his mind from a year ago from opposing this measure to now supporting it, as I assume he is going to do. I have had no indication in the House of his attitude, although I had in committee. I am sure that, interested as he has been in the growing of wheat in western Canada, of which he is so fond of telling us, for a matter of thirty or forty years, he must have had sufficient experience a year ago to direct him how he should vote.


REVISED
[Stage Direction]
That brings me to this, and it is my last point. I would ask the House, is it because of any change in his opinion as to the merits of this bill that he is now supporting it, or is it because of political expediency? Is the passing of this Bill No. 8-I do not want to use a term that will be offensive to the acting leader of the government-
Ernest Lapointe: He has better information now.


Donald MacBeth Kennedy: This bill which did not receive the support of the government a year ago is now taken up by the government, I am assuming and I ask for what purpose? At least the circumstances to my mind are suspicious, and if we could put on Hansard the facts as I know they are in the minds and in the hearts of the sponsors of this bill, we would see some reason for this Bill No. 8, an act to amend the Canada Grain Act, being given such consideration by the government immediately after it was assured of the support of the group which is sponsoring this bill in favour of the amendment in connection with the excise tax on automobiles. I ask the House now to consider this matter on its merits. I leave it in their hands.


Mr. ROGERS:: After my long experience in western Canada, and in the grain business for a very long time, I trust that the committee will bear with me for just a few minutes. Legislation such as that which is now before the House is always dangerous in that it interferes with vested rights. You have been told to-night of the vested interests incident to the terminal elevators, and the country elevators as well, in western Canada. Legislation, I say, under those conditions is always dangerous and is, in general terms, unsound in principle and unjust in its application. May I hope that this legislation, when it becomes law, will not work out in that manner? I am free to say, however, that I believe the hon. member for Mackenzie (Mr. Campbell) and the other members who sit around him in that part of the House will be back here in one or two years asking that this legislation be repealed, believing and recognizing, as they will then, that it is bad in principle, that it will work out with disadvantage to themselves, and prove of no advantage to the grain trade of western Canada. (Believing that, Mr. Chairman, I only wish to express my regret that this legislation has been brought before the House. Still more do I regret that it is plain that this legislation is going to carry, because I am confident that it will work out to the detriment of the grain growers of the country, as it will work out to


EDITION
[Stage Direction]
Canada Grain Act
[Stage Direction]
the detriment of the grain carrying trade of western Canada. That is all I have to say. I just wanted to put myself on record that I am confident that in one or two yeans these same gentlemen who are promoting this measure to-night will be back here seeking a change in the act at the hands of parliament to relieve them from the conditions in which they are placing themselves by passing this legislation to-night.
Mr. ROSS (Moose Jaw):: I beg to move
to add as clause 2 of Bill No. 8 the following: 2. Subsection 2 of section 193 of the said act is amended by inserting the words "Moose Jaw" after the word "Edmonton" in the forth l:ne and also by inserting the words "or the words Moose Jaw" after the word "Edmonton" in the eight line thereof.


Donald MacBeth Kennedy: I would like the mover to explain the purpose of his amendment.


John Gordon Ross: The effect of this amendment is to make Moose Jaw an order point. The Board of Grain Commissioners at the present time are establishing a grain inspection point at Moose Jaw and to make it a practical success an order point has to be made there. That can only be done by an amendment to the act. When Edmonton and Calgary were made inspection points, the act was immediately amended to include Edmonton and Calgary in this section. That is all I am asking now with regard to Moose Jaw.


Donald MacBeth Kennedy: The hon. member seems to be putting the cart before the horse. He says that the Board of Grain Commissioners have under advisement the matter of making Moose Jaw an inspection point, and therefore he wants this amendment made. If that is the intention of the board I suggest that he should have been able to come here with the information that that had been done, or at least have produced some evidence before the Agriculture committee to show that it was the definite intention of the board to make Moose Jaw an inspection point.


Henry Lumley Drayton: Perhaps the minister could tell us at once.


James Alexander Robb: The government have after consideration and consultation with the Board of Grain Commissioners intimated that an inspection point will be established at Moose Jaw, and the Board of Grain Commissioners are now instructed to make preparations to inspect the next year's crop there.


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

[Stage Direction]
Hon. P. J. A. CARDIN (Minister of Marine and Fisheries) moved that the House go into committee to consider the following proposed resolution:
Resolved, that it is expedient to authorize a loan to the Harbour Commissioners of Montreal in an amount not exceeding $12,000,000 to carry on the construction of terminal facilities, upon approval by the Governor in Council of detailed plans, specifications and estimates for such works and tihe deposit of debentures of the corporation to cover said loan.
Mr. SPEAKER:: Is it the pleasure of the
House to adopt the motion?


Robert Rogers: No, Mr. Speaker. This motion proposes a very large expenditure and before we even permit its introduction we should have some explanation. I would ask the leader of the government that the resolution be allowed to stand until to-morrow, at all events until we are given some details. It is a very heavy expenditure to authorize in a few minutes.


Mr. CARDIN:: We are only dealing now
with the resolution. Full details of what is proposed will be presented on the second reading o'f the 'bill. We simply desire to advance the proposed legislation a stage.


Robert Rogers: You will present all the
details showing the necessity for this expenditure?


Pierre-Joseph-Arthur Cardin: Certainly.
Motion agreed to and the House went into committee, Mr. Duff in the chair.


Henry Herbert Stevens: I agree with the hon.
member for South Winnipeg in his request for information. The resolution deals with a large sum. I take this opportunity of saying that as far as I know Montreal has always paid its interest on advances from the government, and I think the harbour commission of Vancouver is in the same position. But this is a large sum, $12,000,000 and I would ask the minister-I am not expecting him to give it to me now-to be prepared to furnish information when the House is in committee regarding certain expenditures that have been made as to w-hich information was laid on the Table last session. I refer, for instance, to the cold storage plant in Montreal. Speaking from memory it was estimated, by the engineer of the harbour commission that the expenditure upon that plant would be $900,000, but I understand it amounts to pretty nearly $3,000,000. There was also a jetty, if I recall the facts aright, or other works, where the actual ex-

Montreal Harbour Commission
penditure exceeded beyond all reason the estimate of the engineer. Furthermore, there was some extension to the elevators proposed. These matters were dealt with in returns brought down last year but which we had no opportunity of discussing. I would therefore ask the minister to give an explanation of these wide discrepancies between the amount expended and the amount estimated. Then I think we are also entitled to a statement as to the amount of Montreal harbour bonds outstanding or held by the government, and the earnings of the port. I am sure the harbour commission have paid their interest, but the House ought to be informed as to the manner in which the interest has been paid and if there has been any delinquency in that regard.
I do not think there has been, but if not let us have the information in an absolutely official manner. I think a full statement of that character will tend to shorten any debate on the matter, and also will give the House confidence in voting a large amount of this character.


Pierre-Joseph-Arthur Cardin: I shall be pleased to give
all the details that have been asked for by my hon. friend when we reach the second reading of the bill.


Henry Lumley Drayton: In the meantime has my hon. friend any idea of what this is for? Because the sooner we get that information the sooner we will be able to deal with the bill.


Pierre-Joseph-Arthur Cardin: I can give that information now.


Henry Lumley Drayton: If you please.


Pierre-Joseph-Arthur Cardin: The idea is to spend a
certain amount of money in harbour dredging


Henry Lumley Drayton: How much?


Pierre-Joseph-Arthur Cardin: About 1800.000. Then on
wharves, piers and basins, $5,400 000; on plant, $155,000; on shops and buildings $322,000; on rails and electrification, $1,342,000.


Henry Herbert Stevens: Is that for switching?


Pierre-Joseph-Arthur Cardin: Yes. For permanent sheds $300,000; for grain elevators $3,155,000; and there are sundries amounting to $142,000. I will give further details when we reach the second reading, but the items I have enumerated are the largest items.


Henry Lumley Drayton: When we have
these details under consideration the minister will advise us at the same time as to the total amount of business done by the port?


Pierre-Joseph-Arthur Cardin: Yes.
14011-277^


Henry Lumley Drayton: The total
amount of business done in grain, the grain storage at present, the necessity for further grain storage, and the necessity for all these different works having regard to the volume of business.


Pierre-Joseph-Arthur Cardin: I will.


Mr. MULLINS:: We have been passing
large sums of money during the past few days in comparison with the few millions apportioned to the Hudson Bay railway. Last night we put through $14,000,000 for the Welland canal, and you are now slipping through $12,000,000 for Montreal harbour. Will there be any money left for Nelson harbour? I should like to ask the minister that question. To western members these amounts are staggering.


Pierre-Joseph-Arthur Cardin: We are not "slipping
through" any amount at all; we are only dealing with the resolution which ordinarily precedes the introduction of the bill. At the next sitting we will deal with the bill itself, and my hon. friend will have ample opportunity to discuss the request we are making. The government is not making a gift but a loan to the harbour commission of Montreal. The harbour commission have paid interest to the government in the past upon all the loans made to them, and they are in a position to pay interest even on the money they are asking for in this instance.


Henry Alfred Mullins: We may need a loan
for Nelson harbour. We will have our indebtedness as well as Montreal, and I shoulcE like to see some money left in the treasury.


William Lyon Mackenzie King: I think I cam-promise my hon. friend that if the Nelson harbour commission will undertake to pay interest as the Montreal harbour commission does, it will get a loan.


George Gibson Coote: I should like to say just a
word on this resolution. I have often wondered what was the purpose of bringing in a resolution previous to the introduction of a bill unless it was to secure the wish of the House as to whether the bill should be introduced. As a rule when these resolutions are brought forward we get very little information such as would enable hon. members to determine whether or not they approve of the proposed legislation. I think it would be good policy on the part of any government, if they think it necessary to introduce a resolution preceding a bill, to advise the House exactly what provision the bill is going to make. Then they would know whether it was the wish of the House that the bill should be proceeded with. Per-

Montreal Harbour Commission
sonally I cannot object to-night to this resolution. I do think, however, that the amount is very large, and if the government are taking it for granted that the House approves and wishes them to introduce the bill it would certainly be a good time to present information in a general way as to what is to be done with the $12,000,000.


William Lyon Mackenzie King: The resolution is simply an extra precaution in the way of preparing members for the bill when it is introduced. It draws their attention to the fact that a bill on the subject will be presented for their consideration. I agree that it is well that information should be furnished on the resolution, but I think far too much time of the House has been taken up, certainly this session, in discussing resolutions. The resolution is merely an introductory feature, but in some cases we have spent much more time in discussing the resolution than in discussing the bill itself. At the time the Grand Trunk acquisition took place, the government of the day, which had charge of that measure, refused to allow the resolution even to be discussed, holding it was not debatable. I cite that case to show how much beyond the former point of view the present administration has gone in regard to resolutions which have been introduced.


Henry Lumley Drayton: A departure from sound practice.


George Gibson Coote: I hope the business of the House will not be carried on according to precedents established by former governments. I think it would be far better to give the members of the House some information on the resolution; then if that information leads them to believe the bill should not be introduced, they have a chance to express their opinions. After the bill is introduced and we vote against the second reading, it becomes equivalent to a vote of want of confidence. Therefore I believe the purpose to be servedl by resolutions is altogether lost :if no information be given when the resolution is introduced.


Mr. HAY:: Can the minister give us the total amount loaned up to the present time to the Harbour Commissioners of Montreal?


Pierre-Joseph-Arthur Cardin: The amount was $44,000,000 up to December 1 last, upon which they have always paid interest.


Mr. RYCKMAN:: How much of principal has been paid?


Pierre-Joseph-Arthur Cardin: None at present.


Edmond Baird Ryckman: What sinking fund has been provided? It is a very nice thing to 
be able to borrow millions of money and simply pay the interest. As hon. members know, a man named Ponzi went to Atlanta penitentiary twice-


Some hon. MEMBERS:: Order.


Pierre-Joseph-Arthur Cardin: If I am not mistaken, they have already a sinking fund of over $1,000,000.
Resolution reported, read the second time and concurred in. Mr. Cardin thereupon moved for leave to introduce Bill No. 189, to provide for a loan to the Harbour Commissioners of Montreal.
Motion agreed to and bill read the first time.
On motion of Mr. Mackenzie King the House adjourned at 11.50 p.m.
Friday, June 11, 1926.