1926-03-17

LEGAL MINIMUM WAGE

[Stage Direction]
On the Orders of the Day:
Right Hon. W. L. MACKENZIE KING (Prime Minister) moved:: That the following motion made by Mr. Woodswortb on Monday, March 15: "That in the opinion of this House a wage sufficient to provide for a reasonable standard of living should constitute a legal minimum wage" be referred to the select standing committee on Industrial and International Relations.
He said:	This was the understanding at
the conclusion of the debate on that motion on Monday last.


Right Hon. ARTHUR MEIGHEN (Leader of'the Opposition):: There does not seem to
be any reason why I should object. One cemetery is as good as another, and this one seems equally acceptable to the mover of the motion and to the government.


Mr. MACKENZIE KING:: Is my hon.
friend the guardian of the cemeteries?


[Stage Direction]
Motion agreed to.

[Stage Direction]
(Questions answered orally are indicated by an asterisk.)
VANCOUVER HARBOUR-FATAL	ACCIDENTS
['1.\tYes.\n2.\tYes.']
Hon. Mr. LAPOINTE:: Department of Public Works:-
1.	No.
2.	(a) No. (b) see (a).
Department of Marine and Fisheries:-
1.	So far as the Department of Marine and Fisheries is concerned complaints as to difficulty in navigating through the bridge in foggy weather only, have been received.
2.	No.



Mr. STEWART (Leeds):: What portion of the building in Paris known as the Scribe hotel is occupied by the Canadian National Railways, and what has been the total capital and other expenditure upon said property to date?


Hon. Mr. ROBB:: Office occupied by Canadian National Railways has an area of 200 square metres, with a frontage of 15 metres on Rue Scribe. The amount expended by Canadian National Railways to acquire control of the entire property was $2,800,000. Under the lease to the Societe des Hotels Reunis, the tenants have expended approximately 15,000,000 francs in alterations and improvements, which will revert to the railway company as lessor, at the termination of the lease. The latter is for a period of 40 years on terms which will provide a return to the National Railways of 5 per cent per annum on the investment, in addition to providing rent free the office space above referred to, which has a rental value estimated at $15,000 per annum.

163S

Questions as Orders jor Returns


SOLDIER SETTLEMENT BOARD-REPORT
Mr. NEILL:: 1.	Has the report yet been received of the official sent out by the Soldier Settlement Board last fall to investigate soldier settlers' farms in the electoral district of Comox-Alberni with a view to consideration of revaluation?
2.	If so, will the report be tabled for information of members?


Right Hon. Mr. MACKENZIE KING:: 1.	Yes.
2.	Yes.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. SUTHERLAND (South Oxford):: 1.	What number of motor cars have been purchased by the government since January 1, 1922, and assigned to members of the government?
2.	What department heads have been so supplied?
3.	What was the date of purchase in each instance, make of car and purchase price?
4.	What has been the cost o-f maintenance or upkeep in (a) wages of employees; (b) cost for repairs and (c) quantity of gasoline used by each?
5.	How many of these cars were of American manufacture?


COST OF CANALS IN CANADA
Mr. BELL (St. John):: 1.	What is the total cost of government owned canals m Canada including amounts spent prior to confederation ?
2.	Were any allowances made by the Dominion government at the time of confederation to Upper or Lower Canada for expenditures on canals by those provinces prior to confederation?
3.	W'hat is the actual cost of each canal system in Canada ?


James Alexander Robb: This was an order for
return, which I now table.
EXPORTS OF PULPWOOD *
iMr. SIMPSON:
1.	How many cords of pulpwood were exported during 1925?
2.	What amount from each province?
3.	How many cords of each of the following classes of pulpwood were exported from each province: spruce, poplar, balsam and jack pine?



CHICAGO DRAINAGE CANAL

Mr. T. L. CHURCH (Toronto Northwest) moved:: For a copy of all correspondence, letters, telegrams, reports and orders in council, relating to the diversion of the waters of the Great Lakes by the Chicago drainage canal, including all communications with the government of Great Britain, the British ambassador at Washington, D.C., and the government of the United States.


John Warwick King: Mr. Speaker, there is no objection to the 
adoption of the motion provided it is understood that if the correspondence includes certain documents which the United States may-object to having brought down, they will not be produced.


Thomas Langton Church: Mr. Speaker, it is true
that some of the papers have been brought down, but none of the correspondence with the British government has been produced. This is the most important part, because Canada is not a party to the treaty. I would like to have tabled the correspondence of the government of Great Britain on this question.


[Stage Direction]
Motion agreed to.

[Stage Direction]
Mr. ALEXANDRE J. DOUCET (Kent, N.B.) moved:
For a copy of all correspondence, telegrams and other documents exchanged between railway employees of Mont-Joli, Quebec, and the Department of Railways.
James Alexander Robb: Mr. Speaker, on Monday last I directed the attention of my hon. friend to the fact that this order would date back almost to confederation, and asked him to limit it in some way.


Mr. DOUCET:: Mr. Speaker, had I not
had my time taken up in the Customs committee I would have interviewed my hon friend. I would ask for the correspondence dating from May 1, 1923.
Motion as amended agreed to.



EXPORT DUTY ON PULPWOOD

[Stage Direction]
On the motion of Mr. ARTHURS:
For a copy of all correspondence, letters, telegrams or recommendations relating to an embargo upon pulpwood or to a proposed export duty upon pulpwood shipped from Canada, such order to apply to correspondence, etc., subsequent to January 1, 1921.
James Alexander Robb: Mr. Speaker, I notice the hon. gentleman is not in his seat. This might stand.
Motion stands.
TRADE COMMISSIONERS Mr. ROSS (Kingston) moved:
For a return showing the names of all appointees as trade commissioners, of all dismissals and resignations from such positions, and also a copy of all correspondence, telegrams, and other documents connected with the same appointees, dismissals and resignations, during the years 1922, 1923, 1924 and 1923.


Mr. ROSS (Kingston):: Mr. Speaker, I
would like the question to be dropped, as I have received the information.
Motion dropped.

Taxation in Canada



PERMANENT FORCE EMPLOYEES

[Stage Direction]
Mr. ALEXANDRE J. DOUCET (Kent, N. B.) moved:
For a return showing:
1.	The numbers of each of the following, lieutenant generals; major generals; colonels commandant; colonels; lieutenant colonels; majors; captains; lieutenants; non-commissioned officers of each rank; privates at present or at the latest date at which the information is available, in the employ of the government of Canada in the permanent force, including civilian employment and the air force, (a) at headquarters at Ottawa, (b) at each military district in Canada.
2.	How and where each is employed, appointment, regimental, staff or otherwise.
3.	The amount paid each annually (a) in cash, (b) amount given to each annually by way of allowance, showing details of allowances.
4.	The amounts deducted from or charged to each annually on any account (other than penalties) showing details of deductions.
5.	Those employed as instructors, with the rank of each and where employed.
6.	The number of persons instructed from August 1, 1924, to August 1, 1925, the rank of each, the course given each and where each instructed.
Right. Hon. Mr. MACKENZIE KING:: I think the 'hon. Minister of National Defence (Mr. Macdonald) suggested' to my hon. friend that he should indicate more in particular the information he wanted, inasmuch as the motion as it stands would involve a great deal of research and Icopying. Perhaps my hon. friend would let the matter stand until he has a chance of conferring with the minister.


Alexandre Joseph Doucet: Stand.
Motion stands.



PRICE OF NEWSPRINT

[Stage Direction]
On the motion of Mr. Stevens:
For a copy of all correspondence, letters, telegrams, documents, etc., passing between R. J. Crombie of the Vancouver Daily Sun, Vancouver, British Columbia, and the Prime Minister of Canada or any other minister of the crown, or any officer of the government and having reference to the price charged in Canada for newsprint and the price at which Canadian newsprint is sold abroad, together with all documents and reports made to the government in regard to the same during the years 1922, 1923, 1924, 1925 and to date in 1926.
Mr. STEVENS:: In connection with this *
resolution, Mr. Speaker, I understand that certain matters have been undertaken by the government which the passing of this resolution might adversely affect, and I would therefore suggest that it be dropped for the time being.


Mr. SPEAKER:: Dropped.
Motion dropped.



MR. H. BOULAY

[Stage Direction]
On the motion of Mr. Culligan:
For a copy of any letter or letters written by Mr. H. Boulay, of Sayabec, county of Matane, to the Minister of Militia and Defence at Ottawa, on January 18, 1918.
John Warwick King: I understand that the minister desires to know the subject matter of the letters referred to. These letters are indexed according to the subject matter in the department, and perhaps the hon. member would indicate what the subject matter is.


Alexandre Joseph Doucet: On behalf of the hon. member for Restigouche-Madawaska (Mr. Culligan), may I ask that the motion stand until he is here.
Motion stands.



IMMIGRATION PERMITS

[Stage Direction]
On the motion of Mr. Morand:
For a return giving a settlement of all permits issued by the Minister of Immigration, under section 4 of the Immigration Act, showing the names of all persons permitted to enter Canada under the said section during the years 1922, 1923, 1924, 1925; the occupations and former residences of all such persons; the dates and places of entry into Canada; the duration of their stay in Canada as allowed by such permits and whether still in Canada; and if so, their present places of residence; and if not now in Canada, the dates and places when and where they left Canada.
John Warwick King: I do not think there will be any objection to this motion, but in the absence of the minister I would be obliged if it could stand.


Hewitt Bostock: Stands.
Motion stands.



REPORTS OF HON. WILLIAM PUGSLEY

[Stage Direction]
On the motion of Sir Henry Drayton:
For a copy of the report or reports, finding or findings, made by the late Honourable William Pugsley, in his capacity as custodian of enemy property, or any other capacity while in the pay of the government of Canada, since his retirement as Lieutenant-Governor of the province of New Brunswick.
Ernest Lapointe: May I ask my hon. friend to let this motion stand, as I should like first to communicate with the Secretary of State?
Motion stands.



TAXATION IN CANADA


Thomas Langton Church: [DOT]
Whereas it was deemed necessary and expedient to impose an income tax by the parliament of Canada as a revenue measure growing out of the war and to temporarily invade the former exclusive field of the municipalities to collect this form of taxation.
And whereas such taxation has led to duplication and there in an urcent demand for reduction of taxation and to restore to the municipalities their former exclusive rights and prerogatives to this form of taxation. Therefore this House will support the government in any immediate measures it may take to give effect to the principles of this resolution and so rcducc taxation.
Taxation in Canada

He said:	Mr. Speaker, at the request of
some of the municipalities I am bringing up this question of taxation. Formerly, income taxation was imposed by the municipalities and provinces alone, but in 1917, during the stress of the war, the federal government initiated income taxation. It may have been a necessity during the war, but it was generally hoped that as soon as the war was over, in view of the increased burdens imposed by the war upon the municipalities of this country from coast to coast, and in view of the further fact that the federal field of taxation was unlimited, this form of taxation would be left as formerly to the municipalities and the provinces.
The main problem before this country today, Mr. Speaker, the one that is discussed upon the public platforms, in the press, by boards of trade, chambers of commerce business men and the working classes generally, is taxation. We spend many days in parliament here, but very seldom do we devote an hour or even half an hour to the most important question before this country to-day, taxation, which affects every man, woman and child in the country. Taxation, immigration, and the taking care of the deficits on the Canadian National Railways are three of the most important problems which the people of this country are facing at the present time. It was hoped, and indeed intimated by the late Minister of Finance and by the present Minister of Finance, that the conference between the federal, provincial and municipal authorities on the question of taxation would result in some equitable, fair and just division of the field of taxation in this country, so that further taxation might be placed on those who were best able to bear it, and that a fair, just and equitable system of taxation would be worked out in which the federal, provincial and muni->
cipal governments would each do its part.
I admit that the duties of the government are not at all light; the responsibilities are very heavy and their duties onerous. It is the desire of all good citizens to pay their fair share of taxation. I think it is the wish and the endeavour of every honourable mau to do what he can in this respect. The hope was entertained th'at when the conference on taxation took place the government would endeavour to do something for the struggling municipalities of this country. It is too bad that this hope has not yet been realized. We were told in the last parliament that the question of unemployment was solely a matter for the municipalities to deal with; th'at the federal authorities had nothing to do with unemployment. Let me point out, Mr. 
Speaker, that meeting the needs of the unemployed and dealing with many other matters entail a heavy burden on the municipal councils of cities and towns, and on the county councils as well. Not only have they to meet the distress resulting from this cause, but they have to maintain hospitals, care for the sick, and provide for many other burdens. Surely it was not within the minds of those who drafted the British North America Act that such a heavy burden should be thrown on the municipalities of this country from coast to coast.
So I say that in 1917 when the federal authorities invaded this income tax field of taxation formerly occupied by the municipalities, they went a little too far. However, the federal government having pursued that course, the hope was entertained that such action could only be temporary, that when the war was over, or within a few years afterwards, it would find some more equitable and just system of taxation as 'a result of which the municipalities would have restored to them the revenue from income taxation exclusively-which prior to that they have always enjoyed. As I figure it out, 80 per cent of the income tax is paid by persons with fixed salary-the small man, the consumer; perhaps it would be fairer, to say the middle-class people of this country. If you refer to the reports of the assessment commissioners of the cities and towns of Ontario, giving the population and the income assessment in each case, and the average tax payable per capita-and I have returns from twenty-six municipalities in my possession- you will find that the great bulk of the income tax levied by civic and the federal authorities is collected from those whose income is fixed and can be readily ascertained, and whose position leaves no possibility of escape from such taxation. I may say that the power of direct taxation on real estate and income is limited in the case of municipalities by the British North America Act. On the other 'hand the Dominion has eleven different methods of direct and indirect taxation. Surely therefore, it can leave to the municipalities the undivided enjoyment of the revenue from income tax which, in the case of the Dominion, has been felt as a great-added burden and double-header tax throughout Canada and has not given the yield it should have done. This is apparent when you remember that whereas the revenue from the Dominion income tax at one time amounted to $119,000,000, it fell last year to $46,000,000. The eleven different methods of federal taxa-

Taxation in Canada
tion now in existence can be enumerated as follows:
1.	Customs tariff.
2.	Excise taxes on various commodities, such as automobiles, matches, cigars, wines, beverages, and so forth.
3.	Income tax.
4.	Tax on sales.
5.	Tax on licenses.
6.	Taxation on corporations and companies.
7.	Tax on cables and telegrams.
8.	Railway and boat tax.
9.	Stamp tax on checks, drafts, bills of exchange, notes and stock transfers.
10.	Stamp tax on money orders, letters and postcards.
11.	Stamp tax on receipts.
From the foregoing eleven sources the Dominion collects about $346,000,000 of direct and indirect taxes in the country. The income tax has a super-tax feature of taxation as well. It is stifling enterprise and imposing a heavy burden on the people. In my opinion we should reduce the income tax and the super-tax to the United States level, thus encouraging capital to invest in Canada and making an economic surplus available for the development of the country, and increasing the revenues of the country.
The present method of taxation is far from equitable. The tax is levied on some and not on others; there are a great many people who escape entirely and who are not called upon to pay any income tax at all. I know of a case in Toronto where the man enjoys an income of from $50,000 to $60,000 but escapes with the payment of a very small income tax. In connection with his year's operations he voted himself a bonus of $100,000 and by calling it a bonus, not income, he escapes by design. That is one way of escaping taxation. Nobody objects to paying a fair share of taxation. It is the duplication and inequalities that make people dissatisfied, combined with the failure to allot an exclusive sphere of taxation to the respective authorities

the Dominion, the provinces, and the municipalities.
At present there are $931,512,900 of war bonds outstanding which are free from taxation. Why cannot part of this be commuted and this vast capital put back into circulation and into economic and industrial development, thereby Creating another source of revenue to the country? Canada is the most over governed country in the world. There are two houses of parliament for the Dominion; two legislative bodies for certain of the provinces; and innumerable municipal councils.


Mr. MACLEAN (York):: May I ask the
hon. gentleman who imposed upon the Canadian people the bodies of which he complains?
Mr. GHUR'CH: I cannot say our constitution does. The hon. gentleman has been in the House longer than I have and I will leave it to him to give that information. These taxes were said to be necessary during the war. I am not making any criticism because of their imposition.


William Findlay Maclean: I am referring
to the institutions which the hon. gentleman mentioned. They have been imposed upon Canada by the British North America Act. We cannot amend them as conditions are at present, so they will continue to be with us until such time as this parliament has the right to amend the constitution.


Thomas Langton Church: The British North America Act has nothing to do with this method of collecting taxation. The municipalities ought to have the field to themselves. The hon. gentleman wants to amend the British North America Act, but it will be a very sorry day for this country if his method of amendment goes through. It will be good-bye then to the province of Ontario, to property and civil rights within the provinces, to vested rights, to the rights of minorities, and to everything else in this country. That is my opinion. However, that issue is not relative here.
Public bodies all over Canada are complaining about the heavy burden of taxation which is in force to-day. In this connection let me quote the following from a speech by Sir Herbert Holt:
In his address at the annua] meeting of the Royal Bank of Canada Sir Herbert Holt said that taxation in Canada has reached the point where it is retarding the growth of national wealth, increasing the cost of production, decreasing demand-and with it profit and wages-and withdrawing money from productive use. He says the country is over-burdened with government, and the enormous expansion of the public debt is a matter of grave misgiving. Canada is over-governed and over-taxed, and the one is the natural corollary of the other. The political diseases from which we suffer have been diagnosed long ago, not only by business men, but by the ordinary voter as well. Administrative extravagance and incompetence have, been in the saddle too long.
Then, too, Sir Thomas White in a speech before the Canadian Club at Montreal expressed himself as follows:
Foremost among our problems of to-day is the problem of our public indebtedness. The net direct public debt of Canada is seven times what it was beforp the outbreak of war. One favourable feature is that it is principally held by our own people. Another is that it is funded and that consequently our currency is not depreciated. This is the reason why our exchange has been well maintained.
The inherent soundness of our financial position is best illustrated by the fact that the Canadian dollar stands at par. We are virtually upon a gold basis1 and at any time could resume specie -payment. Personally I have no criticism for our not having taken
Taxation in Canada

this tax and I think he has been doing what he can to remove the burden of taxation from the breakfast table and from those least able to pay. I hope he will consider the economic principle of taxation of the ability of the average man. to pay, a principle that is neglected in this method of income- taxation, as I think I Showed a few minutes ago. I pointed out that by these eleven federal forms of taxation 1345,000,000 had been collected from the people, eighty per cent of it being taken from the small wage earners, and as to the income tax the man with a fixed salary pays, while some jobbers and others with large incomes are not paying anything at all. I know of one gentleman in Toronto-I sat on a board of directors with him-who is said to have an income of a million dollars and was not paying a cent of income tax, and yet he is occupying one of the highest positions in the country.
Why should this double tax be collected by the Dominion on the first of May and then about the same time by the municipalities on the 15th of May, making it a doubleheader tax on the fixed wage earner at the same time who is moreover paying taxes on taxes, taxes to the Dominion on the amount of money he pays to the municipality?
The other day the editor of the Grimsby Independent was sitting in his office thinking on political economy and taxation and this is what he says:
Discourse On Taxes
Grimsby Editor Tells a Few Plain Truths to All and Sundry
Grimsby-Editor of the Independent puts on his thinking cap and hands out wisdom so that he who runs may read-
A good many municipal authorities have the idea that a grant from the province or from the Dominion relieves the municipality of just that much expenditure. But it does not. All government money is the people's money, and our old ifrienid, Mr. Ultimate Consumer, supplies it all in some way or other. This problem of taxation is one which requires much intelligent thought on the part of all citizens.
I understand the minister the other day met a deputation of the retail merchants who are complaining very bitterly about the burden of taxation that they are paying under the eleven different forms which I have set out to-day. I believe they went into the matter very thoroughly, pointing out that the federal income tax was not a tax which should continue and they presented him with a memorandum on the subject. I will not go into the memorandum to-day because time will not permit, except to say that it proves conclusively that this tax has been a failure and that by redistribution of the

other ten existing forms of taxation we would collect more than is collected by this income tax.
Since this tax has been imposed central Canada has been paying the greatest proportion of it. Of the $57,000,000 collected in 1924 the amounts collected by provinces are as follows:
Prince Edward Island	 $	38,000
Nova Scotia	 847,000
New Brunswick	 767,000
Quebec	 20,148,000
Ontario	 26,039,000
Manitoba	' ..	3,526,000
Saskatchewan	 891,000
Alberta	  1,189,000
British Columbia	 3,930,000
Yukon	 69,000
Total	 $57,466,000
The municipalities of the country are today facing a situation that it is becoming increasingly difficult to cope with. The tax rates of Ontario municipalities have risen fiom 12 to 14 mills on the dollar, which they were before the war, to 28, 32, 36 and 38 mills on the assessment, some of them just three times what they were before the war, the reasons being increased costs of labour and materials and money, the higher cost of living, better living conditions, the eight-hour day and many other matters like that brought about since the war. For these and many other reasons which I have not time to discuss now, I trust the income tax will be discontinued by the government and handed back to the municipalities where it always was, or that the minister in his budget will make reductions and thus give relief.
The municipalities have only a limited field of taxation whereas the Dominion government can levy taxes in ten or eleven different directions. Surely the Minister of Finance (Mr Robb) can relieve the burden on the Canadian people in the matter of income tax. I know that he is doing the best he can but it is obvious that something more must be done. The income tax is one form of taxation that has proved a failure: the government has not been able to collect the tax from those who can best afford to pay it; it is being collected from the poorer and the middle classes. The wage earners have to bear the brunt of this tax, which is unfair and unjust. It is easy for the officials of the government to get after the poorer classes and those in the middle walk of life inasmuch as they can go to the office of the business employing these people and ascertain just what their wages are. It is therefore the people who have a fixed income that are always subject to direct supervision. In the case of the others to whom I have referred there are many ways of escape.

Taxation in Canada
In conclusion I beg to move this resolution, which I trust the House will adopt. This field of taxation was formerly the special prerogative of the provinces and
4 p.m. the municipalities and I think they should once more have the right to collect income tax, particularly, as I have pointed out, in view of the fact that their field is so limited. Moreover, increasing burdens and responsibilities are being placed upon the municipalities. For example, they are being called upon to provide for the unemployed, while soldiers who do not benefit by the pension provisions of the Dominion become a charge upon the municipalities. Hospitals and charities of various kinds have also been shouldered upon the municipalities, who to-day are bearing the peak load of taxation. I regret that the conference between the Dominion and the provinces and municipalities proved abortive but I trust that something will be done this year to relieve the situation. If the income tax cannot be entirely wiped out, at least the government might reduce it by fifty per cent, and put this country on the same basis as the United States so far as this particular branch of taxation is concerned. In the United States the income tax has been reduced three times in five years so that to-day the people over there are well off in this regard in comparison with Canadians. If the government could see its way Clear to reduce the income tax to the extent I suggest, it would be the means of stimulating business and increasing production, and would help very materially indeed to solve the unemployment problem, and the $45,000,000 which the treasury would lose could be made up in other directions.


James Alexander Robb: My hon. friend (Mr. Church) has presented his argument in a very fair manner, as he always does, and I thank him at once for his kind personal reference to myself. If there is any man in public life who requires a little comfort once in a while it is the Minister of Finance of the government of the day.


William Findlay Maclean: He is standing it all right.


James Alexander Robb: Of course I am speaking of
governments in general. There might be another government to-morrow. The Minister of Finance is obliged to find revenues for the administration of the affairs of the country and to provide for the deepening of harbours, for the erection of public buildings, for increased salaries, and all the rest of it. No later than yesterday the hon. member for Toronto Northwest (Mr. Church), who has so
eloquently pleaded this afternoon for a reduction in the income tax, pleaded with equal ability for expenditures in the city of Toronto and for increased salaries to the employees of the country. Clearly, I shall have to have a half hour's quiet talk with my good friend to see whether he can offer me some recipe to enable me to meet the two demands he has made.
I know, of course, that taxes are never popular. Everyone likes to have his taxes as low as they possibly can be, and there are _ a great many people in Canada who are try- >
ing to dodge taxation. There are also methods provided whereby they can do so; we ourselves provided such methods during the war. At that time everyone was keyed up and we were all anxious to finance our share of the obligations of the war. We therefore issued a considerable quantity of tax-exempt bonds, which to-day are held for the most part, not by the ordinary taxpayer whom we can get at, but by rich people who could and should contribute to the revenues of the country. They have these tax exempt bonds stored away and are thereby enabled to evade taxation.
My hon. friend is quite correct when he says that the income tax and other taxes which the people of Canada are to-day paying are the result of the war. We went into the war to the limit, assuming great obligations, and although, as my hon. friend says, the war has been over for some years we must not forget that the expenditures incurred during that time have still to be met. In that sense, therefore, the war will not really be over for Canadians for some time to come.
I do not suppose that there is an hon. member who would stand up in his place in this House and advocate a repudiation of the obligations which we undertook in the war. Well, we require money not only to meet the interest in our war debt but for pensions, and many other expenses which are directly attributable to the war. For instance, it is reckoned by officers of the department that of the estimates now before the House fifty-eight per cent is required to -provide for statutory and war expenditures. Hon. gentlemen will therefore observe how difficult it is for a government, let it economize how it will, to make both ends meet and to provide for the requirements of the country. And everyone who h'as confidence in this country will admit at once, I am sure, that there are certain undertakings which it is necessary that we should carry out.
My hon. friend referred to the conference held a few years ago in Ottawa between the
Taxation in Canada

Minister of Finance of the Dominion iand the treasurers of a number of the provinces. Not all, but most of the provinces were represented at that conference, and while there was a difference of opinion upon some issues, I think we were unanimous on one point, and that is that both the Minister of Finance for the Dominion and each of the provincial treasurers were fairly well disposed to maintain the policy of "what we have, we hold." The provincial treasurers were all anxious to retain their taxes and I was equally anxious to hold on to the taxes in the federal field. It is true, as my hon. friend said in his concluding remarks, that the provinces have incurred considerable expenditure in recent years. This is due to the condition of the times. The automobile has brought about an increased expenditure in most provinces through the construction of better roads-for good roads are expensive. Many of the provinces have spent a good deal of money on the improvement of their highways, and this of course, involves taxation. I am glad to say, too, that there has been an improvement in our system of education; most of the provinces are paying more for education to-day. Many of the municipalities are also paving their streets, erecting public buildings, and doing other things that are adding materially to their expenditures, so that the provinces and the municipalities unquestionably have increased burdens to bear. But none of the provinces or municipalities have any war obligations to discharge. The obligations of the war are upon the federal treasury, and we of the Dominion parliament, having a desire to provide for the expense of the war and the carrying on of the affairs of the country, must consider very carefully what taxes we can dispense with. I notice in the argument of my hon. friend that he did not challenge the right of the Dominion government to impose an income tax. That question was challenged by a minister of one of the provinces, who claimed that under the- British North America Act the provinces alone could impose income tax. The question was decided in a judgment rendered by the Privy Council in the case of Caron vs. the King in 1924, and for the information of hon. members I shall place on the record the headnote of that judgment:
The parliament of Canada had power under section 91 head 3 of the British North America Act, 1867, to enact The Income War Tax Act, 1917 and amending act, of 1919, whereby every 'person residing or ordinarily residing or carrying on business in Canada is rendered liable to pay income tax; and a minister of the government of a province is liable under the acts 
in respect of the salary and sessional indemnity payable to (him under statutes of the province.
The Income Tax Act of 1917 was first introduced by Sir Thomas White in July of that year. It might be ' interesting to hon. members to have on the record the opinion of Sir Thomas White, who was Finance minister of the day. Sir Thomas White was not only a good Finance minister, but a good lawyer and a well posted legal authority as well, and had very decided views on taxation problems as between federal and provincial governments. Sir Thomas, in presenting that bill, made these observations, which I find on page 3760 of revised Hansard of 1917:
Mr. Chairman, the enactment of the Military Sendee bill which has just passed through the House will result in material increase in and acceleration of the war expenditures of the Dominion.
By that bill, provision ds made for calling an additional 100,000 men to the forces of Canada. In view of the expenditure involved, and in order to maintain the credit of the Dominion, it is necessary that we should adopt further taxation measures. Apart from this necessity from a financial standpoint, there has arisen, in connection with the Military Service bill, both in this House and in the country, a very natural and, in my view a very just, sentiment that those who are in the enjoyment of substantial incomes should substantially and directly contribute to the growing war expenditures of the Dominion.
In view of these considerations, I desire to-day to lay before this committee proposals for a national measure of income taxation. I may say that the adoption of such a measure is a distinct innovation in federal fiscal legislation. Hitherto we have relied upon duties of customs and of excise, postal rates and other miscellaneous sources of revenue. It is true that since the outbreak of the war we have adopted the Business Profits War Tax Act which is a measure of direct taxation akin to income taxation, but not so wide in its scope. As the members of the committee are aware, the Dominion government, under the provisions of the British North America Act, is empowered to raise revenue by any mode or form of taxation, whether direct or indirect. On the contrary, the provinces, and, by consequence, the municipalities which derive their taxation powers from the provinces, are confined, in the raising of their revenues, to measures of direct taxation. For this reason, since the outbreak of the war, I have hesitated to bring down a measure of federal income taxation. As I have stated, the provinces and the municipalities are confined to direct taxation, and I have not regarded it as expedient, except in case of manifest public necessity, such as I believe exists at the present time, that the Dominion should invade the field to which the provinces are solely confined for the raising of their revenue.
It will be observed that Sir Thomas White hesitated to bring down that measure, but having the responsibility of providing for the maintenance of our army at the front and for the interest on the debts which had already accrued, he saw the necessity of entering the income tax field and thus providing revenues for carrying on the affairs of the country.
I have sometimes heard Sir Thomas White criticized for having, when he was financing

Taxation in Canada
the war, exempted so many from taxation through tax-exempt bonds. I was never disposed to find much fault with that, because we were living alongside of the United States and they as well as most of the countries in the war at that time were providing tax-exempt bonds. Sir Thomas, having the responsibility of raising money, adopted those measures which were adopted by most of the other countries. So I say here to-day that I am not challenging the policy of Sir Thomas White. Had I at that time the responsibility I have to-day, and under similar conditions,
I do not know that I could have done much better.


Mr. MANIQN:: I would like to ask my
hon. friend a question. Is it not also true that in the United States there are many states and municipalities which have the right even to-day of issuing tax-exempt bonds?


James Alexander Robb: I am coming to that in a
moment, but the fact remains that in financing the war we did provide a means for many people to evade taxation. We have tax-dodgers in this country, as they have in other countries. I am told of a method of evading taxation which is not novel to this country but was borrowed from the United Kingdom, whereby certain companies were organized to enable people to escape taxation. Notwithstanding all that, the people of Canada very cheerfully and willingly contributed to the public exchequer for the carrying on of the war, and the revenues which we have derived from these various taxes have helped materially in providing the interest on the war debt and the pensions we are now paying.
My hon. friend a few moments ago made some reference to the changes in the revenues derived from these sources of income. I have before me now the figures. The revenues from that source in 1918-1919 were $9,349,719.80; in 1919-1920, 820,263,739.91; in 1920-1921 $46,381,824.31; in 1921-1922, $78,684,354.80; in 1922-1923, $59,711,538.37; in 1923-1924, $54,204,027.99; in 1924-1925, $56,248,04282. These figures may be found in the Public Accounts, at page 47.


Mr. EDWARDS (Frontenac):: In what
year was the maximum amount received?


James Alexander Robb: The maximum was received
in 1921-1922. That, I imagine, would be due to the addition of some of the revenues from some of the previous years, when there was a change coming in concerning the business profits tax and the income tax. Some of the taxes which formerly went into the business profits tax might have come in the income tax.


Mr. GEARY:: If I might ask a question,
why does my hon. friend give the years as "1922-1923" and so on?


James Alexander Robb: That is the way they are listed in the public accounts, from which I am quoting.


George Reginald Geary: Will the minister tell* me
why that is? It is the annual calendar year.


James Alexander Robb: The fiscal year ends March
31, and I refer to this year, for instance, as 1926-1927.


George Reginald Geary: I see what you mean.


James Alexander Robb: In addition to the income tax, we have other special war taxes that were imposed under the legislation of 1915. It is not necessary for me to enumerate all these special taxes, but the total revenue derived from these so-called war taxes-so-called war taxes, let me repeat that-in the last fiscal year was approximately $147,000,000, while during the same period the expenditure on account of the war was approximately $167,000,000; so these taxes imposed for war purposes last year were, in round figures, about $20,000,000 short of providing for the total obligations arising that year out of the war.
It may interest hon. gentlemen, in view of statements that have been made from time to time as to the cost of collecting the income tax, to know that the Commissioner of Taxation, Mr. Breadner, advises me that the cost of collecting the income tax has during / the past five years averaged two and two-thirds per cent.
While we all admit that Canada has more taxes than we would like to have, and more taxes than we had prior to the entry of Canada and of the whole world into the war, nevertheless Canada is not taxed to a degree that would induce any of our citizens to leave Canada and go and live in some other country. Indeed, the taxation in Canada compares favourably with that of almost any other countiy in the world where the people enjoy the same comforts. I have here a newspaper reference to the comparative taxation of Canada and other countries. I shall not read the article, because hon. members read the papers just as I do, but if they will refer to the Ottawa Citizen editorial column of March 13, 1926, they will find there a comparison of the per capita tax paid by Canada, Australia, Great Britain and the United States. It is estimated that the total per capita tax paid in Canada, and this includes, I imagine, federal, provincial and municipal taxation, is $66.11; in Australia, $69.68; in Great Britain, $97.12; and in the United States, $67.39. In other words, the per capita tax in the United States,
Taxation in Canada

the country where they boast much of reduction of taxation, is $67,39, as compared with $66.11 in Canada.


Robert James Manion: May I ask my hon. friend
a question in that regard? I do it for information, because that statement has been put out two or three times, and I fear it is wrong.


Ernest Lapointe: It is right.


Robert James Manion: What I was going to ask
is this:	How is it that the per capita tax in
Canada is only $66 when the tax collected by the federal government alone amounts almost to that? Where do the provinces and the municipalities come in?


James Alexander Robb: I am speaking of the taxes
imposed. I have here a statement which has been sent to me by a firm-I do not like to give the name, but if any hon. gentleman is interested I will show him the letter in confidence. It is from a firm of high-class attorneys and counsellors-at-law in New York city, and they provide me with this information. It came about in this way. Their attention had been directed to the grumblings of some Canadians over the duplication of taxation in Canada, and they said: You people in Canada do not know anything about taxation. Here is the information they give me as to the taxation that would be imposed upon a gentleman residing in the city of New York. He would be subject to:
1.	Federal income tax.
2.	New York state income tax.
3.	Local real estate taxes.
4.	Local taxes upon certain kinds of personal property.
5.	Special tax laws, for instance, the tax on motor cars, motor boats, and so forth.
In addition to the foregoing, all individuals there indirectly pay various forms of excise taxes, taxes upon theatre tickets, taxes on club memberships, taxes upon automobiles, and so forth. Then in addition to that, there is another tax which their heirs cannot escape after they are gone; that is, the inheritance tax. Some of our provinces have an inheritance tax, but we have no federal inheritance tax like they have in the United States. In the United States they not only have a federal inheritance tax, but many of the states also impose an inheritance tax, and a resident of New York city, or rather his estate, would have to pay not only a federal inheritance tax, but the New York state inheritance tax and the inheritance tax of any other state in which he held property.


Mr. McGIBBON:: Would it not be much fairer to compare the ratio of taxation with

that of income? Upon that basis does not Canada stand fourth of all countries in the world?


James Alexander Robb: That is a debatable proposition. Having placed these figures on Hansard, I come now to something that may be perhaps a little more hopeful. If hon. gentlemen will follow the estimates as presented to parliament, and the expenditure as found in the public accounts, for the different years this government has been in power, they will find that each year there has been a reduction in the estimates presented to parliament, and a reduction in the expenses incurred. We have reduced some of the so-called obnoxious taxes, and we have made certain exemptions. When Sir Thomas White brought in some of his obnoxious taxes, the sales [DOT]tax, for instance, and' excise taxes, certain exemptions were made, and from year to year we have added to the list of exemptions. On certain foodstuffs we have reduced the sales tax, and on certain items we have removed it entirely; we have cut it in two on boots and shoes, and the finances now are in such shape that I hope to sit down with the officers and be able to work out something that will give a little relief to the people in the waj' of taxation. I do not say that that relief will be in income taxation; I do not say it will be in the sales tax, but I do agree with my hon. friend from Toronto Northwest (Mr. Church) to this extent, that in so far as we are able we must from year to year try to reduce taxation, and particularly try to get away from these so-called obnoxious taxes. But we can only do that if we have the support not only of those who sit on this side of the House, but as well of hon. gentlemen opposite in effecting economies. It is no use to preach economy one day, and the next day to urge expenditures in different parts of the country.
I repeat that there are certain expenditures that must be carried on. Not long ago I had a conversation with the president of one of the largest banks in the country; perhaps I am betraying no confidence when I say it was with the president of the largest bank in Canada. He said: "Mr. Robb, I think we have carried this economy idea to an extreme. I think it is reasonable that the government should provide certain expenditures for carrying on the affairs of Canada and developing this vast country." So that is the policy of the government: to economize where we can but not to the extent to discourage the development of our country and the opening up of new territory.

Taxation in Canada


Mr. CHABOT:: From 1921 to 1925 the
revenue from special war taxes was about $535,000,000 more than it was from 1917 to 1921. What attempt was made by the government during that time to economize with a view of reducing taxation and the cost of living? The minister spoke of economy. Well, the government had an increase in the revenue there, from that source alone, of over $500,000,000 in those four years. I fail to see what attempt was made to reduce the taxation of the national debt at that time.


James Alexander Robb: Answering my hon. friend's
very fair question-and I observe that he not only iputs a question but attempts to answer it-if he will refer to the public accounts, audited by the Auditor General, he will discover that the expenditure has decreased year iby year since 1922.


Mr. MILLAR:: In connection with the
levying of income tax, has the government considered the advisability of collecting the tax for a period of three, four or five years? If that were done it would be possible to provide for what we might call a lean year out of the profits of the good years.


James Alexander Robb: There is something to be
said for my hon. friend's suggestion. I may say that the officers of the department have had that matter under consideration and study. Their objection to the proposal is that there is no finality. The system has not been satisfactory in Great Britain. They have there, I think, a three-year period, but it has not been as satisfactory as they would wish. Consequently they have recently been considering the adoption of the Canadian method, which is operative each year. I may say this to my hon. friend, that I have had some very lean years.


Robert James Manion: I asked the minister a
question as to the issue of tax-free bonds in the United States both by municipalities and by states. He said that he would deal with the question but omitted to dio so. May I ask if the minister has any information on this subject?


James Alexander Robb: I have information that they
are even now in the United States issuing some tax-free bonds, but I am not prepared to admit that it is a wise policy in these days of peace.


Robert James Manion: I was not discussing that
point. I merely wanted to know if that was not true, and whether the minister had any
information on the subject.


William Findlay Maclean: I
largely sympathize with the motion made by my hon. friend (Mr. Church), in favour of a reduction in taxation. The minister spoke of the enormous burdens that have to be met in this country, and pointed out that the revenue from income tax goes in a measure to meet these obligations. Now, I want to point out-I have done so before, but I am going to do it again-that we are wasting over $200,000,000 a year by maintaining a duplicate system of railroads in this country.
I read in the evening paper that the new Minister of Railways (Mr. Dunning), says that he is going to maintain the two systems in spite of anything. He does say that he hopes to get a reduction of duplicate services; but I want to take this occasion, as representing the views of the Canadian people, to point out that they feel the enormous burden of our income tax. If that is so, it is up to the government of to-day to begin to reduce that burden and to deal with the railway question and the .waste of $200,000,000 by unnecessary duplicate services. I hope the minister will pay attention to the fact that the Minister of Railways makes the announcement in western Canada to-day that he is going to maintain the two railway services notwithstanding the cost to the country which they involve.


Mr. W. D. EULER (North Waterloo):: Mr. Speaker, contrary perhaps to your expectation,
I do not rise to give support to-day to the remarks of my hon. friend from South York, although there is a great deal to be said for his contention with regard to waste by way of duplication in the two railway systems in Canada. I should like to make one or two observations on the subject of taxation now before the House. I think all of us receive from time to time many copies of resolutions passed by various public bodies and others asking that certain taxes shall be completely wiped out. Some ask that the income tax be discontinued, others say that the sales tax. should be discontinued; and we are quite unable in many instances to judge for ourselves, as between the varying claims, just what we should do. 'It is true, of course, that taxes are always irksome. Anything that takes money out of our pockets is very unwelcome indeed.
As I see it, Sir, and I have had some experience in the matter of municipal taxation, there are really only two principles upon which the system of taxation can be based. The first one, and perhaps the fairest, if it can be applied, is to tax according to the service
Taxation in Canada

that is given by the expenditure of the moneys raised by way of taxation. That would be the ideal way, the fair, and the just way, if it could be properly applied at all times. In the municipality we can do that to some extent. Taxes collected from the ratepayers are expended on education, fire protection, police protection, and so on. So that there we have developed perhaps to the greatest degree the principle of taxation according to value given. The other principle is to tax people according to their ability to pay, and it seems to me that so far as federal taxation is concerned, that is the principle that should be followed. Perhaps I might qualify that statement. If it were possible to pay the expenses incidental to a national debt caused by the war by taxing those who made money as a result of the war, it would be a very good thing indeed. I am not sure that it is possible to do that. Ndw, then I say that the income tax is right in principle. The man who earns a great deal of money, who makes a great deal of money by reason of the opportunities provided by this country, can very well be called upon to contribute a portion of his gains to the expenses of the country.


An hon. MEMBER:: What about the small fellow?


William Daum Euler: I am coming to his case in
a moment. While I agree in general with some of the observations, and should like to see the income tax reduced if it were possible, I must disagree with my hon. friend (Mr. Church), who suggested that the collection of income tax should be left to the municipalities rather than to the federal government. Probably I am going to get in wrong with my own municipality when I say this, but I believe that since large incomes are made-I am referring particularly to the larger incomes- largely because of the opportunities presented by Canada as a whole, therefore it is fair that the federal government should take a fair proportion of those earnings. If the principle is correct it seems to me it is then pretty much a matter of how the taxation should be applied. I should like to see taxation, the income tax and other taxes, made as little irksome as possible. There is room for improvement as far as the income tax is concerned and as regards some of our other forms of taxation. So long as I have been a member of this House-certainly so long as the nuisance taxes have been in existence-I have protested against the imposition of such taxation. I think my hon. friend the Minister of Finance knows that; I think his predecessor knows that also.
	'


John Wesley Edwards: What do you mean by nuisance taxes?


William Daum Euler: I mean such taxes as the
stamp tax, the tax on checks, the tax on receipts, and all that sort of thing. I see no excuse for the imposition of these taxes; they are just about as inconsistent as the old window tax we used to read about in our school histories. There is no reason for this method of taxation except that it is one means of getting money without any regard as to whether it is got fairly or not, and it imposes inconveniences not justified by the results. I wish the minister could see his way clear, when he brings down the budget, to say "I am going to wipe out the stamp taxes and what are known as the nuisance taxes."
If you make your income tax too high, there is the constant temptation, as we see from day to day, to evade that tax, and I am sure the minister is losing millions of money that should fairly be paid into the treasury if it were possible to collect all the income tax that should be collected. Sometimes a tax will defeat itself. Perhaps I am out of order when I say that I would give as an instance of that in certain forms of excise tax. If you make your excise tax on alcohol-although I have not that particularly in mind-or on tobacco and cigarettes too high, you simply defeat the purpose of the tax altogether and encourage bootlegging and smuggling.


Ernest Lapointe: You are right.


William Daum Euler: My hon. friend says the
middle man pays the most of the taxes. I do not know what he means by that. Perhaps he refers to the man who earns in excess of $2,000, up to $4,000 or $5,000. While I do not question that, I think it is true that the great majority of the working men of Canada under the present law do not, except perhaps indirectly-I suppose they do indirectly-pay a very great proportion of the income tax, and it should be so. I judge that most of the working men, the artisans and others, do not earn a great deal in excess of $2,000 a year, the amount which is exempt under the present law, and if they have a family of children they have an another exemption of $500 for each child. So that I believe after all most of the income taxes are paid by those who can fairly well afford to pay. At the same time I would have no objection if the sum of the exemptions were somewhat increased, possibly to $3,000.
Something has been said about the overlapping of taxation. I think the fact that three different bodies have the power to tax incomes is absurd in the extreme. That muni-

Taxation in Canada
1G5J
cipalities should have the power to tax incomes, that certain provinces should have the power to tax incomes, and that the federal government again should have the power to tax incomes seems absurd and entirely unfair. I do not know what the remedy is. I do not know whether it is necessary to amend the British North America Act in order to correct that evil, but if so perhaps it might be worth well to do such an unprecedented thing as to change that act.
Something is said about the fact that the United States have been cutting their income tax, and that because they had done so we also should do it. I grant that it is very desirable, if the United States by cutting their income tax are creating a condition which operates against us so far as business is concerned, that we should follow their example if we can, but we must consider this: If the same conditions obtain in Canada as obtain in the United States, then we can follow their example, but not otherwise. Fortunately for themselves, they are a wealthy nation and they have been able to reduce taxation, but I do not know whether that is possible in Canada. We must find the money to pay our obligations. The Minister of Finance has given us some encouragement to expect something in this regard. In all these proposals to reduce or abolish the sales tax, the income tax, or some other tax I have found a great dearth of practical suggestions as to how these taxes are going to be replaced by something else, and yet that is necessary.
I desire to make one or two suggestions. I spoke of one already, and that is the abolition of what I call the nuisance tax. We ought also to abolish what is known as the supertax-the tax upon a tax. That seems to me unfair. The income tax could also be somewhat simplified again. I would like to ask the Minister of Finance a question. Perhaps the former Minister of Finance (Sir Henry Drayton) would take it upon himself to answer, because it was under his administration and that of his predecessor that the law was framed. My question is, why are speculative profits not taxable? As I understand the law, it is only the income a man makes from his regular business and from dividends and interest receipts that is taxed. A speculator buys a stock upon margin and invests a small amount of money, if you can call it an investment. He puts up perhaps $10,000, and by a fortunate turn in the market makes another $10,000. In that investment there is no labour involved, and that $10,000 unearned profit is free from income tax. I could never see why the profits earned in speculation should not be more justly
taxable than the income earned by a man's own efforts.


An hon. MEMBER:: Would you give him back his losses?


William Daum Euler: If he loses money in business, he does not get it back either. It would! be fair to make some provision for losses sustained; say for example a business man has a large profit in some one year and in the next year he may lose just as much as he realized the year before; yet he pays taxes on the profits in the year when he is least able to pay. I know by experience-at least by having my attention drawn to it- that in the year 1920, for example, some manufacturers were very successful and made big profits. However, the next year they suffered very heavy losses-just as heavy as the profits made the year before-and yet in the year in which they lost their money they had to find money to pay the taxes on the profits made the year before. They were not one cent ahead on the two years but, had to pay the tax just the same. I understand that in England-and I am open to correction on this-the period during which the income taxes shall be calculated shall be a four year period.


An hon. MEMBER:: Three.
Mr, EULER: I think the principle is entirely sound, and we have now had the income tax in operation sufficiently long that we should be able to adopt that principle.


Mr. WOODSWORTH:: What would my hon. friend say in regard to profits made out of bootlegging?


William Daum Euler: I think I would take them all. I believe absolutely in the soundness and the justice of the income tax. I also believe that it should be reasonably applied and not made any more irksome than is absolutely necessary.


Peter McGibbon: I stated in the House the other day that I thought the income tax was one of the most unfair taxes that we had to deal with. I am still of that opinion because the basis of all taxation ought to be its fairness. I should like to draw the attention of the member for North Waterloo (Mr. Euler) to the fact that in the last five years-I am speaking from memory now and I put the figures on Hansard the other day-the salaried class, who cannot evade the income tax, have paid about $62,000,000 out of $170,000,000 odd collected. There is one class in this community who cannot evade payment of their taxes. They not only have to pay their
Taxation in Canada

own income tax, but, as everybody knows, they have to pay a large share of other people's taxes which are passed on to them in one form and another and I am not finding fault with that. I think it is the legitimate process of business to pass the taxes on, but the fact remains nevertheless that the salaried class in this country to-day is being punished the most by this tax. They cannot evade it, and I hope the Minister of Finance will give this matter at least part of his attention. They have to pay their own tax, because their salary is on record, or reported by their superiors; and the income tax of others is passed on to them and they have to pay indirectly.


William Daum Euler: - I quite appreciate what the hon. member says and I agree with him there is a difficulty in that direction. Does he regard that as a sufficient reason for abolishing the tax entirely, and if so, what would he suggest to take its place?


Peter McGibbon: I am not advocating
abolishing the tax; I am speaking about the unfairness of the tax as it is at present applied. There is no question that the tax is being evaded. It has been stated this afternoon that victory bonds which are tax free are largely held by rich people. The Minister of Finance (Mr. Robb) and I am sure the hon. member for North Waterloo (Mr. Euler) know that to-day men can invest their money in stocks from which they receive a fairly good interest and yet escape the income tax because that tax is paid at the source. If I understand the apiplication of this tax correctly, we do not apply a double taxation and to-day we have the wealthy class buying stocks that are as good as gold and that pay good interest, and thus being exempt from this income tax. We have also dozens of organizations, holding companies and: such like, as a result of which men of wealth and means have their incomes exempted from taxation. Those are some of the unfair ways in which this tax is applied.
The income tax to-day has a very great effect in increasing the cost of living so that the poor man and the salaried man are hit in still another manner. What are we getting out of this tax? We know the tax received from the larger incomes has been decreasing every year and that will probably continue in an increasing degree. On the other hand the one class in this country that cannot evade the tax is being punished more severely every year. This country cannot carry on business and at the same time have a higher rate of taxation than that which exists in the

country to the south of us. Taxation is more or less dependent upon business. If you have no business you are not going to pay taxes, while if you make the country more prosperous, incomes will increase and you will be able to collect a larger amount of revenue from the different sources of taxation. The present application of this tax is unfair to the majority of our citizens, it is increasing the cost of living and it is one of the greatest hindrances to business in Canada.


James Shaver Woodsworth: Would the hon.
gentleman consider the possibility of a super tax on incomes earned in Canada but enjoyed by those resident outside of Canada?


Peter McGibbon: I do not know whether there are many in that class or not, but I see nothing wrong with the suggestion. If people are making their money in Canada and do not think this country is good enough to live in, if it is possible to tax their incomes, I would do so. As the hon. member for North Waterloo said, there are other methods of evading this tax. For instance, I think it is a fact that if a man so wishes he can go on the stock market and buy good stocks for which he does not need to pay outright even if he has the money to do so, and if I understand1 the application of this tax properly he is not taxed on such holdings. A man can also buy stocks which have a real value, which are non-dividend paying, but which will increase and are bound to increase in value in the next two or three years, and that profit is not taxed. Therefore, I say that application of this tax as it is enforced to-day is not in the best interest of this country. I am not advocating (the abolition of the tax, but I think it could be enforced in a manner that would be much fairer to the Canadian people and that would produce a greater revenue 'for the public treasury. I am offering these suggestions to the minister, and I hope he will take into consideration the salaried people who cannot evade the tax and who are indirectly paying a considerable amount of the other taxes.


Mr. J. L. BROWN (Lisgar):: Mr. Speaker, I want to place myself very solidly behind income taxation as a principle. I agree with the statement that the only principle of taxation is ability to pay, and the intention is that the income tax should be levied upon those who are able to pay. I agree with the statement that in its application it has not always worked out fairly, but I am glad the hon member for Muskoka^Ontario (Mr. McGibbon) has not advocated the abolition

Taxation in Canada
of the tax. I was under the impression from remarks he made in this House on a former occasion he was advocating the abolition of the income tax. I agree that there are some things in which its application is unfair. Undoubtedly those who are living upon fixed salaries are in a different position from others in that it is hard for them to evade this tax, because the amount of their income can be readily ascertained and they are in all cases compelled to pay according to the amount.
I will offer one or two suggestions as to the system we might adopt. A distinction should be made between earned income, that is income derived from salaries or income actually earned in the conduct of business, and income derived from investments. On the one hand you have a salaried man depending upon a fixed salary and paying his regular tax every year. He passes away and those who are dependent upon him are deprived of that source of income. Another man who is perhaps living upon the proceeds of investment passes away and yet the income goes on, his family receiving the same income as they did while he was alive.
Some attention should be paid to incomes derived from stocks in any corporation. As has been pointed out, under the present system the taxation is collected at the source. Objection is sometimes taken that the income tax handicaps industry, and I believe it would be well if in order to get rid of that objection, industries as such should not be subjected to this taxation, but that it should be levied upon individuals. I know the amount is much more easily collected at the source as is the case to-day, but I do not see any reason why a wealthy man who is drawing large dividends from stocks should be exempted from paying income tax on that amount. I would prefer that the tax on industrial corporations should be abolished and should be levied entirely upon the individuals. The most equitable way would be to have the tax levied over a period of three or four years. Not only is it true in business, but it is eminently true of those who make their living from farming that there are sometimes very lean years. A farmer may have a good crop one year and be in a position to pay a tax while the next year he may be in no position at all to pay a tax. The result is that he may pay much more than he would be really entitled to pay if the tax were extended over a three-year period. I appreciate the objection that might be raised by the officers of the department that it would be difficult to apply such a system, but if it could be applied, there is no question as to its fairness. I do not think it 14011-105	:
is necessary to lay emphasis upon the fact that the income tax increases the cost of living, for all taxes do that. I do not see any reason therefore for distinguishing between this and any other form of taxation from the standpoint of the cost of living.


Peter McGibbon: Does the hon. member
think that the sales tax contributes very much to the cost of living?


John Livingstone Brown: To some extent all taxes
must have that effect. Hon. gentlemen talk about taxes being a levy on capital, but all taxes are in some measure a levy on capital. We are taking something out of our pockets when we pay taxes, and therefore we have that much less with which to carry on business.
Considerable stress has been laid on income tax as an inequitable levy. The hon. member for Toronto Northwest (Mr. Church) dwelt upon this point. It seems to me that his argument would have had a great deal more force had he not suggested that the right to impose an income tax should be abandoned by the Dominion and left to the municipalities. If the income tax is unfair when levied by the Dominion, it is certainly just as unfair for the municipalities to impose it.
I would point out one respect in which, as I suggested a year or two ago, there might be some redress in the matter of income tax. I refer particularly to the tax as applied to farmers. Now, the farmer and his wife are one body working together, and their income is considered a joint return for purposes of taxation. In the case of people in some other walk of life, however, although husband and wife may have separate incomes they are allowed two exemptions. I admit that if the farmer's wife derives an income from some source outside the farm it is considered as separate from her husband's, but no matter how hard the two may work together on the farm, their income is treated as a joint income when it comes to paying the income tax. There are many men in other walks of life who enjoy a good income themselves while their wives are also in receipt of a fair competence, and they are entitled to two exemptions. My contention has always been and is now that the income of the wife for purposes of taxation should be considered jointly with that of her husband and be subject to one exemption, and this in every case.


John Léo Chabot: I just want to comment briefly upon a question I put to the Minister of Finance (Mr. Robb) when he was discussing the matter of taxation in a general way. The minister has been kind

Taxation in Canada

enough to send me a copy of the public accounts, to enlighten me as to the reduction in expenditures by the government during its tenure of office between the years 1921 and 1925, and I am bound to say that during that time the government has failed to deal satisfactorily with taxation, notwithstanding the wonderful resources of the country, notwithstanding our favourable situation, and notwithstanding the fact that Canada pays less than any other country in the world for selfdefence. My figures are also derived from the public accounts. I claim that 5 p.m. from 1921 to 1925 the government has actually collected in the form of special taxes the sum of $629,601,176 more than the government preceding it did during a similar period. In 1917 the special war taxes amounted to $16,000,000; in 1918, $25,000,000; in 1919, $56,000,000, and in 1920, $82,000,000. Let us compare that with the revenues derived from the same source in the Liberal regime for three years. I have not the figures for 1921, but in 1922 there was collected $177,484.000; in 1923, $181,634,000, and in 1924, $182'000,000 odd. Notwithstanding these enormous collections the government did not reduce taxation by a cent, and I simply want tc express the hope now that if hon. gentlemen opposite retain power for any length of time -as I am sure they will not-they will make an honest effort to reduce expenditures and thus reduce taxation.


Mr. HEAPS:: Is the hon. member taking
into consideration the value of the dollar in the respective periods he has cited? That is an important factor.


John Léo Chabot: That may make some
difference, but it cannot account for the large increase in revenue from 1921 to 1925 over the preceding four years.


Abraham Albert Heaps: In 1920 the value of the
dollar was 41.1.


John Léo Chabot: The Canadian dollar was
never as low as that.


Abraham Albert Heaps: I am speaking of the purchasing power of the dollar; that is what we have to consider.


John Millar: The
hon. member for Muskoka-Ontario (Mr. Mc-Gibbon) objected to the income tax on the ground that in some cases it was being passed on. This may be partly true of course, but I can think of no other tax that cannot be passed on while this one can be passed on only to a limited extent. As pointed out by the hon. member for Lisgar (Mr. Brown), the IMr. Chabot.l
farmer in many cases pays in lean years for that which he has reaped in fat years, and others may be able to show that in some respects the tax militates against them in the same way. Judging by the remarks of some hon. gentlemen, there seems to be an impression that this is a new tax, but I was surprised to read recently that it was proposed over a hundred years ago. The Reverend Henry Beeke, professor of modem history at Oxford from 1801 to 1813, who was frequently called into consultation by Pitt, proposed this form of taxation at that time. He wrote a book entitled Observations on the Produce of the Income Tax, in which he claimed that the tax was based on moral equity and political wisdom. I believe the income tax has come to stay. It has been known for over a hundred years, and it is one form of taxation that is levied on those who are able to pay it. I believe it should be kept in force.
In Canada we have no means of knowing how much income tax the individual pays, but in the United States, until a short time ago at any rate, the figures were published. I believe a change has been made recently, so that the returns are not now made public, but statistics are available to show how much was paid by various individuals in the year 1923. I quote the following:
These returns have to do with the year 1923 and present many curious features. For instance, Douglas Fairbanks put up $225,000 as his yearly share, while the greatest international banker in the country, J. P. Morgan, paid $98,000. Jack Dempsey's share was $90,000. All of which goes to show that from a financial standpoint it is far better to be a movie king than a financial king, and it is almost as lucrative to be a "pug" in the first flight. President Coolidge paid a modest $6,000, while the Ford family contributed $19,000,000. John D. Rockefeller, Sr., paid $124,000 while John D. Jr., paid $7,425,000.
Andrew W. Mellon, Pittsburgh, Secretary of the Treasury in the Coolidge cabinet, appears to be the richest man in public Life in that country, as he paid in 1923 the sum of $1,173,000 in income taxes. William Wrigley, Junior, of Chicago, contributed $865,000 as his share of the income tax in 1923, while his corporation paid $649,000.
We should not forget that money must be raised and the business of the country carried on. Canada was spending hundreds of millions of dollars in the Great war while the United States was selling munitions to the allies and filling her coffers with that money, and that is one reason why at present we as Canadian people must expect to pay a heavier tax than is paid in the United States. We should not object to this; we favoured carrying on the war; we favoured putting in our last dollar if necessary to win the war, and now we have to pay the price. We have not the figures for Canada, but if they were avail-

Taxation in Canada
able they would show that the large sums are paid by the rich. If they are not collected from the rich they must be collected from the poor, which would form a very heavy tax. The sums which I have quoted, spread over the masses of the people of the United States, would add greatly to the cost of living.
In a discussion such as this reference is frequently made to the fact that the producer of grain or cattle-in a word, the farmer of Canada-pays a very small share of the income tax. Objection should not be taken to that, for the reason that he is not paying because he is not making any money. If he were making money he would as readily contribute his share to the upkeep of the country as any other class. He has no objection to paying according to his ability to pay, but owing to the fact that the prices of farm produce; dropped very suddenly after the war while the prices of other commodities were reduced very very slightly or not at all, the farmer was the first to suffer. It may be admitted that he made money easily in many cases during the war, and I think I may further admit that when he was making money easily, in a great many cases he was just the same kind of simple person we find in the city; he spent his money just as easily. If those who live in the cities think the farmer spent his money too freely and expanded too much, they are blaming him for the same mistake they themselves made and will perhaps make again. For the last four or five years the income of the farmer has been very small, and in many cases he has had to live on his capital. He is worth less now than he was worth five years ago, yet he is making as little complaint as possible. He is carrying on and keeping his land in a good state of cultivation so that when the opportunity comes to produce a crop and take his stand with other industries and pay his share of taxes, he will be able to do so. I think that is all you could expect.
It may be contended-and I have heard it stated-that the fact of so many farmers not paying income tax is evidence that they are shirking their duty, that they are either putting in no statements or making false statements. I do not for one moment think that that is correct. You will find people in every walk of life with so little honour and so little patriotism as to put in a false statement or bring about an adjustment of business whereby they would be relieved of paying income taxes, but I do not think they are any more numerous among the farmers of the country than among the professional and industrial people. It is simply that the farmer has not the.money, 14011-1054
and until he reaches the point where he is aible to pay, I think it better for even those industries of Canada which are paying the large proportion that they should carry the burden for the present. The producer of grain and cattle will thereby the sooner reach a position to purchase the manufactured goods of these companies.
Objection is sometimes taken to this tax, because there is a little difficulty in making out the income tax statement. I am inclined to think that the benefits accruing to the agricultural class-speaking of that class only, because I believe they are the greatest offenders in not keeping proper books-the advantages they get from that training and from being compelled to keep books will repay for the inconvenience and sometimes the small cost they are put to in securing the services of those competent to fnake out the statements. As time goes on they will find less difficulty, and many of them now know where they are making and where they are losing money, largely because they have been compelled to keep some records. I believe they will derive considerable benefit from that.
If the income tax can be simplified or reduced in proportion as other forms of taxation are reduced, I would be very glad, but since it is the fairest form of taxation and cannot be passed on, I would be very sorry indeed to see it abolished.


John Wesley Edwards: Mr. Speaker, I have only a few words
to say in regard to this matter. I am entirely in accord with the principle involved in the income tax, and I think it would be a very great mistake to abolish that tax as one source of revenue to the country. Adjustments may be necessary in order to make it more equitable and fair, but I would be absolutely opposed to its abolition.
There is no doubt, as the hon. member for Toronto Northwest (Mr. Church) has said, that the burden of taxation on the municipalities is at present extremely heavy. Speaking for the rural districts I can say that today the taxes on farms and farm property in eastern Ontario amount practically to a rent, and are bearing very heavily on the people. We must have a better system of roads than we formerly had, and the costs of education are much higher than they were a few years ago.


John Livingstone Brown: Would the hon. gentleman tell us about what the ordinary tax is on a well equipped, hundred acre farm?


John Wesley Edwards: I think on a good, well equipped farm of one hundred acres the tax would probably be between $260 and
Taxation in Canada

$300. I would not like my hon. friend to take that as definite, because there would be a very great variation, but the tax is heavy and there is no question that in Ontario-and I presume it is much the same in other parts of the country-municipal taxation has increased tremendously in the last eight or ten years. So I think my first statement may 'be taken as fairly correct, that a great many people in the country districts regard the present taxation on farm property as practically equivalent to a rent.
I have just one or two observations to make with respect to the remarks of the last speaker (Mr. Millar), as well as those of the Minister of Finance (Mr. Robb). I agree with the last speaker that the farmers of this country will be as willing to pay their share of taxation, whether it is income tax or any other tax, as any other class of the community. No other class of our citizens will play the game any fairer than the farmers will. It is true, I believe, that they are not paying very much in income taxation, and the reason they are not doing so is because they have not the income, and the reason they have not the income is to be found largely on the other side of the House in the policy pursued by the present government and backed up by hon. gentlemen to my left. I want to suggest this further thought, that if the government persists in the course which it has indicated a tendency to follow and submits to further dictation from these so-called free traders from the west, I do not think they will get any income tax from farmers in any part of Canada, because they are exposing the farmers of Canada unjustly to the competition of the world, and are not giving them a fair deal and a fair opportunity to make an income on which they might pay some income tax.
The figures presented by the Minister of Finance as to the amount of income tax collected in the last three or four years are very suggestive. I recall that prior to 1921 the Liberal party in this country were very loud in their condemnation of the Conservative government on account of the so-called war taxes, income tax and other taxes.
Mr. EULiBR: The Union government.


John Wesley Edwards: Well, the
Union government; that will bring my friend nearer to the condemnation. So strongly did the Liberal party feel in regard to this matter that in their platform of 1919 they put in a special clause condemning the government for non-enforcement of the income tax law. The convention on that occasion said:
This convention condemns the government because it ha3 not enforced the income tax law in such a

manner as to make it produce the revenue which such a tax sho-uld produce if properly collected.
I gathered from the Finance minister's remarks that he is not getting all the money he should from the income tax at the present time. His figures show that in the last three or four years there has been a steady diminution in the amount that has been collected in income tax. That must mean one of two things; either the government must be condemned for non-enforcement of the income tax law, for inefficiency in collecting the tax, or else the lessened revenue from the income tax is an indication of the extent of that prosperity which the government has been talking about as existing in this country and growing greater year by year. One would naturally suppose, if the country was becoming more and more prosperous as the years go by, that the amount derived from income tax would be increasing each year; an increased revenue from that source might be taken as a fair indication of prosperity. But taking the minister's own figures, I say we must conclude one of two things, either that there is gross inefficiency in the enforcement of the income tax law and the collection of the income tax, or else if they are collecting all they should collect, the reduced revenue from that source is an indication of lessened prosperity in this country as compared with a few years ago.


James Alexander Robb: I would like my hon. friend
to remember that we have extended the exemptions under the income tax law.


John Wesley Edwards: I do not
think those exemptions would materially affect the figures which the minister gave. While it is true there have been exemptions in regard to the income tax which might contribute to a diminution in the revenue from that source, it is not true of the special war taxes that were imposed away back in 1917, and since. The Conservative and Union governments were very roundly condemned for the amount of money they were collecting from the people in those ways up to 1921, and while promises were made before the election of 1921 that a change of government would mean a material reduction in taxation along those lines, the fact remains, as has been pointed out by the hon. member for Ottawa (Mr. Chabot), that in the next four years the government which had promised relief to the people in reduced taxation from these sources collected something over $500,000,000 more than was collected by the Union and Conservative governments. .

Taxation in Canada


Mr. McLEAN (Melfort):: In considering
the increased taxation following 1921, has the hon. member taken into consideration the large borrowings that were necessary to make up for the lack of taxation in the years previous to 1921?


John Wesley Edwards: I did not
understand from the arguments advanced and applied all over the country that gentlemen of the party to which my hon. friend belongs thought there was any lack of taxation in those years. I thought they were all complaining that the taxation was entirely too heavy.


Malcolm McLean: Perhaps the hon. member did not understand my question.
I asked if he took into consideration the immense amount of money raised by way of loans previous to 1921 on which this government had to pay interest raised by way of taxation.	_
Mr. EDWARiDS (Frontenac): I think the governments previous to 1921 paid their way pretty well. I know that previous to 1921 they had to meet, and did meet, obligations amounting to many, many millions of dollars, which their successors in office did not have to meet. There were many things arising out of the war which called for enormous expenditures under the former government, which expenditures this government did not have to meet.


Malcolm McLean: Did you meet those expenditures by taxation or by borrowing?


John Wesley Edwards: By both.


William Daum Euler: Were they not largely capitalized, loans raised on which interest had to be paid later on?


John Wesley Edwards: That is very true. They were largely capitalized, but if you compare the expenses for the four years previous to 1921 with those of the four years after 1921, I say that in the former period there were expenses of a special nature which had to be met by the government of 19171921 which did not have to be met by their successors in office, and that therefore their successors in office should have been in a position to implement the promises they made previous to the election of 1921 and reduce taxation all along the line, especially along those lines -which they so roundly condemned at that time. But as a matter of fact there has not been amelioration in the slightest degree since they came into office.
I think the income tax as such is a legitimate source of revenue, and one to be generally approved. The only question I believe in the minds of members of this House is as to the best method of applying it. I for one am strongly in favour of the income tax if it can be justly arranged. I believe there has been a fair attempt made by all parties in this House to fairly adjust that tax. It is a comparatively new source of revenue so far as this country is concerned, and it is quite possible that it is open to a good deal of improvement. I think, however,' there is a general disposition among the people of this country, irrespective of the party to which they belong, to continue the income tax and see that it is properly and fairly adjusted and applied. It is a source of revenue which I think we shall have to continue, and it is only a question of the best way of continuing it.
I presume we must take into consideration one thing in connection with the income tax; we must take into consideration the fact that there is a similar tax in effect across the line. We must, it seems to me, be somewhat influenced by that tax whether we want to be or not. We cannot afford to have in Canada an income tax very much higher than a similar tax in the country to the south. We may have one somewhat higher, but we cannot afford to have it very much higher. We must endeavour to follow their line of taxation to some extent although not to the extent, perhaps, of following it figure for figure.
I think this tax is a source of income which has quite properly been brought into effect and should be continued. I do not think any censure is due the government that introduced this tax in the first place. When it was introduced benefits were given to certain people which were not extended in later applications of the tax. But it was a new principle in this country and perhaps mistakes were made in that respect which would not be committed if in the light of our present knowledge we were now adopting an income tax for the first time. At any rate, the principle of the tax is right, in my estimation, and the tax should be continued as a legitimate and proper source of revenue to the country.


Abraham Albert Heaps: I have just one or two observations to make on this particular question. Having had a little municipal experience prior to my coming here, I have a good deal of sympathy with the motives which actuate the mover of this resolution (Mr. Church). There is hardly a municipality in this Dominion to-day that is not complaining about the burden of taxation; there is hardly a province that is not
Taxation in Canada



'COMMONS

[Stage Direction]
making the same complaint; and I think everybody is advancing the same complaint against the Dominion government. I regret sometimes to see the rather partisan spirit which characterizes discussions of this character, and I have no wish personally to display any of that spirit. I think it makes very little difference whether we have a Conservative government or a Liberal government in office; the question of taxation has got to be met; revenue must be raised to meet the necessary expenditure, and the question arises what is the fairest method to adopt. Personally I know of no fairer method of raising revenue than that based on the ability to pay, and the income tax meets that particular requisite.
Now, I want to deal more particularly with the resolution which has been placed before the House, and especially one particular part of it. The motion wishes " to restore to the municipalities their former exclusive rights and prerogatives to this form of taxation." This is the first time I have ever heard it stated that the collection of income tax was the exclusive prerogative of municipalities. If I understand anything about municipal government in Canada it is a fact that municipalities receive their charters from the provincial government, and that the rights of municipal taxation are distinctly set forth in those charters. That is true of the city of Toronto; it is equally true of the city of Winnipeg in which I am interested. The government of Manitoba has been asked for a number of years to allow the city of Winnipeg to levy a local income tax. Each year the request was made it met with refusal until a couple of years ago, when the provincial government itself imposed an income tax in Manitoba. I say that for all purposes of taxation a local income tax is bound to be a failure. It cannot be a success because it is far too restricted in its area; and if you tax a man who is living in a certain municipality he will probably move over into the next municipality where there is no such tax in force. If I understand the taxation law in effect in the province of Ontario this particular tax is not an income tax, it is an optional form of taxation. For example if a person, say, in the city of Toronto, has a certain amount of property, and is liable on real estate assessment as well as for income tax he pays the tax which happens to be the higher of the two.
An hon. (MEMBER: That is not the case.
Abraham Albert Heaps: I understand the law to be
that if this real estate tax is higher than his income tax he would not pay income tax.


William Daum Euler: That is not the law in other municipalities in Ontario.


Abraham Albert Heaps: Perhaps it is the case in
some and not- in all. One of the difficulties of creating local forms of income taxation, is that you do not secure uniformity throughout the province. Thus if you give local authorities the right to levy taxation you are going to have a dozen or two different forms of income taxes within the provincial area making it almost impossible to have an equitable application everywhere within those limits.
Now what would happen if this motion were to carry? It would entirely dio away with $56,000,000 of revenue. How is the government going to replace this revenue? Where [DOT]would it get the money to do so? I do not think the government can get along without this very substantial sum of money. Now the Minister of Finance claimed that 58 per cent of the money expended fey the federal authorities was uncontrollable, leaving 42 per cent capable of being controlled. If you take away $56,000,000 it means that you remove 33 per cent of the money available for controllable expenditure, making it almost impossible for the government to function properly. Now, let us see what our financial situation is. Compared with the period prior to the war the national debt has more than trebled. In pre-war time, I believe, the interest alone on the national debt amounted to $35,000,000 per annum, but that interest to-day amounts approximately to no less than $135,000,000 annually. If I am correctly informed no part of the capital expenditure -which goes to make up the national debit has yet been liquidated1-I mean to say that part which arose out of war conditions. Therefore, if you are going to reduce your taxation and allow the national debt to stand where it is, how are you going to solve the problem which exists in connection with it? The national debt is a very serious problem, and it will have to be dealt with by the present government or some future administration. Some way must be found by which to reduce our national debt. Australia is reducing its national debt, so is Great Britain, but Canada is not. Whatever government is entrusted with power this issue will have to be fairly and squarely dealt with. And when I speak of reduction of the national debt I mean some large and substantial reduction. It is in that way that relief from

Taxation in Canada
taxation will come to us. I do not know how this reduction can be brought about Certainly you are not going to do it if you reduce the income tax in the way suggested by my hon. friend (Mr. Church). In my estimation there will have to be more taxation in some form or other before the national debt can be brought to the figure where it ought to be 'at the present time.
There is another problem which ought to be dealt with, and that is to define clearly the sphere Of activity as between the Dominion and the respective provinces. A little while ago a conference took place at which it was hoped some solution of the problem might be reached. That conference, however, proved abortive, a fact which is much to be regretted.
I agree somewhat with the statement of the mover of the resolution as to the machinery of government in Canada. I believe with my hon. friend, that Canada is over governed at the present time. We have in the provinces what we might call nine states, and we have in the Dominion one super state. I do not know exactly how we are going to reduce the governmental machinery, but in Australia a strong movement is on foot for the abolition of some of the state governments and to hand over the authority now exercised by the parliament of those states to the federal parliament, as well as to grant a larger amount of authority to the municipalities. I think one of the states of Australia has passed a resolution along that line, and it has gone so far in Australia that one of the federal ministers has suggested that a plebiscite be taken to ascertain whether the people are in favour of the abolition of the state governments. I suggested last- week at a meeting I addressed in my own city that it might be desirable to reduce the number of provincial legislatures in Canada. That will mean an amendment to the British North America Act. I can understand the difficulties and I can understand some of the feeling of certain hon. members in this House towards a move along that line, but 1 suggest, as a step in that direction, that there Should be one legislature for the three prairie provinces, Manitoba, Saskatchewan 'and Alberta, where their problems are almost identical. I do not know whether it would be possible at the present time to have one legislature for Quebec and Ontario.	[DOT]


Mr. NICHOLSON:: Why?


Abraham Albert Heaps: I am not going into that
question just now. But 1 think it would be possible to have one legislature for the three
provinces down by the Atlantic, Nova Scotia, Prince Edward Island and New Brunswick, and that might be a step in the right direction whereby we might get more centralized government. I think one of the things we are suffering from in Canada at the present time is that we have either too much authority or too little authority. It is always a question of passing the buck, if I may use that term, between the provinces and the Dominion government, and I think it would not be a bad move at all if the British North America Act were so amended as to give the three provinces one legislature, with the consent of the provinces of course, and reduce the number of provincial legislatures from nine to five.
While I have a good deal of sympathy with the motion of the hon. member for Toronto Northwest (Mr. Church), I do not think I can support it, for the reasons I have outlined, because after all I do not recognize that this sphere of taxation is the exclusive preserve of the municipal authorities. I think it ought to be the preserve of the Dominion government, and then it migjht at some time be advisable for the Dominion government, being the central authority for the collection of the taxes, to remit a certain portion of the money collected for taxes to the provincial- authorities, and they might in turn, if they saw fit, hand back some of the money to the municipalities. I think the method in the state of Wisconsin is that the state collects the income tax and remits a portion to the county and also to the municipality.
At the present time in Canada there are as many as two and possibly three collections of income tax. There is too much duplication. If the matter were centralized in one authority, which should be the Dominion government, and the Dominion government were to hand back some of the money collected to the provinces, it would be a far better method of dealing with the resolution than that proposed by the hon. member for Toronto Northwest.


Hon. EDMUND BRISTOL (Toronto East Centre):: I do not propose at this time to make a lengthy speech on this important matter of the income tax, but I would like to call the attention of the government to the fact which is well known, namely, that we have been losing during the last four years about 500,000 of our young men and women, born possibly in the provinces of Ontario and Quebec. Two factors operated in taking these people away. First, there was the lack of work in these provinces, occasioned by the tariff policy and the higher wages necessarily paid in the United States, and second, there was the very important fact that the income
Taxation in Canada

tax paid by people in the United States who earn incomes up to $10,000 is very small in comparison with what young men and young women earning from $1,200 upwards in this country have to pay. In other words, Canadians who want to work here as stenographers, or in other small positions, earning from $1,000 to $3,000, pay $30, $40 or $50 as against a payment of $7 in the United States. I really think those members of the community, who are trying to make a living and get ahead in this country and who cannot get as good wages here as in the United States, should receive from any government in power in Canada every possible encouragement along that line.


George Brecken Nicholson: Without going into the question at length, I desire to make one or two observations. In relation to the resolution itself, and the remarks of my hon. friend from North Winnipeg (Mr. Heaps) as to whether the tax had been looked upon as a special preserve of municipalities, I think what the hon. member who moved the resolution had in mind was this-and I believe is the fact-that prior to the war no income tax was levied by any except municipal authorities. There had been no federal income tax, with the possible exception of British Columbia, and I am not certain with regard to that. No provincial income tax was levied prior to the war. There is a very good reason for that, and a very definite reason why this form of taxation should be the preserve of the municipalities. Neither municipal bodies nor provincial bodies have the right in Canada to levy indirect taxes. They must secure all their revenues by the method of direct taxation, while the federal authority is the only one that has the right to levy anything in the character of an indirect tax. Prior to the exigencies of the war I think it was generally looked upon as the right of municipalities to levy income tax. I do not know the situation in Manitoba or any of the other provinces, but so far as Ontario is concerned my hon. friend is entirely misinformed when he intimates that it is optional with the taxpayer whether he shall pay his taxes on assessed value or on his income, whichever is the higher. The fact is that if he derives an income from taxed property he pays a tax on that property and does not have to pay a second tax.


Abraham Albert Heaps: Is it the same in all municipalities?


George Brecken Nicholson: That is the law in Ontario, and it must be applied in the same
	.
way in all the municipalities. You cannot apply it one way in one municipality and differently in another.


Abraham Albert Heaps: Has the city of Toronto a special charter, or does it come within the municipal law of the province?


George Brecken Nicholson: It comes within the
municipal law. Every municipality comes within the municipal law. I think I am right when I say that. What the hon. member for North Waterloo (Mr. Euler) said with regard to the incidence of taxation touches the base of the whole thing. I think one of two principles should apply. Taxes should be paid in accordance with the service rendered, or in accordance with the ability to pay. The difficulty in relation to the latter tax, however, is that of collecting the tax from those who have the ability to pay. If it were possible to levy a tax and be sure you were at all times getting it from those who had the ability to pay, and if the income tax could be collected from those who have the ability to pay and that class alone, then it would be a perfectly fair and equitable tax, but so far we have not found a method by which that can be done.
In its general incidence there is nothing that has had such a blighting influence on business in this country as the income tax. In the main it is being paid, although we have not the opportunity of finding out who the particular individuals are who pay it. We have an opportunity of finding out the classes who pay it, and in the main it is being paid, as_ my hon. friend from Muskoka-Ontario (Mr. McGibbon) said, by the salaried class in this country. They are paying very much the larger proportion of the taxes. There are very definite and good reasons for that. For instance, it was shown here clearly by my hon. friend, speaking on this subject before, that the part of Canada where the greatest individual wealth is in proportion to the whole class of people, pays the smallest amount in income tax. The provinces west of the Great Lakes are the provinces where the greatest average wealth prevails, but they pay the least by way of income tax. We need not assume, from that, however, that the people west of the lakes are tax-evaders because it is quite reasonable to assume, from the character of their location, so many people in the prairie provinces being of the farmer class, that they have an average income that is fairly substantial but that does not come within the scope of the income tax law. On the other hand in the other provinces that are more industrial, people are divided into two classes, namely, those who-; pay income tax and those who do not.

Questions
Coming for a moment to the incidence of this tax in relation to business and to one or two observations that have been made, let me ;refer to what the hon. member for Lisgar (Mr. Brown) said as to a farmer and his wife pot being in the same position as a business man and his wife. There is not the slightest difference whatsoever. The wife of the business man is just as much a partner in that business and in spending her life to assist in that business as is the wife of the farmer or of the mechanic. Her position is exactly the same, and she gets no extra exemption unless she has a private income.
A great misapprehension seems to prevail in connection with the fact that taxes are not paid on dividends earned from business. There is the point where the tax injures business perhaps more than anywhere else. If a group of men have their business in an incorporated company, what happens? Ten and one-half per cent of the total income of their business goes in income taxes. If they distribute a sufficient amount of the earnings, if there are any, for them to live on, that amount is also taxed under the surtax and supertaxes which prevail and which in reality are the heavy portions of the tax. Let me give one or two illustrations that have come under my observations-and this has regard to the advisability, if the Minister of Finance can work out such a scheme, of taking a group of years instead of an individual year as the period over which the income tax should be levied. One particular case that came under my observation was of a group of men in business who in two years, 1920 and 1921, the deflation years, lost so much money that they had to go to the bank and borrow over $100,000 in order that they might be able to carry on. They have been paying interest on that money ever since. In 1923, 1924 and 1925 the business has been coming to a point where it is commencing to return a small amount of this money, thus enabling them to pay off what they had previously borrowed, but the income tax collector comes along and collects income tax just the same, with the result that on the money they have borrowed they are paying not only income tax, but interest to the bank. That is one of the most unfair phases of the income tax and one phase of it that more than any other is doing injury to business in this country.
As a general principle, looked at from the theoretical standpoint, the levying of income tax from those who are able to pay it is a fair method of taxation, but as it has been worked out in this country it is not a fair method of taxation: it is doing injury to business, it is
placing a burden upon a particular class that cannot get away from it. That is one reason why we are having such great difficulty in getting back to normal conditions. My opinion is that the question of the country's indebtedness should have been taken hold of resolutely and determinedly after the war period was over and after the time had passed when we were getting our men back into civilian life; the war debt should have been consolidated and the special taxes applied to a reduction of that debt instead of carrying on as we have been doing. Notwithstanding what the Minister of Finance has said about reducing expenditures, he knows that may look very well on paper; but when the question comes down to what the national debt is today as against what it was in 1920 or 1921, he knows the gross obligations of the people of Canada are much greater to-day than they were in 1920 or 1921. We should consolidate the war debt, earmark the special taxes to take care of it, keep the general expenditure within the general income of the country, and then we shall find some way whereby these taxes may be reduced.


Thomas Langton Church: In view of the promise of the Minister of Finance to take up the matter in the budget, I ask leave to withdraw the motion. [DOT]
Motion withdrawn.
At six o'clock the House adjourned, without question being put, pursuant to rule.
Thursday, March 18, 1926